Footnotes
1. Those states which have adopted Art. VII of the Uniform Probate Code require trustees to register their trusts with the appropriate court.
2. See, for example, Miss. Code 1972, §91-9-1; 60 Okla.St.Ann. §172.
3. See Conn. G.S.A. 45A-177; N.H. Rev., Stats. Am. 564;19; Ohio R.C. §2109.30.
4. Va. Code §55.19.
5. Canfield v. Security-First Nat’l Bank of Los Angeles, 1939, 87 P.2d 830, 13 Cal.2d 1.
6. See, generally, Restatement (Second) of Trusts §156 (1959). See Weyawoth v. Delaware Trust Co., 45 N.2d 427 (Del. Ch. 1946).
7. 12 Del.C. §3536.
8. J.B.G. v. P.J.G., Del. Ch. 286 A.2d 256 (1971), aff’d, Del. Super., 306 A.2d 737 (1973).
9. See Note 7 above.
10. Id.
11. 10 Del.C. §3502.
12. Id.
13. Attachment is the process of seizing property and bringing the same into legal custody. Attachment proceedings are often used to obtain local jurisdiction over a nonresident by seizing his property within the state. In Delaware, this process may not be used upon a nonresident trust beneficiary.
14. 12 Del.C. §3536(b); Wilmington Trust Co. v. Carpenter, Del. Ch. 1961, 168 A.2d 306.
15. For example, a beneficiary may reduce his personal income taxes through a charitable deduction for interests assigned to a qualified charity.
16. 12 Del.C. §3302(d); 3303.
17. 12 Del.C. §3302(c) states that the propriety of an investment decision is to be determined by what the fiduciary knew or should have known at the time of the decision about the inherent nature and expected performance of the investment, the attributes of the portfolio, the general economy, and the needs and objectives of the beneficiaries.
18. 12 Del.C. §3313. For example, a direction advisor to a Delaware Trust would have the same fiduciary duties regarding investments as the trustee itself.
19. 25 Del.C. §503.
20. See, generally, Restatement of Property, §§390-392 (1944). Also see, Mondell v. Thom, 1944, 143 F.2d 157, 79 U.S. App. D.C. 145 (District of Columbia); Northern Trust Co. v. Porter, 1938, 13 N.E. 2d 487, 368 Ill. 256 (Michigan).
21. Delaware is unique among the states in allowing a trust to continue for generations by the exercise of a power of appointment. In addition, Delaware has no rule limiting the period during which a trust may accumulate income, as in other states where accumulations are limited to the period of the rule against perpetuities. Therefore, income may be accumulated in Delaware for generations, if desired.
22. See a discussion of Delaware’s Court of Chancery in, Gruson, "Tiny Delaware’s Corporate Clout," The New York Times, Sunday, June 1, 1986, at 6F.
23. 12 Del.C. §1307.
24. For example, fees of executors and attorneys in Delaware are set by the Court of Chancery at a comparatively low rate. Chancery Rule 192.
25. See Wisc. States. §71.14(7).
26. An irrevocable trust may be taxed in the state of the trustee’s residence, in states such as Arizona, California, Michigan and Virginia.
27. 30 Del.C. §1138.
28. Id.
29. Mercantile-Safe Deposit & Trust Co. v. Murphy, 15 N.Y. 2d 579, 203 N.E. 2nd 490 (1964) (New York); McCulloch v. Franchise Tax Board (1964) 37 Cal. Rptr. 636, 390 P.2d 412, 61 A.C. 171, appeal dismissed, 85 S.Ct. 278, 379 U.S. 133, 13 L.Ed.2d 333. The McCulloch case states the California position, now codified in West’s Ann. Calif. Rev. & T. Code §17745, that income accumulated from a nonresident trust for the benefit of a California beneficiary will not be taxed during the years of the trust’s administration. The accumulated income will be taxed, however, when it is actually distributed to the beneficiary upon termination of the trust.
30. Id. In addition, the due process clause of the Fourteenth Amendment to the U.S. Constitution has been interpreted to require minimum contacts between a taxing state and the person or property being taxed and some benefit or protection must be afforded by the taxing state.
31. 30 Del.C. §1122(c); 1142; The income from the trust may be subject to Delaware income taxation if the trust were engaged in a trade or business within Delaware.
32. See, for example, N.C. Code §105-274, 275 (North Carolina).
33. Id.
34. Commonwealth v. Stewart case, 1940, 12.2d 444, 338 Pa. 9; 72 Pa.C.S.A. §7301,7305.
35. Id. In the Stewart case, it was held that Pennsylvania could tax the equitable interest of a Pennsylvania beneficiary to a New York trust.
36. See, for example, N.C. Stats. §105-164.4, et. seq.
37. West’s Ann. Calif. Rev. & T. Code §6051 (Sales Tax), §6201 (Use Tax).
38. This position has been adopted by the Uniform Probate Code and the Uniform Estate Tax Apportionment Act.
39. West’s Fla. Stats. Ann. §§198.01, et seq.
40. 30 Del.C. §1501.
41. 30 Del.C. §1303.
42. 30 Del.C. §1323(b).
43. As to Class A beneficiaries (husband and wife), the exemption is $70,000, and for Class B beneficiaries (parents, children or other lineal descendants) the exemption is $25,000 for each 30 Del.C. §1322.
Glossary
Beneficiary: A person entitled to receive benefits (usually money or other property).
Fiduciary: Anyone responsible for the custody or management of property belonging to others, such as an executor, administrator, trustee, guardian, or conservator.
Grantor: A person who creates a trust; also often referred to as "trustor," "donor" or "settlor."
Irrevocable Trust: A trust that cannot be changed or revoked by the person who created it.
Marital Deduction: A deduction for estate and gift tax purposes for property that passes to a spouse.
Probate: The procedure in each state required to settle legally the estate of a deceased person and transfer his probate property.
Spendthrift Provision: The provision in a trust agreement that allows the donor to place the share of the beneficiary out of reach of the beneficiary’s creditors. The funds of this particular beneficiary (other than the donor) while in the trust cannot be attached or recovered by someone suing the beneficiary.
Trust: A relationship in which one person (the trustee) is the holder of the legal title to property (the trust property) to keep or use for the benefit of another person (the beneficiary).
Trustee: An individual or professional organization that holds the legal title to property for the benefit of another person or persons.