Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

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kxl19
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Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by kxl19 »

Hi all - we're working to setup our estate plan and it includes a corporate trustee.

We've decided on Fidelity or Schwab. Estate planning attorney says their language requires state to be NH (Fidelity) or NV (Schwab), and he's not familiar with those states for asset protection, vs. our home state in the midwest which has strong asset protection laws

Has anybody else run into this issue? Is it OK to accept the state that Fidelity/Schwab prefer?
fabdog
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by fabdog »

Well, if you want to use their services you'll have to accept their domicile. They aren't going to set up in your home state.

Here's an youtube from a law firm from a google search claiming NV has strong asset protection, but this appears to be for a specific type of asset protection trust. you'll have to do your own due diligence on the type of trust your plan will create.

https://www.rblawfl.com/what-state-has- ... rusts.html

You could also query Schwab and Vanguard on how NV and NH stack up on asset protection from creditors... assuming that was part of their process for setting up their trust business

and depending on what your state of residence is when you pass... your state may consider the trust resident to your current home state no matter where the fiduciary is. Your trust may end up filing 2 or more state tax returns depending on beneficiary location, etc

Mike
bsteiner
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by bsteiner »

Your concern should be state income taxes, not asset protection. Any trust you create for your family members will be protected from their creditors and spouses. However, different states have different ways of determining when a trust is taxable in that state. You also have to consider whether your beneficiaries will need the level of service of a conventional bank trust department or trust company, which will come at a higher cost, or whether Fidelity, Schwab or Vanguard, at a lower cost, will be sufficient.

I've had several clients name Vanguard as a trustee in their Wills, but none of them has died yet, so I don't have any experience with them. I haven't had anyone name Schwab yet. I wasn't aware that Fidelity was willing to act as trustee except in coordination with an outside investment manager, which would probably end up costing more than a conventional bank or trust company. Is Fidelity now able to serve as trustee at a Vanguard or Schwab level of fees?
afan
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by afan »

I have not used Vanguard as a corporate trustee, but from talking with them, the services appear quite limited.
The situs for a Vanguard trust will be PA, which has an income tax. I don't know how PA taxes trust income, or whether having the situs in PA would subject that income to PA tax.
Vanguard also reserves the right to change the situs to the state in which the Vanguard office administering the trust may be located. They say they will notify the then current beneficiaries but that they will not need court approval. If you care about the situs, this may be a reason to be careful of Vanguard.
Bsteiner, did this concern you for the estate plans that had Vanguard as trustee?
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Bogle64Pilot
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by Bogle64Pilot »

There’s a reason these companies are in the states they are. Nevada is one of the best states for asset protection and trust administration that’s why everyone is there. There’s a bunch of Nevada specific trusts to accomplish anything you want such as:

• Nevada Self-Settled Spendthrift Trusts (DAPTs)
• Beneficiary Defective Inheritor’s Trusts (BDITs)
• Dynasty Trusts (IDGTs)
• Nevada Incomplete Gift Non-Grantor Trusts (NINGs)

I believe dynasty trusts can last 365 years under current Nevada law so that is also an important factor.

Personally I am using Premier Trust as my successor corporate trustee. My grandfather used them and they were excellent and their fees extremely reasonable.

https://premiertrust.com/
nigel_ht
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by nigel_ht »

Bogle64Pilot wrote: Fri Jun 04, 2021 9:27 pm
Personally I am using Premier Trust as my successor corporate trustee. My grandfather used them and they were excellent and their fees extremely reasonable.

https://premiertrust.com/
Who do you use on the investment side?
bsteiner
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by bsteiner »

afan wrote: Fri Jun 04, 2021 8:39 pm I have not used Vanguard as a corporate trustee, but from talking with them, the services appear quite limited.
The situs for a Vanguard trust will be PA, which has an income tax. I don't know how PA taxes trust income, or whether having the situs in PA would subject that income to PA tax.
Vanguard also reserves the right to change the situs to the state in which the Vanguard office administering the trust may be located. They say they will notify the then current beneficiaries but that they will not need court approval. If you care about the situs, this may be a reason to be careful of Vanguard.
Bsteiner, did this concern you for the estate plans that had Vanguard as trustee?
Pennsylvania won't tax a trust merely because the trustee is a Pennsylvania resident. So this wouldn't be an issue unless the decedent was a Pennsylvania resident.

Vanguard also has offices in Arizona and North Carolina. Arizona won't tax a trust merely because the trustee is an Arizona resident. So this wouldn't be a concern unless the decedent was an Arizona resident.

North Carolina taxes trusts if there's a beneficiary in North Carolina. A recent Supreme Court case held that the residence of a contingent beneficiary isn't sufficient for them to tax a trust. However, having both a trustee and a beneficiary in North Carolina would be sufficient. So this would only be a concern where there's a beneficiary in North Carolina.

So far, none of my clients who've named Vanguard as a trustee live in Pennsylvania or Arizona or have beneficiaries who presently live in North Carolina.
bsteiner
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by bsteiner »

Bogle64Pilot wrote: Fri Jun 04, 2021 9:27 pm ... I am using Premier Trust as my successor corporate trustee. My grandfather used them and they were excellent and their fees extremely reasonable.
I have a good relationship with Premier Trust in Nevada and have been satisfied with them. However, people generally use trustees such as Premier Trust to take advantage of some aspect of that state's law.

While they're able to handle distributions, trustees like Premier Trust require that someone else be responsible for the investments.
Topic Author
kxl19
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by kxl19 »

bsteiner wrote: Fri Jun 04, 2021 5:23 pm I wasn't aware that Fidelity was willing to act as trustee except in coordination with an outside investment manager, which would probably end up costing more than a conventional bank or trust company. Is Fidelity now able to serve as trustee at a Vanguard or Schwab level of fees?
The Fidelity fees were reasonable, slightly more than Vanguard or Schwab, but not as expensive as a Northern Trust or even a local bank. Fidelity is now doing both trustee and management.
Bogle64Pilot
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by Bogle64Pilot »

bsteiner wrote: Sat Jun 05, 2021 9:19 pm
Bogle64Pilot wrote: Fri Jun 04, 2021 9:27 pm ... I am using Premier Trust as my successor corporate trustee. My grandfather used them and they were excellent and their fees extremely reasonable.
I have a good relationship with Premier Trust in Nevada and have been satisfied with them. However, people generally use trustees such as Premier Trust to take advantage of some aspect of that state's law.

While they're able to handle distributions, trustees like Premier Trust require that someone else be responsible for the investments.
Bruce,

I’ve known the Dreschler family for a long time. A service like Premier Trust is the best of both worlds. They will handle the distributions and you can have Vanguard PAS manage your investments if that is why you would otherwise use VNTC. This all combined with Nevada situs is the best of both worlds.
bsteiner
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by bsteiner »

Bogle64Pilot wrote: Sun Jun 06, 2021 9:12 am ...
Bruce,

I’ve known the Dreschler family for a long time. A service like Premier Trust is the best of both worlds. They will handle the distributions and you can have Vanguard PAS manage your investments if that is why you would otherwise use VNTC. This all combined with Nevada situs is the best of both worlds.
You are correct. That could be a good solution in some cases.

For it to work, someone other than Premier would have to have responsibility for the investments. That person(s) would have to make the decision to hire Vanguard to manage the assets.
nigel_ht
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Re: Corporate trustee - does state matter? Estate atty prefers local state vs. NH/NV

Post by nigel_ht »

bsteiner wrote: Sun Jun 06, 2021 10:57 am
Bogle64Pilot wrote: Sun Jun 06, 2021 9:12 am ...
Bruce,

I’ve known the Dreschler family for a long time. A service like Premier Trust is the best of both worlds. They will handle the distributions and you can have Vanguard PAS manage your investments if that is why you would otherwise use VNTC. This all combined with Nevada situs is the best of both worlds.
You are correct. That could be a good solution in some cases.

For it to work, someone other than Premier would have to have responsibility for the investments. That person(s) would have to make the decision to hire Vanguard to manage the assets.
Hmmm…what if one is using a family LLC instead of a trust?
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