Advantages of New Hampshire Trust Laws

By Livia DeMarchis, Esq.

IN 2023, TRUST COMPANY OF VERMONT opened an office in Keene, New Hampshire and officially registered to do business as a trust company in the Granite State. This means that Trust Company of Vermont can serve as a trustee of a trust governed by New Hampshire law even if the trust donor or trust beneficiaries do not live in New Hampshire. Because New Hampshire has purposefully modernized its trust laws to provide many cutting-edge planning benefits, this is exciting news for Trust Company of Vermont clients. This article reviews some of the main features of New Hampshire’s trust laws that make the state such an advantageous trust situs for our clients. 

As highlighted in our October article about the estate planning opportunities created by the OBBBA, New Hampshire allows trusts to shelter assets from estate tax for future generations indefinitely. In contrast, many states, including Vermont, still have a “rule against perpetuities,” which limits the duration of a trust (usually to no more than 21 years after the death of a beneficiary who was alive when the trust was created). Under New Hampshire law, however, trusts need not be limited under a rule against perpetuities and, if a trust company with a New Hampshire situs is trustee, the trust can continue indefinitely for all future generations. If a trust is exempt from generation-skipping transfer tax, this can protect assets from ever being subject to estate tax again. The extremely high generation-skipping transfer tax exemption of $15MM per person under the OBBBA offers high-net-worth families an opportunity to wrap up significant assets in continuing trust under New Hampshire law so that none of their descendants will ever need to include those assets in their taxable estates again. These continuing “dynasty” trusts also provide beneficiaries with excellent creditor protection, a feature that can be especially important, for example, in the event of a beneficiary’s divorce. 

If a trust needs to be modified or “repaired” because the language is lacking or it is no longer operating as intended, New Hampshire law offers several options. For relatively minor issues related to administration, New Hampshire offers a unique silent trustee modification option where a trustee can, pursuant to statute, modify a trust for administrative reasons without notifying the beneficiaries. This can be very helpful to correct simple issues that are completely consistent with a grantor’s intentions. For more substantive issues where all the interested parties (typically, all trustees and beneficiaries) are on the same page, New Hampshire allows the use of nonjudicial settlement agreements. Issues that can be resolved by nonjudicial settlement agreement include, for example, questions of trust agreement interpretation, the need to clarify whether a trustee is permitted to take certain actions, or changes to trustee succession provisions. To correct more significant problems, or when a trust agreement contains numerous concerning provisions, New Hampshire law also permits decanting, where an old trust can be “poured” into an entirely new trust agreement. New Hampshire’s decanting statute is understood to be one of the more user-friendly statutes of its kind.

In addition to the important features of New Hampshire trust law described above, the state also offers a handful of innovative trust features not available in all other jurisdictions. These include: 

• “Quiet” trusts where the typical statutory notice requirements can be modified or eliminated so that beneficiaries aren’t required to receive information about the trust. 
• “Asset Protection” trusts intended to keep trust assets safe from a grantor’s or a beneficiary’s creditors. 
• “Divided” trusts in which powers and duties are split among more than one trustee, trust advisor, and trust protector. 
• “Directed” trusts in which someone other than a trustee, trust advisor, or trust protector has the power to direct, veto, or consent to actual or proposed actions by a trustee, trust advisor, or trust protector. 

New Hampshire’s legislature has been very intentional about making the Granite State a favorable jurisdiction for trust administration. Trust Company of Vermont is excited to be able to administer trusts under New Hampshire law, so that we can offer our clients all the benefits of New Hampshire trusts, even if those clients are resident elsewhere. And I, personally, am proud to have recently been admitted to the New Hampshire bar so that I can more effectively collaborate on planning to help our clients take advantage of all the trust features the state has to offer.