Post-COVID pressures are forcing many advisors to get up to speed on estate planning ahead of schedule. They’re facing intense pressure from younger clients to help them choose trust solutions to pass on their wealth to their children in a structured way should they fall victim to the pandemic. In this environment, independent companies like National Advisors Trust Company are stepping up the plate to offer advisors access to education, guidance, and a full array of trust administration services.
It should be no surprise that COVID-19 convinced millions of Americans to start thinking more about their own mortality. Instead of putting off important legacy planning decisions, they want to make sure that their wills are up to date and that plans are in place to transfer their wealth to their spouses and heirs in an orderly fashion should they become a victim of the pandemic.
Increasing numbers of parents and their children are asking their financial advisors to offer guidance and solutions to help them address these concerns. This is forcing many advisors who have rarely dealt with these issues before to quickly get up to speed on estate planning in general and trusts in particular.
This groundswell of interest can be good news for independent advisor-friendly trust companies like Kansas City-based National Advisors Trust Company, which administers more than $12 billion in trust assets for more than 800 wealth management firms through both a South Dakota trust charter and a national charter as well.
All ages are interested
“We’re fielding an increased volume of requests from advisors across the country to help them provide trust solutions and services for their clients,” says James Combs Jr., National Advisors Trust Company’s President and CEO.
And these requests aren’t just coming from older clients.
“Over the past year, advisors have seen increased interest in trusts among members of the so-called ‘sandwich generation,’” says Chief Operating Officer Michael Schoonmaker.
“These are people on the tail end of the Baby Boom and Generations X and Y who were caught off guard when their parents, friends or other family members were hospitalized with COVID-19 infections or were infected themselves. The pandemic has served as a wake-up call that both they and their parents need to get an estate plan in place, including the creation of trusts that can both protect their wealth from creditors and provide a structured plan for passing it on their heirs.”
Founded by advisors for advisors
Unlike traditional bank-trust companies, National Advisors Trust Company was founded by advisors. And while the firm does work directly with individuals and families, most of its inquiries come from independent advisors and financial planners.
"Since many of us come from the advisory world, we understand the challenges advisors face in getting up to speed on the complexities of estate planning and trusts. That's why we partner with them to provide the education they need to feel comfortable talking about various trust structures with their clients," says Schoonmaker.
Transferring assets without giving up control or revenue
One common reason why many advisors have been resistant to recommending trusts is that the believe they’ll no longer have investment oversight over—or earn advisory fees from—assets transferred into a trust.
While this may be true for trusts established with banks and broker/dealers, it’s not the case with National Advisors Trust Company.
“Nearly all of the trusts we administer are directed trusts, where the advisor has discretionary investment authority over assets in the trust. And unlike trusts established with banks or wirehouses, where investment choices are often limited to proprietary products, we offer true open architecture. Advisors can invest trust assets in stocks, bonds, or mutual funds and ETFs from just about any fund company, as long as these investments meet the fiduciary standards that apply to the management of trust assets,” says Combs.
Helping clients establish trusts and then managing the assets is a win-win for advisors. Not only can they continue to earn investment advisory fees for managing the trust, but doing so allow them to strengthen relationships with trust beneficiaries, who are most often the children of their wealthier clients.
Easing worries, minimizing friction
As former advisors, Combs and Schoonmaker understand the complex family dynamics that often compel parents to establish trusts to deal with complicated wealth transfer issues.
“While many people believe that trusts are used primarily to remove assets from a grantor’s estate and avoid estate taxes, in reality they’re more commonly used by parents to provide a structured way to pass their money on to their children,” says Schoonmaker.
“They’re commonly set up to provide lifetime income for children with special needs, or to set specific conditions under which children with substance abuse or other issues will receive payments.”
In these situations, parents or siblings often believe they should be appointed as trustees. National Advisors Trust Company works with advisors to help them communicate the reasons why this may not be the best idea.
“When family members serve as trustees, it can create friction and acrimony, especially if there is disagreement between trustees and beneficiaries over whether certain disbursement conditions have been met,” says Schoonmaker.
To eliminate these potential family conflicts, National Advisors Trust Company often serves as the sole corporate trustee. As a disinterested third party, they can make these often-difficult disbursement decisions objectively. It’s also beneficial for the advisor, since it removes from the family crossfire and absolves them from having to take on direct fiduciary responsibility for the administration of the trust.
The advantages of a trust-friendly location
Among many advisors who are taking their first tentative steps into the world of trusts, there’s also a common misconception that all trusts have to be set up locally. Fortunately, this isn’t true.
“A trust can be legally established in a state where the advisor does business, and then registered and administrated by a trust company in another state,” says Combs.
This flexibility gives independent operators like National Advisors Trust Company a competitive advantage. As a firm with a national charter, they can work with advisors and clients who formalize the legal trust documents in their home states. Or, if they prefer, the trusts can be registered in South Dakota, one of the nation’s top jurisdictions for trusts, via National Advisors Trust Company's affiliated trust company in South Dakota, National Advisors Trust South Dakota.
Why the choice?
For one thing, the Mt. Rushmore State has no state or local income taxes. And over the past few years South Dakota has passed some of the nation’s most favorable trust protection laws.
These laws safeguard the privacy of grantors and beneficiaries, shield trust assets and payments made to beneficiaries from claims by loan companies, debt collectors, litigants or ex-spouses, and allow certain kinds of family trusts to operate in perpetuity without having to disburse assets at a certain time to meet federal estate tax law requirements.
At the table or behind the scenes
Another benefit of working with National Advisors Trust Company is their ability to be as up front or behind the scenes as advisors want.
“Some advisors like us to be at the table when they’re discussing trusts with clients, since it demonstrates their ability to partner with firms that can address their clients’ financial challenges,” says Schoonmaker.
“Other advisory firms want to position themselves as the provider of trust services, so we offer them can access to private label trust, trustee, and trust custody services that they can market under their own brand name.”
Regrettably, COVID-19 is accelerating what is already recognized as the greatest wealth transfer in modern history.
People who thought they had decades to live now fear that they will fall victim to the next variant of the virus. When they talk to their advisors, they’re as concerned about transferring their wealth as they are about growing it.
Advisors can’t afford to be caught flat-footed when their demands for legacy planning help come in. Fortunately, National Advisors Trust Company is there to help advisors provide these solutions during these most challenging of times.
National Advisors Trust Company is included in the 2021 America's Most Advisor-Friendly Trust Companies published by The Wealth Advisor. This complimentary50-page complimentary Guide features 22 of the top advisor-friendly trust companies in America, who collectively manage over $438 billion in assets.
To gain an overall sense of National Advisors Trust Company's capabilities, please CLICK HERE,