Posts Tagged Summit Trust
11 Top Trust Firms Make the Winners’ List for Advisor Friendliness in Our New Special Report
Posted by Scott Martin in News on February 6, 2012
Teamwork is key for a whole generation of trust officers who have little motive and less opportunity to cut the advisor out of the game. Unlike football, everybody wins.
After decades of financial advisors and trust companies fighting over client loyalty, a few members of each of faction are realizing that it’s more profitable to work together.
That’s what we found out when we surveyed the industry and learned that the trust companies that actively court long-term relationships with financial advisors are winning big accounts — without stealing them from the advisors themselves.
The most advisor-friendly of all made it into our latest special report. (Download it here.)
They’re an eclectic bunch of organizations, ranging from white-glove institutions to high-tech entrepreneurial upstarts. Pretty much all they have in common is their independence and their eagerness to prove that they’re not a threat to your business.
They don’t have in-house wealth managers hungry for commissions or management fees, so the motive to ingratiate themselves into the lives of your best clients and squeeze you out just isn’t there.
They don’t have proprietary investment products to push into trust portfolios. And they don’t even mind if your preferred custodian hangs onto the money.
Get inside the list
Operationally, the most advisor-friendly trust companies out there emphasize flexibility and service.
Whether they’ve been around for a few years or close to a century, every single one is willing to work with any custodian you care to name: TD Ameritrade, Pershing, Schwab, Fidelity.
Between them, just about all the major accounting platforms are on the table, so if you want plug-and-play integration with Schwab, SunGard or anything else, you’re probably going to find it somewhere on the list.
And big surprise: all of the top trust jurisdictions are well represented.
Advisors have been flocking to trust companies that operate in Alaska, Nevada, South Dakota and Delaware — not to mention New Mexico — in order to get their clients access to the most flexible trust statutes and best tax treatment in the country.
Dynastic trusts, which run for centuries or even forever, are a popular offering. So are asset protection trusts, unitrusts and other specialized vehicles.
On the service side, most have the in-house expertise in place to promise extremely fast turnaround. A trust that could take weeks to set up elsewhere can be up and running in under a day here.
Not willing to hog the ball
The very idea of an “advisor-friendly” trust company might come as a shock to the 85% of advisors worried about losing the assets their clients move move into trust.
For too long, that account “migration” was a painful fact of life for advisors who wanted the best for their clients.
Wealthy clients quite rightly demanded the ability to incorporate trusts into their financial plan to protect their property from taxes, nuisance lawsuits and ultimately mortality itself.
But when advisors located a conventional trust company to serve as corporate trustee, it generally meant handing over about $1 million in assets — roughly half the typical high-net-worth investor’s net worth — as well as the associated management fees.
The clients were happy. The trust company was overjoyed to get the business and active management rights over the portfolio. And the advisor suffered.
Needless to say, a lot of advisors were less than eager to recommend that their best clients take their assets elsewhere, and so the adoption of trusts lagged.
As a result, according to Fidelity, a full 40% of high-net-worth households have yet to set up trust arrangements, even if it’s in their financial interest to do so.
A shot at a shared win
The trust companies on our list saw that natural resistance as an opportunity to offer advisors a better deal and capture that elusive 40% of the market.
Every single one of them supports an arrangement known as directed trust, in which the client assigns the right to manage the assets to an advisor — usually the one he or she is already working with.
The trust company does what it does best: run the trust.
All the bookkeeping, reporting and fiduciary responsibilities remain with the trust company, which earns a nominal fee for the service. If there’s a problem, it’s up to the trust company to deal with.
From the advisor’s point of view, nothing changes. The assets remain on the book of business and keep generating the same fees. With few exceptions, the trust company has no legal right or duty to interfere in the investment choices.
The client is happy to have an advisor looking out for his or her ultimate best interests. The advisor-friendly trust company gets new trust accounts to run. And the advisor doesn’t lose.
Scott Martin, senior editor, The Trust Advisor. Steven Maimes assisted with the research.
Deportation Trusts Become Hot Commodity with Rich Undocumented Immigrants
Posted by Scott Martin in News on November 28, 2010
As the quest to deport illegal aliens looms, wealthy immigrants with questionable status wait and worry about their dependents’ financial well-being. Some immigration attorneys and estate planners have engineered a cottage business creating trusts that protect assets in the event they are deported. But trust firms are cautious.
Practically speaking, the country’s 11 million undocumented immigrants have always been in a precarious legal position. But with federal and state authorities cracking down, the threat of sudden detainment or deportation is more real than ever.
In the face of that threat, wealthy foreign nationals are reaching out to estate planners to insulate their families and shield their property.
A simple power of attorney will do the trick in some situations, but others may require a full-fledged trust. That’s where things can get complicated, says Chuck Sharpe, a Dallas estate planner and co-founder of Wealth Advisors Trust.
To open a trust or bank account, a resident alien needs to register with the IRS to get an international taxpayer identification number (ITIN).
While many undocumented immigrants studiously avoid any contact with the federal government, plenty — 3.8 million of them — have ITINs and are paying taxes.
If members of this group can scrape up enough proof of identity to satisfy the trust company and if nothing in their background raises a red flag, the process of creating a trust can be relatively simple, Sharpe says.
“I don’t know of any requirements requiring you to be a U.S. citizen — or a citizen of a particular state, for that matter — to set up a trust,” he explains.
“The only special issue on that front is that you use the ITIN number in place of a Social Security number,” he adds.
Meet the deportation trust
The arrangements that estate planners are coming up with — call them “deportation trusts” if you like — need to work like a conventional asset protection trust, while building in a lot of the features of a will or estate plan.
Once the trust is in place, it works like a conventional asset protection trust. The settlor can use the assets as long as he or she is in the United States, and if a deportation order is ever served, the asset protection kicks in to make it harder for the authorities to freeze or confiscate wealth granted to the trust.
Meanwhile, the “estate plan” side provides instructions for winding down life in the United States in an orderly fashion: appointing guardians for children left behind, liquidating non-trust assets and paying debts.
“The one thing you probably want is to make sure you’re creating the trust in a jurisdiction that allows for self-settled trusts,” Sharpe says.
In the Southwest, that means your options boil down to the domestic asset protection states: Nevada or South Dakota as a first choice, followed by Utah or Colorado, whose statutes either make a lot of exceptions or are too vaguely worded for many lawyers’ comfort.
Since neither Arizona nor California — hotbeds of anti-immigration rhetoric — support self-settled trusts, wealthy aliens in these states would probably be better served by situating their assets elsewhere.
Pinning down the details
Naturally, the normal asset protection statute of limitations is in force. A Nevada deportation trust, for example, would need to hold the assets for at least two years before providing any benefit.
Because the deportation process rarely gives people longer than one year to wind down their U.S. affairs, it’s going to be too late to get the trust process moving if someone is already on Immigration’s radar.
This makes advance planning critical. And since the people with the assets to take advantage of these arrangements tend to also have top-notch advice, many started laying the groundwork back in 2006 when Arizona first got tough on undocumented nationals within its borders.
“Anybody thinking of doing it probably has some wealth,” Sharpe says. “And with that kind of wealth, they were probably already thinking of broader estate planning needs.”
In those cases, amending the existing paperwork to cover the possibility of forcible ejection from the country — and add asset protection, where needed — may be enough, estate planners say.
At that point, the real questions revolve around beneficiary and trustee choice and the tax ramifications of any grant or gift of property. Gift tax considerations, for example, may apply whether the beneficiaries are foreign nationals or U.S. citizens.
As for fees, Sharpe says that a deportation trust should be roughly as expensive to administer as a more traditional asset protection trust. Added costs may arise if there are a lot of foreign beneficiaries or other research-intensive details complicate the situation.
No ITIN, no trust?
But if no taxpayer ID or tax record exists, even routine trust company due diligence could raise a red flag and make an already precarious situation worse.
“If you are in this position and use a third-party trustee, you are definitely opening yourself up to additional government scrutiny,” Sharpe says.
ITIN or no ITIN, some trust companies may want to see more documentation than these people can provide.
“It’s a mixed bag” for those who can’t come up with the paperwork, says Les Revzon, who handles due diligence for Nevada’s Summit Trust. At a minimum, he says, trust companies want to see a valid driver’s license or government ID, plus a credit card and a utility bill as proof of address.
For truly undocumented immigrants, granting power of attorney to a U.S. citizen and designating a temporary guardian for any children should go a long way toward ensuring that a sudden shift in the enforcement environment doesn’t wreck their lives completely.
Stipulations in the power of attorney can act like a “living will,” spelling out exactly what should be done with assets left behind in the event that the signer is detained or deported.
Without granting clear authority, it can be tough to sell cars, real estate or businesses in order to send the cash back or free it up for family members who remain here.
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes contributed to the research and reporting.
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