City National W E A L T H M A N A G E M E N T

The Advantages of a Delaware TrustWith more than 250 years of history developing legal precedent in trust law, Delaware’s Court of Chancery continues to lead the way in areas of multigenerational planning, asset protection and tax savings. They operate under the premise that a grantor should have the legal right to control the investment, management and distribution decisions for their trust – and they offer a great deal of flexibility to a grantor in ensuring their wishes are followed.Regardless of your state of residency, there are many compelling reasons to consider a Delaware trust as part of your estate:

Tax Advantages. Delaware irrevocable trusts are exempt from Delaware state income tax on accumulated earnings and capital gains if there are no remainder beneficiaries residing in Delaware. In fact, in most cases no Delaware tax of any type will be assessed on these trusts.

Strict Confidentiality. Delaware courts are sensitive to a grantor’s right to confidentiality. They do not require court filings which helps ensure a trust stays private rather than becoming a matter of public record. Grantors can even restrict beneficiary access to information under certain circumstances. This is especially useful for those who aren’t ready to disclose the existence of, or value of, the trust to beneficiaries.

Balanced Beneficiary Needs. Delaware was among the first states to permit the use of “total return trusts” which better align the interests of income and remainder beneficiaries.

Continuity and Control. “Dynasty trusts” are not subject to the rule against perpetuities that governs when a trust must vest. These trusts can, instead, continue indefinitely* – potentially free from estate, generation-skipping, gift and inheritance taxes. This can result in significant tax savings and ongoing financial control for the trust.

Investment Flexibility. Through a “directed trust,” a grantor can appoint a third-party advisor to manage the trust’s investments. This is particularly useful for those with illiquid or concentrated positions that a trustee may feel obligated to diversify as part of their administrative duties.

Protection from Creditor Claims. An irrevocable trust can protect assets from creditor claims against the grantor. However, Delaware’s “spendthrift” trust statute can also provide significant protection from creditor claims against beneficiaries. This provides an attractive alternative to housing an account offshore.

Expertise and Expediency. Delaware’s Court of Chancery is widely recognized for being know-ledgeable, effective and expedient. Because they do not exercise continuing jurisdiction over a trust, they can efficiently handle the cases that come their way. On the other side, the legislature is known for quickly implementing new laws that better assist grantors in fulfilling their wishes.

City National Personal Trust. As corporate trustee or co-trustee, we can offer clients the tax savings and flexibility of a Delaware Trust through our trust office in Wilmington, Delaware. Whether you have an existing trust that you’d like to move, or are interested in creating a new one, our Delaware trust capabilities broaden our ability to help you meet specific objectives and take advantage of unique trust and tax savings opportunities.

* Under Delaware law, real estate that is held in the trust – and not through a corporation, LLC, partnership, statutory trust, business or other entity – is subject to the 110-year rule against perpetuities.

City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules in the areas of law, tax, and accounting are subject to change and open to varying interpretations. Before implementation, you should consult with your other advisors on the tax, accounting and legal implications of any recommended trust strategy based on your particular circumstances.

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