Delaware Trust Laws - When And How To Create A Living Trust

A Delaware living trust is a great tool to avoid probate and transfer your assets to your loved ones promptly after your death.

However, a Delaware living trust is not mandatory for everyone. Read on to learn when and how to create one in Delaware.

5 Steps to Create a Living Trust in Delaware

A living trust is a legal document. The process of creating a trust is similar in all states, and the rules don't vary much. Here are a few steps you can follow.

Pick your choice - Irrevocable vs revocable trust.

Do you want to keep your assets in an irrevocable living trust or a revocable living trust? Some people opt for a revocable living trust since it allows them to control their assets and terminate them at any time. They also have the right to remove a few assets from the living trust. Married people can keep a joint trust. But if they have a late marriage, they can maintain two separate trusts. That is more feasible for them.

Choose the assets carefully.

Assemble all the required documents and choose the assets you wish to keep in the Delaware living trust. Check the property deeds, bank account documents, certificates of deposits, etc., as you may need to keep these documents.

Pick a trustee

This is a vital step. The trustee is responsible for managing the trust assets. You can choose yourself as the trustee, but in that case, you also have to select a successor trustee.

Prepare all the documents.

Next time, prepare all the trust documents. You can use online software for this. Read the papers carefully and sign them. Make sure you sign all the papers in the presence of a notary public.

Transfer the assets

Once all the documents are signed, you can consult a lawyer to help you in transferring assets into the trust.

What to consider before creating living trusts for the entire estate

1. The general structure of the trust
2. Surviving spouse access to the trust
3. Where do you want to set up the trust
4. Choosing the right trustee
5. Beneficiary's interest

How much do you have to spend for a living trust in Delaware?

The biggest expense is attorney fees, which can cost around $1000 or more. Other expenses may include deed preparation fees, property transfer fees, county recording fees, etc. If you can't afford the fees, you can use a few online programs, which cost less than $100. Remember, there can be many problems with doing so. Estate planning is not easy, and you may end up making many costly mistakes.

Why should you create a living trust in Delaware?

The biggest reason is to avoid probate fees and save money. The probate process in Delaware is quite lengthy and expensive since they have not enacted the Uniform Probate Code. Since the legal process is quite lengthy, lawyers' fees go up. In a probate process, the court inspects the will and then decides how to treat the property.

Delaware law offers asset protection benefits for a prolonged period. There is no time limit on a properly structured estate plan. Once assets are transferred, your descendants can avoid estate taxes for generations.

Delaware asset protection trust protects your assets from creditors. Earlier, you couldn't create an irrevocable trust for your benefit and save your assets from creditors. But now, you can enjoy trust benefits and protect assets from your and your beneficiary's creditors through the Delaware Asset Protection Trust. However, there is an exception.

You can't protect real property if your creditors are the Securities and Exchange Commission, the IRS, or child support claims.

Privacy and confidentiality are yet another benefit of creating living trusts in Delaware. Suppose you don't want your beneficiary to know about the trust for a certain period. In that case, you can create a quiet trust in Delaware wherein your beneficiary would be notified about the discretionary trust at a specific time. For example, you want your grandchildren to know about the trust after they turn 21. A quiet trust in Delaware allows you to do that. The standard protocol is to inform the beneficiary as soon as possible.

When should you create a living trust in Delaware?

It is a myth that living trusts are meant for only wealthy people. If your total net worth is above $30000, you should create a Delaware living trust. Other than this, you can create a living trust if you have assets in other states or want to avoid probate proceedings.

Scenarios

• Your net worth exceeds $30000
• You want to avoid expensive probate process
• You want to postpone the asset distribution until your heir reaches a certain age.
• Do you want to disinherit someone
• You want to distribute your assets in an unequal way
• Of course, you can create a will to distribute your assets as per your wish but a living trust is harder to contest.

Should you make a will when there is already a living trust in Delaware?

The simple answer is 'yes'. Both wills and trusts have pros and cons. So, it's best to enjoy the lucrative features of both. For example, you may not be interested in keeping all your assets in the trust. Moreover, you can appoint a guardian for your minor children in a will. You can specify how to pay off debts and taxes.

Can a Delaware living trust help to reduce taxes?

There is no guarantee that a living trust can help you lower estate tax. Some states impose a 10% tax. However, you don't need to worry about federal estate tax. That's because the federal estate tax is not applicable in Delaware unless the total worth of your estate plan is more than $12 million. If the total value of the trust property is $12000 or more, you can opt for AB trust.

Delaware law does impose capital gains tax and state income tax on the accumulated income from the trust on non-resident beneficiaries. However, the state may impose a tax on the trust distribution.

Is Delaware a trust-friendly state?

Some states have trust-friendly laws. These states are Delaware, Alaska, South Dakota, Wyoming, and Nevada. Delaware law offers benefits to people who want to create long-term trusts. The governing instrument has flexible trust laws.

Conclusion

Living trusts are a good estate planning tool. To navigate the estate planning process smoothly, consult a financial advisor and a tax advisor. A tax advisor can help identify areas of tax savings and understand the complicated estate tax laws. The financial advisor can tell you how to manage assets, whether you should choose a revocable trust or an irrevocable trust, and prepare the trust document.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for advice on your specific situation.