Wealth-Friendly Delaware

Four of the independent trust companies in our directory (out of 68 respondents) are based in Delaware. Due to the many advantages The First State has to offer companies in financial services, it’s a wonder there aren’t more. Each state determines its own trust laws. Delaware trust law started with the formation of the Delaware Court of Chancery in 1792. The court rules on major business decisions, as well as trust decisions. With roots reaching back to the King’s Chapel in feudal England, it is recognized as one of the most efficient and effective court systems in the world–one of the reasons why Delaware is home to so many large corporations.

“The court gives Delaware a huge advantage in terms of its efficiency and its court system. And its smallness makes it very easy to get things accomplished,” says Jim McMackin Jr., VP of marketing for Wilmington, Delaware-based Commonwealth Trust Company, which was formed in 1931. “It’s amazing how quickly they can react and get things done.” For example, he cites trust cases taking three to four years for a hearing in Philadelphia’s Orphans’ Court (which among other duties has jurisdiction over most estate administration matters, including trusts). “In Wilmington, you’d get it done in three or four days,” he says.

Efficiencies aside, Jeffrey Lauterbach, chairman, president, and CEO of The Capital Trust Company of Delaware, also based in Wilmington, calls Delaware laws “the most wealth-friendly of any state in the country.” Of special interest to advisors, it’s also a state that allows someone other than the trustee to be named as the investment advisor for the trust, which means they become a co-fiduciary (of course an advisor already is a fiduciary if operating as an RIA). A few other states have similar statutes, such as Ohio and South Dakota. “But when you combine that with all the other advantages of Delaware, it makes it extremely attractive,” Lauterbach says.