With $468 billion-plus now being managed by trust companies chartered in NH, it has become abundantly clear the state is a haven for trusts. Since the state began methodically modernizing its trust laws in 2003, the growth has been astounding—from 16 trust companies with $32 billion in assets to 26 companies that managed $633 billion at the market high last year (a 187 percent increase). To put that in perspective, the state regulates almost 20 times more trust assets than all of the assets and deposits held by the state-chartered banks and credit unions.
The state’s favorable trust laws are attracting some major players, such as the Johnson family, the family behind the multi-billion-dollar financial services firm Fidelity Investments. Crosby Advisors in Salem manages trusts on behalf of the family. In fact, Fidelity’s three different funds and foundations doled out $104 million from that office in 2013, 85 percent of it to organizations in other states.
The Granite State has worked hard to attract trusts. New Hampshire has updated its trust laws 10 times since 2003, with the most recent update last year. Unlike many other states, NH doesn’t tax many forms of income from trusts and has a court specifically dedicated to trust-related issues.
“Here’s the magic potion of this economic development initiative for the state of New Hampshire,” says attorney William “Bill” Ardinger, head of the Tax Practice Group at Rath, Young & Pignatelli, PC in Concord. “If we in New Hampshire amend our laws to make them the most modern, most sound, most flexible in the country, and if we amend our laws to provide for a very balanced, sound, but modern regulation of trust companies, and if we have a good state tax structure, we become a great location for families from all over the world who are shopping for the best place for a trust.”
Changes to trust laws have included allowing the formation of family trust companies and clarifying that the income and dividends tax does not apply to accumulated income. In 2011, the Wall Street Journal reported that “New Hampshire, in fact, has become a kind of mini-Switzerland for wealthy Northeast families.” “Since the time we’ve started this initiative the number of trust companies in New Hampshire has dramatically increased compared to other states,” Ardinger says. “But maybe even more important, the amount of assets under the administration and custody of trust companies has grown.”
A Foundation of Trust
A trust is a fiduciary arrangement allowing an individual or trustee the authority to hold or manage a person’s assets for a beneficiary or beneficiaries, or according to the person’s wishes. Trusts primarily protect assets, transfer wealth and further philanthropic goals. “In the early ’90s, we saw a lot of people creating wills. Today we see a lot of family trusts,” says Edward H. Benway, founder and president of Measured Wealth Private Client Group LLC in Portsmouth. “When it comes to trusts there is a plethora of options.”
There are public trust companies, family trust companies and trusts. The NH Banking Department regulates and charters public trust companies, many of which serve as asset managers for retirement funds and retirement plans, says NH’s Deputy Bank Commissioner Ingrid E. White. In addition, the department charters family trust companies, or private trust companies, an area expected to grow in the next five to 10 years thanks to new laws that went into effect in October. To take advantage of the state’s laws, it’s only necessary to have a trustee in NH. “A key component and factor in the launch of this effort to help make New Hampshire into one of the leading jurisdictions for trusts was to build up this sector of the economy,” says Todd D. Mayo, principal and general counsel at Hampton-based Perspecta Trust, founded in 2007 and named the country’s best independent trust company in 2015 by Family Wealth Report Awards. “These are good jobs.”
Ardinger agrees. “I would challenge anyone who is skeptical, who says it’s just about wealthy people; I would say that’s dead wrong,” he says. “Let’s say they bring a billion dollars of assets under management in a trust. Those assets don’t have to be in New Hampshire. But the management of the trust is being done in New Hampshire, the lawyers are in New Hampshire, the accountants are in New Hampshire, the secretaries are in New Hampshire and the trust that is a billion dollars pays the fees to New Hampshire [service providers].”
To keep up with the demand, White says the NH Banking Department created a separate trust division two years ago, with its own examiners. The trust growth was sparked initially in 2004 when NH became one of the first states to repeal the rule against perpetuities. This allowed trusts to pass wealth from generation to generation while minimizing the federal estate tax. In 2006 the state’s Trust Modernization and Competitiveness Act further clarified trust laws.
“The conditions were already favorable,” says Stephen J. Tall, COO at Perspecta Trust. “So the modernization of the trust laws enabled the state to extend its advantages to an additional market of investors. It really has created quite a dynamic environment for the trust industry.”
And NH keeps upping its game. It’s the only state with a specialized trust Docket of the Probate court which focuses on complex trust disputes, according to Ardinger. It also has its own forum and industry advocacy group, called the NH Trust Council, a coalition of trust companies, law firms and representatives from the state’s trust services sector.
A Continuing Evolution
Historically recognized for a strong history of protecting settlor intent, the state codified that into its statutes as well. “Courts have had a very long tradition in New Hampshire, more than any other state, to protect settlor intent,” Mayo says, meaning that the intent of the person establishing the trust is kept intact. “Some states are very lax, giving future generations a lot of latitude to make changes. In New Hampshire, the settlor can have restrictions or guidelines, including how the assets are going to be invested.”
As Mayo points out, trusts are becoming a more common way of passing wealth from one generation to the next. “Trusts have evolved into a way of providing multi-generational management of wealth for a family,” he says. “They can be as straightforward or as evolved as you want.”
“There’s no question trusts are actually an important part of a lot of people’s estate plans,” says Glenn Perlow, the former NH Bank Commissioner and the new vice president of government affairs at Perspecta and executive director of the NH Trust Council. “Regardless of what state you’re in, there are important benefits of employing trusts in one’s estate plan.”
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