On July 11, Governor Hassan signed SB 289 which amended certain New Hampshire trust laws with an effective date retroactive back to July 1, 2014. That bill, which was co-sponsored by Senators D’Allesandro and Bradley, continues the decade-long effort to make New Hampshire one of the best legal environments for trusts and their administration.
The intended consequence is for not only New Hampshire residents, but out-of-state residents to take advantage of New Hampshire laws. This increased demand has led to the creation and increased hiring of investment advisors, trust officers and supporting legal and accounting services. According to the New Hampshire Banking Department, New Hampshire now has twentynine (29) trust companies compared to eighteen (18) in 2006. The most recent trust company to enter this marketplace, Fiduciary Trust Company of New England, will be opening its New Hampshire office in Manchester in September.
There are five key provisions of this new legislation. First, trustees will be given the unilateral authority to modify and update trust administrative provisions without being requested to create a new trust and having to transfer assets into that new trust (a “trust decanting”). Transferring assets into a new trust can have a number of significant hurdles where the trust assets consist of real estate (especially when subject to mortgages), limited partnership interests and other interests subject to transfer restrictions. By allowing trustees to modify trusts, they can improve trust administration efficiencies, insert provisions which were not anticipated at the time of the trust’s creation and resolve ambiguities. Second, trustees and executors (and other trust advisors and trust protectors) and their attorneys are now entitled to attorney-client privilege for communications between their lawyers and advice given concerning how to serve in their roles as fiduciaries. Previously, it was uncertain whether beneficiaries of a trust could gain access to these confidential discussions. This created situations where trustees might be wary of seeking legal guidance when they needed it the most.
Third, trusts can be written to require trust beneficiaries to resolve disputes through nonjudicial means (i.e., mediation and arbitration). With litigation becoming increasingly unattractive, due to court delays, costs and legal fees, trusts can now impose a mechanism to streamline the resolution of these controversies.
Fourth, New Hampshire refines its law for directed trusts – a trust where one of several trustees has specific responsibilities for the trust (i.e., usually investments or distributions). The remaining trustees which are not involved in those decisions are “excluded” fiduciaries and not subject to any claims or liability. This open architecture of structuring a trust allows clients to tailor trusts to their individual circumstances.
Finally, individuals who write a trust can now ask the court to declare that the trust is legally valid at its creation. This procedure can avoid expensive and time consuming litigation after the trust creator dies. There are frequent will and trust contests when a family member objects to receiving less than their expected share of family assets. The court can now determine the trust’s validity while the person is alive, when it is the easiest and most convenient time to determine whether the trust creator was of sound mind and under no undue influence. There is a similar procedure for declaring an individual’s will to be valid during his or her lifetime.
With these changes, New Hampshire continues to be one of the most attractive jurisdictions for trust administration – good news for trustees and good news for our New Hampshire economy.