The Delaware Court of Chancery: An Efficient and Fair Judicial System
The Delaware Court of Chancery is widely recognized as the nation’s premier forum for the determination of fiduciary adjudication and dispute resolution. With over 200 years of experience in trust and corporate law, the Court of Chancery is a court of equity as opposed to a court of law. The court is authorized to apply principles of equity, as opposed to those of law, to cases brought before it. The court hears cases involving remedies other than monetary damages. The Court of Chancery consists of one Chancellor and four Vice Chancellors, as well as Masters. The Chancellor and the Vice Chancellors are nominated by the Delaware Governor and approved by the Delaware Senate for 12-year terms. The Court of Chancery is a non-jury trial court that serves as Delaware’s court of original jurisdiction in all corporate and trust matters.
Delaware has a long and proud history of well-reasoned court rulings, by a sophisticated judiciary, and is has consistently demonstrated its commitment to protecting the advantages of Delaware’s laws. The strong body of fiduciary law helps ensure predictability and sufficient infrastructure to fairly and efficiently address disputes.
Delaware’s Legislative History
Delaware proudly boasts a forward-looking, bi-partisan, and progressive legislature that is knowledgeable about trust law and is invested in the success of the Delaware trust industry. Legislators are keenly aware of the industry’s position in fueling job growth and economic development. The Delaware Banker’s Association and State Bar Association work collaboratively to ensure Delaware’s trust legislation remains on the cutting edge.
Delaware’s laws are focused on carrying out the settlor’s intent. In 1933, Delaware enacted a law allowing for a new perpetuities period, leading up to the outright repeal of the Rule Against Perpetuities decades later. In 1994, Delaware enacted into law the Directed Trust Statute and bifurcation of trust duties into defined roles amongst multiple fiduciaries. Investment duties could also be assigned to an investment adviser. The statute provides for contractual flexibility in allocating separate fiduciary duties.
In 1995, Delaware repealed its Rule Against Perpetuities, laying the groundwork for the Delaware Dynasty Trust. Grantors to trusts could now use transfer tax exemptions remaining in existence forever and accumulate income transfer tax fee for future generations. In 1997, the legislature enacted the Delaware Qualified Dispositions in Trust Act to permit self-settled trusts, known as asset protection trusts. These irrevocable trusts contain a spendthrift clause and provide that Delaware law govern the trust’s validity, construction and administration.
Key legislation has followed in the past two decades, including the Total Return Trust Statute in 2001 and the Decanting Statute in 2003, which established that a trustee could distribute principal to one or more beneficiaries and also exercising power into further trust, thus providing a framework for non-judicial reformation of a trust. In 2004, Purpose Trust legislation (trusts established without identifiable beneficiaries) was enacted to achieve a specific purpose. In 2010, the legislature enacted legislation allowing for tenancy by the entireties property.
In 2015, Delaware updated its Delaware trust merger statute. This allows a trustee’s power to merge trusts is available when a new trust is created for the purpose of participating in the trust merger.
While the Delaware legislature is a part-time body, there are trust drafting committees that actively work year-round. These committees are comprised of leaders in the Delaware trusts & estates community who mark up proposed initiatives that benefit the industry at-large.