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MARSHFIELD, Mass., May 28 /PRNewswire/ — The Wall Street Journal recently profiled Advisors Institutional Services in the context of increased interest from wealth managers, investment advisors, broker-dealers and other financial institutions in creating and operating trust companies in South Dakota. As the WSJ story points out, South Dakota is becoming the top choice for trust […]
Banks and advisors continue to flock to top-rated South Dakota for favorable trust laws and cost-effective operations.
PIERRE, SD., Feb 12 – Denver-based United Western Bancorp (Nasdaq: UWBK) has applied to receive a trust charter in South Dakota, according to a report released this week by the South Dakota Division of Banking.
A United Western spokesman confirmed to the Trust Advisor Blog that it has filed with the South Dakota Division of Banking to restart its currently Texas-based trust operation, once part of Sterling Trust, with a South Dakota charter.
United Western, according to its website, is the third-biggest savings bank in the western United States, with eight full-service community banking branches scattered across Colorado’s affluent Front Range, $2 billion in deposits and about 370 employees.
In April last year, United Western sold most of its lucrative Sterling Trust Company, a pricy alternative asset custodian, to the Ohio-based owner and operator of Equity Trust Company of South Dakota for $61 million; the deal closed in June. The remainder firm, known as United Western Trust Company or UW Trust Company, is now a relatively small Waco-headquartered and chartered trust company with roughly 12 employees and $26 million in trust (as of September 30, 2009). In its present form, the company primarily provides legacy, escrow, life insurance settlement and paying agent service accounts.
Restarting UW Trust under a South Dakota charter would immediately let United Western take advantage of that state’s bank-favorable regulatory environment, says Denver estate attorney David Kirch. “States have been enacting more trust-friendly laws and South Dakota is definitely one of the friendly types,” he told The Trust Advisor. “That’s probably why they chose it.”
Jon C. Walls, a banking industry expert and former Lehman Brothers investment banker, told the Trust Advisor that “United Western’s Scott T. Wetzel is a veteran banker with experience at both Compass Bancshares and KeyBank. He understands the importance non-spread businesses can play in diversifying the revenue mix of a community bank.”
Walls added, “While capital adequacy issues seemingly prompted the sale of the bank’s trust division in mid-2009, its successful common stock offering last September put it at levels exceeding regulatory requirements.”
After a month of death tax confusion, The Trust Advisor checked in with key providers to see if business slacked off.
Between the threat that Congress will retroactively de-repeal the currently repealed federal estate tax and the ongoing questions about what happens to the tax in 2011 and beyond, the wealthy and their advisors are busier than ever.
We thought that most death tax consultants and trust officers would have taken a long vacation in Hawaii without an estate tax this year to worry about. But it’s shaping up to be just another year in the trust planning business. “The whole repeal is much ado about nothing,” said Phil Kavesh, a Southern California estate attorney and founder of UltimateEstatePlanner.com.
In an interview with The Trust Advisor Kavesh suggested, “Let’s not kid ourselves, there’s going to be an estate tax moving forward. We’re telling our clients to keep planning, full speed ahead.”
That’s the reality. After years of speculation, lobbying and not a little daydreaming to the contrary, nobody seriously believes the estate tax is going away for good, and the rich will have to go on planning around it.
The question is how we’ll be defining “rich” when the tax makes its comeback. If Congress does nothing, estates valued at more than $1 million will be taxable at a rate of up to 55% next year. But as University of California-Davis estate law professor Joel Dobris explained it, that low exemption level would alienate a lot of potential campaign contributors for Republicans and Democrats alike. “It makes for more unhappy upper-middle-class voters.”
An exemption of $3.5 million (as proposed in President Obama’s 2010 budget and passed in a narrow partisan House vote December 4) or $5 million (as the equivalent Senate bill mandates) is far more likely to win bipartisan support. Given the recent adjustment of power on Capitol Hill, there’s a chance Republicans could fight for the higher number. But gridlock would work against them—if they fail to make a deal in the next 11 months, they expose tens of thousands of America’s wealthiest households a year to a new tax liability.
Never the Main Market
In any event, while those households wield a lot of economic heft, there really aren’t that many of them — whether the exemption is fixed at $5 million, $3.5 million or even $1 million.
According to numbers from the Urban Institute and Brookings Institution’s Tax Policy Center, about 1.7% of all Americans who die each year (44,000 estates) would accrue an estate tax liability in 2011 if the $1 million exemption remains in place. Raising the tax bar to $3.5 million shrinks the pool 85% to 6,400 estates; a $5 million exemption would cut that population in half again, leaving only the 3,500 richest estates owing anything to the IRS.