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Posts Tagged best trust states

Nevada, Alaska Win for Top Choices as Best Trust States in America

Cross-border asset war enters a new phase as Nevada captures almost twice as many votes as every other jurisdiction in the country put together. What’s the state’s secret? And are the accounts following its fame? 

nevadaWhen we asked Trust Advisor readers to name the best state for trust accounts, we were expecting a tight race between the top-tier jurisdictions.

After all, the gap between Nevada, Alaska, South Dakota and Delaware is surprisingly thin from a statutory point of view. But the way the narrowest distinctions are playing out in the court of public opinion is shocking.

According to our numbers, Nevada wins by a landslide.

When they heard, Las Vegas trust company Premier Trust volunteered to explain why they and their clients are so happy with the state. You can sign up for their September 16 webinar HERE. As always, it’s free and should run about an hour.

The numbers add up to a boom

Nevada ended up with 64% of the response to a very simple question: which trust state is best?

Alaska, Delaware and South Dakota –the other names in the traditional bulge bracket – barely scraped up the remaining 36% of the vote between them.

We were expecting a much more balanced result, so I suspect trust officers around the nation will be sneaking into the Premier webinar to see what one of the top firms in Nevada considers the reason the state is so dominant in advisor consciousness right now.

Maybe it just blows down to marketing and tireless promotion. On a deep level, the playing field is roughly level, so each state should get roughly the same respect from the industry.

All four support roughly the same level of protection from creditors, roughly the same favorable tax treatment and support for comparably lengthy “dynastic” trust periods. Nevada often has a tiny edge somewhere, but on the whole it’s too close to really call a winner.

But while Nevada may only capture a slight lead before a rival changes its rules to keep up, trust companies that operate there have become very savvy about communicating their edge while they have it.

And as we know, the basis of long-term success often boils down to the multiplication of the smallest and most transitory edges from month to month, year to year and decade to decade.

Other states may try hard to catch up or challenge whether all wealthy families need or even want every perk in the Nevada trust code, but that’s at best a reactive strategy.

Think of how you interact with your prospects. Do you spend more time telling them all the ways you’re great, or do you focus on explaining why they don’t really want what your fiercest competitors are bragging about?

Maybe the nation’s richest families really think they might have to lean on all the fine points of Nevada’s asset protection environment in their lifetimes. Or maybe they simply want to know the rules are there to protect future generations from a bad choice of spouses, for example.

In any event, it’s a long game that Nevada seems to be winning at the moment.

Picking a runner-up

If Nevada’s blowout performance was the biggest surprise in these numbers, the way the other states stacked up behind it was only a little less revealing about how each of them is getting the competitive message out there.

Alaska batted far above its weight class. The state has two trust companies on the books and as of three weeks ago, the Alaska Trust team runs them both.

Nonetheless, that team has managed on its own to keep Alaska alive as an attractive destination for assets from the Lower 48.

Because it’s the only game in Anchorage, Alaska Trust effectively garnered every vote for Alaska, which comes out to 15% of the total. That’s huge. At best, only a few heavyweights in Nevada could even hope to match that performance.

Matt Blattmachr, a vice president and trust officer at the firm, was thrilled to hear Alaska ranked No. 2.

“We are very excited that Alaska has been chosen as one of the leading jurisdictions by clients throughout the U.S. looking for the most advanced estate planning solutions,” he says.

“We greatly appreciate the support that practitioners and clients throughout the country have given us.”

South Dakota, with its dozens of independent trust companies, paradoxically looks a lot less impressive with its 11% of the vote to split so many ways.

Over the last few years we’ve seen South Dakota institutions become extremely quiet about the benefits their state provides cross-border accounts. It’s still one of the better trust jurisdictions in the country, but it’s hard to put a finger on when exactly it would be the best choice for a given trust.

Arguably a lot of the ways South Dakota excels are behind-the-scenes operational factors. The state obviously shines when it comes to luring trust companies to move their charter or set up shop in its territory. Whether that translates into new accounts remains to be seen.

And then there’s Delaware. With just 10% of the vote, the white-glove standard of the traditional trust industry seems a little defensive as non-conventional competitors keep popping up in far-flung states.

But let’s be realistic here. Delaware’s trust industry barely bothers to market itself because these firms have sheer gravity on their side.

The tiny state has captured close to quadruple its rightful share of the nation’s personal trust assets on a raw state-by-state basis. Per capita, these trust companies are 18 times as successful as their rivals anywhere else.

Given the often-tiny distinction between what a trust can get in Delaware and Nevada, gravity and convenience evidently pushes a lot of dollars toward Wilmington.

Do the distinctions outweigh inertia where your clients are concerned? The Premier Trust team will provide their view on September 16.

Obviously they’re a little biased toward Nevada. That’s why they chose to set up shop in Las Vegas. But if you’d like to hear the secret of their success, you can still register HERE.

 

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Apple’s $2 Billion Tax Dodge Gets Tax-Free States Worried

Routing revenue to tax-free Nevada has halved the tech giant’s IRS bills but the backlash may force trust havens and clients alike to reconsider business as usual.

Shunting business and assets to the most favorable jurisdictions was a time-honored element of tax planning process before growing public outcry against “fat cat” breaks got everyone riled up. Read the rest of this entry »

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Alaska, Delaware, Nevada, South Dakota Remain Top Trust States

Tennessee and Rhode Island make our favorites list, but Hawaii just doesn’t get the recipe right. New rules predicted for new South Dakota trust firms.

The battle to woo trust business heated up last year as trust advisors and estate planners rushed to take advantage of the 2010 tax environment — and lawmakers scrambled to make their states look as attractive as possible.

Our 2011 ranking of the top trust states corrects a few oversights from last year, updates for new developments and addresses a few controversies.

Tennessee and Rhode Island make the list this year, at Tier 2 and Tier 3, respectively. Idaho and Wisconsin, which offer out-of-state trusts little real benefit beyond dynastic trust arrangements, drop off.

Checking all the boxes…or else

To make a serious bid for a share of the $1 trillion personal trust market, you really need to provide dynastic trusts, directed trusts and asset protection trusts, plus favorable tax treatment for non-residents.

“Fail to check a box as you go through the list, and that state might automatically get crossed off,” says South Dakota trust attorney Daniel Donohue, a partner in Davenport Evans Hurtwitz & Smith.

“You might not need to use a type of trust now, but family members are always active and doing things, so you might want to make use of those statutes down the road,” he added.

This is especially important in dynastic scenarios where advisors have to reckon with family members who haven’t even been born yet, but may eventually need a way to shield a trust’s assets from creditors decades from now.

In fact, despite Florida’s efforts to allow asset protection trusts this year, its failure to do so was one reason that kept it from joining the Big Four — Alaska, Delaware, Nevada and South Dakota — which offer just about everything on the menu.

As it is, Florida does allow directed trusts, which let outside advisors manage the underlying assets, as well as a substantial 360-year dynastic trust period.

“Florida is a good example of a state that doesn’t belong near the top but doesn’t belong at the bottom either,” explains Steve Oshins, Las Vegas estate attorney and author of Nevada’s 365-year dynastic trust statutes. “Their dynasty trust provisions are okay.”

Delaware has taken care to keep its trust code current while building on its own reputation as a high-net-worth mecca where assets can remain in trust not just for centuries, but forever.

The Best States for Trusts

Tier

State

State Income Tax

Directed Trust Statute

Asset Protection Trust

Dynasty Trust Ability

Number of Trust Cos.

Time Zone (from NY)

1

Alaska

No

Yes

Yes

1000 yrs.

5

(-) 4

1

Delaware

Residents

Yes

Yes

Perpetual

53*

(-) 0

1

Nevada

No

Yes

Yes

365 yrs.

18

(-) 3

1

South
Dakota

No

Yes

Yes

Perpetual

58

(-) 1 / 2

2

Florida

No

Yes

No

360 yrs.

29

(-) 0

2

New
Hampshire

Residents

Yes

Yes

Perpetual

25

(-) 0

2

Tennessee

Residents

Yes

Yes

360 yrs.

22

(-) 1

2

Wyoming

No

Yes

Yes

1000 yrs.

11

(-) 2

3

Colorado

Yes

Yes

Uncertain

1000 yrs.

11

(-) 2

3

Ohio

Residents

No

No

Perpetual

20

(-) 0

3

Rhode Island

Yes

No

Yes

Perpetual

6

(-) 0

3

Utah

Yes

No

Yes

1000 yrs.

7

(-) 2

All tiers listed in alphabetical order. States links to state trust statutes.
Trust companies include state-chartered trust companies and OTS/OCC chartered institutions with trust powers.
* DE includes 19 state-chartered limited purpose trust companies.

Data: February 2011. © 2011 TheTrustAdvisor.com

South Dakota is too good to be true

And South Dakota has definitely established its credentials for no-nonsense service on directed trusts in particular.

However, South Dakota’s long ride with a $200,000 capital requirement may come to rest this year as more state trust regulators continue to complain that their entry rules are too easy.

States like Nevada, New Hampshire, Pennsylvania, Delaware, Florida and others all require $1 million or more to qualify for a trust license.

Recently, a South Dakota trust firm was prevented from doing business in Pennsylvania unless it posted $2 million in capital.

For several years, banking authorities in Florida have been annoyed with South Dakota trust firms operating there without meeting their $2 million capital requirements to do business.

Last year, the Florida banking department denied a new South Dakota trust company local operating privileges because its capital was too low.  Experts say more of that is to come.

With 58 trust firms now based in South Dakota and operating in all 50 states and abroad, the South Dakota regulator will likely feel the heat and tighten up to prevent more regulator complaints and bad publicity.

Is it a matter of asset protection or nothing?

However, the ability to provide a high level of asset protection may emerge as the most important factor in how the various more-or-less trust-friendly states differentiate themselves in 2011.

“I believe more and more emphasis is being put on asset protection,” Oshins says.

“If so, that helps break away Nevada from the other top-tier states, given that it has the leading self-settled asset protection trust laws,” he added.

Last year, uncertainty about the future of the tax code drove a lot of middle-market families to move their money into trusts.

But since the eleventh-hour Congressional compromise raised the exemption to $5 million — well above the level where it could apply to any but the wealthiest Americans — the trust industry’s priorities are rotating.

The logic here is fairly simple. While raising the estate tax exemption from $1 million to $5 million lets all but 3,500 families a year off the estate tax hook, the number of affluent doctors, entrepreneurs and potential divorcees out there who could benefit from asset protection trusts remains fairly constant.

Asset protection may become a more important factor in next year’s rankings, but that may not help Hawaii make it onto the list.

The Aloha State tried to make a big splash in the industry by allowing asset protection trusts last summer. But the statute was so diluted by restrictions and added fees that it just didn’t impress many onshore family offices.

Shortly after we published our 2010 survey, we reported that New Mexico was moving closer to enacting more trust friendly rules to attract trust business. That may not be the case. Shortly before press time this week, we learned that one of New Mexico’s largest trust firms was jumping ship and filed for a South Dakota trust charter this week.

Scott Martin, contributing editor, The Trust Advisor Blog. Jerry Cooper and Steve Maimes contributed to the reporting and research.

Permalink: http://thetrustadvisor.com/news/states2011

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