But did you know that the state where you establish your trust can make a significant difference in the future trustee’s ability to manage the trust’s investments and modify its provisions, if needed, even after it becomes irrevocable?

The state where you establish your trust will also affect its tax liability.

That’s why so many people are taking a closer look at establishing their trusts in “trust-friendly” states like New Hampshire, Delaware, South Dakota, and Alaska. These states have created a legal environment that is attractive to all parties involved in trust creation and administration, including grantors, beneficiaries, trustees, drafting attorneys, and other estate planning professionals.

The New Hampshire trust advantage

In New Hampshire, for example, trust laws are regularly reviewed, updated, and modernized to make sure they address today’s needs for flexibility. New Hampshire also allows trust grantors to establish several types of trusts not available in many other states. Those trusts include:

Dynasty Trusts

If you want your trust to stay in existence for many generations, even forever, you can do this by creating a Dynasty Trust in New Hampshire that continues into the future without violating the Rule Against Perpetuities. This is not the situation in most states which require that a trust terminate within a specific number of years or at the end of someone’s lifetime (a life in being).

This means that a trust you create for a particular purpose or beneficiaries does not need to terminate according to a set time frame or lifetime. It can continue for many generations -- or for eternity, if you choose -- under current law.

Directed Trusts

New Hampshire law also allows for investment and administrative responsibilities to be separated so that a grantor – the person who establishes the trust- can appoint different trustees or agents for investments, distributions, and other decisions. This division of duties is not possible in many other states. If directed in the trust document, an advisor can be considered an “excluded fiduciary” and will not be liable for the actions of the other advisors.

Asset Protection Trusts

Also called wealth preservation trusts, these trusts provide significant protection for assets held in the trust from a grantor or settlor’s creditors (such as those arising from litigation or divorce) while still allowing access to the trust’s funds. To protect assets in this way, the trust must be irrevocable and have an independent trustee.

Other features that make establishing trusts in New Hampshire desirable include:

• No state income tax: New Hampshire does not impose a state capital gains or income tax on dividends or interest earned by the trust when the income accumulates within the trust in a non-grantor trust. As a result, your trust beneficiaries may enjoy significant tax savings. (Any distributions made from the trust are taxable.)
• Allowing trust protectors and trust advisors: New Hampshire law recognizes trust protectors and trust advisors who can oversee or advise the trustees or investment managers, and can have the authority to remove those parties.
• Efficient administration provisions: Through concepts such as virtual representation (which allows certain beneficiaries to represent the interest of other beneficiaries) and non-judicial settlement agreements, trustees often can resolve administrative issues without court involvement, saving time and legal expenses.
• Dispute resolution without court involvement: In New Hampshire you also can include provisions in a trust that require any disputes to be resolved without court intervention.
• Decanting: Decanting is a process by which a trustee creates a new trust and transfers assets from the old trust to the new one. Because this can improve the trust’s administration by clarifying provisions about investments, distributions, or trustee succession, decanting is an attractive option for an otherwise irrevocable trust.

So, if you believe that the administration of an ongoing irrevocable trust could become difficult in the future – even 100 years from now – decanting the trust to a new one in New Hampshire gives the trustee the ability to change the trust to make it more workable or close it down completely in favor of one that does work, keeping your original intentions in mind.

• Incentive provisions: Incentive provisions can be included in a New Hampshire trust to encourage (“incent”) specific behaviors by beneficiaries.
• No contest clauses: These clauses are designed to allow a trustee to stop distributions to beneficiaries if they have taken action to “contest” the provisions of a will or trust from which they benefit. For example, if a beneficiary takes legal action to have your trust distributed, you can allow the trustee to cancel any distributions to that beneficiary. Giving a trustee the ability not to pay out the entire trust also may be helpful in managing the demands of entitled beneficiaries.
• Proving a will or trust: In New Hampshire, an individual can “prove” a will or trust while they are living by filing a petition and giving notice to “interested persons.” A court hearing determines if the document is valid, but having the living person present for the hearing can avoid a future contest in many cases. The law also sets limits on the time frame for someone to contest the validity of a will or trust.

Choose a knowledgeable guide

While many of the trust features and provisions described above are not permitted in other states, they are available in New Hampshire to individuals living in any state -- as long as specific guidelines are met and the trust is drafted correctly.
That’s why it’s important to work with a qualified attorney and trust professionals who have knowledge of New Hampshire trust laws. They can help you take advantage of the special trust benefits that the state offers and guide you through the process of establishing or moving a trust to the Granite State.

For more on how Cambridge Trust can help you realize the benefits of a New Hampshire trust:

• call Susan Martore-Baker, President, Cambridge Trust New Hampshire at 603-369-5101
• visit one of our three Wealth Management office locations in Concord, Manchester, or Portsmouth, New Hampshire, to speak directly to a trust professional
• read about The New Hampshire Trust Advantage on our website.

This article is for informational purposes only and should not be construed as investment or legal advice.