Setting up a Trust in Alaska for Asset Protection

In My Humble Opinion
1

http://www.alaskausatrust.com/trustee/alaskaBenefits.asp

This site provides many details about setting up a trust in Alaska.

From reading the site, it seems as if I could set up a revocable trust in Alaska, make myself the beneficiary, (have the company in the link act as trustee but limit its powers to "whatever jtgain tells you to do) and:

  1. Transfer all of my assets into the trust protecting them all from creditors. (I’m currently solvent, just looking down the road).

  2. Defer any federal taxes until I actually take money out instead of paying cap gains “as you go”

and

  1. Since AK has no “rule against perpetuities” I could set up a “John Jones Dollar” trust where I invest a dollar with instructions to leave it to my 100th great grandchild, at which time he would have all of the money in the world due to compounding interest.

Am I wrong here?

2

Those are certainly the goals, to achieve creditor protection and minimize federal estate and related taxes.

Note that these trusts are irrevocable, not revocable.

Protection from creditors: If you actually live in Alaska and the trust invests in Alaska real estate, you’re probably in a strong position. Suppose, however, that you live in New York, your car is titled and insured in NY, and all of the trust’s millions of dollars of assets are invested in NY, other than a $10K CD in an Alaska bank. If you were to run over me with your car, I would sue you in NY and argue that NY law should apply – which would allow creditors to reach the trust assets. I think I would win that argument in some courts but lose it in others.

Income tax: AFAIK, the arrangement does not defer or avoid any federal income tax. Indeed, it’s a disadvantage on this point, because federal income tax rates for trusts are higher than for any natural persons.

Gift/estate and GST taxes: If I’m thinking about this correctly, you wouldn’t save any money at the time of your death, because putting assets into the trusts does not increase your personal exemptions for these taxes. I think it would achieve the goal of avoiding these taxes upon the deaths of your descendants. That’s the advantage that you’re bequeathing to Prof. Farnsworth in the year 3013. (I suppose it’s possible that the government could feel sufficiently threatened by these exemptions to change the rules in the future somehow.)

As far as compound interest goes, doesn’t inflation erode its growth (and your descendants’ ability to claim all of the money in the world)?