Aging baby boomer demographic bodes well for trust companies

TCO is in the midst of a growth phase. The company had $412 million in assets under management as of Jan. 31, up about 10 percent from the end of 2005. That fiscal growth has led to a new hire and five promotions at the firm. (See box below.)

Much of the growth, according to TCO executives, is due to overall growth in the trust industry, which provides individuals with a means to pass their assets on to heirs without their personal financial information being put out in open court.

“You have to be where the clients and the wealth are, and people are moving here and bringing with them their retirement funds, 401(k) rollovers and other assets,” said CEO Dwight Rahmeyer, Trust Company. “It’s also a demographic shift – as the baby boomers age, they have more assets to pass on.”

The trend bears itself out nationally – trust company assets reached $68.2 trillion at the end of 2005 according to the Federal Deposit Insurance Corp., up 26 percent from the end of 2003.

With the oldest of the 76 million U.S. baby boomers passing the 60-year-old mark, more and more are looking to retire, and many are looking to the Midwest and the Ozarks.

“Overall, the demographics of our society are changing,” said Robin Robeson, senior vice president and Springfield market executive for Commerce Trust Co. “Baby boomers are such a large part of the population, and they tend to be really driving the trust and estate planning.”

Robeson said Commerce Trust adds about 10 percent in new accounts ever year, which counteracts losses incurred when trusts are paid completely out. As of July 17, 2006, Commerce Trust reported $847 million in assets, according to Springfield Business Journal’s Book of Lists research.

Lifetime benefits and privacy

Trust services offer security to those who wish to pass their assets on to their heirs, according to Wade Nash, general counsel for the Missouri Bankers Association.

“The whole trust business is focused on providing continuity in family relationships as money is passed down from generation to generation,” Nash said. “Sometimes they wish to only permit certain relatives to receive the income, or they otherwise want to control the distribution of assets into the next generation.”

So why choose a trust over a simpler document, such as a will?

The main advantage, according to TCO President Rodger Gadd, is that a will can only be used at death, while a trust has advantages during the trustee’s lifetime.

“Maybe I want to go down to Florida and play golf,” Gadd said. “I put a trust company in as my successor trustee, and they can manage the money and do anything financial for me while I go play golf. If I’m incapacitated, they can still do everything financially for me, and then at death, they follow my instructions on what I want them to do with my assets.”

Trust companies also offer services ranging from bill payment to tax record keeping to health care payments as part of the trust fee, which is usually about 1 percent of the estate’s value.

Trusts also offer tax advantages, allowing beneficiaries to pay less in income and estate taxes – even those with more modest means, Rahmeyer said.

“If we can bring value, regardless of what the amounts might be, we want to assist people with their planning,” he added.

Privacy is also an issue, according to Commerce’s Robeson – a trust allows people passing on assets to avoid having their information in open court, because a trust is drawn up by an estate lawyer.

“They want to avoid the probate process,” she said. “Most people want to keep their information private rather than having that out in public, (during) probate.”

Another benefit of having a corporate trustee through a trust company is longevity and permanence, according to Troy Kennedy, executive vice president of Springfield Trust Co..

“If you name Uncle Ralph as your successor trustee, someday Uncle Ralph is going to die,” he said. “Also, there’s the expertise – there are tax returns that have to be done when the trust becomes irrevocable. … If you have Uncle Ralph in charge, he’s going to have to do distribution requests, the investment of the assets, the tax reporting, and typically a family member doesn’t have that expertise.”

Staff Changes at Trust Company of the Ozarks

• Steve Vaught, above, joined TCO as senior vice president for trust and investment planning. He previously spent six years at Springfield Trust Co.

• Patty Johns was promoted to trust officer. She has a bachelor’s degree in finance and insurance from Missouri State University.

• Jennifer Webb Martin was promoted to senior vice president and operations officer after more than 20 years in the trust industry.

• Jennifer Moore was promoted to vice president and trust officer. She has more than 12 years in personal trust administration, retirement planning and investment management.

• Tim Parrish was promoted to senior vice president of trust and investment planning. He has 16 years of experience and was a member of Springfield Business Journal’s 2001 “40 Under 40.”

• Beverly Schneider was promoted to vice president and trust officer. She has 25 years of banking industry experience. [[In-content Ad]]