You are throwing away a big chunk of your next generation’s assets if your trust company is domiciled in Oregon or California, or for that matter most other states.
If the trust company you are using also manages your assets you are throwing away part of your investment return and asset value each year now.
Let me explain both these statements.
We will start by asking how much do you pay in state taxes on the trust you hold now? Is it more than zero?
Irrevocable trusts are taxed at the state level where the trustee resides. For instance, if you choose a Nevada domiciled trust company you avoid filing a state income tax return or paying state income taxes entirely. Using a Nevada based trust helps reduce the erosion of trust assets by the state tax rate.
Further, a Nevada dynasty trust allows a trust to avoid an estate tax for multiple generations.
Next let me explain the asset erosion caused by large bank and trust companies. Large corporate trust providers (national banks and trust companies) that you may be with now always insist they additionally manage your assets. Check into your fully disclosed annual fees. You are typically paying two, three or more percent annually for these services. If you’ve been with these firms for a decade or more, you have now paid them 20-30% of your assets while receiving investment returns and service that you may not consider top tier.
That’s because large corporate trust managers increase their profits by having too many clients and not enough experienced employees to take care of them. You may have noticed that you are not dealing with the senior trust officer and you are not dealing with the advisor who really manages your money.
How many different junior trust officers have you been cycled through in the last few years?
Most bank trust companies manage your money by allocating your money between 16-20 different generic “buckets” they have created. Your portfolio owns the same, non-personalized bucket with only slightly different allocations from everyone else at that big bank or trust company.
These large trust and investment providers’ systemic neglect, low level of customization, and high fees have allowed us to create a solution to exploit at NW Securities Advisors.
Bifurcating the trust services and investment management eliminates an inherent conflict of interest and significantly lowers asset erosion while building tax advantages for your assets and estate.