Alaska Trusts – A Wealth of Benefits

There are many states that offer beneficial trust laws, but none stand out quite like Alaska. Alaska has various estate and tax planning benefits that offer unique opportunities for individuals and families preparing to set up trusts. Some of these benefits include asset protection trusts, community property trusts, continuous improvement in statutes, and much more. Did I mention that you don’t need to be a resident to set one up?

The Alaska Trust Act of 1997 allowed for the creation of domestic self-settled asset protection trusts and the removal of the Rule Against Perpetuities (detailed below). These trusts allow a grantor to set up an irrevocable trust, while also being a discretionary beneficiary, and prevent creditors from laying claim to the assets. Additionally, they allow the grantor to exclude the assets in the trust from their own estate, even if they are a beneficiary to the trust.

By removing the Rule Against Perpetuities, Alaska enabled the possibility of creating dynasty and perpetual trusts. Generally, an Oregon trust is required to terminate in a time frame put into place by the Rule of Perpetuities, specifically, the later of 90 years after its opening or 21 years after the death of the primary recipient. Since Alaska rid itself of the Rule of Perpetuities, assets in a dynasty trust will not face a transfer tax when being passed down to future generations and will allow for much greater growth with each generation.

The Alaska Community Property Act allows married couples who live in non-community property states to have the same benefits of a community property state. One of the most important benefits is the double step up in basis upon the death of a spouse. This increases the tax basis of a property to the current fair market value, which will reduce the total taxes paid on the gain from the property sale.

Pairing these benefits with the absence of a state income tax truly makes Alaska one of the best, if not the best, states to open a trust in. We only scraped the surface when it comes to Alaskan trust benefits. If you would like to learn more, please reach out to our team and we will be happy to help!