U.S. Trust Situs Selection in Unprecedented Times: The Vital Importance of Fiscal Soundness Post COVID-19

Selecting the proper U.S. trust jurisdiction in the planning process is perhaps more important now than ever as the nation and world navigates the COVID-19 crisis and soon emerges into a new “normal” socially, politically, and economically. Undoubtedly, the nation and world will recover, heal, and be stronger than ever because of the sheer power, adaptability, and unbreakable will of the human spirit.

The federal and state governments across the nation have taken swift historic action to support struggling businesses and families. These actions, and the hard work of many great political leaders, have been inspiring to watch over the past several weeks as thousands of businesses and families are helped across the nation by federal and state government funded support measures. However, the difficult reality is that state governments across the nation are dealing and will deal with extremely difficult economic issues in the aftermath of tremendous spending. As reported in the The New York Times,

“State governments are facing a fiscal crisis born of collapsing revenues, increased demand for safety-net programs like Medicaid, and the direct costs of leading the COVID-19 response.”

Therefore, as we look to wealth and trust planning in a post COVID-19 world, a critically important factor to consider when selecting proper U.S. trust situs will be a state’s fiscal soundness and stability. Currently, top tier trust jurisdictions like South Dakota have no state income tax, which is one of the factors that renders the state so attractive to planners. However, there is no guarantee this will always be the case, particularly during these unprecedented and uncertain times, which is why evaluating the fiscal strength of a state when selecting a trust jurisdiction is more essential now than ever.

An objective evaluation, considering multiple factors, reveals that South Dakota unequivocally entered the COVID-19 crisis as the most fiscally sound of all the top tier trust jurisdictions and has the greatest likelihood to be the strongest and most stable post crisis.

With respect to the likelihood that South Dakota will ever impose a state income tax, even after the COVID-19 crisis, consider these factors:

  • South Dakota did not shut down business or commerce to the degree or severity as most other states during the crisis, therefore maintaining jobs, essential tax revenue, and not placing strain on the state’s “safety-net” programs.
  • South Dakota has a constitutional prohibition against estate and inheritance taxes and requires a 2/3 vote of both houses of the legislature to impose an income tax.
  • South Dakota has had a balanced budget each year since statehood and again has one this year.
  • Despite having no income tax, South Dakota entered the crisis ranking 1st out of all 50 states according to The Pew Charitable Trusts research and analysis with respect to tax revenue volatility with an extremely stable state income stream (Alaska is 50th, Wyoming 48th, Delaware 38th, Nevada 29th, and New Hampshire 7th).  1
  • In terms of debt and unfunded retirement costs with public pensions over 100% funded, South Dakota entered the crisis ranking lowest of all states at 1st (Alaska is 50th, Delaware 43rd, Nevada 32nd, New Hampshire 26th, and Wyoming 10th). 2
  • South Dakota entered the crisis ranking in the top 10 in budget surpluses for how long the state can run on just rainy day funds. 3
  • South Dakota entered the crisis with a AAA bond rating by all 3 rating agencies, indicating a very strong state government and fiscal presence. 4
  • In 2018, the nonprofit Mercatus Center at George Mason University ranked all the states by fiscal condition considering a number of factors, including cash solvency, budget solvency, long run solvency, service level solvency, and trust fund solvency. South Dakota ranked as 2nd, just behind Nebraska (Wyoming is 6th, Nevada 10th, Alaska 11th, New Hampshire 12th, and Delaware 44th).  5
  • Finally, South Dakota entered the crisis the second highest bank assets in the nation, only slightly behind Ohio, reporting in excess of $3.16 trillion, ahead of New York and every other top tier trust jurisdiction.

When planning for families post the COVID-19 crisis, the fiscal soundness of a state is a critically important factor to consider in conjunction with a careful comparison of each state’s trust laws. South Dakota’s powerful modern trust law and its relative fiscal soundness and stability, when compared with that of other top tier jurisdictions in the aggregate, clearly indicates that it is the superior jurisdiction in the nation and the most compelling choice for trust situs in a post COVID-19 economic world.

For more information regarding fiscal soundness and its importance while selecting trust jurisdiction, please contact Bridgeford Trust via our contact page.

 

 

https://www.pewtrusts.org/en/research-and-analysis/articles/2018/08/29/tax-revenue-volatility-varies-across-states-revenue-streams.
2 
https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2014/fiscal-50#ind4
https://www.pewtrusts.org/en/research-and-analysis/data-visualizations/2014/fiscal-50#ind5
https://en.wikipedia.org/wiki/List_of_U.S._states_by_credit_rating
https://www.mercatus.org/publications/urban-economics/state-fiscal-rankings?utm_source=twitter&utm_medium=social&utm_campaign=fiscalrankings2018

Delivering Direction and Control Podcast Series – Episode 10 with William Blum

Episode 10 is now available on Bridgeford Trust Company’s Delivering Direction and Control Podcast Series! Head on over to our podcast page at bridgefordtrust.com/podcasts to hear the latest episode!

Episode 10 features David Warren – Co-Founder/Chairman of the Board of Bridgeford Trust Company and President/CEO of Bridgeford – and guest, William Blum – Partner and International Tax and Business Lawyer at Solomon Blum Heymann – for a discussion on his experience and expertise on the Virgin Islands as a tax haven and its asset protection capabilities, as well as the impact of CRS and FACTA. William also speaks on the influx of international families coming to America and how it has impacted his practice.

Our Podcast Series was developed to educate, challenge, and inspire listeners. As we interview experts in the trust planning arena, we keep listeners updated on developments regarding modern trust law and provide practical discussion on the powerful planning opportunities available to advisors around the country and the world – all in an effort to deliver far more direction and control to clients and their advisors than ever before.

You can listen on our podcast pageSoundCloudiTunesSpotifyGoogle Play, and iHeartRadio. We hope you enjoy Episode 10!

South Dakota Purpose Trust: What is the Purpose?

Unlike traditional trusts, the South Dakota Purpose Trust, considered the most flexible in the nation, is a type of trust which has no beneficiaries. A Purpose Trust can be established to hold and protect assets for a specific purpose and not for the benefit of beneficiaries.

Similar to a charitable remainder trust which exists to support a particular charity or charitable intent, the Purpose Trust can be created to support or maintain a specific purpose, in perpetuity uniquely under South Dakota law.

Examples of a Purpose Trust include: Business Interests; Private Trust Companies (PTCs); Royalties; Real Estate; Art; Cryptocurrency; Pet Care; Grave Sites; and Cryogenics.

Settlors of Purpose Trusts and their advisors can harness the power of South Dakota’s trust laws – dynasty trusts, privacy, and asset protection – while maintaining a great deal of direction and control utilizing the directed trust structure, appointing a trust protector, and naming an enforcer (which can be the same person). As long as the Purpose Trust is established for a valid purpose (not in violation of public policy), the trust can exist forever or be converted to a beneficiary trust at the direction of the trust protector if the purpose comes to an end.

Be sure to watch the video below for additional information about the South Dakota Purpose Trust.

For questions regarding the South Dakota Purpose Trust or for more information on South Dakota’s powerful modern trust laws, please contact Bridgeford Trust via our contact page.

Webinar Recap – Modern Trust Law: Delivering Direction and Control in Unprecedented Times

This webinar entitled “Modern Trust Law: Delivering Direction and Control in Unprecedented Times” was originally produced on Thursday, April 9, 2020. We hope that you enjoy the full recording of the presentation and additional resources offered below.

Modern trust laws, including directed trust, trust protector, and the newly created family advisor, have revolutionized the trust industry in the United States and are more compelling now than ever before as we move forward through this worldwide crisis together. During this webinar, David Warren, Chairman of the Board/Co-Founder of Bridgeford Trust Company and President/CEO of Bridgeford, presented how these modern progressive trust laws — found only in a handful of states including South Dakota — have drastically changed how trusts are created and administered, delivering far more direction and control to settlors of trusts, beneficiaries, and their advisors than ever before.

This webinar:

  • Examined the directed trust, trust protector, and family advisor role in detail and how these concepts combine to deliver tremendous direction and control to settlors of trusts and beneficiaries over many important aspects of trust administration, including investment and distribution decisions.
  • Considered South Dakota’s Special Purpose Entity concept and how this unique planning nuance, only available in South Dakota, can provide even more control and protection for settlors of trusts and the advisors that serve in various fiduciary roles within the directed trust structure.
  • Explored the concept of decanting in the context of the direction and control this powerful planning tool brings to beneficiaries of trusts and their advisors looking to “breathe new life” or otherwise modernize older trusts.

If you have any questions regarding the material covered in this webinar, please contact us via our contact page.

Webinar – Modern Trust Law: Delivering Direction and Control in Unprecedented Times

Bridgeford Trust Company invites you to join us for a free webinar on Thursday, April 9 at 2pm EST entitled Modern Trust Law: Delivering Direction and Control in Unprecedented Times.

Modern trust laws, including directed trust, trust protector, and the newly created family advisor, have revolutionized the trust industry in the United States and are more compelling now than ever before as we move forward through this worldwide crisis together. During this webinar, David Warren, Chairman of the Board/Co-Founder of Bridgeford Trust Company and President/CEO of Bridgeford, will highlight how these modern progressive trust laws — found only in a handful of states including South Dakota — have drastically changed how trusts are created and administered, delivering far more direction and control to settlors of trusts, beneficiaries, and their advisors than ever before.

This webinar will:

  • Examine the directed trust, trust protector, and family advisor role in detail and how these concepts combine to deliver tremendous direction and control to settlors of trusts and beneficiaries over many important aspects of trust administration, including investment and distribution decisions.
  • Consider South Dakota’s Special Purpose Entity concept and how this unique planning nuance, only available in South Dakota, can provide even more control and protection for settlors of trusts and the advisors that serve in various fiduciary roles within the directed trust structure.
  • Explore the concept of decanting in the context of the direction and control this powerful planning tool brings to beneficiaries of trusts and their advisors looking to “breathe new life” or otherwise modernize older trusts.

This free, one hour-long webinar will take place on Thursday, April 9, 2020 at 2:00 p.m. EST.  We look forward to you joining us!

Trust Planning and Powerful Modern Trust Law in the midst of COVID-19

As we continue to monitor the COVID-19 (Coronavirus) outbreak, our thoughts turn to the health and well-being of our friends across the country and around the world. All of us at Bridgeford extend our most heartfelt thoughts and prayers to all of you during this unprecedented, uncertain, and difficult time.

The very unique aspect of the current economic situation and financial landscape makes trust planning using powerful modern trust law even more compelling and relevant than perhaps ever before. Especially around state tax planning using trusts in no state income tax jurisdictions like South Dakota, asset protection, and privacy. As we move through this crisis together, Bridgeford will continue its commitment to provide relevant and timely education through all of our digital media platforms including interactive webinars, podcast episodes, videos, and blog posts.

Watch the video below for a presentation given by David Warren, Co-Founder and Chairman of the Board of Bridgeford Trust Company and President/CEO of Bridgeford. In it, David discusses important state tax planning opportunities under recent Supreme Court case law and the vital importance of proper trust jurisdiction selection in the planning process.

 

 

As the COVID-19 situation continues to evolve, know that your friends at Bridgeford have you all in our thoughts, and look forward to our continued collaboration, friendship, and work together as we move through, and emerge from this crisis together, stronger than ever. Below is a piece that greatly resonated, and inspired hope and clarity during these difficult times for Bridgeford. Please do all you can to care for yourselves and your families. Stay healthy and safe!

“And the people stayed home. And read books, and listened, and rested, and exercised, and made art, and played games, and learned new ways of being, and were still. And listened more deeply. Some meditated, some prayed, some danced. Some met their shadows. And the people began to think differently.

And the people healed. And, in the absence of people living in ignorant, dangerous, mindless, and heartless ways, the earth began to heal.

And when the danger passed, and the people joined together again, they grieved their losses, and made new choices, and dreamed new images, and created new ways to live and heal the earth fully, as they had been healed.”

~ Kitty O’Meara

 

Delivering Direction and Control Podcast Series – Episode 9 with Gideon Rothschild

Episode 9 is now available on Bridgeford Trust Company’s Delivering Direction and Control Podcast Series! Head on over to our podcast page at bridgefordtrust.com/podcasts to hear the latest episode!

Episode 9 features David WarrenCo-Founder/Chairman of the Board of Bridgeford Trust Company and President/CEO of Bridgeford – and guest, Gideon Rothschild – Partner and Co-Chair of Moses & Singer’s Trusts and Estates and Asset Protection practices. Listen in for an intriguing discussion on asset protection, including the debate among practitioners, domestic vs offshore asset protection, as well as the factors, issues and planning strategies available to international families in the United States.

Our Podcast Series was developed to educate, challenge, and inspire listeners. As we interview experts in the trust planning arena, we will keep listeners updated on developments regarding modern trust law and provide practical discussion on the powerful planning opportunities available to advisors around the country and the world – all in an effort to deliver far more direction and control to clients and their advisors than ever before.

You can listen on our podcast page, SoundCloud, iTunes, Spotify, Google Play, and iHeartRadio. We hope you enjoy Episode 9!

Bridgeford Trust to Sponsor 16th Annual International Estate Planning Institute in NYC

Bridgeford Trust is very pleased to be sponsoring the 16th Annual International Estate Planning Institute, presented by STEP New York, STEP Mid Atlantic, and the New York State Bar Association (NYSBA).

Taking place on Thursday, March 12th and Friday, March 13th at the Crowne Plaza Times Square in NYC, this Institute is a much anticipated annual event at which trust and estate practitioners, bankers, and accountants from around the world gather to hear leaders in their fields exchange ideas and discuss developments regarding cross-border planning with a U.S. component. As more and more international families are seeking U.S. trust solutions, Bridgeford Trust is excited to continue to sponsor this event. Below are links to informational pieces that may be of interest to advisors working in the international space.

Foreign Grantor Trust – https://www.bridgefordtrust.com/what-we-do/foreign-grantor-trust/

Educational Brochure, outlining powerful planning options under South Dakota law – https://www.bridgefordtrust.com/wp-content/uploads/2020/02/Bridgeford-Educational-Brochure.pdf

Our team will be attending the Institute and if you are going to be there as well, we encourage you to visit Bridgeford Trust’s exhibit booth and talk with us about how we may be able to collaborate to best serve the international community.

For additional details about the Institute, click here. We hope to see you there!

South Dakota Again Considered a Top U.S. Trust Jurisdiction by Trusts & Estates Magazine

Trusts & Estates magazine once again names South Dakota as a top tier trust jurisdiction. Annually, Trusts & Estates magazine evaluates trust jurisdictions utilizing an objective approach that considers the following factors: 1) whether a state has a Rule Against Perpetuities; 2) whether a state has income, inheritance, or premium taxes; 3) whether the state has adopted “modern trust laws” such as decanting provisions, directed trust capability, and privacy options; 4) whether a state has an asset protection statute and the effectiveness of the statute; 5) the effect of migration on the rights of beneficial interest.

Interestingly noting that Delaware, long considered to be a leading U.S. trust jurisdiction, is not keeping pace with other progressive U.S. trust jurisdictions, the authors’ state,

“While Delaware has been in the top four jurisdictions consistently for the past 10 years, we think that its asset protection laws still need to be strengthened for it to remain competitive.”

Alternatively, South Dakota has been consistently considered by many commentators and planners to be the best trust jurisdiction in the nation because of its cutting edge laws around asset protection, dynasty and directed trusts, and privacy. Trusts & Estates magazine’s article again accentuates the vital importance of selecting the proper trust jurisdiction, stating,

“Planning professionals catering to high net worth clients need to understand the difference in trust laws and planning opportunities, and how it affects those clients and their beneficiaries.”

You can view the complete article entitled “Which Trust Situs is Best in 2020?” by clicking here. This article was featured on WealthManagement.com which is the digital resource of Trusts & Estates magazine.

The authors’ conclusion is particularly compelling when considered in conjunction with the fact that South Dakota…

  • Is generally regarded by most practitioners and academics, including Steve Oshins, as being the best Dynasty Trust state, and having the best Decanting Statute in the nation. In addition, the authors of the aforementioned article concur with Mr. Oshins, stating, “South Dakota has the most flexible decanting statute…and appears to provide the best example of flexibility for trust remodeling.”
  • Unequivocally has the most robust privacy laws in the country, as pointed out in the Trusts & Estates magazine article wherein the authors noted, “Of the top tier trust jurisdictions, South Dakota has the best trust privacy laws.” (Also, take note of footnote 49 in the Trusts & Estates Magazine article, where a post written by Bridgeford Trust was cited and quoted.)
  • Is one of only two states with a Community Property Trust, a compelling tax planning tool for spouses.
  • Is the only state in the country with the Family Advisor, referred to as a “Trust Protector Light,” not mentioned in the article but a very important planning tool.
  • Has one of the lowest insurance premium tax in the nation at 8 basis points, which applies to both policies held by individuals and policies held within an LLC. (While Delaware boasts 0 basis points on policies held by individuals, policies held within an LLC – which is typically the case – are taxed at 200 basis points.)
  • Is the most fiscally sound among all top tier trust jurisdictions.

When all of these attributes are considered in the aggregate, South Dakota clearly emerges as the superior trust jurisdiction in the nation. Click here for a well-researched chart comparing the leading U.S. trust jurisdictions, with a particular emphasis on areas that clearly distinguish South Dakota as the superior trust jurisdiction in the overall analysis.

For more information, please contact Bridgeford Trust via our contact page.

South Dakota’s Decanting Statute is Ranked, for the 7th Time, as Best in the Nation

South Dakota is again ranked, for the 7th consecutive year, as having the top decanting statute in the nation! Published by Nevada attorney Steve Oshins, the new 7th Annual Trust Decanting State Rankings Chart is an excellent resource for advisors and clients because of his methodical and objective approach to evaluating the factors that impact the viability of a state’s decanting statute.

The concept of decanting has become a very powerful tool for planners to modify irrevocable trusts, and has emerged as one of the most progressive planning strategies available in dealing with dynasty planning issues. Appropriately referred to as a “do over,” decanting essentially distributes assets from an irrevocable trust into a new trust with different, and presumably more desirable and flexible terms, leaving the unwanted terms in the original trust and not binding on the assets. Decanting is also a streamlined option for easily transferring a trust from one state jurisdiction to another more favorable jurisdiction, such as South Dakota, with directed and asset protection trust statutes.

Steve Oshins’ findings regarding South Dakota’s decanting statute are particularly compelling when considered in conjunction with the fact that South Dakota…

  • Is generally regarded by most practitioners and academics, including Steve Oshins, as being the best Dynasty Trust state.
  • Unequivocally has the most robust privacy laws in the country, as pointed out by an article appearing in the January 2020 edition of Trusts & Estates magazine comparing U.S. trust jurisdictions wherein the authors noted, “Of the top tier trust jurisdictions, South Dakota has the best trust privacy laws.”
  • Is one of only two states with a Community Property Trust, a compelling tax planning tool for spouses.
  • Is the only state in the country with the Family Advisor, referred to as a “Trust Protector Light.”
  • Has one of the lowest insurance premium taxes in the nation at 8 basis points.
  • Is the most fiscally sound among all top tier trust jurisdictions.

When all of these attributes are considered in the aggregate, South Dakota clearly emerges as the superior trust jurisdiction in the nation. Click here for a well-researched chart comparing the leading U.S. trust jurisdictions, with a particular emphasis on areas that clearly distinguish South Dakota as the superior trust jurisdiction in the overall analysis.

For a more detailed discussion about decanting and how it modifies irrevocable trusts that were once considered unchangeable, click here for a video on the concept and how it works in the planning process.

Please contact Bridgeford Trust via our contact page if you have any questions on decanting and the power of the South Dakota Advantage.