Delaware Living Trust

Introduction

Key Things to Know

1. 1

   A Delaware living trust is void as to its death-time gifts unless it is witnessed, not merely signed. 12 Del. C. Section 3545(a) makes the creation, modification, or revocation of any trust interest contingent on surviving the settlor void unless the writing is witnessed in the settlor's presence by at least 1 disinterested person or 2 credible persons. A notary public may serve as that one disinterested witness. This puts Delaware alongside Florida and New York, not with the many states where a signed writing is enough.

2. 2

   A Delaware living trust avoids probate only for what you actually retitle into it; anything left in your own name still goes through Delaware probate. When you do fund a home into the trust, the deed is exempt from Delaware's realty transfer tax because you remain the beneficial owner (30 Del. C. Section 5401(1)j.1), and if you and a spouse held the home as tenants by the entirety immediately before funding, 12 Del. C. Section 3334 preserves that creditor protection inside the trust, something most states destroy on funding.

3. 3

   Delaware has no homestead exemption, and no restriction on how you may leave or fund a principal residence through a trust. The state's only residence protection, a $200,000 equity exemption under 10 Del. C. Section 4914(c)(1), applies only in a federal bankruptcy or state insolvency proceeding and has nothing to do with funding this trust.

4. 4

   Funding your trust can make your surviving spouse's elective share bigger and the money available to pay it smaller. Delaware measures the one-third elective share against your full federal gross estate, which includes this revocable trust (12 Del. C. Section 902(a)), but Section 908(b) excludes any property held in trust from the contributing estate that actually pays the claim, shifting the shortfall onto your remaining probate property.

5. 5

   Delaware imposes no estate tax and no inheritance tax on any death occurring on or after January 1, 2018; both taxes were fully repealed (30 Del. C. chapters 13 and 15). Neighboring Maryland, New Jersey, and Pennsylvania all still tax death in some form, but a Delaware living trust should be chosen for probate avoidance of funded assets, incapacity planning, and privacy, not death-tax savings.

6. 6

   A revocable Delaware living trust gives you no protection from your own creditors while you are alive; 12 Del. C. Section 3536(c) exposes it the same as property you own outright. After death, claims against the trust are barred on the same 8-month clock, running from the date of death, that applies to a probate estate (Sections 3337, 2102(a)). Delaware's separate Qualified Dispositions in Trust Act (Sections 3570-3576) does shield assets from creditors, but only for an irrevocable trust with a Delaware trustee, not this one.

7. 7

   Nothing is filed to create or maintain a Delaware living trust; 12 Del. C. Section 3522 requires no accounts or inventories from an inter vivos trustee. Instead of handing over the full instrument, your trustee can give a bank or title company a certification of trust that must be an acknowledged, notarized writing under Section 3591(b); a party who demands the complete document in bad faith is liable for the resulting damages and attorney's fees (Section 3591(h)).

Delaware Requirements for Living Trust

• Delaware Witness Requirement Voids an Unwitnessed Trust

  12 Del. C. Section 3545(a) makes the creation, modification, or revocation of any trust interest contingent on surviving the settlor void unless the writing is witnessed in the settlor's presence by at least 1 disinterested person or 2 credible persons. A notary public may serve as the disinterested witness, but a bare signature does not satisfy the statute.

• Delaware Transfer Tax Exemption on Funding Real Property

  A deed conveying real property to the trustee of this trust is excluded from Delaware's realty transfer tax, which runs as high as 4 percent combined, because the settlor remains the beneficial owner (30 Del. C. Section 5401(1)j.1). Record the deed promptly; Delaware is a pure race-recording state under 25 Del. C. Section 153.

• Delaware Tenancy by the Entirety Preserved in Joint Trust

  12 Del. C. Section 3334 preserves tenancy-by-the-entirety creditor protection when spouses fund property held that way immediately before contribution into a trust revocable by either or both of them, limiting a sole creditor's remedy to an order transferring the property back to both spouses as tenants by the entirety.

• Delaware Has No Homestead Exemption

  Delaware imposes no homestead exemption or devise restriction on a principal residence. The only residence protection, a $200,000 equity exemption under 10 Del. C. Section 4914(c)(1), applies solely in a federal bankruptcy or state insolvency proceeding and does not affect funding a home into this trust.

• Delaware Certificate of Trust Must Be Notarized

  12 Del. C. Section 3591(b) requires a certification of trust to be an acknowledged, notarized writing before a bank or title company may rely on it in place of the full instrument. Section 3591(h) makes a person who demands the complete document in bad faith liable for the recipient's damages and attorney's fees.

• Delaware Elective Share Counts Trust Assets Without Funding the Claim

  12 Del. C. Section 902(a) measures the one-third elective share against the decedent's full federal gross estate, including this revocable trust, while Section 908(b) excludes property held in trust from the contributing estate that pays the claim, shifting the shortfall onto remaining probate property.

• Delaware No Trust Registration Required

  12 Del. C. Section 3522 requires no accounts or inventories from the trustee of an inter vivos trust except as this instrument, a Court of Chancery order, or an order appointing the trustee provides. No filing brings this trust into existence or keeps it valid.