dsmWealth August 15, 2019

Nate Birkholz, president of BTC Trust, a South Dakota subsidiary of Bankers Trust.

Trusting in South Dakota
BY STEVE DINNEN

In the right hands, a trust can be a powerful wealth management tool. In the right state – neighboring South Dakota, in this case – a trust can provide your family or business with even greater ways to control and manage your wealth for now and generations to come.

Lawmakers in South Dakota opened their doors for business in the 1990s when they allowed people living anywhere in the nation to establish a trust in their state. This attracted firms such as Des Moines-based Bankers Trust Co., which soon established BTC Trust Co. in Sioux Falls, to take advantage of some very flexible rules.

Longevity. At some point – and it may be decades away – trusts wind down. Not necessarily so in South Dakota, where the rule against perpetual trusts doesn’t exist.

Taxes. There is no state income tax in South Dakota. And capital gains are not taxed there, either. Sterling Trustees of Sioux Falls calculated that after 30 years, a $10 million trust in South Dakota that derived its income from a split of ordinary income (30%) and capital gains (70%) would accumulate an extra $5.3 million over what would be available if it was sited in Iowa.

Privacy. Trusts in South Dakota are automatically perpetually sealed. Directed dynasty trusts that are designed for perpetual duration in other states would have to obtain a court order to be sealed and that time frame will be limited. All trusts and actions related to the assets or parties to the trust are outside of the public record.

Further, a trust in South Dakota can own a limited liability company, and since records are sealed, the identity of that LLC is private.

"The Swiss banking approach to privacy has drifted [onto] our shore," said Nate Birkholz, president of BTC Trust. Other distinguishing qualities:

Direction flexibility. The trust department does not control the asset. Rather, that responsibility lies with a committee selected by the client that handles direction of the asset in trust. And that asset can be virtually anything of value – cars, paintings, apartment buildings, etc.
Protection. Beneficiaries can still receive income and principal at the discretion of their distribution trust adviser, but creditors face significant hurdles to collection when there is no income interest and no property interest.

Birkholz said that Bankers Trust sees its role in South Dakota as serving as administrator in a three-pronged approach with clients. BTC administers the trust. The client chooses an investment trust adviser. The client chooses a distribution trust adviser, and trustees such as BTC act on the directions from them. (And in South Dakota, trusts do not break a relationship clients may have with their local bank).

Note the word adviser. South Dakota trust administrators don’t dictate to beneficiaries. Rather, they set the ground rules. It’s up to the beneficiaries to prudently manage their asset, for all the generations to come.

Defining, and Aspiring to Attain, the Threshold of Wealth
BY STEVE DINNEN

Where does wealthy start? Try $2.3 million, according to those quizzed by Charles Schwab & Co. as part of its Modern Wealth Survey.

The Schwab report pegged the amount that is 20 times the actual median net worth of a U.S. household. But hope springs eternal, as more than 50% of respondents indicated they intend to reach that milestone at some point in their lives.

Eight percent of the respondents said they already are wealthy. Interestingly, the net worth for that group is just $700,000. Nearly three-quarters of respondents said that wealth is not tied so much to money in the bank but the way they live their lives.

And what might happen to these folks if they suddenly got $1 million dropped onto their lap? Fifty-four percent said they would spend it, either on a house, a car or travel. (Is that the best way to get to $2.3 million?)

A quarter of respondents said they would pay down debt. About as many people said they would invest it, while 21% said they would save it. These last two responses are probably better choices if you’re serious about joining the wealthy.

World’s Wealthiest Family Gains $4 Million Every Hour
FROM BLOOMBERG

The numbers are mind-boggling: $70,000 per minute, $4 million per hour, $100 million per day.

That’s how quickly the fortune of the Waltons, the clan behind Walmart Inc., has been growing since last year’s Bloomberg ranking of the world’s richest families.

At that rate, their wealth would have expanded about $23,000 since you began reading this. A new Walmart associate in the U.S. would have made about 6 cents in that time, on the way to an $11 hourly minimum. Even in this era of extreme wealth and brutal inequality, the contrast is jarring. The heirs of Sam Walton, Walmart’s frugal founder, are amassing wealth on a near-unprecedented scale — and they’re hardly alone.

The Walton fortune has swelled by $39 billion, to $191 billion, since topping the June 2018 ranking of the world’s richest families. Other American dynasties are close behind in terms of the assets they’ve accrued. The Mars family, of candy fame, added $37 billion, bringing its fortune to $127 billion. The Kochs, the industrialists-cum-political-power-players, tacked on $26 billion, to $125 billion. >> Read more

How To Be Sure Heirs Are Ready for Wealth Transfer

BY LORIE KONISH for CNBC

Many individuals surveyed said the most important thing they want to communicate to their families is how to use their money wisely. Yet just 46% of respondents said they have talked with their families about things like values or operating principles.

Even though those conversations are not happening, wealthy individuals do want to have them. "Our experience is that, yes, people don’t talk about wealth, but many want to," said Matt Wesley, director at the Center for Family Wealth at Merrill Private Wealth Management.

There are various reasons why individuals do not broach the subject with their children, Wesley said. One common theme is the complexity of the topic. Many do not want to demotivate their children by revealing how much they stand to inherit. Plus, they may be reluctant to stir up tensions in their families. >> Read more

Why Many Millionaires Don't Feel Wealthy
BY JANNA HERRON for USA Today

Would having $1 million make you feel rich? For most people, it's not enough.

Only 13% of Americans with at least $1 million investable assets feel wealthy, according to a new survey from Ameriprise Financial provided exclusively to USA Today. Six in 10 define themselves as upper middle class, while a quarter identify as middle class.

The vast majority of the millionaires who don't feel rich have between $1 million and $5 million in investable assets, including cash in checking or savings accounts, stocks, bonds, mutual funds, and money in retirement plans. Five percent have more than $5 million in assets.

"Why would this be the case for people who have reached some financial success?" says Marcy Keckler, vice president of financial advice strategy at Ameriprise. >> Read More