Advisor Friendly Trust Companies

The term “Advisor Friendly Trust Company” (AFTCs) first appeared in the lexicon of the fiduciary community in the early 2000s.

The term connotes an arrangement where the “Advisor Friendly Trust Company” partners with financial advisors to enable the financial advisor to manage trust assets which might otherwise be transferred to a corporate trustee not able or willing to involve the financial advisor to continue to serve the client’s family.

Through advancements in technology, AFTCs no longer require possession of trust assets to fulfill their responsibilities. AFTCs are non-depository trustees, and trust assets remain with financial advisors’ institutional custodian. In essence, nothing changes on the investment side of trust relationship. The family’s financial advisor typically has a long-standing relationship with the client and often the client’s family members.

Free from investment responsibilities, the AFTC can focus on the administration of the trust and serving the interests of the trust’s beneficiaries. The result is two separate and distinct professionals doing what they do best in the client’s best interest.

Continuity

“The wealth stays where it belongs”, with the financial advisor. Financial advisors often work with their client for years, if not decades. They understand the client’s goals and objectives and work for the client’s family on an intergenerational basis. Continuity of investments is critically important. The increased focus on model portfolios requires that existing investment portfolios be liquidated to cash and reinvested into a completely new portfolio. The resulting capital gains create additional taxes to be paid by the trust or beneficiaries. Partnering with an AFTC helps to avoid this.

Favorable State Trust Laws

Most AFTC’s charter their company in states with favorable trust laws. Favorable trust laws include zero-state taxation, enhanced privacy laws, the ability to modify trusts if required, and a host of progressive trust laws not available in the majority of states. ( SD, AK, DE, NV, WY) are considered primary progressive trust states.

Investment Flexibility

As mentioned above, favorable state trust laws provide protection for trustees holding “special assets”. Special Assets might include closely held stock, real estate, concentrated stock, as well as other assets not defined as marketable securities. “Advisor Friendly” trust companies often work with the client’s attorney to create LLCs and other vehicles to allow the assets to be held in the trust while minimizing the trustee’s role in the day-to-day management of the asset.