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Trusts’ structure luring wealth to NH

New Hampshire Union Leader
January 24, 2010
by Jim Kozubek

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​Changes in the state's trust laws are encouraging wealthy families to move to the state and set up trusts, state officials and trust lawyers say.

"This is just ramping up," said Sheila Christie, 41, founder of Cashel Private Wealth Partners LLC in Portsmouth, a firm started in 2007 to manage trusts for high-net-worth families.

"Banks need to decide where they want their principal place of business, and that's what families are doing."

Since the major change in state law, the Trust Modernization and Competitiveness Act in 2006, the number of non-depository trust companies has increased from 16 to 22, according to the state banking commission.

Banking Commissioner Peter Hildreth called it a "pretty hefty change," considering that families who seek to use a trust company in the state typically do so with a minimum of tens of millions of dollars.

Companies such as Cashel and Perspecta Trust LLC in Hampton that manage administration or investments for these families represent a rising business sector in the state.

Cambridge Trust Co. of New Hampshire has fi led paperwork to set up in Concord, and law firm McDonald and Kanyuk is in the process of setting up a trust company, tentatively named Concord Trust Co., which it will use to manage administrative functions for families.

Scott Baker is a principal at Perspecta, a trust company set up in 2007 to oversee wealth transfer for wealthy families. Perspecta, a company that now has 30 employees at Perspecta and its affiliates, manages four family trusts with at least $50 million each. The company saw revenue double since 2008, Baker said.

"2010 is looking stronger still," he said. "This is a significant catalyst for us. While it takes time for news to get out within the trust community, momentum has picked up dramatically. It is becoming common knowledge within the industry (that) New Hampshire has arguably the best trust laws in the country."

Jobs and tax revenue

Bill Ardinger, an attorney at Rath, Young and Pignatelli, is one of the architects of changes to trust and trust company law in the state. He says the changes will create jobs and raise business taxes for the state. The idea is to make New Hampshire a leading place for trust companies, like what Delaware is for corporations.

Fast-growing Perspecta, along with subsidiary Latona Associates LLC, is capable of managing both administration and investments. Like Perspecta, Cambridge Trust Co. will be full service. It will charge a 1 percent fee on funds it supervises.

Concord Trust Co., if it gains commission approval, would only manage the administrative side of a trust to ensure regulatory compliance, information security and accounting.

Christie, of Cashel, said she can take a 0.1 to 0.2 percent fee on supervised funds to oversee administration. Christie is currently helping an out of-state family move an $80 million trust company into the state. Even a small percentage charge for concentrated wealth like that can quickly add up to hundreds of thousands of dollars a year for a company, producing revenue that also feeds business enterprise and profits taxes for the state.

Trust law changes

"There is an important difference between a trust and a trust company," Ardinger said. "Any person can establish a trust to protect the interest of beneficiaries. But a trust company is a heavily regulated business that is authorized to serve as a trustee and provide fiduciary services."

The state abolished its common law "rule against perpetuities" in 2003, enabling long-term "dynasty trusts." The Trust Code was adopted in 2004 to make it possible to change the terms of a trust without an extensive probate court process.

The Trust Modernization and Competitiveness Act came in 2006, establishing a modern, flexible law for trust companies. Changes in 2008 enabled establishment of "asset protection trusts," which, similar to off-shore trusts, give families more protection against creditors.

Perspecta's Baker said trust laws the state enacted provide enhanced flexibility, privacy and clarity. Examples include "quiet trusts," where creators need not disclose the beneficiaries, and trust decanting, which enables the changing of the working terms and conditions of a trust without a lengthy probate court process.

"The laws provide a lot of clarity," Baker said. "Some nearby states have trust laws that are very outdated and ambiguous, and this creates uncertainty. New Hampshire's new laws give everyone greater confidence that the trusts they are creating will be managed as intended by the grantor."

"This is terribly important," he said. "Some trusts can last for several generations, and you don't want to be wondering what great-granddad really meant when he established the trust 80 years ago."

Family offices

Christie, formerly a partner for Pierce Atwood LLP, later worked for Latona Associates before starting Cashel to help manage trusts moving into the state. Many of those trusts can take on income from assets such as rental properties. She said if a family has millions in a trust and has to pay 10 percent income tax in another state or 0 percent in New Hampshire, "it's extraordinarily significant."

A combination of modern state laws regulating trusts and a mild tax environment are contributing to calls and visits from wealthy families and their trustees, leaders of trust companies say. A family that has high net wealth has become a business in itself, they say.

"Once you get to a certain level of wealth, it's a full-time job," Christie said.

The trust companies essentially operate as a type of headquarters or home office for those families and often multiple families, conducting accounting, privacy, regulatory compliance and overseeing investments, and with all that come the hiring of janitors, staff, the creation of a business.

The effects are difficult to calculate, since some trust companies, such as Perspecta, house trusts for multiple families and become so-called multi-family offices.

Private trust companies

The state has seen a significant increase in the creation of trust companies but it has had only a single "family fiduciary services company" or "private trust company" set up since the new trust law was enacted in 2006.

Such private trust companies are for the very wealthy, controlling $30 million to $100 million or more in a single family, and were a major target of the legislation, according to those who shaped it.

"We had hoped and anticipated these private family trust companies would come to the state, but so far that hasn't happened," said Amy Kanyuk, a partner at McDonald and Kanyuk.

Susan Leahy, a partner with McLane, Graf, Raulerson and Middleton, said she got several inquiries about starting up a trust company, and one client seems serious about meeting again in the spring.

"There hasn't been a huge rush to New Hampshire that I know of, but more and more people looking more seriously at moving their family trust business to New Hampshire," she said.

Christie said ultra-high net-worth families are often reluctant to discuss their wealth openly, so until the decisions are made, much of the groundwork goes unnoticed. "These people are extraordinarily private about their wealth," she said. "They think that Paris Hilton stuff is kind of tacky."

Todd Mayo is president of the non-depository Cambridge Trust Co. of New Hampshire, a company that has filed paper-work to set up a full-service trust company in the state. He said out-of-state awareness is improving. "I have gotten a number of calls from attorneys out of state. There is keen interest."

Lawyers and trust company leaders in the state say what has been lacking is a marketing campaign to go with the legal reforms. Such a campaign would show that New Hampshire is among the most advantageous states to place wealth, along with South Dakota and Wyoming.

Banking commissioner Hildreth acknowledged the absence of a marketing campaign. He also said the laws have been as effective as can be expected, if somewhat slower that some had anticipated, in drawing old money to the state.

"These families that have enough capital or assets to do this are conservative," Hildreth said. "They don't just move on a whim."