Skip to content 
When setting up a trust, most people focus on who the beneficiaries are, what assets will be included, and who will serve as trustee. But there’s another crucial element that often gets overlooked: the governing law of the trust. This choice can have a significant impact on how the trust is interpreted, administered, and even taxed.
What Does “Governing Law” Mean?
The governing law of a trust refers to the state laws that control how the trust operates. These laws determine:
- How trustees must act and report.
- What rights beneficiaries have.
- How disputes are resolved.
- What tax rules may apply.
When you create a trust, you typically specify in the trust document which state’s laws will apply. If you don’t, courts may decide based on where the trust was created, where it’s administered, or where the trustee or beneficiaries live.
Why Governing Law Is Important
1. Trustee Powers and Duties
Different states have different rules about how trustees can manage investments, distribute assets, and report to beneficiaries. Choosing favorable governing law can give trustees more flexibility while still protecting beneficiaries.
2. Beneficiary Rights
Some states give beneficiaries broad rights to information, while others allow more privacy and discretion for the trustee. The chosen law affects how much control or insight beneficiaries will have.
3. Asset Protection
Certain states offer stronger protections against creditors or divorcing spouses. Selecting the right jurisdiction could help preserve wealth for future generations.
4. Taxes
State tax laws vary. Depending on the governing law, your trust may face different state-level income or inheritance tax obligations.
5. Dispute Resolution
If conflicts arise, the governing law determines how courts interpret the trust and resolve disputes. Some states are known for having more efficient or favorable trust litigation rules.
Changing the Governing Law
In some cases, trusts can be moved—or “decanted”—to a new jurisdiction with more favorable laws. However, this process can be complex and requires court approval or careful compliance with state statutes.
Final Thoughts
The governing law of your trust is more than just a technical detail—it shapes how your trust is managed, taxed, and protected for years to come. When creating or updating a trust, it’s essential to consult with an experienced estate planning attorney who understands Georgia law and can advise if another jurisdiction’s rules may better serve your goals.
