A client sat in my office last week. He’d spent forty years building a successful apparel business in Manhattan, but his children now live in Florida and Texas. He’d set up a New York trust for them years ago, but now he was second-guessing that decision. “Russel,” he asked, “I keep hearing about Delaware and South Dakota trusts. Is my New York plan obsolete?”
It’s a question my firm addresses more and more. For the vast majority of families I represent, a trust domiciled in New York is the most direct and prudent path. But for a select few—often with specific asset structures or generational goals—looking beyond our state’s borders is a worthy exercise. The work is not about finding the single “best” state; it is about aligning the trust’s legal home with the family’s specific reality.
The Case for a New York Trust
For most of our clients, the center of gravity is here. The family business is here, the real estate is in Brooklyn or on Long Island, and the intended trustees are local. In these situations, establishing a trust in New York is a matter of simple practicality.
Our courts are deeply familiar with the state’s Estates, Powers and Trusts Law (EPTL), which provides a predictable framework for administration. When a question arises, we aren’t dealing with a remote court system or an unfamiliar body of case law. Administration is streamlined. Fiduciaries have direct access to local expertise, and the costs of managing the trust are often lower.
New York law also provides established mechanisms for handling contingencies. For example, EPTL § 7-1.9 provides a pathway for beneficiaries and the creator to consent to the modification of an otherwise irrevocable trust. This isn’t a free-for-all—it requires careful procedure—but it demonstrates a built-in flexibility that can serve a family’s evolving needs without requiring them to engage with a foreign jurisdiction.
Why Some Families Look Elsewhere
When does it make sense to consider a trust in a state like Delaware, Nevada, or South Dakota? The conversation usually centers on one of a few specific objectives that go beyond what New York law prioritizes.
Asset Protection: Some states have enacted laws that are highly protective of trust assets against the creditors of the beneficiaries—and in some cases, even the creator of the trust. These are often called Domestic Asset Protection Trusts (DAPTs). New York is not a DAPT state. For clients in high-liability professions or with particular concerns about future claims, establishing a DAPT in a state like South Dakota can be an important part of their planning.
State Income Tax: For an irrevocable trust designed to accumulate income over many years, the tax implications are substantial. If the trust is properly structured in a state with no fiduciary income tax—like Nevada or South Dakota—it can grow without that annual tax drag. This can result in a dramatically larger legacy for future generations. This requires careful planning, however, to avoid conflict with New York’s own tax rules for its residents.
Perpetual Trusts: New York, like most states, has a “rule against perpetuities” that limits how long a trust can last. For families who wish to create a true multi-generational legacy—a dynasty trust that can provide for great-grandchildren and beyond—states that have abolished this rule are very attractive. In a state like Delaware, a trust can be designed to last for centuries, stewarding wealth as a perpetual resource for the family line.
The Practical Test: The Trustee
Choosing a state is not an abstract legal decision. It comes with a critical, real-world requirement—the trustee. A trust’s legal home, or domicile, is typically tied to the residence of the trustee. If you want to benefit from Delaware’s trust laws, you generally must appoint a Delaware-based trustee.
For most families, this means hiring a corporate trust company in that state. These institutions serve an important role, but it changes the dynamic. A corporate trustee is not a family member. They are a professional fiduciary, with their own fee structures, investment philosophies, and administrative procedures. Appointing one requires a deliberate choice to professionalize the management of the family’s legacy. It can be the right choice, but it’s a trade-off. You gain the benefits of that state’s laws, but you may lose the personal touch of a family advisor or friend serving as the steward of your assets.
The question my client asked was the right one. His circumstances had changed, and a plan that was perfect a decade ago deserved a second look. A trust is not a static document; it is the legal and financial engine for your family’s future. Choosing its legal home is fundamental.
If your family’s geography or financial picture has evolved, a jurisdictional review of your existing trust documents is a prudent first step. Schedule a meeting with our firm to map out your assets and long-term intentions against the legal frameworks available, and we can determine if your plan remains aligned with your goals.
