Working with Commonwealth Trust

Commonwealth Trust provides unparalleled Delaware directed trustee services to clients as part of a highly specialized and responsive team of trust Advisers. Our commitment to deliver client-focused administrative services allows the other fiduciaries serving the client to do what they do best, resulting in a superior experience for our mutual clients. We make it a priority to have only the most qualified attorneys, accountants, and trust administrators on staff.

Our focus is providing tailored solutions to every individual client. Every trust has a unique set of requirements, assets, beneficiaries and fiduciaries. Our success is a result of our attention to the details of each distinctive feature of a trust plan while working collaboratively with the client and the other trust Advisers to make sure that trust administration is efficient, economical and result oriented.

What sets us apart from any other trust company is our specific focus on trust administration. We have taken advantage of the Delaware directed trust statute to focus our duties on all fiduciary responsibilities minus investment decisions.

This structure allows the grantor of a trust to bifurcate the investment duties of a traditional trustee and have those responsibilities assigned to someone who can focus his or her attention solely on the investments of the trust. When the investment powers and the administrative powers of the trustee are separated and assigned to two different fiduciaries, the grantor may gain more control by choosing each of those professionals and avoid the ultimate conflicts inherent in administering a trust when only one fiduciary is responsible for everything.

In a traditional trust setting, where the trustee has all duties of overseeing the trust, grantors and beneficiaries have historically run into difficulties resulting from a feeling of lost control. While it is true that a trust must be separate from the grantor, the use of a directed trust affords the grantor significant choice, in that they are able to place separate aspects of the traditional trustee role with separate individuals, thus tailoring the team to meet the specific goals of that particular grantor and his or her family. The grantor can place investment authority with one individual or entity while allowing administration and distribution authority to vest in completely different Advisers. This can allow a grantor and beneficiaries sufficient checks and balances within the trust so as to afford them comfort with the loss of control inherent in establishing a trust as well as better service from fiduciaries that are focusing their specific area of expertise.

We have decades of experience dealing with trusts of all types that have international issues, tax issues, and family dynamic issues and we have proven to be a valuable team member in helping to address and resolve these issues for our clients.

Unlike many other traditional trust companies, we are comfortable dealing with closely held family owned businesses and succession planning within trusts. Because of our focus on administration, we are able to respond quickly and expertly to trust administration issues and can generally turn distribution requests around within a matter of hours.

Our experience in administering trusts for over 80 years gives us great perspective and insight into how to address each new trust that we take on. We have developed a systematic and thorough approach to reviewing trusts and the particular issues involved in each so that tax and administrative issues are addressed at the outset to avoid complications during the life of the trust. Our long time ties with the Delaware trust community have sealed our reputation as trust administration experts. Our professionals are well respected in the community and are keeping Delaware’s trust legislation ahead of other states.

Per the Forbes lists, we work with 10 of the 400 Wealthiest Americans and 7 of the World’s Billionaires.

Working with Advisers

As an independent trust company, Commonwealth Trust works with a client’s attorneys, accountants, and financial planners to achieve desired results. We do not manage investments, thus assuring the professional Advisers that we are not in competition with them. Unlike bank trust departments, Commonwealth Trust has no interest in taking over management of a client’s funds, which is the greatest protection for the professional adviser. We are in the business of building relationships with our clients and their Advisers. At Commonwealth Trust, we complement a client’s Advisers; we do not compete with them. When considering an “independent” trust company, you should first determine if they are truly independent: Professional Advisers are often shocked upon learning that they are losing their client’s business to another broker referred by the trustee. Some trust companies claim independence while, in fact, forming joint ventures and/or referral relationships with national securities firms. We recommend asking the following questions when inquiring about your prospective trustee’s independence:
We work with Advisers and brokers from all over the world because of our independence, and we plan to keep it that way. Our company flourishes because of the high-quality services we provide with an independent and impartial attitude, not because of any particular alliance or joint venture with outside firms. Because of the closely-held ownership of our stock, Commonwealth Trust will remain independent, even in the ever-changing world of bank mega-mergers. At Commonwealth Trust, we look to complement, not to compete.

  1. Is your company’s stock publicly traded?
  2. Do you have any institutional investors, and if so, who are they?
  3. Do you sell any particular brand of investment or insurance?
  4. How are you compensated for your services?
  5. Do you have any alliances with any particular brokerage house or planning firms?
  6. Have you ever been involved in a merger with another company or is there a possibility of merging with another company in the near future?
  7. Are you a subsidiary of another corporation, or do you have any subsidiaries involved in other types of business?

At Commonwealth Trust, the answers are simple and straightforward. The officers, directors and employees have owned 100% of our stock since 1931. We do not sell, nor are we looking to sell any proprietary products. We are compensated for our services through annual fees.*

When considering an “independent” trust company, you should first determine if they are truly independent.

Working with our Clients

Commonwealth Trust has more than $11.6 billion in assets under administration representing over 960 trusts. Our trust values range anywhere from under one million to over one billion. Per the Forbes lists, we work with 10 of the 400 Wealthiest Americans and 7 of the World’s Billionaires. We also have trusts created by several current and former chief executives of Fortune 200 and 500 companies, and a $500,000,000 charitable remainder trust created by the co-founder and Chairman of a Fortune 200 Company. We have no minimum requirements. Many of our clients own closely held businesses in trust and many of our trusts have international grantors, beneficiaries or assets.

We are a state chartered, non-depository trust company which is located solely in Wilmington, Delaware and overseen by the Office of the State Bank Commissioner of Delaware. We have high client retention rates and referrals due to the reputable quality of our services and the close relationships that we build with our clients and their outside Advisers. Commonwealth Trust focuses on administering each trust properly and professionally. Issues are approached from a team perspective in an attempt to reach the most economical and efficient outcome for the client while ensuring compliance with the trust document, relevant law and tax reporting. We are a privately held non-depository directed trustee and income is earned exclusively through annual fees. We do not, nor do we have an exclusive relationship with any companies that, market proprietary products. We specialize in superior professional trust administration services while allowing our clients to maintain their existing team of wealth management, financial and legal Advisers located all over the world. We work closely with these Advisers to maximize the quality of service and objective representation of our clients, and to assist in achieving our clients’ overall estate planning objectives.

We are a state chartered, non-depository trust company which is located solely in Wilmington, Delaware and overseen by the Office of the State Bank Commissioner of Delaware.

Directed Trustee

The directed trustee statute has been around for almost twenty years in Delaware. However, the concept of a directed trust has been around for more than a century. In its earlier form, wealthy families used directed trusts to restrict a trustee’s ability to negotiate a family business or other significant asset. In addition to the standard third-party trustee, these trusts involved advisers (typically a family member or business associate) who (1) would direct the trustee in matters related to the family business, (2) determine the appropriate time to sell an asset or otherwise dispose of it, or (3) simply provide guidance to a trustee with regard to family matters. Today, this concept of split duties continues through the use of directed trustee statutes.

Under Delaware’s directed trustee statute, there is a complete bifurcation of trustee duties, such that any actions taken by a trustee at the direction of an adviser limits the directed trustee’s liability as to that action. The adviser, as a co-fiduciary, has his or her own relationship with the beneficiaries and acts in the adviser’s sole discretion. This structure allows a Delaware trustee to be solely an administrative trustee and thus limit the administrative trustee’s responsibilities. These administrative duties need to include certain minimum responsibilities to establish situs in Delaware.

Below is the commonly accepted list of administrative duties typically performed by the directed trustee:

  1. Maintaining or arranging for custody of accounts.
  2. Maintaining storage of tangible property & evidence of intangible property.
  3. Keeping trust records.
  4. Providing office for Trustee meetings.
  5. Trust accountings & communications.
  6. Responding to inquiries.
  7. Executing documents and authorizing trust account transactions.
  8. Retaining Advisers in connection with the performance of the Administrative Trustee’s duties.
  9. Preparing or reviewing trust income tax returns.

Our experience in administering trusts for over 80 years gives us great perspective and insight into how to address each new trust that we take on.

The Delaware Advantage

Delaware's Court of Chancery

With over 200 years of experience in trust and corporate law, the Delaware Chancery Court is a court of equity, as opposed to a court of law. Most states do not separate the types of legal remedies available to litigants into equity and law the way that Delaware does. The Court of Chancery consists of one Chancellor and four Vice Chancellors, as well as, Masters. The Chancellor and Vice Chancellors are nominated by the Governor and must be confirmed by the Senate for 12-year terms. The Delaware Court of Chancery is a non-jury trial court that serves as Delaware’s court of original jurisdiction in corporate and trust matters.

Because the Court of Chancery is able to focus exclusively on fiduciary and commercial matters, this court system does not experience the same backlog that other state court systems do. This court system has been ranked number one every year since 2002 by the U.S. Chamber of Commerce state liability systems ranking study. A premium is placed on confidentiality throughout the court system. Unless asked, Delaware courts do not supervise the administration of trusts. In the event a dispute arises, the parties can easily obtain a court order to seal the record, keeping the trust agreement, the parties, and their dispute out of the public eye. Delaware’s statutes also allow a settlor, by express direction to the trustee, to maintain the secrecy of a trust’s existence for a designated period of time, allowing a settlor to limit beneficiary notification.

Delaware has a long history of well reasoned court rulings and it has consistently demonstrated its commitment to safeguarding the advantages of Delaware’s laws. All trust administration and trust interpretation cases are exclusively within the jurisdiction of Delaware Court of Chancery, and upon appeal, the Delaware Supreme Court.

Delaware's State Legislature

In addition to its unique court system, Delaware also has a very progressive state legislature that is very knowledgeable about trust law. The legislature benefits from a strong and influential state Bar Association and Banker’s Association that work together to keep Delaware’s trust legislation on the cutting edge. Delaware’s laws are focused on carrying out the settlor’s intent. The Delaware legislature has historically been a leader in trust legislation with many other states following Delaware’s lead. A timeline of important Delaware trust legislation starts with the 1933 enactment of law allowing the beginning of a new perpetuities period upon the exercise of a power of appointment, the pre-cursor to the repeal of the Rule Against Perpetuities. Additional significant legislative enactments can be found on our timeline.

Delaware’s law permitted directed trusts and bifurcation of trust duties in 1994 to allow the grantor to separate the duties traditionally held by a trustee into clearly defined roles for two or more fiduciaries. This legislation permitted the separation of investment duties from the Trustee’s other duties by giving those duties to an Investment adviser. The decision as to whom the adviser will be and the extent of the adviser’s power is determined by the trust document. The use of these separated fiduciaries allows the Trustee to focus on its separate duties and be removed from decisions with regard to investments; instead taking direction from advisers as to trust investments. It also allows the Trustee to act upon the direction of the adviser without being responsible for the adviser’s decisions. This flexible approach to allocating separate fiduciary duties is very different from traditional trusts where the Trustee may delegate trust duties, but still remains liable for some level of oversight as to both the choice of fiduciary and decisions made by the same.

In 1995, Delaware repealed its Rule Against Perpetuities, thus allowing for the Delaware Dynasty Trust. This legislation opened the flood gates for trust planning in Delaware since it allowed a grantor to set up a trust using transfer tax exemptions that could remain in existence forever and continue to accumulate income transfer tax free for future generations. This legislation was followed by legislation enacting the Delaware Qualified Dispositions in Trust Act in 1997 to allow for self settled trusts sometimes referred to as asset protection trusts. These self settled trusts must be established within certain parameters, such as they must be irrevocable; contain a spendthrift clause; provide that Delaware law govern the trust’s validity, construction, and administration; and appoint at least one Delaware trustee.

Other significant legislation has followed, such as the codification of the common law doctrine of virtual representation in 2000, the total return trust statute in 2001, and the decanting statute in 2003 which established that a trustee, who could distribute principal outright to one or more beneficiaries, may also exercise that power in further trust unless the governing instrument provided otherwise, thus providing a method for non-judicial reformation of a trust. Legislation establishing Purpose Trusts was enacted in 2004, allowing for trusts to be set up without beneficiaries to achieve a specific purpose, such as a cemetery trusts or other non-charitable purpose trusts. And most recently, in 2010 the Delaware legislature passed a law that allows tenancy by the entireties property to retain its character when contributed to a Delaware trust.

Delaware Income Tax Advantages

Delaware permits a trustee of a resident trust to deduct income (including capital gains) set aside for future distribution to nonresident beneficiaries, thus allowing for a trust to have a significantly reduced state income tax burden so long as its beneficiaries reside outside of the State of Delaware. As the burden of state income taxes can be a significant drain on the growth of an irrevocable trust, this can be a substantial benefit. This aspect of Delaware law may be of significant use to those establishing a Delaware Incomplete Gift Nongrantor Trust or “DING,” in eliminating state income taxes on capital gains realized upon the sale of trust assets, making it attractive to closely held business owners who are considering selling their interest in the business at a future date.

*For a more detailed breakdown of our pricing, please contact us via email at businessdevelopment@comtrst.com

The Delaware Advantage

Delaware's Court of Chancery

With over 200 years of experience in trust and corporate law, the Delaware Chancery Court is a court of equity, as opposed to a court of law. Most states do not separate the types of legal remedies available to litigants into equity and law the way that Delaware does. The Court of Chancery consists of one Chancellor and four Vice Chancellors, as well as, Masters. The Chancellor and Vice Chancellors are nominated by the Governor and must be confirmed by the Senate for 12-year terms. The Delaware Court of Chancery is a non-jury trial court that serves as Delaware’s court of original jurisdiction in corporate and trust matters.

Because the Court of Chancery is able to focus exclusively on fiduciary and commercial matters, this court system does not experience the same backlog that other state court systems do. This court system has been ranked number one every year since 2002 by the U.S. Chamber of Commerce state liability systems ranking study. A premium is placed on confidentiality throughout the court system. Unless asked, Delaware courts do not supervise the administration of trusts. In the event a dispute arises, the parties can easily obtain a court order to seal the record, keeping the trust agreement, the parties, and their dispute out of the public eye. Delaware’s statutes also allow a settlor, by express direction to the trustee, to maintain the secrecy of a trust’s existence for a designated period of time, allowing a settlor to limit beneficiary notification.

Delaware has a long history of well reasoned court rulings and it has consistently demonstrated its commitment to safeguarding the advantages of Delaware’s laws. All trust administration and trust interpretation cases are exclusively within the jurisdiction of Delaware Court of Chancery, and upon appeal, the Delaware Supreme Court.

Delaware's State Legislature

In addition to its unique court system, Delaware also has a very progressive state legislature that is very knowledgeable about trust law. The legislature benefits from a strong and influential state Bar Association and Banker’s Association that work together to keep Delaware’s trust legislation on the cutting edge. Delaware’s laws are focused on carrying out the settlor’s intent. The Delaware legislature has historically been a leader in trust legislation with many other states following Delaware’s lead. A timeline of important Delaware trust legislation starts with the 1933 enactment of law allowing the beginning of a new perpetuities period upon the exercise of a power of appointment, the pre-cursor to the repeal of the Rule Against Perpetuities. Additional significant legislative enactments can be found on our timeline.

Delaware’s law permitted directed trusts and bifurcation of trust duties in 1994 to allow the grantor to separate the duties traditionally held by a trustee into clearly defined roles for two or more fiduciaries. This legislation permitted the separation of investment duties from the Trustee’s other duties by giving those duties to an Investment adviser. The decision as to whom the adviser will be and the extent of the adviser’s power is determined by the trust document. The use of these separated fiduciaries allows the Trustee to focus on its separate duties and be removed from decisions with regard to investments; instead taking direction from advisers as to trust investments. It also allows the Trustee to act upon the direction of the adviser without being responsible for the adviser’s decisions. This flexible approach to allocating separate fiduciary duties is very different from traditional trusts where the Trustee may delegate trust duties, but still remains liable for some level of oversight as to both the choice of fiduciary and decisions made by the same.

In 1995, Delaware repealed its Rule Against Perpetuities, thus allowing for the Delaware Dynasty Trust. This legislation opened the flood gates for trust planning in Delaware since it allowed a grantor to set up a trust using transfer tax exemptions that could remain in existence forever and continue to accumulate income transfer tax free for future generations. This legislation was followed by legislation enacting the Delaware Qualified Dispositions in Trust Act in 1997 to allow for self settled trusts sometimes referred to as asset protection trusts. These self settled trusts must be established within certain parameters, such as they must be irrevocable; contain a spendthrift clause; provide that Delaware law govern the trust’s validity, construction, and administration; and appoint at least one Delaware trustee.

Other significant legislation has followed, such as the codification of the common law doctrine of virtual representation in 2000, the total return trust statute in 2001, and the decanting statute in 2003 which established that a trustee, who could distribute principal outright to one or more beneficiaries, may also exercise that power in further trust unless the governing instrument provided otherwise, thus providing a method for non-judicial reformation of a trust. Legislation establishing Purpose Trusts was enacted in 2004, allowing for trusts to be set up without beneficiaries to achieve a specific purpose, such as a cemetery trusts or other non-charitable purpose trusts. And most recently, in 2010 the Delaware legislature passed a law that allows tenancy by the entireties property to retain its character when contributed to a Delaware trust.

Delaware Income Tax Advantages

Delaware permits a trustee of a resident trust to deduct income (including capital gains) set aside for future distribution to nonresident beneficiaries, thus allowing for a trust to have a significantly reduced state income tax burden so long as its beneficiaries reside outside of the State of Delaware. As the burden of state income taxes can be a significant drain on the growth of an irrevocable trust, this can be a substantial benefit. This aspect of Delaware law may be of significant use to those establishing a Delaware Incomplete Gift Nongrantor Trust or “DING,” in eliminating state income taxes on capital gains realized upon the sale of trust assets, making it attractive to closely held business owners who are considering selling their interest in the business at a future date.

*For a more detailed breakdown of our pricing, please contact us via email at businessdevelopment@comtrst.com