Trust and Trusts: The Rise of the Delaware Statutory Trust

Corporations and LLCs get the attention, but Delaware offers a third vehicle that has grown indispensable in specialized corners of finance: the statutory trust. Flexible, durable, and lightly regulated, it has become a favorite structure for real-estate syndications, asset securitizations, and investment funds.

The statutory trust's appeal lies in its adaptability. Like an LLC, it lets the parties write their own governing agreement with minimal interference from the state. Unlike a corporation, it can be tailored to isolate assets, streamline ownership among many investors, and satisfy the technical requirements of tax rules that reward particular structures.

Real estate has embraced the form with particular enthusiasm. Sponsors use Delaware statutory trusts to pool many investors into a single property while preserving each participant's ability to defer taxes on a sale. Securitization desks rely on them to hold pools of loans at arm's length from the institutions that originated them.

Most consumers will never knowingly encounter one, yet these trusts sit beneath a surprising share of the financial products that ordinary savers own. It is Delaware law working, as it usually does, out of sight.