A PRACTICE MANAGEMENT WHITEPAPERSPONSORED BY PREMIER TRUST

DOES A CLIENT HAVE A LIFE AFTER DEATH?

ADVISORS WHO MANAGE FAMILY MONEY HAVE AN 8 OUT OF 10 CHANCE OF BEING FIRED BY HEIRS AFTER THEIR CLIENT DIES

7 THINGS YOU CAN DO TO BE SURE YOU’RE NOT FIRED WHEN YOUR CLIENT DIES.

2 DOES A CLIENT HAVE A LIFE AFTER DEATH?

As wealthy baby boomers beginto pass away up to $23 trilliondollars in wealth will be transferredfrom one generation to the nextbetween 2007 and 2026, according toestimates from Boston College’sCenter for Wealth and Philanthropy.

We are currently witnessing the largest generational shift of wealth in UnitedStates history.

If you don’t do anything to keep the next generation in your book of busi-ness, you stand a four in five chance of getting fired.

Even advisors who have reached out to their clients’ children and grandchildren through family conferences and one-

on-one meetings may find themselves shut out after the estate transfers.

The same Prince Associatessurvey found that fewer than 1% of thepeople who inherited money from theirparents continued to use the sameadvisor after their parents pass away.

What’s the single most important step to take right now to keep your clients?

Develop strong ties with the trust com-panies that manage their trusts.

Research shows that trust compa-nies are among the least likely of all professional advisors to be fired after a generational transfer.

DO YOU BELIEVE THAT AFTER your clients die you

will still have relationships with their heirs? Think again.

Advisors who manage family money have an eight in

ten chance of being fired by heirs after their clients die,

according to a study by Merrill Lynch and Prince Associates.

97%

CHANCE OF WHO GETS FIRED AFTER THE CLIENT DIESTRUST COMPANIES ARE LEAST LIKELY TO BE FIRED BY HEIRS

95% 91% 86% 97% 44%

BUSINESS ATTORNEY

Source: Rothstein Kass©The TrustAdvisor.com

CPAs PRIVATE BANKERS

RIAS BANK TRUST COMPANY

3 DOES A CLIENT HAVE A LIFE AFTER DEATH?

A study by Rothstein Kass found that only 44% of trust companies were replaced after inheritance, about half the rate for business advisors (97%), CPAs (95%), private bankers (91%), RIAs (86%) and banks (86%).

This data provides compelling evidence that advisors, wealth managers and others who manage client money, and want to hang onto it when their client dies, need to be involved at an earlier stage in their client’s wealth transfer planning process.

They need to participate intheir client’s trust preparation andongoing administrative process.

Advisors can either develop arelationship with a trustee provider, orcreate a directed trust arrangement, where an advisor can be more certain to hold onto their client’s accounts after the heirs parents pass away.

Directed trusts are a powerful tool for asset retention

These strategies will strengthen your position with current clients – and perhaps make their children and other heirs more receptive to your services. However, that may not be enough to enable you to retain assets.

The most powerful way to increase asset retention after inheritance is to take an active role in managing your clients’ trusts.

The simplest way to become part ofthat durable relationship is to assistyour clients in establishing directedtrusts.

A directed trust permits an advisor tohave full discretion to choose invest-ments that best meet the trust’s objec-tives; including stocks, bonds, mutualfunds, and other marketable securities.

The advisor’s name is listedin the trust document and can beremoved by the trustee only if he failsto meet his or her fiduciary duties.

Meanwhile, the advisor hands off theresponsibility for administering thetrust to an outside corporate trustee.

This corporate trustee handlestime-consuming non-discretionarytasks like distributing income andcapital gains and filing taxes, as wellas discretionary tasks like interpretingthe provisions of a trust or making decisions that are not explicitly coveredin the trust documents.

For most advisors finding the rightpartnering trust firm may not be asimple task.

A Directed Trust Insures You Won’t Get Fired After Your Client Dies

4 DOES A CLIENT HAVE A LIFE AFTER DEATH?

Finding the right directed trust relation-ship is the “sweet spot” between spend-ing to run a trust business in-house and turning the business away.

The breakthrough came in the 1990s, when some states altered the rules to allow the creators of a trust to direct the trust company to follow the investment choices of an outside advisor. As far as the portfolio is concerned, the advisor (you) is the boss. The advisor earns the management fees. The trust company earns its own fee for handling everything else: accounting, custody (if required), re-porting and payments to the beneficiaries.

Directed versus delegated trusts

Some states welcome directed trusts. In others, the closest you get is a variant called delegated trusts. Some states support both.

The words look similar, but in practice, they represent very different ways to break down the responsibility for running a trust. The creator of a directed trust takes the job of managing the assets from the trustee and assigns it to some-one else. This generally lets the existing wealth manager keep on doing what he or she is doing, while releasing the trust-ee from all but the most basic responsi-bilities over how the money is invested.

Delegated trusts give the trustee the power to decide who will manage all or some of the assets. In this kind of rela-tionship, the trustee remains responsible for overall performance and will monitor the outside manager’s activities to en-sure that all parties meet their fiduciary obligations.

Given the choice, advisors naturally prefer to have the trust direct man-agement powers to them, since this usually entails less surveillance and more security that the assets won’t be taken away without reason. Whether the trust is directed or delegated depends on the grantor’s wishes and the rules of the state in which the trust is set up.

Choosing the right partner for your directed trust

Not all U.S. states support direct-ed trusts, and in fact some experts consider only a handful of trust centers -- Nevada, Alaska, Delaware, and South Dakota -- to be really top-tier places to create and run a trust.

However, anyone from any state can set up a trust in any jurisdiction, so no ad-visor should feel constrained by what’s available at home. Recent trends have led wealthy families and individuals to

Finding the right directed trust relationship is the “sweet spot” between spending to run a trust business in-house and turning the business away.

5 DOES A CLIENT HAVE A LIFE AFTER DEATH?

seek out the most favorable environments for their assets. Many large family offices are opting for maximum flexibility when the time comes to decide where to set up the new trust.

Even if the prospective trust grantor doesn’tneed a particular tax benefit or class ofprotection at the moment, these advisorsknow that that circumstances change. Ifmultiple generations are part of theequation, the trust must be able to evolvewith the family’s needs.

These are the reasons why many advisors look for a combination of factors when search-ing for a trust company:

Perpetuities. Conventional trusts can expire a few decades or maybe a century af-ter the original grantor dies, but a few states allow property to remain in trust for multiple generations, if not forever. These perpetual trusts or dynasty trusts are a very popular technique for planners and clients today.

Favorable tax rules. Avoiding stateincome or capital gains tax is another key objective for planners to achieve for their clients. Nevada, Alaska, Florida, South Da-kota, Texas, Washington and Wyoming do not impose an income tax on trusts.

Asset protection. Some states offer varying degrees of protection for locally

domiciled trusts from the trust creator’s creditors. While the language can be so vague as to be useless in court, jurisdic-tions like Nevada and South Dakota have a rich body of statute and precedent in place designed to shield property from legal claims.

Seven strategies for hanging on to the next generation.

What else can you do to skew the process in your favor? How can you increase the odds

that your client relationship outlives your client? How can you make sure that your client relation-ships outlive your clients?

1 First and most important, develop relationships with trust company’s administrative trustees and other trust providers so that advisors are a part of the trust relationship.

2 Be sure that you are named as the investment advisor in any successor of transfer instruments such as a revocable living trust or any other trust that provides for client succession planning.

3 Get to know the spouse and children while your client is still healthy. Involve your main client and the whole family in informal meetings to talk about family wealth and values. Add value by providing education to

heirs who may not be familiar with investment concepts, and involve them in any major investment decisions.

4 Avoid running into clashes between parent and heir agreements as the client may feel that the advisor is pandering to the heir and that will disregard the advice and the account objectives of the parents.

5 Be empathetic. The emotional toll of having an heir become wealthy immediately means a reassembly of their priorities, life’s goals and investment objectives.

6 Distance yourself from the providers that are most likely to be ditched after death. These include the client’s business attorney, CPA and private banker.

7 Add value to your service. The advisor and trust provider should offer wealth transfer planning and asset protection to create motivation for the heirs to stay put.

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CHOOSE A SEASONED PARTNERYou can make yourself more valuable to high net worth clients during their lifetimes – and retain more assets when they pass on – by establishing a re-lationship with a seasoned trust company. Premier Trust, with 40 team members and more than 150 years combined experience in the trust business, can help you grow and protect your business.

Located in trust-friendly Nevada with offices in Las Vegas and Reno, Premier Trust administers trusts only and does not manage investments. Our clients maintain continuity in their investment plans and retain the relationships they have with their trusted investment and financial professionals. We work closely with financial advisors and other professionals, including attorneys and CPA’s to help them organize, structure and administer their clients’ estate plans. If you’d like to learn more about how to give your client relationships a life after death, contact us at www.premiertrust.com • Tel: (702) 507-0750 • Fax: (702) 507-0755 • Direct Marketing Phone: (702) 577-1777.

Total return trusts. Many states have enacted total return trust or power-to- adjust statutes. Trustees in these states can now invest based on a total return approach and satisfy beneficiaries who receive either a share of current income or the principal at a later date. Most states with total return trust legislation have the ability to convert a trust to a unitrust per-centage between 3% and 5%.

Delegation. Needless to say, you want a trust provider that operates in a state that allows an outside advisor to manage the portfolio.This is not quite as intuitive as it initially seems. Review state statutes permitting segregation of duties to make sure that the trustee will provide exactly the level of supervision you find comfort-able -- neither more nor less.

Privacy. Most states have methods for insuring that fiduciary matters will not be a matter of public record, although some are stronger than others.

However, state laws differ on beneficiaries’ entitlement to trust information and only a few states allow a trust instrument to delay or prohibit disclosure of trust information to future beneficiaries.