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Investing involves risks and you may incur a profit or a loss. Past performance cannot guarantee future results. This material is provided for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. There is no assurance the any investment, financial or estate planning strategy will be successful.

New York is a high tax state, regularly coming in as one of the highest in the country with a top marginal tax rate at 10.9%. New York City applies an additional income tax between 3.078% and 3.876%. Combined, these taxes may approach 15% for a resident of New York City (www.ny.gov).

Personal trusts can be important tools for helping to minimize a family’s state income tax liability. Holding family wealth inside a trust may limit the ability of New York state and New York City to tax the trust’s income. The “location” of your family’s assets (where your assets are held in trust) may be a significant driver of wealth by potentially reducing or eliminating the drag of state (and city) income taxes. This has been especially true since the effective repeal of the SALT (state and local tax) deduction in 2017, which capped the amount of state taxes that may be deducted against federal gross income.

How do I establish or move a trust to Delaware?

Regardless of your state of residence, you may create a new trust in Delaware and many existing irrevocable trusts may be moved into Delaware for ongoing administration. If you live in New York and created a trust, or you are the beneficiary of a trust, it may be as simple as changing from a trustee who is located in New York to one located in Delaware in order to potentially reduce the trust’s state income tax burden. Creating a new trust requires engaging an attorney who drafts the trust agreement to meet your specific planning goals. You select the beneficiaries of the trust, often your immediate family members, which could include a spouse, and determine when and how they may benefit from the assets held in trust. Finally, you select the assets to place in trust that you want to shield from state income tax. Importantly, while real estate located in New York and other assets that produce New York source income generally cannot escape New York tax, you should be able to shield most other assets, including certain marketable securities, from state taxes.

Please see important disclosures at the end of the article.

Note that a few states, including Delaware, have special trust advantages that may not be available under the laws of your state of residence, including asset protection trusts and directed trusts. This article is for information purposes only. There is no assurance that any investment, financial, or estate planning strategy will be successful.

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