Choosing a state with trust-friendly laws

Where your irrevocable trust is administered has an important impact. Different jurisdictions in the United States offer different opportunities. It’s critical to choose a location – or situs – for your trust that’s favorable to your long-term vision.

The appropriate jurisdiction for your trust depends on your unique goals and circumstances, and should be explored with legal counsel. We can help you navigate the complexities of trust situs and determine what location might be best for your situation.

Key considerations:

  • Estate and fiduciary income taxes
  • Creditor protection
  • Privacy
  • Duration

Frequently preferred jurisdictions:

  • Delaware
  • Nevada
  • South Dakota

State fiduciary income taxes

While irrevocable trusts in the United States cannot escape federal fiduciary income taxes, a number of states (such as Nevada and South Dakota) require no state fiduciary income tax. Also, Delaware, New Hampshire and Wisconsin exempt trusts with non-resident grantors and non-resident beneficiaries from state fiduciary income tax.

If you choose to create an irrevocable trust in a state that doesn’t have state fiduciary income tax, your trust will need to be administered in that state to realize the tax advantage.1

Further considerations for the situs

Several factors must be considered when selecting the most favorable situs for your trust. A few of those key issues are:

  • Whether the state’s laws govern the administration or interpretation of the trust
  • Residences of the grantor, the trustee and the beneficiaries
  • Whether the trust is created during lifetime (intervivos) or becomes effective after death (testamentary)
  • Type of assets held by the trust
  • Physical location of the trust’s assets

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  1. It is important to research state laws thoroughly prior to selecting a different situs for your irrevocable trust. State laws vary and are subject to change.

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U.S. Bank and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

The information provided represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific investment advice and should not be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation.

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