1st Annual Dynasty Trust State Rankings Chart Released

Nationally known estate planning and asset protection attorney Steve Oshins recently published a Dynasty Trust State Rankings Chart at http://www.oshins.com/images/Dynasty_Trust_Rankings.pdf.  Like his annual Domestic Asset Protection Trust State Rankings Chart at http://www.oshins.com/images/DAPT_Rankings.pdf, the Dynasty Trust Chart breaks down the material differences among the leading trust jurisdictions so the end-user can make an informed decision when selecting the appropriate trust jurisdiction.  Mr. Oshins was the author of Nevada’s 365-year Dynasty Trust law in Nevada’s 2005 legislative session.

This analysis is especially relevant as we enter the tail-end of the greatest gifting opportunity in the history of the gift tax.  With so many people setting up Dynasty Trusts right now as we close in on the end of the $5.12 million gift tax exemption opportunity, this Dynasty Trust Chart couldn’t have been created at a better time.

In determining the total score for each jurisdiction, the Dynasty Trust Chart assigned weights to several factors, including: the rule against perpetuities (30% weight); state income tax (25% weight); third-party spendthrift trust provision effective against divorcing spouse/ child support (divorcing spouse – 15% weight/ child support – 2.5% weight); domestic asset protection trust state ranking (10% weight); decanting statute (5% weight); directed trust statute (5% weight); and reputation/ other adjustments (7.5% weight).

We asked Mr. Oshins to do an interview for The Nevada Trust Reporter to give us some details about the Dynasty Trust Chart.  The interview questions and answers are below.

Schoenblum:  Just like your Domestic Asset Protection Trust Chart, your Dynasty Trust Chart is very useful.  What prompted you to create the Charts?

Oshins:  After years in this industry, I have gotten tired of all of the misinformation that is being disseminated.  My goal with the Domestic Asset Protection State Rankings Chart was to create a single page with just the material facts.  I wanted the end-user to be able to make a good, solid decision.  Not to mention, people are infatuated with rankings.  Rankings create discussion and discussion is good for the industry because it brings out people’s opinions.  That Chart became so popular in the industry that I decided to replicate it for Dynasty Trusts.

Schoenblum:  Your Domestic Asset Protection Trust Chart ranks Nevada #1, but your Dynasty Trust Chart ranks Nevada #3.  Why are they different?

Oshins:  I knew that question was coming!  Part of the responsibility in putting out these Charts is to be as accurate as possible.  Since I am a Nevada resident, there is an added perceived conflict of interest given that Nevada is one of the Tier 1 jurisdictions.  Therefore, it was important for me to show all of the facts and then make some ranking decisions that would be in line with the facts.  There is no doubt that Nevada is the #1 Domestic Asset Protection Trust jurisdiction, but after looking at the material differences among the Dynasty Trust jurisdictions, although the differences are minor, I would have lost all credibility if I had ranked Nevada #1.  Doing so would essentially make me no different than the marketers who tell their clients that their own jurisdiction is #1 even though they know it is not.  And that is what I wanted to clean up in our industry.

Schoenblum:  How are the Dynasty Trust states ranked?

Oshins:  There was never a doubt in my mind about the top three states.  I ranked South Dakota #1 with a Total Score of 97, Alaska #2 with a Total Score of 95.5 and Nevada #3 with a Total Score of 95. There is a big drop-off after those three states.  Tennessee is ranked #4 with a Total Score of 88, which would surprise many people since Tennessee doesn’t always get mentioned among the leading jurisdictions.

After Tennessee, there is another big drop-off.  Delaware and Wyoming are tied for #5, both with Total Scores of 79.  New Hampshire is ranked #7 with a Total Score of 77.  Then there’s another drop off before Ohio (#8, 72.5 Total Score), Illinois (#9, 71.5 Total Score) and Florida (#10, 66 Total Score).

Schoenblum:  Why were South Dakota (Total Score of 97), Alaska (Total Score of 95.5) and Nevada (Total Score of 95) so close in Total Score?

Oshins:  The only material difference among these top tier states is the permitted duration of the Dynasty Trust.  South Dakota allows a perpetual Dynasty Trust.  Alaska allows a perpetual Dynasty Trust, except that the Dynasty Trust is limited to 1,000 years if a beneficiary exercises a power of appointment (which is very likely).  Nevada allows a 365-year Dynasty Trust.  Unless a client cares about year 366, there are no material differences among the big three states.  The proper jurisdictional trustee selection therefore often becomes the most crucial decision when selecting from among the top three jurisdictions. And with so many people combining the Dynasty Trust with the Domestic Asset Protection Trust, Nevada is often selected given its position as the leading Domestic Asset Protection Trust jurisdiction.  You can’t go wrong choosing one of the Big Three regardless of which jurisdiction is selected.  It depends which feature is of the greatest importance to the client.

Schoenblum:  Your State Rankings Charts are a big help to our industry.  They have helped educate a lot of the advisors with whom we work.  Thank you for all of the hard work in putting them together each year.  Do you have any additional comments?

Oshins:  Thank you, Neil.  I’m glad the Charts are helping so many people.  My final comments for the readers are that they should be doing both Dynasty Trusts and Domestic Asset Protection Trusts.  If they are not, then they are missing the boat in my opinion.  I hope that this interview helps more people realize these great opportunities.


* Steve Oshins was interviewed by Neil Schoenblum, Senior Trust Officer at Provident Trust Group.  Mr. Schoenblum specializes in asset protection and trust law, particularly the advantages offered by Nevada.  He can be contacted at (888) 855-9856 or by e-mailing neil@trustprovident.com.


New Article on Nevada Asset Protection

The article was recently published in CCH Estate Planning Review and is entitled “Asset Protection in the Desert: Nevada’s Rules, Recent Developments, and Advantages.”



In Case You Missed It…The Trust Advisor Is Hosting a Second Webinar on Asset Protection Trusts

A little over a week ago, Provident Trust Group presented at a webinar hosted by The Trust Advisor, entitled “Strategies for Sheltering Wealth Using Asset Protection Trusts.”  Due to popular demand, The Trust Advisor will be hosting this same webinar, again, on Thursday, June 28, 2012, from 2:00pm – 3:00pm ET.  Provident is very pleased to announce that it will have the opportunity to present at this second webinar on asset protection trusts.

The webinar will examine uses and advantages of domestic asset protection trusts (“DAPTs”) as well as key differences between the states that allow them.  In particular, the webinar agenda will include a discussion of: several asset protection concepts (statute of limitations, fraudulent transfers, exception creditors, etc.); which states are leading DAPT jurisdictions and why; the strategy of combining a DAPT with two LLCs; and the Hybrid DAPT.

Provident will be speaking along with attorney Steven J. Oshins of Las Vegas, Nevada, who recently published his 3rd Annual Domestic Asset Protection Trust State Rankings Chart.

Virginia Enters the Asset Protection Arena

On April 4, 2012, Governor McDonnell signed into law Senate Bill 11, which added sections 55-545.03:2 and 55-545.03:3 to the Code of Virginia, thereby allowing self-settled spendthrift trusts to be established in Virginia.  Effective July 1, 2012, Virginia joins the ranks of other domestic asset protection trust states, including Nevada, South Dakota, Alaska, Delaware, Hawaii, Missouri, New Hampshire, Oklahoma, Rhode Island, Tennessee, Utah, Wyoming, and Colorado (although it is uncertain whether the latter’s statute provides protection).

Senate Bill 11 specifies that only “qualified self-settled spendthrift trusts” will be able to take advantage of the statute’s asset protection provisions.  The statutory requirements to establish a Virginia qualified self-settled spendthrift trust include:

  • the trust needs to be irrevocable;
  • the trust needs to be created during the settlor’s lifetime;
  • the trust needs to include at least one other beneficiary in addition to the settlor;
  • the trust, at all times, needs to have at least one “qualified trustee,” meaning any natural person residing within Virginia or legal entity authorized to engage in trust business within the Commonwealth, who maintains some or all of the trust property in the Commonwealth, maintains records within the Commonwealth, prepares fiduciary income tax returns for the trust within the Commonwealth, or “otherwise materially participates within the Commonwealth in the administration of the trust”;
  • the trust needs to be governed by the laws of Virginia;
  • the trust agreement needs to include a spendthrift provision, as defined in section 55-545.02 of the Code of Virginia, restricting voluntary, as well as involuntary, transfers of the settlor’s qualified interest; and
  • the settlor cannot retain the right to veto distributions from the trust.

Regarding the protection afforded by the Commonwealth’s self-settled laws, two Virginia commentators have written: “From a pure asset protection standpoint, Virginia is not as attractive as other jurisdictions, such as Alaska or Nevada.”  First, the Commonwealth’s statute provides that a “settlor’s creditor may bring an action under § 55-82 to avoid a transfer to a qualified self-settled spendthrift trust or otherwise to enforce a claim that existed on the date of the settlor’s transfer to such trust within five years after the date of the settlor’s transfer to such trust to which such claim relates.”  This five-year statute of limitations, or seasoning period, before the trust assets are protected, is longer than other self-settled states.  For instance, in comparison, Nevada’s statute of limitations for preexisting creditor claims is the later of two years from the date of transfer of the assets to the trust or six months after the creditor discovers or reasonably should have discovered the transfer.

Second, unlike Nevada, Virginia’s self-settled laws prohibit the settlor from retaining the power to veto trust distributions.  Third, under the Commonwealth’s statute, the actions of the independent qualified trustee, who is responsible for approving distributions, are not “subject to direction” by a broad list of persons and entities, including the settlor’s spouse, parents, issue, siblings, employees, or business entities in which the settlor maintains at least thirty percent of the voting power.  Furthermore, the foregoing individuals and entities cannot serve as independent qualified trustees.  Fourth, Senate Bill 11’s asset protection provisions just apply to a qualified interest, that is, the settlor’s right to receive discretionary distributions of income and principal from the trust.  As a result, all of the assets in the Virginia asset protection trust might not be shielded against the claims of a settlor’s creditors.  Finally, unlike Nevada, Virginia imposes an income tax against Virginia self-settled spendthrift trusts created by non-resident settlors.