Trust Companies Struck Gold in December Setting Up $5 Million Estate Planning Trusts

As Congress dithered over the fiscal cliff, independent trust firms worked around the clock to process a flood of last-minute accounts. Some booked a year’s business in three weeks. Where now?

Firms celebrate year-end rush of new business.

December is usually anything but calm for investors scrambling to lock in the tax year’s opportunities, but the last few weeks pushed all the industry’s buttons at once.

Up until the last minute of 2012, nobody knew whether the $5 million gift and estate tax exclusions would survive a full-court Congressional debate.

Money poured into trusts and other vehicles designed to take advantage of the current tax code, leaving independent trust companies buried in paperwork but flush with cash to expand.

Trusts hit the big time

And with everyone from the wealthiest Americans on down to mere millionaires feeling like they dodged a bullet, insiders suspect this was a game-changing moment for the industry.

“We did two years’ worth of business in one month,” says Matthew Blattmachr at Alaska Trust.

“And these were not just existing relationships but what you might call mass affluent investors,” he adds. “Trusts have hit the mainstream.”

Down in Nevada, trust companies stayed open past midnight on December 31 to make sure new clients got their gifts approved and the forms signed ahead of the deadline.

Premier Trust was turning around accounts in hours if not minutes as long as the grantors and their attorneys knew exactly what they wanted, says CEO Mark Dreschler.

“Even if people weren’t on our system yet, we could get them checked out and the assets transferred that day,” he explains.

These weren’t simple self-directed IRAs, either, but family businesses, farms and other alternative assets that require special handling to ensure advisor-friendly treatment.

Premier might have added $500 million to its books in three weeks, estimates chairman Bob Bruderman — but a final number will have to wait until the dust clears.

Across Las Vegas, Provident Trust was also seeing the normal uptick in year-end business turn into a blizzard of business.

“This was not your average December,” says senior trust officer Neil Schoenblum. “There was definitely no holiday for us!”

Schoenblum’s team saw part of their new business come from big banks that simply refused — or were unable — to burn the midnight oil it took to work with last-minute clients eager to shield their wealth.

Reaping the whirlwind

A sense that the looming fiscal cliff would translate into a whirlwind of last-minute business gave many well-run firms time to prepare.

“We anticipated it toward mid-year, knowing that the exemption was scheduled to decrease and that Congress was unlikely to do anything before year end,” says Cynthia Brown, president of Delaware-chartered Commonwealth Trust.

“But a lot of grantors waited until the election to push the button, which means that a lot of business didn’t arrive until after Thanksgiving.”

Brown says her pipeline is still full of business that didn’t depend on the December 31 deadline and so clients agreed that planning could wait until early 2013 to be completed.

New York Private Trust was another Delaware-chartered trust company ready to roll with the punches.

“The anticipated increased volume of business occurred” says chief operating officer Richard Trumpler.

“Trust activity started peaking in August or September and then in the last few weeks of the year there occurred a virtual tsunami of year-end business.”

While Trumpler can’t go into specifics of how much wealth was in motion late last year, he notes that attorneys were a big driver of the last-minute push toward Delaware directed trusts.

But while existing relationships primed the pump, ability to execute was crucial.

His team was still taking new paperwork on December 27 — the Thursday after Christmas — and getting the trusts accepted and funded by the year-end deadline.

Windfall or the “new normal?”

The real question here is whether the asset flows will continue.

On the one hand, the immediate threat seems to have receded, taking the urgency to lock in the now-“permanent” $5 million exemption with it.

Clearly, the election gave a lot of millionaires a motive to push the button on formerly slow-moving estate plans that might not have turned into trusts for another year or two.

But while a few trust companies are looking forward to an empty 2013 pipeline, most are eager to build on their recent successes as Americans wake up to the realities of higher taxes.

“We will have a year or two of very good business opportunities,” admits George Brown, chief marketing officer at Summit Trust, of Nevada whose marketing office is in Colmar Pennsylvania.

All it takes is one act of the incoming Congress to overturn the results of the fiscal cliff deal and put everyone back into the planning fog.

In the meantime, the sheer number of truly last-minute estate plans has already started generating follow-up opportunities.

Some firms are ramping up to decant rushed last-minute trusts created to beat the clock without getting every single detail of jurisdiction or structure right.

Others are moving to take over trusteeship from attorneys who accepted short-term responsibility themselves in order to make the deadline.

And quite a few are simply looking forward to taking care of utility business that piled up while the emergency accounts took priority.

Either way, trust firms are now focused on new opportunities created in a post-cliff environment.

Premier Trust is taking no chances business will walk in the door by itself this year. They have retained a high-caliber email marketing consultant to help navigate messaging to the advisor community for the rest of the year

Those who proved that they can work well with advisors as well as their clients have been rewarded.

Let’s see where they go from here.

Scott Martin, senior editor, The Trust Advisor


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