Article on Connecticut’s Trust Situs Laws

Caroline M. Watson recently published an Article entitled, Why Oh Why Wyoming: Why Connecticut Should Amend Its Trust Situs Laws and Move Onward and Westward with Wyoming, 29 Quinnipiac Prob. LJ. 469 (2016). Provided below is a summary of the Article:

Benjamin Franklin once said “in this world nothing can be said to be certain, except death and taxes.” In fact, death and taxes have become so certain in this world that they are the driving forces behind modern-day trust creation. Trusts are most often created so that the settlor has control over how his property is distributed after his death. When creating a trust, the settlor must decide where to settle the trust, in other words where to set up the trust. In past decades, off-shore trust situses were a popular option, as they allowed the settlor to avoid having to pay various federal and state taxes. However, in recent years, the United States has adopted various laws regarding the use of trust instruments, aimed at restoring the United States’ economy, making off-shore trust situses less attractive to trust settlors. Due to the various changes in off-shore trust laws, many jurisdictions have drafted new trust legislation, prompting much discussion among experts about the advantages of different approaches. Many states have enacted modern trust statutes to include low or non-existent state income taxes, abolish or expand the Rule Against Perpetuities, and include asset protection laws. The leading trust situs jurisdictions include Alaska, Delaware, Nevada, New Hampshire, South Dakota, and Wyoming.

This Note discusses the various leading trust situs jurisdictions and the laws those jurisdictions have enacted, as well as the applications and implications. This Note then analyzes Connecticut as a trust situs jurisdiction and proposes why Connecticut should amend its trust situs laws. While there is great potential for the state of Connecticut to heed long-term benefits from what this Note proposes, admittedly many of this Note’s proposals are unlikely to take effect. Part II of this Note provides the relevant background information on the leading trust situs jurisdictions, with specific emphasis on Wyoming. Part III of this Note explores why Wyoming is such an attractive trust situs jurisdiction. Part IV of this Note compares Wyoming’s trust laws to Connecticut’s current trust laws and fully analyzes why Connecticut should amend its current laws to echo the more modern and popular situs jurisdiction of Wyoming. Currently, with its common-law Rule Against Perpetuities statute and harsh state income tax statutes, Connecticut is not an attractive trust situs jurisdiction to resident settlors and trustees, let alone nonresident settlors and trustees. This Note proposes that Connecticut reform its trust situs laws and join the revolutionary trend, which includes decanting and domestic asset protection trusts, in trust situs jurisdictions that are beginning to sweep through the United States.