I hope I don't insult any readers here, but I want to insert a little background. It took me a while to figure out this trust business. Our trust laws came from England. A traditional trust has a settlor (grantor) and a trustee, both people, not corporations, usually for the benefit of a third party. Both the settlor and the trustee have unlimited liability. A corporation protects its owners and shareholders from liability.

In 2005, Duncan's firm was approached by an organization called New Hampshire First and asked why New Hampshire was not the best private trust company state in the country. "We advised them to do something dramatic to jump ahead of the curve by making their trust laws the best in the nation," he says.

Now New Hampshire meets a lot of important criteria for where people want to have their trusts. "We were the principal draftsman of the new trust company act and subsequent revisions of trust laws. Our job was to make it a progressive and modern state for trusts. We adopted the best things from other progressive states and then put in some new things."

For example, the original law, adopted in 2006, left unclear the taxation of dividends and interest, Duncan says. People were hearing that the New Hampshire trust law was good, but that dividends and interest might be taxed. "The ambiguity was holding a lot of people back," he says. An amendment was added to make clear that dividends and interest were no longer a problem unless a family member, who is a beneficiary of the trust, resides in New Hampshire.

Another amendment to clean up further ambiguities is before the New Hampshire House of Representatives now and was already passed by the Senate. "That's our goal for 2011," Baker says. His firm, Perspecta, was set up in 2007 to take advantage of the 2006 law by acting as trustee for trusts and helping families set up their own trust companies.

Perspecta, based in Hampton, N.H., serves wealthy clients, those with more than $25 million. The firm helped set up the first private trust company in New Hampshire. Baker joined from Goldman Sachs two years ago. Last year, an affiliate of Perspecta invested in Ballentine Partners, an independent investment advisory firm overseeing more than $5 billion in client assets. The goal of this partnership is to give wealthy families access to trust and investment management services to take advantage of New Hampshire's favorable state tax rules and trust laws. Ballentine, formerly known as Ballentine, Finn & Co., has offices in Wolfeboro, N.H., and Waltham, Mass., and serves 100 families worth at least $20 million.

Another amendment to the law allows the formation of an asset protection trust, Baker says. "Before this law was passed, people had to go offshore to do this," Baker says. Duncan Associates also created a "decanting dynasty purpose trust" for New Hampshire. A dynasty trust can last forever, Duncan says. A purpose trust has no beneficiaries but instead a purpose "doing whatever helps the family's mission." No one can sue a purpose trust. "'Decanting' means that someone can set up new trusts, new purpose trusts or new family trusts," Duncan says. So if, for example, someone like Bill Gates wants to decide how much money to put in trust for a charity, for family and so forth, he doesn't have to make that decision now. He can put the money in a purpose trust.

This type of trust is very new, Duncan says. You could make the purpose of a trust "global peace." This trust, which is taxable, "has great value," he says. "There are a lot of nuggets in the New Hampshire trust law that are being picked up by other states like Delaware, Nevada and Tennessee."

With the new definition of family office, as well as other restrictions in the Dodd-Frank law, Duncan expects some states to follow New Hampshire's broadening of trust rules. And, of course, he expects New Hampshire to benefit greatly from this law.

 

Mary Rowland can be reached at [email protected]. She has been a business and personal finance journalist for 30 years and has written two books for financial advisors: Best Practices and In Search of the Perfect Model.

First « 1 2 » Next