Likewise some, but not all, states allow “self-directed spendthrift trusts” that allow a person to create a trust for his or her own benefit and still enjoy protection from creditors that might arise from a business matter, divorce or other family change.
For wealthier donors, the purpose of a trust might be to benefit future generations, but some states limit the time a trust can be in existence. By picking the right state for the formation of the trust, the donor may be able to establish a trust that benefits a large number of generations, while avoiding the imposition of any transfer taxes on the trust assets at any generational level, the white paper says.
“Between the differing state trust laws and the changes that state legislatures continually make, there are a lot of moving parts here. The best thing the advisor can do is review the client’s issues with someone who knows the landscape and pick a state accordingly,” Delaney says.