Selecting a Trust Situs in the 21st Century

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Probate & Property

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Pareja, Sergio; Warnick, John A.
article description
While members of Congress vigorously debate the advantages and disadvantages of keeping the current transfer tax system, states rapidly are enacting laws that entice long-term trusts to those states. Although establishing or relocating a trust to a state other than the grantor's home state is not for every family, it is a planning technique that merits consideration by families with significant assets. The chart on pages 60-63 provides general information on the laws of all fifty states. This article focuses on three specific considerations related to selecting a favorable trust situs. First, it considers the effect of recent repeals or modifications of the Rule Against Perpetuities (RAP). Within this context, this article primarily focuses on generation-skipping transfer tax (GST Tax) implications. Second, it considers ways to carefully select a situs that can provide families with protection from creditors. Finally, the article examines ways to use favorable state tax laws to reduce a client's state income tax. After discussing these three specific considerations, the article examines some general considerations related to trust situs.