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mcpherson1031dst · 3 years ago

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As early as the 16th century, the concept of property held by one person in trust for another person was part of English common law.

For nearly 400 years, the common law fund has been used by lawyers, primarily for the benefit of extremely wealthy individuals who have established a kingdom of trusts to pass the ownership of assets from generation to generation with the least tax and the greatest amount of wealth. security in the process.

However, a Delaware Statutory Trust (DST) is a legal entity, created by filing a trust certificate with the Delaware Department of Corporations, and subject to Chapter 38, Part V, Title 12 of the Delaware Code. Annotated (see §§ 12 § 3801 to 3862).

Legal Trust vs. Mutual Trust Delaware is one of the few states in the United States that has a statutory trust act. Most states still rely on common law trusts.

Common law trusts, while still often in use, have many outdated rules, which can create uncertainty about a number of legal aspects of the trust. Delaware has undertaken the task of modernizing the common law and establishing an effective and judicially secure form of entity.

Legal credit law, similar to the Delaware LLC law, is based on the legal principle of freedom of contract (see 12 § 3823(b)). This gives the power to determine the rights and responsibilities of the various parties to the drafters of the ruling instrument, which is generally called a trust agreement (see 12 para. 3801(f)). A trust agreement is the private document governing an entity.

Delaware does not require the filing of a trust agreement (unlike many other states), and therefore the parties to the trust and their relative duties and responsibilities may remain confidential from the parties involved (see 12 §3810).

The trust agreement is a final document, and Delaware law provides that a Delaware Chancery court will enforce its terms on trustees and beneficial owners (see 12 §3804).

What does a Delaware legal fund do? A trust agreement is a contract and therefore enforceable. It can establish different classes or groups of trustees and/or beneficial owners (see 12 §3806), and establishes the nature of the distributions of trust assets in favor of beneficial owners (see 12 §3805).

Trustees may have very broad powers or very limited powers, depending on the trust agreement, and can delegate their duties and powers to the officers, committees, agents, or other persons mentioned in the trust agreement (see 12 §3806).

There is no requirement to draft the trust agreement in English, and no requirement to submit the document to any authority in Delaware for approval.

There are no restrictions on the specific location that the trust agreement must be kept in, and there is no specific format or wording that must be taken into account. In fact, the drafters have the full power to invent the trustee and beneficial owners relationship as they wish.

For example, the voting rights of the trustee or beneficial owners may be extended, limited, or revoked in connection with any matter relating to the fund, such as investment decisions or distribution decisions (see 12 §3806).

This provides greater flexibility compared to common law trusts and most alternative forms of business organisation, which often contain mandatory provisions on matters such as voting rights and dividends.

How to Open a Delaware Legal Trust The Delaware Legal Trust Act (DSTA) states that the trust is a separate legal entity and that no creditor of the beneficial owner is entitled to any property belonging to the trust (see 12 § 3805)(b)).

The DSTA also states that the beneficial owner has no identifiable interest in the trust property (see 12 §3805(c), and the beneficial owner may terminate the trust only in accordance with a special trust agreement (see 12 §3803).

Therefore, the other beneficial owners of the trust are protected against any bankruptcy or divorce of the beneficial owner, or any major life changes.

Beneficial owners may have the same limitations on the entity's personal liability as Delaware shareholders (see 12 §3803); That is, beneficial owners may participate in the management or effective control of the legal trust through the direction of the trustees, without incurring any personal liability (see 12 §3806(a)).

Beneficial owners may transfer their interests to others, unless prohibited or restricted by the trust agreement. Courts will allow portability unless specifically limited in a trust agreement (see 12 §3805(d)).

Trustees vs Beneficial Owners In general, an entity has two types of participants: trustees and beneficial owners:

The trustee retains legal ownership of the trust assets, but is required to follow the terms of the trust agreement in managing these assets. The beneficial owner has equitable ownership and is also bound by the terms of the trust agreement with respect to his or her ability to manage, control or benefit from the assets. Trustees and beneficial owners cannot be held liable for their good faith reliance on the provisions of the trust agreement (see 12 §3802). At least one trustee must be a Delaware resident and may be satisfied by appointing a Delaware trust or forming a Delaware corporation to act as trustee (see 12 §3807).

There is no Delaware tax or income tax on statutory trusts formed in Delaware.

Under the United States Internal Revenue Code, a business trust can be treated as a grantor, partnership, or partnership trust, just like a corporation, depending on the wording of the trust agreement.

With the "check the box" regulations in place, it is possible for a charter fund to choose the type of tax structure under which it wishes to operate. Additionally, nonresident alien beneficiaries of established trusts are not required to pay any income tax or file any tax return in the United States. See 26 CFR Section 1.6012-1(b)(2).

A Delaware statutory fund may qualify as a REMIC (real estate management investment contract), REIT (real estate investment trust), or a regulated investment company, such as a mutual fund, under an IRC and receive preferential tax treatment .

Mutual funds created with a Delaware statutory trust may not be required to hold annual meetings of shareholders or allow shareholders to vote on any matter.

Delaware statutory funds are often used to finance commercial aircraft. The trust owns the aircraft, which is administratively managed by a Delaware trust. The airline is the beneficial owner, using and maintaining the aircraft while paying the lender, generating a return on investment.

This type of arrangement is sometimes called a leveraged lease; In this way, none of the three is responsible for the aircraft itself, in the event of an accident. This type of entity demonstrates how much flexibility is allowed while still protecting the parties under a law that respects its trust agreement and the good faith management decisions of the parties involved.

Delaware Legal Fund Benefits To summarize, here are some of the benefits of forming a Delaware statutory fund:

More security than "general" trust relationships Flexibility in defining the categories of trustee and usufructuary, as well as the specific rights and responsibilities of the different parties included in the trust Privacy of individuals due to a trust deed not required to be filed with the State of Delaware No franchise tax or income tax in Delaware For those who want to learn more about trust.

McPherson Delaware Statutory Trust (DST)

1402 Villa Juno Drive S Juno Beach, FL 33408

321-297-3217

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