New trust law gives N.H. an advantage

One of the major changes New Hampshire’s adoption earlier this year of the Trust Modernization and Competitiveness Act of 2006 trust laws brings to the state’s trust law is the creation of a new group of trust companies called family fiduciary service companies.

Prior to the creation of family fiduciary service companies, there were two types of trust companies in New Hampshire — depository and nondepository. Depository trust companies act with all the same rights and powers as traditional banks, while nondepository trust companies are unable to make loans or take deposits.

The family fiduciary service company is similar to the nondepository trust company in that it cannot make loans or take deposits. However, unlike nondepository trust companies, family fiduciary service companies serve only family members.

These family fiduciary service companies are unable to do business with the general public, unless proper steps are taken to convert into a nondepository trust company. In that case, the family fiduciary service company would need to file a notice on a specified form with the state bank commissioner.

Those wishing to form a family fiduciary service company in New Hampshire must meet the following requirements:

• There must be three organizing members. (Prior to the adoption of the act, New Hampshire required 10 organizing members in forming any trust company.)

• The organizing members must submit an organizing instrument with the trust company’s name, purpose, registered agent’s name and address, amount of capital in the trust, and number of shares which the capital will be divided into. The minimum amount of capital required is $500,000 — increased from $250,000 under the act.)

• The organizing instrument must be accompanied by the required application fee, a copy of the proposed family fiduciary service company’s articles of incorporation, business plan, capital plan and other relevant documentation. These documents must highlight the fact that the trust will not conduct business with the general public. It must, therefore, specify the name of the relative whose relationship determines whether the company has the necessary family link required to form a family fiduciary service company.

Since the New Trust Modernization and Competitiveness Act recognizes a difference between trust companies that are acting as full-fledged banks and those that are merely serving families, it allows for reduced administrative and accounting burdens on family fiduciary service companies. Other benefits include a simplified application process, enhanced privacy, and reduced regulatory burdens and examination requirements. 

Under the act, the bank commissioner is authorized to reduce a variety of regulatory burdens if requested by the family fiduciary service company, including:

• Commissioner supervision and examination of conditions and management

• Semi-annual displays of information regarding fees, charges and products relating to demand deposit accounts

• Public demands for information on deposit accounts

• Development of specific procedures and policies by a board of directors

• Election of an investment committee

• Holding of nine meetings a year and keeping accurate records to reflect those meetings

• Certified annual audit reports

• Maintenance of a 10 percent surplus of funds on hand

• Election of a president, secretary and board of directors of at least five members

The reduced regulatory burden allows for increased privacy of trusts administered by family fiduciary service companies, which makes New Hampshire a desirable location for families with over $500,000 in capital to administer their trusts. However, it should be noted that where a family fiduciary service company later files notice with the bank commissioner to conduct business with the public, any exemptions that were granted no longer apply.

Doria DiBona Aronson is an attorney in the Trusts and Estates practice at the law firm of McLane, Graf, Raulerson & Middleton. She can be reached at 628-1290 or

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