The Nevada Advantage: Broker-Dealers Enhance Their Trust Service Offerings With Dunham Trust Company

A major wirehouse plus more than 100 other broker-dealers and RIAs have streamlined access to the Nevada trust advantages for their financial advisors and their clients by approving Dunham Trust Company to their trust solutions platforms.

Wirehouses, independent broker-dealers, and RIAs working with trusts have many choices in trust partners for their financial advisors. However, simply picking a name in a favorable trust state like Nevada without first conducting extensive research would be a little like Russian roulette.

After all, clients may be thrilled to have all the protections that Nevada provides, but the wrong choice of corporate trustee could effectively hand those assets to a stealth competitor, leaving the advisor in the cold.

Dunham Trust Company is a trust service partner committed to honoring the key advisor role and refraining from making a play for assets. This – in addition to its ideal Nevada location - could be why Dunham Trust Company is such a popular choice among broker-dealers.

Nevada trust climate continues to heat up

Nevada is one of the hottest domestic estate planning destinations for truly dynastic capital. The state offers some of the best tax treatment, asset protection, privacy and administrative workability in the country. Nevada’s legal, business and legislative leaders continue to embrace, promote and enact expertly-crafted trust laws and tout Nevada’s trust climate as progressive and well-established. This is for a variety of reasons. Here are a few that financial advisors should keep in mind:

Self-settled spendthrift trusts: A client may set up a Nevada irrevocable trust and be a direct beneficiary of such trust, able to receive distributions from an independent trustee, while also protecting assets from creditors. That client can also retain the right to distribute trust assets to beneficiaries other than him or herself.

No state income or capital gains tax: Nevada has no state income tax and no state capital gains tax on trust accumulated income that is not distributed (depending on the trust type). In addition, there is no state estate tax for residents of Nevada.

No exception creditors, even for spousal support or preexisting torts: Exception creditors are those that are permitted to “pierce” the trust and reach the trust assets. Other top Domestic Asset Protection Trust (DAPT) jurisdictions permit certain exception creditors to reach trust assets.

Two-year statute of limitations: In Nevada, trust assets are protected from the reach of future creditors once two years have passed from the date the assets were transferred into the trust. Other top DAPT jurisdictions have four-year statutes.

No affidavit of solvency required after initial transfer: Other top DAPT jurisdictions require a new affidavit for additional transfers to a trust. Nevada does not.

365-year trust life: Nevada statutes permit trusts to continue for 365 years, providing a long-term legacy for heirs. In a world where so many carefully nourished advisory relationships evaporate as soon as the assets are transferred to the next generation, this is a game-changing strategic edge for financial advisors.

Decanting statute: Recently, Nevada improved its statute; arguably making it the most progressive decanting statute in the U.S. Nevada’s improved statute can be used as a tool for trustees and advisors to use to help clients improve existing irrevocable trusts. Specifically, the decanting statute can be used to update certain trust terms that no longer allow the best method of administration, including terms that were once thought to be something simply to be “tolerated.”

Directed trust statute: Nevada statutes permit “directed trusts.” These trusts allow investment advisors to continue to manage assets in a co-trustee capacity with another “administrative” trustee handling non-investment trust administration matters.

Flexibility and balance win the platform position for Dunham

Since its doors opened in 1999, Dunham Trust Company has supported an “anti-poaching policy” that has helped establish a robust advisor-friendly culture. In fact, Dunham was originally created to work with financial advisors. While Dunham does often hold the ultimate fiduciary hire and fire powers, it does not seek opportunities for its trust officers to even “suggest” shifting the financial advisor relationship to an in-house manager. Instead, Dunham builds key advisor teams and strategies with the right balance of oversight and autonomy, and Trust Advisor has taken notice. We’ve named Dunham as one of the most advisor-friendly trust companies for the last five years.

Previous generations of trust service providers had few scruples about ultimately cutting the advisor out as the AUM shifted. Today, as more and more wealth crosses state lines in search of the best outcomes and family offices, high net worth advisors logically insist on ensuring that a distant partner really is on their side.

In practical terms, the partner decision now comes down to whether the trust company embraces various arrangements. Within the document and legal guidelines, the trustee must be willing to support an architecture that separates tasks, defines authority and assigns ultimate responsibility.

Flexibility is clearly of utmost importance. Dunham will act as discretionary trustee, consider delegation of investment duties, or act as directed trustee. This evidently makes a compelling case for some mighty big firms to make room on their platform for an independent player.


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