Historically, the vast majority of our asset protection planning clients have been business owners, real estate developers and professionals such as doctors and corporate executives. However, a recent trend has developed in which corporations have also been looking to benefit from asset protection planning in order to better position both themselves and their owners in this volatile economic climate. In the typical situation, a corporation has substantial cash on hand. The concern is that unexpected claims can expose this asset to the company’s creditors.
Through contact with several of our sources in Delaware, including both attorneys and several Delaware trust companies, we have learned that a corporation can protect assets from creditors through a trust created under the terms of the Delaware Statutory Trust Act. A Delaware statutory trust, which is considered a separate legal entity apart from its beneficial owners and trustees, may carry on any lawful business purpose or objective.
Delaware statutory trusts have been utilized by corporations for various transactions in which they wish to limit their exposure or liability. However, the Delaware statutory trust also provides a methodology for a corporation, as the beneficial owner of the statutory trust, to insulate the assets of the statutory trust from the creditors of the corporation itself.
The underlying functions and operations of Delaware statutory trusts allow for substantial flexibility for both corporations and their owners. As with all high level corporate and asset protection planning, the key to any plan utilizing a Delaware statutory trust will be in the establishment of a fundamentally sound and practical approach that meets the needs and accomplishes the objectives of the parties. The ability to incorporate a Delaware statutory trust into the asset protection planning process provides exciting opportunities for corporations with assets that may be in need of protection.