• Trusts must be based in Delaware to have protection under the law.Documents image by GHz from Fotolia.com
  
  Creating a trust in Delaware provides the settlor and trustee with protection under the law not granted in other states. Under Delaware law, a Delaware-based trust held in an offshore account is protected from others wanting to collect against it. Delaware also recognizes tax-free or minimized tax trusts. In those trust types, beneficiaries will not be taxed as long as the assets remain a part of the trust.
  
  

Continuing Trusts

• Delaware allows anyone to create a valid trust in Delaware. To satisfy the law, the trust must be Delaware-based. This means the trustee must be a Delaware resident, a licensed Delaware trust company or a licensed Delaware financial institution.
  
  The Generation-Skipping Trust, also called a Dynamic Trust, passes the trust's assets to future generations and minimizes the tax. In a Dynasty Delaware Trust, no taxes have to be paid on the assets as long as the assets remain a part of the trust. Foreign Delaware Trusts allow world citizens living outside the U.S. to pass trust assets to U.S. residents or citizens. During the individual's lifetime, the trustor does not pay taxes. Because of the offshore haven, creditors do not have a legal right to collect against the trust.
  
  

Asset Protection Trust

• An Asset Protection Trust is a trust designed to protect the trust's assets from creditors or litigation. Under Delaware Law, the settlor of the trust can be listed as a beneficiary. In addition to being Delaware-based, a Delaware bank or financial institution must hold a portion of the assets.
  
  The trust is for the protection of assets and not committing fraudulent acts. Asset Protection Trusts do not protect against fraudulent transfers and certain other claims. The trust will not protect assets against family support claims, such as spousal support, alimony and child support. Trusts do not protect property or assets transferred after a personal injury or property damage occurs. Claims stating that the settlor gives a creditor a written statement advising the creditor that the trust's assets are available to settle a claim are not protected by the trust.
  
  

Trustee Responsibility

• Standard duties of the trustee include managing, investing and distributing assets to beneficiaries. Trustees of an Assets Protection Trust are required by state law to have partial responsibility in completing the trust's income tax return. They must also have some administrative duties. Although the trustee has the right to make distributions, the settlor has the right to veto the trustee's distribution decision. Trustees have the right to distribute to the settlor, but the settlor must be a separate individual from the trustee.
  
  Under the Delaware Trust Law, the trustee can manage high risk portfolios. In pubic family businesses, trustees can hold highly concentrated stock positions without the fear of being held liable. Trustees acting on behalf of the written consent of the trustor cannot be sued for breach of trust.