EP.63 BUILDING A NEW TRUST COMPANY: A Discussion with BETSY BROWN

Part of the fun of the Wealth Actually podcast is to delve into topics around wealth management and better ways to help families understand the intersection between wealth and the fulfillment of goals and ideals. I also get to speak to people as they describe their entrepreneurial journeys- which in itself provides many lessons on the path to success. Occasionally, you get both in one conversation. Enter Betsy Brown.

In this episode, we talk about:

Betsy’s background at larger institutions and the entrepreneur “bug”

The changing Wealth Management Industry

The desperate need for independence and customization for clients

The appeal of Tennessee as a legal jurisdiction, a growing business haven, and a nexus for diversified businesses

How this led her to the formation of Pendleton Square Trust Company.

The development of her support system and the importance of having a community of entrepreneurs to lean on and share ideas (and opportunities!).

The importance of story-telling in communicating, not just to the families she speaks with, but the market at large

The influencers in her life that provide her “north star”.

This is a particularly fun I get to see this up close as I work with Pendleton Square Trust Company to bring the message of benefits of Tennessee law to the advisors for family offices, foundations and fiduciaries in the Northeast and beyond.

More information about the firm and Betsy can be found on the links below:

LINKEDIN: BETSY BROWN

Transcript

Tell us about the origin of the firm and what makes it special:

We chartered Pendleton Square Trust Company in October of 2015- so we are about to celebrate our 5 year anniversary! Happy Birthday, Pendleton Square! We are a chartered trust company regulated by the TN Department of Financial Institutions. The opportunity came about from listening to families frustrated with the traditional corporate trustee options.  We also studied and implemented accounting and administration technology platforms to build our dream independent trust company. I always use the term “we” because it took a team. My partner Derek Church is a genius- he is an attorney and oversees regulatory, compliance and operation side of the business- our board and investors believed in us and supported our plans to build a best in class independent trust company. Our trust officers and team members are serving our families and building efficient processes.

I want to stress that we are an independent trust company– our definition of independent is that we are not affiliated with other banks or financial institutions- we focus on trust administration and we do not manage the liquid assets. As a fiduciary we are held by law to the highest standard of responsibility. Our model is designed to avoid conflicts of interest and provide a natural system of checks and balances, we are not managing assets or drafting estate planning documents. In addition- our fee structure is simple and transparent.

I also want to share how the concept of INTERdependence is extremely important for our model. We are interdependent on the network of advisors surrounding the family- the financial advisors, estate planning attorneys, family CPAs, insurance specialists. There is constant communication and collaboration with our partners as we serve the family. In many cases, the financial advisor is the quarterback of the relationship- we are there to assist and provide the backbone of trust and estate services.

How did you get into the trust business?

I cannot believe that I am approaching 25 years in the financial services industry.  I grew up in the traditional big bank environment- and I am so thankful for my strong credit and analysis background. I spent 10 years in Debt Capital Markets- a true transaction business- but my mentor always told me I should be in the long-term relationship business. I transitioned to private wealth and trust business for the next 10. Reflecting back on the past 20 or so years- I like to think I have identified my spiritual gifts while serving as trustee or executor and helping families through life events: they are discernment, service, and administration. The team that we are building is focused on deepening relationships, establishing partnerships and helping others.

Why Tennessee?  (Law, geography and business climate)

I hail from the great state of TN- home of Dolly Parton, Grand Ole Opry, Graceland, Jack Daniels, Big Orange Country, the Great Smoky Mountains, and Pendleton Square.

Frazer, when we met when you were in law school in our early 20’s- I grew up in TN- but it was in my rearview mirror. After living in Virginia and Atlanta, and brief stints in DC, New York and London- we moved home to raise our family. My eyes were opened to the very progressive and productive public/private partnerships in Tennessee. The Tennessee Bankers Association has been instrumental in leading or supporting many of the trust initiatives. Our legislature, regulatory body and Commissioner Gonzales are pro-business, pro-family and extremely collaborative. In the US News ranking of state fiscal stability- Tn is ranked #1 in long term fiscal health and we have a AAA credit rating. 

As a matter of fact, Tennessee gets its name from the Yuchi Indian word that means “meeting place.” I like to think that in our connected world, Tennessee will become a meeting place for families- and we will of course share Southern hospitality- good music, food and spirits- along the way.

Over the past 2 decades, Tennessee has created a very attractive trust and tax environment. It is a 2-part strategy: provide additional flexibility for TN residents, and attract out of state families to maintain trusts in Tennessee.

Timeline:

  • The Uniform Trust Code 2004
  • Extension of rule against perpetuities (360 years) 2007
  • Asset Protection Trusts 2007
  • Community Property Trusts 2010
  • Trust protectors 2013
  • Tenancy by entirety trusts 2014
  • Special purpose entities as protectors/advisors 2019

Additionally, there is no state income tax for out of state beneficiaries- and Tennessee will join other states with no income tax Jan. 1st, 2021.

Why is now an important time for estate planning ?

The pandemic has of course reminded us to understand the importance of having our affairs in order, but on top of that . . .

  • Low interest rate environment
  • Volatile market/ low valuations
  • Current federal gift and estate exemptions are high, but scheduled to be cut in half when the law sunsets in 2026 or even sooner.

Delaware Case Study

One example I would share is a family in New York that funded a family trust in November 2012- sound familiar?

They chose Delaware as the jurisdiction- unhappy with the responsiveness and service of the administrative trustee- and it was a complex web of investments that needed consolidation and oversight reporting. Their investment advisor linked the family with us. We reviewed the governing document and accomplished the transition to Pendleton Square and Tennessee through a simple Non judicial settlement agreement and a Notice of Change of Situs.

I encourage families to examine several components when looking for new trustees:

Service- how am I current being served, how may that be improved? Does an individual have the resources to fulfill all of the duties as trustee? Is my family lost on the big bank restructurings?

Situs- will changing situs improve flexibility, protection, fee structure? are there tax advantages?

Succession- when my family goes through a transition, what type of team, or entity will I want to be there to help my family?

What are some of the strategies that you are seeing clients use?

  • Direct gift to an irrevocable trust to benefit a child
  • Spousal limited access trust (SLAT)
  • Installment sales to an irrevocable grantor trusts

I would first analyze the cash flow impact of any gifting strategy. Of course it is very difficult to generalize. We encourage families to connect with their estate planning attorneys to discuss gifting strategies.

Tell us a little bit about how you started and built the business and your influencers?

I grew up as a child of a female entrepreneur. My Mother started a small business when I was 5 and grew it for 30 years. I worked there weekends and holidays. It was in this retail environment where I first learned about serving clients, employees and the community. Her motto was the customer is always right.

My Father was an early adopter of the power of positivity. He woke me up every morning with quotes from Winston Churchill- Never give in- except to convictions of honor and good sense” or Zig Ziglar- “see you at the top.” To him attitude was everything. He was also very involved in the community and helped in the early stages of the Chattanooga Renaissance. I like to think I am following in his footsteps as a community contributor.

Faith and family really are my inspirations- we have a very large extended family- there are 16 in my children’s cousins generation- so family means a lot to us. I like to say both professionally and personally- families matter.

My husband Hugh is helping the team build the business- I could not manage family and work life without him. Our main mission is to set an example of service, hard work and faith for their three young children.

Tell us about the JumpFund and your community of entrepreneurs

One of my mantras is surround yourself with passionate and interesting people-

In 2013 I joined a group of dynamic, passionate friends- true problem solvers with diverse backgrounds. We recognized that there was lack of capital available in the South for female entrepreneurs- less than 3% of venture capital in the Southeast was being allocated to female led growth ventures.

Instead of starting another nonprofit, we know capital is king. We founded The JumpFund- an angel investment fund- and raised money from women to invest in women. We now have 2 funds and 24 active portfolio companies. From fintech to life sciences we have a well-diversified portfolio of scalable, high growth companies. One of our companies was acquired by Amazon- and several are growing and getting west coast attention.

By watching our amazing female founders- I gained courage and the confidence to build a vision for Pendleton Square. We set out to raise capital and charter in 2015 from thinking big with my JumpFund Partners.

THE JUMPFUND WEBSITE

and we have a great PANDEMIC RESOURCE LINK for small businesses and women founders. 

https://www.thejumpfund.com/covid-19-resources

Telling Treasures

In our everyday conversations with families, we are helping them weave their own tapestry and legacy. The stories you remember are “telling” as they reveal what you and your family value most. Family relationships are sometimes difficult- and when you add wealth on top of it- psychology and counseling come in handy. Preparation and family education is vital to a successful transition. I appreciate the author of “The Ultimate Gift“ – Jim Stovall’s quote:

“It is critical that people pass along their values before they pass along their valuables. Giving future generations resources without an emotional and informational foundation is like giving them a loaded weapon without instruction or caution.”

Several years ago, we created an initiative called Telling Treasures. One of my dear friends is a teacher and writer and very interested in family stories, legacy letters and ethical wills.  By telling and retelling family stories, values are uncovered. . . these are valuable for family connection. I encourage families to write letters to beneficiaries and trustees to give heart and spirit to estate planning documents.  

(For more about letters of wishes, click on the picture or link below)

https://pendletonsquaretrust.com/dear-trustee-a-letter-of-wishes-adds-heart-and-spirit-to-your-trust-document/

Betsy, thank you for taking the time to tell you story! For more information about Pendleton Square Trust, you can visit the website here:

PENDLETON SQUARE TRUST

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