Real Property vs. Personal Property

April 13, 2006

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One of the most complicated issues involved in setting up a Delaware or Alaska asset protection trust is the question of jurisdiction when state laws conflict.

Probably one of the most secure ways to establish jurisdiction over the trust in Alaska or Delaware is to have the trust invest in real property (land and buildings) situated in that state.

It is clearly established that jurisdiction over real property is accorded to the state in which the real property is situated. Thus, the trust could invest in a rental apartment building or a condominium located in Delaware or Alaska, depending on the site of the trust.

While using this strategy would limit investment choices and reduce liquidity, it would also make it very difficult for creditors from outside these states to challenge the validity of the trust.

Warning

Because a state can assert jurisdiction over real property located within the state, it would be a mistake for an Alaska or Delaware trust to invest in real property located outside of one these states. Doing so would likely ensure that the state in which the real property is located will have jurisdiction, and that the trust, at least to the extent of this asset, is invalid.