States Vie to Shield the Wealth of the 1 Percent by Patricia Cohen

In her article, Patricia Cohen discusses a tactic many estate planning lawyers are using to protect the wealth of the superrich, with a specific focus on Nevada, Delaware and other states. Cohen elaborates,

Yet even as more and more states seek ways to help the richest Americans protect their wealth from creditors, divorcing spouses and children, as well as some federal and state tax collectors, critics worry that the effort to attract the lucrative trust business is turning into a competitive game of giveaway.

“There is no doubt that many, many jurisdictions are committed to being at the bottom,” said Edward McCaffrey, a professor at the University of Southern California Gould School of Law. “I think the real question now is: ‘Where is the bottom?’”

The federal government leaves it to each state to draw up its own trust laws, and several have tried to go as far as they can without inciting accusations that they are abetting tax evasion or hiding assets, he said. But in pushing the envelope, they can also run into challenges from courts in other states, including the Kloibers’ home of Kentucky, that have different statutes governing trusts.

The clear leaders are Nevada, Delaware, South Dakota and Alaska, but other states have also joined the frenzy. New Hampshire, Wyoming, Tennessee and Ohio all hope to dip a spoon in the trillion-dollar-plus pot of cream that had traditionally been preserved in offshore tax havens like the Cayman Islands.

Over the last decade, for example, New Hampshire has passed nearly a dozen laws affecting trusts that expanded their life span, lowered taxes and made it easier to transfer assets. In 2013, the state created a special trust court subdivision to handle the complex litigation; last year, an overhaul of state banking laws simplified regulations.

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Posted by Allison Trupp, Associate Editor, Wealth Strategies Journal