PIERRE, SD., Aug 28 – New private trust company launches have declined in the past two years according to data recently released by the South Dakota Division of Banking. Previously, the South Dakota regulator only reported the name and address on South Dakota Trust Company formations. The new Excel format report, called a credentials roster covers more comprehensive information which includes, if the enterprise is public or private and its launch date.
Private trust companies or family trust companies cater to ultra-high-net-worth individuals with at least $100 million in investable assets. These trust companies which have been set up by families to avoid the necessity of using third-party trust companies and who have special assets such as closely held family businesses, real estate or partnership interests or don’t feel comfortable handing over their assets either to an individual or to a big trust company to manage.
Private trust companies often have boards set up with various committees that enable family members from many generations of branches to be involved in managing the family’s wealth.
Private trust companies launches hit a peak in 2007 with 4 launches and when they were chronicled in a Wall Street Journal article; Wall Street Journal; Matters of Trust: Super-rich Setup Companies. According to the WSJ story, private trust companies have been promoted by private trust company expert John P. C. Duncan, a Chicago lawyer. Duncan reported, in 2007, that the numbers have increased because more trust lawyers have touted their benefits.
TRUST COMPANY TRENDS
South Dakota public trust company start-ups have surged this year. Last month, The Trust Advisor reported an increase in start-ups nationwide including South Dakota. With five launches completed and several other now awaiting filing, 2009 will likely become a record year for the State.
SHIFT TO NEVADA?
Perhaps the reason for the decline in South Dakota is that many trust lawyers are waiting for a new Nevada law to become effective October 1, 2009, Nevada SB-310 which permits private family trust companies to be setup without special licensing and without regulatory capital. Previously, Nevada required private trust companies to have $300,000 of regulatory capital.
Earlier this year, Duncan testified at a Nevada State Senate Hearing in support of SB-310, endorsing higher capital requirements for public institutions and no licensing or capital requirements for private family trust companies.
L. Scott Walshaw, Nevada’s former banking commissioner and regulatory advisor with Garrison Institutional said, “It’s too early to determine that the decline in South Dakota is a definite trend. There is not enough data to statistically validate any conclusions.”
Walshaw added, “Besides the year is not over and there could be ten filings before the end of the year. As for the shift to Nevada no one knows how many new trust companies will be incorporated under SB-310.”