Banking on Trust

DATE: November 7, 2010 

PUBLICATION: New Hampshire Sunday News (Manchester, NH) 

By DENIS PAISTE New Hampshire Union Leader 

MANCHESTER — Changes in trust company law since 2006 have brought nearly a dozen new players to New Hampshire.

“Prior to 2006, there were only 16 chartered trust companies in New Hampshire, and in the past five years, 11 new ones have been chartered,” Paul Montrone, president and CEO of Perspecta Trust in Hampton, said in a recent interview.

“If a few new charter applications are approved, our state will have doubled the number of trust companies in five years. That’s pretty good,” Montrone said.

Fiduciary, or nondepository trust companies, are specialty firms that manage wealth for trusts and their beneficiaries. Unlike a traditional bank and trust company, however, they cannot accept deposits or make loans. Trust company assets also are kept separate from client assets.

Scott Baker, principal with Perspecta Trust, said that over time, the trust industry could become a meaningful part of the state’s economy.
Baker also serves as president and chairman of the recently created New Hampshire Trust Council, a nonprofit industry association. The council aims to provide a voice for the state’s trust industry and represent it in speaking engagements and at industry conferences.

“There is a lot of business out there that has been going to states like Delaware that, historically, had advantageous trust laws,” Baker said. With the recent expansive changes in New Hampshire law, the challenge today is to spread the word, letting the nation know that the Granite State is now among the leading states in the country for modern trust law, he said.

“For Boston-based law firms, there will be a tipping point where it will become a competitive disadvantage not to be conducting their trust business in New Hampshire,” Baker said.

Besides fiduciary trust companies, new entrants to the state could include law firms, investment firms and others.

Deputy Bank Commissioner Robert A. Fleury said, “I think the market is limitless.”

Flourishing field
Since the law changed, the Banking Department has received 15 applications, approved 12 and has three still pending, Fleury said.

The firms that are attracted to New Hampshire “like the fact we are very experienced in the regulation and supervision of the nondepository environment,” Fleury said.

New Hampshire Bankers Association President Gerald H. Little said the group has long supported trust law reform and worked on behalf of fiduciary trusts.

“The bottom line is consumers and the economy are best served when there are options, and we have large institutions and small institutions,” Little said.

“There are certainly products and services that large banks can offer that small ones can’t,” he said. “Small ones will make the argument they can provide a high level of service that large ones struggle to replicate.”

Little said he welcomes the creation of the New Hampshire Trust Council.
“The more resources that can be focused on making New Hampshire a great place to do business is a good thing,” he said.

Clean industry
Besides immediate jobs at fiduciary trusts, other jobs likely to increase in demand range from attorneys, to draft trusts and estates, to advisers to minimize taxes, to financial planners to direct investments and information technology specialists to program software for those services.

“This is a nice clean industry. It’s clean and sustainable because all these jobs are basically office jobs,” Montrone said.

“It goes all the way from creating more demand for office space, of which there is plenty available in the state, to new office staff and all the vendors needed to support them,” he said.

To attract that growth, New Hampshire will have to maintain its competitive advantage, Montrone said. “Business could easily move to  another state if we don’t maintain our competitive edge.”

Recent changes
The Trust Modernization and Competitiveness Act in 2006 made it easier to create and operate trust companies, including private trust companies, and removed time limits on the duration of trusts. But it left in place the state’s interest and dividends tax on New Hampshire beneficiaries.

This year, Senate Bill 421 streamlined rules governing family trust companies, and  House Bill 1607 confirmed that the state interest and dividends tax does not apply to trusts that have only out-of-state beneficiaries.

“When you create a trust, the assets in it are no longer yours,” Montrone said.

But where you create the trust matters for  taxes. If someone in New York, for example, creates a trust in New Hampshire to benefit his or her children, that pot of money can grow free of state taxes, he said.

Baker said the legislative changes were part of  a concerted effort to catapult New Hampshire into the upper echelons of states looking to attract trust business.

“It is now fair to say that no other state has a competitive advantage over New Hampshire,” he said.

Attracting new trusts
Locating a trust is not limited to the state where you live.

Regardless of where you are a resident, you can establish a trust in the state of your choice,” Baker said.

“What we are trying to do is educate people of that fact, especially people in the Northeast,” he said.

“Just because you live in Massachusetts or New York or Florida, doesn’t mean your trust has to be set up in those states,” he said.
“While it is common for attorneys to establish trusts for their clients in the state where they practice, it may not be the best option for the client,” Baker said.

“I give presentations throughout New England and New York on the changes to New Hampshire’s trust laws, and most folks have no idea what has been accomplished here. Your look around the audience and see jaws drop as they realize that they’re not up to speed on legislation that was passed over the last five years.

“Many of them have not been involved in the trust migration to New Hampshire, but folks across the country are catching on, and that’s a good thing for the state,” Baker said.

On the Net:

www.nhtrustcouncil.com

www.nhbankers.com

Write to Denis Paiste at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .