I am often asked why we have recommended making a different state the location for a client's Dynasty Trust, Family Limited Partnership, or LLC. Since setting a trust or entity up in another jurisdiction is
There are many different reasons for doing so.
Some states allow a trust to last forever. California, on the other hand, severely limits the length of time the trust may exist. This can have real negative tax consequences to my clients.
Some states allow for great restrictions on the Limited Partners or LLC Members. California, on the other hand, is fairly loose. This means that those entities do not get the best valuation discounts nor the asset protections afforded by other states.
Recently, Tamara Pow of the Structure Law Group, posted on the San Jose Business Lawyers Blog an article on Choice of State for a New Corporation. In it, she compares California, Nevada, Delaware as places to form your new corporation. She discusses the pros and cons of each. I commend her post for your perusal.
Obviously, these are complex issues that require time and an understanding of the client's goals and objectives. It is not uncommon, in my practice, for clients to decide to do the more convenient thing rather than the most “tax efficient” thing. They may a business decision. Or they make a family decision.
But it is very important that clients be given options… so they can make a decision. In my experience, most Santa Clara County Estate Planning Lawyers only advise and recommend California trusts and entities. They often don't know better.
Make sure you client's get options. Fill out our Contact Form or call the office to comment or ask questions. A reminder… our office is in San Jose near the airport with convenient freeway access and free parking.