For years, U.S. citizens have looked to offshore jurisdictions to create trusts that protect a settlor's assets from the claims of creditors, yet allow the settlor to be named as a beneficiary. United States law and public policy have long been against the idea of allowing a person to enjoy benefits from assets that are simultaneously shielded from creditors' claims. However, despite this existing public policy, Alaska and Delaware have enacted statutes that attempt to do just that. Essentially, these statutes claim to make what used to be possible only offshore, now possible in the United States.
This Note seeks to show that regardless of whether the new legislation is effective in protecting assets from creditors, its mere passage seems to mark a break from long-standing U.S. public policy against self-settled spendthrift trusts. This well-established policy, reflecting ideas of equity and fairness, dictates that debtors should use available resources to pay their debts. This policy is most pronounced in situations where people are able to successfully shield their trust assets from such involuntary creditors as spouses, children, and tort victims. It seems that the Alaska and Delaware legislators may be willing to ignore what is fair to creditors in order to bring money into their states. In fact, these legislators may be putting the interests of their respective states, as well as the interests of wealthy asset protectors, before the rights of creditors, previously held concepts of fairness, and what has been the prevailing law in this country. If estate planners and asset protectors elect to utilize trusts under these new statutes, Alaska and Delaware stand to be the depositories of massive amounts of wealth. This will translate into financial growth in each state through increased business among banks, attorneys, accountants, financial advisors, and any other professions that will assist clients in establishing and managing these trusts, the benefits of which will trickle down throughout each state's economy. Since asset protection is the primary reason U.S. citizens create offshore trusts, Part II of this Note explains the goals behind asset protection and how the self-settled spendthrift trust works to achieve these goals. The policy implications of self-settled spendthrift trusts will be discussed, as well as the differences between U.S. law and that of foreign jurisdictions. Part III examines the background and the structure of the Alaska and Delaware statutes. Part IV discusses the effectiveness of the new Alaska and Delaware trusts as asset protectors. This Note concludes with an analysis of the significance of the shift in U.S. public policy and a determination that the Alaska and Delaware statutes do not represent good policy.
Amy L. Wagenfeld,
Law for Sale: Alaska and Delaware Compete for the Asset Protection Trust Market and the Wealth that Follows,
32 Vanderbilt Law Review
Available at: https://scholarship.law.vanderbilt.edu/vjtl/vol32/iss3/11