Who can you Trust with your Trust?
Not Your Grandmother's Trust: Women with Assets
Ann Zuraw of Zuraw Financial Advisors and David Warren of Bridgeford Trust talk about the advantages of a trust situs in South Dakota. David Warren discusses the role of a Trust Protector also known as a “Super Trustee”. Ann and David discuss the various opportunities for fiduciary roles in the management of the trust. South Dakota is the only jurisdiction currently offering the ability to appoint a Family Advisor Role. The Family Advisor role offers the ability to choose your investment manager or keep a family lawyer involved.
DW: One of the most amazing things about South Dakota law at this point is the control that it gives back to clients. We talk about it in terms of how important that is to women, as well. There is a particular nuance in South Dakota that delivers great control in conjunction with the directed trust statute called “Trust Protector.” And we refer to the Trust Protector as a super trustee because, under South Dakota law, the Trust Protector really has more power, quite frankly, than the trust company itself, and the trustee itself, which we believe, at Bridgeford, is a very good thing for you, and a very good thing for your clients because it places much more control, as I said earlier, back into the hands of clients. And, often, I would suspect you’ve been asked to be a Trust Protector over the years. And how do you respond to that?
AZ: When I was part of a Broker-Dealer and we’re able to be a trustee for a family-related trust, there’s definitely a fiduciary liability. What the role of trustee is very important. I think, “No.” Most financial advisors will say, “No,” to being trustees.
DW: And that makes sense because the trustee and the Trust Protector are both fiduciary roles, which means that you have a heightened duty to always do the right thing. And I know you always would do the right thing.
AZ: I am a fiduciary as an RA. However, the trustee is a whole other level of legal interpretation.
DW: Absolutely. And, so, lots of compliance groups don’t want their people to do that. And, so, what South Dakota did, and frankly it’s the only state right now in the country that had the foresight to create this provision, or role really, it’s called a “Family Advisor.” And, the Family Advisor is so powerful because it’s very much like a Trust Protector in that it gives a lot more control outside the trust. It can control aspects of the trust, but it’s a non-fiduciary position. So, South Dakota created this position in direct response to the challenges you had. So, you get very close to your clients. I know your clients love you and they want you to be part of their world for a long, long time in that capacity, but your regulators aren’t happy to have you be in the fiduciary role. So, South Dakota created this non-fiduciary role, and we refer to it a lot as a “Trust Protector to Life.” So, you have a lot of the same powers but just without the fiduciary liability.
AZ: I think that’s key. It’s fiduciary liability versus fiduciary responsibility because, just as a registered investment advisor, I am a fiduciary, and we can define fiduciary from a legal perspective, but it means we do what’s in your best interest. And, I think this is a good example that getting other people involved, whether it’s a Family Advisor, or it could be a lawyer the family has used forever, whatever state you’re out of. Or, it could be somebody who is involved with a company, a family company. I mean, there are a lot of different roles that that Family Advisor could be, and be a part of that asset, the family, which I would like to think is a family asset.
DW: Absolutely. And it’s important to know that at this point, as I said earlier, only South Dakota has this capability. So, when we talk about the importance of selecting the proper trust jurisdiction, if a family’s really worried about control, and that’s what’s driving their planning, and that’s what they need is the ability to control these trusts, and South Dakota really is where they want to be looking at this point.
AZ: Thank you all for joining, and we just want to reiterate, “It’s no longer your grandmother’s trust. It’s a changed trust environment.” And, if you have any questions, don’t hesitate to call me.
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