While it is very exciting to see these types of developments in an area of US law that has been relatively stagnant for decades, and while as a wealth planner the author very much appreciates the additional options which these new planning tools afford, there is a certain danger here. The danger is that it appears that many persons of means and their advisors are being lulled into a false sense of security. Are there new trusts really, as proclaimed by one attorney, 'the estate-planning tool of the decade?'

From an estate planning point of view, some are attracted to the Alaska and Delaware statutes because they purportedly provide one with the ability to settle assets in trust, remove them from the estate for US estate tax purposes, and then possibly receive them back on some 'rainy day.' There is nothing in the new enactment that itself allows for this (as if state legislatures can override matters of federal tax law). Moreover, this planning goal of placing assets aside for a rainy day can be accomplished under the law of any of the 50 states. The significant issue is not one of federal estate tax law, but of whether once such a trust is settled, creditors of the settlor can access the trust's assets. The legislatures of Alaska and Delaware have addressed this latter issue, at least to a limited extent. Therefore, could it possibly be that the legislators are hiding a true agenda of asset protection behind the facade of federal estate tax planning opportunities?

Getting things in perspective
Some perspective is important to better appreciate the asset protection planning implications of what we now see in Alaska and Delaware. As the reader likely knows, the trust concept dates back many hundreds of years. People settle (or create) trusts for many reasons. A little over ten years ago the idea of using a trust to protect property from what many felt (and still believe) to be the vagaries of the American legal system started to gain in popularity. Many planners saw the wisdom in settling the trust in an offshore jurisdiction. Not only would the geographical and jurisdictional factors weigh in heavily should a claimant someday pursue trust assets, but the fact that the trust law of certain offshore jurisdictions was more flexible in terms of allowing the person settling the trust to retain elements of control over and benefit under the trust was very attractive.

In 1989, the Parliament of the South Pacific jurisdiction of the Cooks Islands enacted specific asset protection-style legislation. As a matter of statute, this legislation results in a claimant's pursuit being made all the more difficult. It also provides statutory certainty that assets settled in trust remain protected even if the settlor retains liberal doses of benefit and control. Since that time another 16 offshore jurisdictions have enacted laws which to varying degrees accomplishes the same.

Keeping it onshore
Along comes Alaska. In an unabashed effort to develop its financial services industry and to keep onshore what might otherwise head offshore, its legislature recently passed a law designed to protect asset settled in trust even though the settlor retains certain degrees of benefit under and control over the trust.

Not to be outdone and with the express purpose of 'maintain[ing] Delaware's role as the most favoured domestic jurisdiction for the establishment of trusts,' a similar body of law was just enacted by its legislature.

Protective trusts?
The key question is, exactly how protective will these new Alaska Delaware trusts be? In the author's view, the new laws do a very fine job of turning a BB gun into a rifle. The Sherman Tank remains offshore. Why is this? There are many reasons, most of which are explained by the grid which appears as part of this article. Some of the more significant reasons include the following:

• As any qualified asset protection planner knows, one of the most important advantages offshore offers is that judgments rendered by courts foreign to certain offshore jurisdiction are not recognised. This means the claimant needs to have the matter tried all over again, in one (or possibly more) foreign courts. This would require that the foreign court(s) exert jurisdiction over the US defendant who settled the trust. Aside from cost and aggravation factors, the process will be quite difficult (if not impossible as a practical matter) to achieve. Last I checked, Alaska and Delaware each still recognise judgments of other states, in fact, the Full Faith and Credit Clause of the US Constitution mandates this result;

• Second, a number of offshore jurisdictions have short limitation periods within which actions must be brought against trusts. The limitation periods in Alaska and Delaware are at least two to three times as long as those of certain offshore jurisdictions;

• Third, the 'beyond reasonable doubt' standard of proof required to prevail in certain offshore jurisdictions (which is the standard of proof that could not be met in the O.J. Simpson criminal case) is much more stringent than is the 'preponderance of evidence' standard required by Alaska and Delaware;

• Finally, the ability of a settler to retain benefit and control is much more explicitly defined under the law of certain offshore jurisdictions.

Make the comparison
Then, of course, one should compare what is available onshore to itself. A number of differences appear between the new trust law of Delaware and of Alaska. Significantly, Delaware law specifically provides no asset protection with regard to 'obligations to any creditor who was induced by a settlor to extend credit on the strength of the settlor' financial statement or over written representation that the trust assets were available to satisfy debt. ' This irrebuttable presumption of fraudulent intent in such cases is in itself strong reason for planners and their clients to have cause for pause in using Delaware trust law.

There is the additional concern of what, say, the courts of Alabama or Mississippi (known for their plaintiff-oriented leanings) will do when they are asked to interpret or apply the Alaska or Delaware law. One of the many advantages of offshore is that it puts the settlor and the trustees in the position of not being too concerned with what a competing domestic court may decide.

While the new Alaska and Delaware trust provisions do much to advanced the relative position of these two states against the other 48, they do little to advance their respective positions against the offshore jurisdictions which have protective trust law.

Finally, readers may be interested in knowing that neither Alaska nor Delaware is the pioneer in this field it is claiming to be. Colorado has had similar law since 1861; Missouri claims the same fame as of the late 1980s.

The grid which appears as part of this article will assist the reader in comparing protection available in those jurisdictions which have enacted asset protection-style legislation. •