Some states are more well known as Asset Protection Friendly laws. Below is come great information from Alaska Trust Company
Alaska Trust Company's mission is to provide reliable wealth management approaches and innovative trust and investment management services.
Alaska is the leader in updating its trust laws that provide all Americans the ability to access unique estate and financial planning options as well as providing the most comprehensive asset preservation statutes in the country.
We are committed to providing the finest services to our clients. With our unique philosophy of customizing solutions and internal and external expertise, we are able to "think outside the box" to provide strategies that will have a positive impact for our clients in meeting their financial and estate planning goals.
REASON ONE
PLR 200944002; IRS has agreed that the Grantor can be a Trust Beneficiary of an Alaska SelfSettled Spendthrift Trust and the assets of the trust will not be included in the Grantor's Estate. Alaska is the only state that has received a favorable ruling from IRS.
REASON TWO
Alaska Was the First State to Provide For SelfSettled Spendthrift Trusts
Alaska has the best trust spendthrift statutes for both the grantor and other trust beneficiaries. Alaska provides for "selfsettled" spendthrift trusts which allows the grantor to set up an irrevocable trust, be a discretionary beneficiary and avoid having the assets be subject to creditor claims of either the grantor or any other beneficiary. Also, the assets in such a trust may be excluded from the grantor's taxable estate even though the grantor is a trust beneficiary. Therefore, there is no reason to go "offshore" (that is, to create a selfsettled trust in a jurisdiction outside of the United States). Alaska has no special "class" of creditors which, unlike the laws of other states, would permit those creditors to attach the assets of the trust. Alaska allows creditors to attach trust assets in a self settled trust only upon proving by actual fraud (and not "constructive" fraud).
Property subject to the so called "Crummey" or "5 X 5" withdrawal powers is not subject to creditor claims of the beneficiaries who holds such powers. Courts cannot compel distributions or attach beneficial interest. A beneficiary may be given a special power of appointment and the trust assets will still be protected from creditor claims. Alaska is the only state that defines an "existing creditor" which effectively puts a defined limit on when a claim against a selfsettled trust may be made.
REASON THREE
Alaska Has No State Income Tax on Trust Income
Therefore, trust beneficiaries can see the earnings in the trust compound free from state and local income taxes thereby providing extraordinary yearonyear returns. In addition, Alaska has no state gift tax and no intangibles tax.
REASON FOUR
Alaska Permits Perpetual (Dynasty) Trusts
Using perpetual trusts can significantly increase wealth passing from generation to generation by avoiding unnecessary estate, gift and generationskipping transfer ("GST") taxes. In Alaska, trusts can last forever; however if a beneficiary exercises a special power of appointment the trust is limited to 1000 years. An Alaska Perpetual Trust is an excellent vehicle to enhance the benefits of the Federal exemption from the (the "GST" tax). If a family uses only $1 million of the "GST" exemption after 120 years with an aftertax return of 6%, the trust would be worth over $1 billion. If a trust was not used; the value of the property would be only about $68 million.
REASON FIVE
Additional Trusts with Creditor Protection
In Alaska the Grantor may retain an interest in the following types of trusts and have protection from creditor claims:
● Charitable Remainder Trust (CRT)
● Total Return Trust
● Grantor Retained Annuity Trust (GRAT)
● Grantor Retained Unitrust (GRUT)
● Qualified Personal Residence Trust (QPRT)
REASON SIX
Alaska Creditor Protected IRAs.
Alaska Law has a provision that the trust laws of no other state has: it permits an individual whose IRA is not protected from creditor claims under the law of his or her own state (such as California) to use Alaska law to provide that protection. The reason is that Alaska's selfsettled trust law applies to any IRA that is in the form of a trust that is governed by Alaska law.
REASON SEVEN
Opt In Community Property Trusts
Alaska is the only state that allows couples to opt into community property for some or all of its assets, by using an Alaska Community Property Trust. Community property can provide unique income tax and estate tax savings. For example, upon the death of one spouse, the entire community property asset is "steppedup" in basis and not just the half of the asset included in the gross estate of the spouse dying first.
REASON EIGHT
Best Trust Decanting Statute
Alaska has the most powerful decanting law, which is the paying of trust assets from one trust to another. Alaska's decanting statute (paying trust property to another trust) is the broadest and most comprehensive of all decanting laws. Many times the terms of the trust do not permit the trustee and beneficiaries to take advantage of planning opportunities. The Alaska decanting provisions can be made to apply to a trust created outside of Alaska which can be used to provide significant advantages to the trust beneficiaries.
REASON NINE
PreMortem Probate
Alaska has just adopted legislation that permits individuals to have their wills admitted to probate before they die essentially eliminating any risk of a will contest, which normally is an emotional and financial wreck for the family members involved. The reason, of course, is that the person who signed the will can testify before the court establishing the document is a valid will. Although three other states (Arkansas, Ohio and North Dakota) also permit such predeath probate, Alaska has become the first state to permit nonresidents of its state to have their wills admitted to original probate procedures. Alaska, like New York, has long permitted nonresidents of its state to have their wills admitted to original probate and several individuals have used this process. In addition, Alaska has become the first state to have an explicit procedure to allow individuals who have created trusts during their lifetimes to have the trusts "proved" before they die. This too reduces the risk of postdeath squabbles over the spoils of an owner's death and ensures his or her wishes will be followed. Alaska also has one of the strongest "no contest" legislation for trustswhich essentially allows any beneficiary to be "disinherited" for taking action prohibited by the trust instrument.
REASON TEN
Trust Incontestability Clause
This provision provides that lifetime trust provisions that "penalize" (for example, "disinherits") a beneficiary for taking certain action, such as "contesting" the trust or the decedent's will or suing another family member will be enforced even if probable cause exists for the beneficiary to have instituted the proceeding.
REASON ELEVEN
Alaska's Unique and Flexible Trust Provisions
Grantors and beneficiaries may increase or decrease trustees duties and responsibilities providing for the most reliable ways to accomplish their goals.
Alaska law permits a grantor to separate the trust's investment duties, distribution duties and administrative duties by appointing different trustees for each area of those areas ofresponsibility. A trustee that has not been given a responsibility cannot be held liable under Alaska law for the other trustee's actions. Nonresidents of Alaska can have their will probated under Alaska law. The advantages of this legislation are:
● It should allow the estate to avoid state and local income tax during the
Probate administration
● It should avoid any statutory executor/personal representative fees and/or
Attorney’s fees
● The probate process in Alaska is very simple and straightforward which
should save time and money
● It seems that any trust that was created under the will would then have the
Ability to qualify as an Alaska perpetual trust and the other protective
Provisions of Alaska law
REASON TWELVE
Life Insurance Trusts
Alaska has one of the lowest life insurance premium taxes. With Alaska's low tax and Alaska Trust Company's experience in handling large life insurance policies make Alaska and Alaska Trust Company the only choice in setting up an Irrevocable Life Insurance Trust (ILIT).
REASON THIRTEEN
Total Return Trusts
In Alaska, traditional income trusts can be converted into "total return" trusts which means the trust will pay the "income" beneficiary a percentage of the annual value of the trust. This allows the trust to align the interests of all beneficiaries' whether income or remainder beneficiaries. In other words the trustee may invest the assets that will provide the best overall return (whether by current income or appreciation) for all beneficiaries, thus reducing tensions between current and future beneficiaries.
REASON FOURTEEN
Best Limited Partnership and Limited Liability Statutes
Alaska's laws give Limited Partnerships (LP's) and Limited Liability Companies (LLC's) maximum flexibility and asset protection. Courts cannot terminate Alaska LP's or LLC's thereby preventing creditors of the partners or member from attaching the assets of the LP or LLC. Unlike the default rules under most state laws, an Alaska LP or LLC does not go out of existence upon the death of a general partner of a limited partnership or the managing member of a limited liability company. Alaska has eliminated any right to demand to be bought out on 6 month or other notice. In fact, under default state law, a partner is entitled to distributions only as provided by the governing document. These provisions provide for optimal tax treatment and valuation discounts. In Alaska, LP's and LLC's can be set up "online" for immediate formation.
By statute, the only remedy for a creditor who attacks a partner's interest in an LP or
LLC is a "charging order", which is a court judgment against the LP or LLC.
REASON FIFTEEN
Confidentiality
Alaska provides the highest confidentially to grantors and beneficiaries because trust court filings generally are not required. Privacy and confidentiality are important concerns of Alaska Trust Company. If a court filing is needed, it can be done efficiently and in a cost efficient manner because of Alaska's flexible court processes.
REASON SIXTEEN
Customized and Innovative Investment Management
Alaska Trust Company provides a Unified Management Account approach. This allows for the best of two worlds: access to the expertise of the nation's finest money managers, yet still maintaining complete control over the investment process. This provides for
● a custom designed multimanager portfolio
● independent research and conflictfree advice
● tax efficient strategies that help clients keep more of what their investments earn.
REASON SEVENTEEN
Advantageous Charitable Remainder Unitrusts
Alaska law allows capital appreciation to be considered income. This allows for an attractive income tax deferral strategy when using Net Income with Makeup Charitable Remainder Unitrust (NIMCRUT).
This is a great discussion of Alaska as an Asset Protection Location.
Please contact Dwayne K Dowell, CPA/PFS at dkdowell@dkdcpa.com or call (502) 271-8452 for Wealth Strategy and Asset Protection Planning.