Mary B. Hickok, Esquire Vice President and Trust Counsel Wilmington Trust Company Wilmington, DE Tel: 302-651-1173 Fax:

1. Presentation for CHESTER COUNTY ESTATE PLANNING COUNCIL Mary B. Hickok, Esquire Vice President and Trust Counsel Wilmington Trust Company Wilmington, DE Tel: 302-651-1173 Fax: 302-651-1981 E-mail: mhickok@wilmingtontrust.com October 12, 2006 ©2006 Wilmington Trust Corporation. Affiliates in California, Delaware, Florida, Georgia, Maryland, Nevada, New York, Pennsylvania, Tennessee, London, Cayman Islands, Channel Islands, Dublin, and Milan. This presentation is for information purposes only and is not designed or intended to provide legal, investment, or other professional advice because such advice always requires consideration of individual circumstances. If legal, investment, or other professional assistance is needed, the services of an attorney or other professional adviser should be sought.

2. SCOPE • Advantages of Delaware Law for Trusts • Delaware Asset-Protection Trusts (APTs) • A few thoughts on the new Pennsylvania Uniform Trust Code

3. ADVANTAGES OF DELAWARE LAW FOR TRUSTS • Tradition • Trust legislation kept current • Carry out trustor’s/testator’s objectives – 12 Del. C. § 3303(a) • Perpetual trusts possible – 25 Del. C. §§ 501-506 • No tax imposed on income accumulated or capital gains incurred for nonresident – 30 Del. C. §§ 1601(g), 1636, 1605 • Prudent-investor rule followed – 12 Del. C. § 3302 • Division of trust responsibilities authorized – 12 Del. C. § 3313

4. ADVANTAGES OF DELAWARE LAW FOR TRUSTS (cont’d) • Effective third-party spendthrift trusts available • Spendthrift trusts – 12 Del. C. § 3536 • Crummey trusts – 12 Del. C. § 3536(d) • Accounts in banks – 10 Del. C. § 3502 • Effective self-settled spendthrift trusts available • Qualified Dispositions in Trust Act – 12 Del. C. §§ 3570-3576 • Accounts in banks – 10 Del. C. § 3502

5. ADVANTAGES OF DELAWARE LAW FOR TRUSTS (cont’d) • Total-return unitrusts and power to adjust permitted • Conversion of existing trusts – 12 Del. C. § 3527 • Recognition of new trusts – 12 Del. C. § 3527A • Power to adjust – 12 Del. C. §§ 6113-6114 • Appropriate judicial relief provided • Court system • Confidentiality • Non-judicial accountings – 12 Del. C. § 3522

6. ADVANTAGES OF DELAWARE LAW FOR TRUSTS (cont’d) • Trustor’s/designate’s standing to enforce charitable trust – 12 Del. C. § 3303(b) • Surviving spouses’ elective rights might be defeated – 12 Del. C. §§ 901, 908, 3573 • Trustee “decanting” power available – 12 Del. C. § 3528 • Perpetual noncharitable purpose trusts authorized – 12 Del. C. § 3555 (2006) • Transfer to DE does not extend trust’s duration – 12 Del. C. § 3332(a) (2006) • DE law generally governs administration of trust moved to DE – 12 Del C. § 3332(b) (2006)

7. DELAWARE APTs • Trusts created for third parties generally not reachable by their creditors • Trusts created in U.S. for trustor generally reachable by trustor’s creditors • DE now recognizes self-settled trusts – 12 Del. C. §§ 3570-3576

8. DELAWARE APTs (cont’d) • Since 1997, over 400 DE APTs created worth over $2 billion • Requirements – irrevocable DE spendthrift trust that appoints qualified trustee • Qualified trustee – DE resident (not trustor) or DE bank or trust company which performs specified actions

9. DELAWARE APTs (cont’d) • “Best” structure – DE trustee given complete discretion • Distribution options: • Current income • Up to 5% interest in GRAT, GRUT, or TRU • Interest in CRT • Interest in QPRT/qualified annuity interest • Ability to get income/principal under standard or complete discretion • Ability to be reimbursed for income taxes attributable to trust

10. DELAWARE APTs (cont’d) • Other options • Trust may appoint non-DE cotrustees, advisers, or protectors • Trustor may keep power to veto distributions and special testamentary power of appointment • Who may reach trust assets? • Existing/foreseeable creditors on horizon • Existing/foreseeable creditors not on horizon • Trustee may create trust

11. DELAWARE APTs (cont’d) • Federal tax implications • Income tax • Trust usually will be grantor trust • DE APT may be nongrantor trust • Gift/estate tax • Transfer may be incomplete gift • Transfer probably can be completed gift and excluded from estate • GST tax – exemption probably should not be allocated

12. DELAWARE APTs (cont’d) • Constitutional and related issues • Jurisdiction • In rem • Personal • Court of primary supervision • Applicable law • Full faith and credit • Bankruptcy

13. DELAWARE APTs (cont’d) • Possible uses • Estate planning • Asset protection • Premarital planning • Protect CRTs and other estate planning vehicles • Save state income/intangible tax • Preimmigration planning • Provide protection for trusts moved from offshore/onshore jurisdictions • Address Rev. Proc. 2005-24 for CRTs

14. A FEW THOUGHTS ON THE NEW PA UNIFORM TRUST CODE • The effective date is November 6, 2006, not November 4, 2006, as was sometimes reported earlier last summer. • The same bill that enacted the UTA repealed the PA Rule Against Perpetuities for all interests created after December 31, 2006. So, perpetual trusts may be created as of January 1, 2007. • UTA requires trustees to give notice of the existence of an irrevocable trust to any beneficiary over 25 who currently may be entitled to receive income or principal. § 7780.3

15. A FEW THOUGHTS ON THE NEW PA UNIFORM TRUST CODE (cont’d) - An interesting exception covers an irrevocable trust where the Settlor is still living, and has not been declared incapacitated by a court. - Once the Settlor dies, notice must be given within 30 days. - In general, a Trustee of an existing irrevocable trust has until November 6 of 2008 to give notice. • The statutory and judicial rules of construction governing testamentary trusts now apply to revocable trusts. § 7710.2 In general, all rules in force for Wills will apply to revocable trusts. • Choice of Law: a Settlor may select the law that will govern the meaning and effect of the trust instrument unless that law contravenes one of the mandatory rules set forth in Section 7705, such as the notice and creditors’ rights provisions.