Trusts sector boosts NH’s economy

In his recent article (“Is NH losing trust in trusts?” July 18-Aug. 1 NH Business Review), Bob Sanders discusses the Legislature’s longstanding support for innovative trust laws and trust company regulations to grow the state’s trust services industry. This remains sound policy.

In the words of State Senate President Donna Soucy, who was interviewed earlier this year in this publication, “the number of trust companies actually outnumber banks… [i]t’s really an industry that has taken off.”

Senator Soucy’s view is supported by economist Russ Thibeault, who recently studied the economic impact of the state’s trust services sector and reported his findings to the Legislature. He determined that there are between 300 and 600 direct and indirect jobs in the state attributable to the trust services sector, with an average salary well above the state average, and an annual economic impact of between $25 million and $43 million.

There is broad, bipartisan support in this state for policies that encourage the growth of industries, such as trust services, that are unencumbered by structural concerns, like high energy costs, that pose a barrier to entry for many business sectors, and create stable, well-paying jobs that appeal to younger workers.

One common characteristic among the states that compete to attract trust services business is a commitment to reasonable taxation. New Hampshire’s interest and dividends tax was amended in 2012 to better align with federal tax law and the economic realities of modern trusts. Senate Bill 326 shifted the responsibility to pay I&D tax from trusts to the beneficiaries who receive interest or dividend income in trust distributions. The bill was intended, and has proven to be, revenue-neutral.

Contrary to the suggestion in Mr. Sanders’ article that these changes may have resulted in a loss of revenue, when the Legislature revisited this question several years ago, in 2015, it found no evidence to substantiate such revenue loss. As a result, the bill’s sponsor, then-Rep. David Hess, requested that it be voted inexpedient to legislate.

Often, states make extraordinary economic concessions, picking winners and losers, to foster economic development. Not so with New Hampshire’s trust services industry. At no cost to the public, the state has been able to foster growth simply by ensuring that we have some of the best trust laws and trust company regulations in the nation.

New Hampshire-chartered trust companies pay their own way, both in business taxes on their New Hampshire-sourced income and operations, and, importantly, each pays its proportionate share of the administrative expenses of the Banking Department, which derives 100% of its revenue from fees, assessments and penalties.

Mr. Sanders suggests that the state may be losing out on some economic benefit because we do not require trust companies to maintain a physical presence here. This deliberate policy decision, however, encourages existing and new trust companies to choose a New Hampshire charter, while being able to maintain operations wherever it makes the most sense for them.

While companies that choose this model may not create jobs here directly, they nevertheless indirectly support the economy by retaining local service providers, and their choice to charter here burnishes New Hampshire’s reputation as a first-class trust jurisdiction.

Further, for legal and other reasons, many customers of these companies will ultimately deepen their ties to the state when it comes time to make significant estate planning decisions.

I had the privilege to serve for five years at the Banking Department, the last three as commissioner. During my tenure, we made significant structural changes to ensure that the examination and support staff have the specialized knowledge, expertise, information and resources they need to soundly regulate chartered trust companies. My successor, Bank Commissioner Jerry Little, has maintained and built on these enhancements, and I believe under his leadership the department continues to safely and effectively supervise these entities.

While a small minority of the state’s trust services providers focus on individuals and families with substantial assets and complex needs, the vast majority provide trust services to a broad range of consumers. The flexibility built into our modern trust laws allows trust services providers to meet the unique needs of each family they serve, including, for example, helping to manage the special legal and administrative concerns that arise within an aging population.

Recently, a well-known local trust and estates attorney (who has no affiliation with the New Hampshire Trust Council) testified to the House Commerce Committee that “New Hampshire has the best trust code in the nation.”

New Hampshire’s support for innovative trust laws and trust company regulations is working. The sector has seen steady, progressive growth as word of New Hampshire’s advantages for trust formation and administration has spread. This is creating good jobs and boosting our economy, without cost to the public and with no evidence of reduced consumer protection or an increase in financial crimes.

The Trust Council, which represents a cross-section of trust services providers, supports the Legislature’s efforts to more fully understand our industry and its place in New Hampshire’s economic future. We look forward to providing helpful information and insight.

Glenn Perlow, president of the New Hampshire Trust Council and vice president of government affairs and chief compliance officer of Perspecta Trust LLC, served as New Hampshire banking commissioner from 2013 to 2016.