Bar News - October 6, 2006
Trust Modernization Act Expected To Attract Finance Industry to NH
By: Susan Leahy
The Trust Modernization and Competitiveness Act signed by Governor John Lynch on June 20 is significant new law. Its purpose is to make New Hampshire the “most attractive legal environment in the nation for trusts and trust services.” The governor was quoted in the Wall Street Journal saying he hoped the new law would “make New Hampshire first in the country in the new national market for trust services and the good, high-paying jobs in that industry.” A significant boost to the economy is anticipated if the state is able to capture trust business that will be generated as a result of the $41 trillion wealth transfer anticipated in the United States by the middle of this century.
The Trust Modernization and Competitiveness Act is a combination of banking and trust legislation. The Act establishes a new category of trust companies called “family fiduciary services companies.” These companies will be non-depository trust companies and they will be limited to providing services to members of a broadly defined “family.” The law is designed to attract to New Hampshire so-called “family offices” which have long operated elsewhere providing private trust services to many of the wealthiest people in the country. Though these family offices will be regulated by the Bank Commissioner, the Act has features designed to provide the high level of confidentiality demanded by their wealthy customers.
On the trust law side, the Act makes improvements to the state’s Uniform Trust Code that will encourage people from across the country to establish trusts governed by New Hampshire law and administered here.
Significant changes to the Uniform Trust Code include:
• defining new categories of fiduciaries called “trust protectors” and “trust advisors” and establishing the relationships between trustees, trust protectors and trust advisors;
• abandoning what has been the controversial concept of “mandatory notice” to beneficiaries;
• permitting settlors to establish non-charitable “purpose” trusts that are perpetual rather than limited to 21 years;
• providing new protection for a fiduciary who, at the direction of a settlor, holds a concentrated asset position in a trust portfolio; and
• clarifying the broad authority already in the Uniform Trust Code for fiduciaries and beneficiaries to enter into non-judicial settlement agreements to modify or terminate trusts.
Additionally, the Act adopts the Uniform and Principal and Income Act, effective Jan. 1, 2007. Perhaps the most notable provision of the UPIA is that it will give trustees a new power to adjust income and principal in making distributions to beneficiaries from “income only” trusts. This new power will be similar in many ways to the power institutional trustees have to adopt spending policies under the Uniform Management of Institutional Funds Act. It is also similar in some ways to the more cumbersome and limited authority trustees have to convert “income only” trusts to unitrusts under the unitrust conversion provisions of RSA 564-A.
The Trust Modernization and Competitiveness Act is already attracting national attention. There will be an increased demand for New Hampshire attorneys who are experienced in trust law, banking law and general business law.
Susan Leahy is of counsel for McLane, Graf, Raulerson & Middleton. She is an estate planning and trust attorney.