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Commonwealth Trust Company
An
Independent Delaware Trust Company Established in 1931
INSURANCE TRUSTS
Benefits of Delaware Trust
Law
How to Take Advantage of
Delaware Trust Laws
Corporate Versus
Individual Trustees
The Typical
Trust Structure.
Delaware law
permits the appointment of investment advisors (the advisor may even
be the settlor of the trust), trust protectors and distribution
advisors, none of whom are required to be residents of Delaware, so
long as a Delaware trust company is serving as trustee. Commonwealth
Trust Company, as your independent trustee, requires only that you
utilize an independent investment advisor.
About Insurance Trusts
Life insurance
proceeds payable to anyone other than an insured’s spouse are
subject to Federal estate tax if the
insured holds certain ownership rights (incidents of ownership) in
the policy at the time of death.
Incidents of
ownership include:
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The right to
change beneficiaries,
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The right to
borrow against the policy, or
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The right to
pledge the policy as collateral.
An effective method
in avoiding Federal estate tax is the creation of an Irrevocable
Life Insurance Trust where the insured holds no incidents of
ownership. Upon acquisition of a new policy on the settlor’s life,
the trustee holds all incidents of ownership in the policy and the
life insurance is immediately excluded from the settlor’s estate.
Upon transfer of
the ownership of an existing policy to a trust, all incidents of
ownership are assigned to the trust. After placement of an existing
insurance policy into the trust, three years must pass before the
policy is excluded from the settlor’s taxable estate.
Aside from
potential gift considerations, the Irrevocable Life Insurance Trust
remains an excellent tool for reducing or avoiding estate tax in
both spouses’ estates while providing future generations with
tax-free proceeds.
By implementing
an Irrevocable Life Insurance Trust, insurance proceeds may be
removed from a taxable estate. These proceeds may provide liquidity
for estate expenses, estate tax payments or balancing bequests to
beneficiaries when non-liquid assets such as closely-held business
or real estate held in an LLC dominate estate holdings.
Financial Institution Fees Versus Commonwealth Trust Fees
Many financial
institutions will not accept Irrevocable Life Insurance Trusts or,
if they do, excessive fees are charged for the performance of Trust
Administration during the life of the insured. The excessive fees
are due to the non-liquid nature of the trust. During the life of
the insured the trust owns the life insurance policy yet owns
virtually no liquid assets for investments.
Commonwealth Trust
Company Offers Professional, Economical Services.
In comparison,
Commonwealth Trust Company provides the insured with professional,
economical trust services. Since our sole function as trustee is
trust administration, that is, management of your trust, we are able
to offer streamlined, economical services.
Effectively Assigning Rights Of Ownership
To effectively
assign rights of ownership, the insured cannot act as trustee for
their Irrevocable Life Insurance Trust. Ideally, an Independent
trustee, other than one of the trust beneficiaries, is chosen.
Commonwealth Trust Company is an independent trust company acting as
an independent trustee to your trust. In that role, we are able to
offer professional, economical trust services.
When Considering a Corporate Trustee, Consider
Commonwealth Trust Company
An Independent
Delaware Trust Company Established in 1931
The Delaware Advantage
· Delaware
law allows the formation of asset protection trusts which shield
assets from certain classes of creditors and allow the settlor of
the trust to remain a potential beneficiary.
· There is
no Delaware income tax on ordinary income or capital gains
accumulated or distributed to non-resident beneficiaries.
· There
are no Delaware intangible personal property taxes.
· Delaware
allows the creation of dynasty trusts which can last indefinitely
without imposition of additional estate or gift taxes.
· Trust
accounting rules are streamlined and may be eliminated if the
settlor so desires.
· Delaware
law recognizes spendthrift trusts and provides virtually complete
protection from claims of creditors for a trust beneficiary,
especially if the trustee is a Delaware bank or trust company.
· Delaware
does not require trust agreements to be filed or recorded, and if
they are subject to litigation, the Chancery Court has been willing
to place the court record under seal.
· Delaware
permits the settlor of a trust to limit the number of beneficiaries
who are to receive notice of the trust, both during the settlor’s
lifetime and after his or her death.
· Delaware
permits the settlor of the trust to establish his or her own
investment policy in the trust instrument, and permits the use of
investment advisors of their own choice to advise the trustee
without breaching the trustee’s fiduciary responsibility.
· The
Chancery Court has a history of seeking to determine the settlor’s
wishes and the settlor’s intention, as demonstrated in the trust
instrument.
· Delaware
law permits decanting.
About Commonwealth Trust Company
Commonwealth Trust
Company is a non-depository trust company that serves as Corporate
Trustee for various types of Delaware situs trusts including:
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The Delaware
Dynasty Trust
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The Delaware
Asset Protection Trust
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Life Insurance
Trusts
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GRATS
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Charitable
Trusts
What makes our
service unique is that we only perform trust administration,
offering you the resource needed to take advantage of Delaware trust
law while working with your current trusted advisors and never
replacing them.
Since we only
perform administrative services and do not provide investment
services, our structure permits you to use your existing investment
advisor. Delaware law also permits you to use a distribution advisor
and a trust protector of your choosing.
We are professional
trust administrators with a well trained, responsive staff. Our goal
is to provide our clients with the best service experience.
With our staff of
highly skilled professionals, Commonwealth Trust Company offers you
and your client experience and integrity. We have been engaged in
trust services for over 75 years gaining extensive expertise in
business and fiduciary matters. You will benefit from our expertise
and will find we respond quickly and efficiently to all trust
matters.
*This information is
not meant to convey legal or tax advice.
You should contact
the appropriate advisor on these matters.
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