New Hampshire Trust Laws Give New Meaning to ‘Live Free’ for HNW Individuals and Family Offices

Glenn DiBenedetto

The New Hampshire state motto, “Live free or die,” is arguably one of the most memorable in the country with roots in the battleground of the American Revolution. Proudly emblazoned across license plates and memorabilia, the adage is not only championed by state residents, but has now taken on new meaning for the ultra-affluent outside of state limits as well.

Over the past 15 years, New Hampshire has become the premier destination for wealthy residents and non-residents to establish and administer non-grantor (irrevocable) trusts. With over $300 billion in trusts regulated by the state, the favorable trust law changes have created unparalleled opportunity for high-net-worth individuals and family offices. Enacted in 2012, the changes essentially eliminate state income taxes on interest, dividends and capital gains earned by non-grantor trusts. The majority of states tax such income at rates ranging from 5 to 12 percent. In addition, non-grantor trusts are not subject to filing New Hampshire interest and dividends tax returns.

The state’s SALT-free peers, Delaware and South Dakota, offer many of the same tax benefits, however, New Hampshire’s robust and modernized trust laws provide several significant advantages. Below are four important reasons why New Hampshire is one of the most attractive states for the wealthy to create and manage their trusts:

●     Enhanced Asset Protection - New Hampshire allows for the creation of trusts that shield assets from a settlor’s or beneficiary’s creditors. Transfers made to the trust are irrevocable, but the family office or other transferors still retain significant benefits, including control over investment decisions and dispositions.

●     Creation of Dynasty Trusts - Unlike most states, New Hampshire legislation offers the opportunity to create a “dynasty” or perpetual trust - an important consideration for legacy planning. These trusts can continue for an indefinite amount of time, without a termination date mandated by the state.

●     Right to Privacy - Under the New Hampshire trust laws, the settlor can establish when and to whom a trustee must disclose information about the trust to beneficiaries. A luxury not often afforded by other states, this right to privacy is invaluable for settlors who do not want beneficiaries to know that a trust exists or who would prefer to refrain from revealing specific trust information.

●     Settlor’s Intent - Should relatives contest certain aspects of the trust, New Hampshire has strong settlor’s intent laws that fairly balance the interests of beneficiaries and trustees. Under these protective measures, settlors can create a trust in New Hampshire with the reassurance that their wishes will be fulfilled.  

If you are looking to safeguard your family’s assets, New Hampshire may be the best option for establishing an irrevocable trust. From tax savings to asset protection, the state’s advantageous trust laws can enhance the future of your wealth and family legacy.

The Small Business Marathon: Training and Planning for a Successful Finish

Nick Giacoumakis

Experienced runners would never embark on a marathon without adequate training. Taking on this physical and mental long distance feat shouldn’t be entered into lightly and without defined strategies for how to cross the finish line. The same can be said for the challenges small business owners face, which include launching, operating, growing and ultimately exiting their ventures at the end of their careers. Unfortunately, many business owners fail to thoroughly prepare for the last stage of the marathon – a successful sale or transition.

In our 25 years of experience counseling small business owners, we’ve found most of them are inadequately prepared for the succession or sale of their business. A recent Exit Planning Institute study confirms this, revealing that 70-80 percent of businesses put on the market don’t sell. This number should come as no surprise, considering 83 percent* of business owners lack a formal, written transition plan.

Taking into account these alarming statistics, we stress to our clients that exit and succession planning is no longer something to think about down the road. Business owners need to consider exit strategies throughout the lifecycle of their businesses to maximize enterprise value. By following best practices there is the potential to double the value of your business in a few years.

If you are nearing the end of your career, considering retirement or simply pondering the future, it’s important to keep in mind the following reasons why adequate preparation is integral to a successful sale or transition of your business:

Creates a roadmap for the transition process - Transitioning your business requires meticulous planning and attention to detail, so it is critical that owners understand the process from start to finish. Whether you are selling your enterprise or transitioning ownership to a family member, creating a roadmap will help identify opportunities for improvement and define value. From initial assessment and valuation to closing the deal, mapping out your exit plan requires a significant investment of time, often several years. Getting a jump start on the planning process will help business owners strike the appropriate balance between working in the business and working on the business.

Prepares for the unexpected - Forty percent* of business owners have no plans in place to cover a forced exit. When faced with unexpected life events such as illness, death or simply general fatigue, owners are often left without a second-in-command ready to assume all the responsibilities of running the business. While owners may find they have several good employees, these workers often lack the training and skills needed to lead the company. An exit plan helps identify potential successors and provides them with the appropriate preparation to take over if the unexpected happens.

Allows a seamless transition to life’s next venture - Challenges are inevitable during times of transition, but mindful exit planning can greatly reduce any obstacles. With attention, consistency and a proper strategy, small business owners can preserve their legacy and maximize the value of their greatest investment – their business.

As business owners, we understand how quickly day-to-day operations take priority, but we also know carving out time to connect with the right partners can make your life’s efforts pay off for you and your family.

*All statistics are from the Exit Planning Institute’s 2017 State of Owner Readiness survey.

Restricted Social Security Application

As we approach the end of the year and focus ahead on 2019 financial planning needs, we wanted to remind you of an important planning tool which will soon be phased out.

The underused and not well-known social security planning technique has to do with filing a restricted application to receive spousal benefits while allowing your benefit to grow until age 70.  This was eliminated along with the “file and suspend” strategy for most individuals when social security was revised under the Bipartisan Budget Act of 2015.  However, for individuals that turned 62 before the end of 2015, the restricted application is still available to use as a planning strategy.  Under this strategy, the spousal beneficiary (usually a lower wage earner for maximum value) can file a restricted application on their own benefit and receive a spousal benefit instead while allowing their own benefit to grow at 8% per year up to the maximum amount at age 70, afterwards then switching to their own full benefit.  Having the lower earner file early could make sense for couples that would like to bring in some additional income while allowing the higher earner to delay their benefit.  As stated, the stipulation is that they must have turned 62 before the end of 2015 and has to have reached full retirement age (FRA) by the time he/she files.  Also, it’s worth noting that the other spouse has to have applied for and be receiving their benefits for this to work.  For individuals that turned 62 after 12/31/15, this technique is no longer available. 

As many people may know, social security benefits grow on a monthly basis every month after FRA in which a person delays receiving their benefits until age 70 when they receive the maximum amount possible.  Full retirement age is based on your date of birth.  For most people, it is age 66, but has been increasing gradually over the years and for those born in 1960 or later, FRA is 67.  Below is a link to the full retirement age chart from the Social Security Administration’s website.

https://www.ssa.gov/planners/retire/agereduction.html

Keep in mind that spousal benefits are up to half the amount the primary earner receives (if he/she waits until their FRA).  If one spouse has no earnings history and is not eligible to receive benefits on their own record, they would be better off just filing for spousal benefits rather than a restricted application.  Trying to determine a strategy that will work best, and which spouse should file first is really dependent on the facts and circumstances and one should consult with their financial planner or a qualified retirement planning specialist prior to making a decision.  As a final point, 2019 will be an important year as this loophole will end in January 2020 and 2019 is the final year it can be used.

Numerous calculators to help determine the best filing strategy can be found online, including one provided by the Social Security Administration at www.SSA.Gov.

Keep in mind that you won’t find an estimate for your spousal benefit on either of your social security statements.  To get that estimate, you will need to call SSA at 1-800-772-1213 or visit your local social security office.

Your team of trusted advisors at NEIRG is here to assist with any questions you have regarding the above or other planning strategies you should consider.