After 27 years of operation, Northwest Trustee & Management Services, a Spokane-based professional trust and estate management firm, has transitioned from a sole proprietorship to a limited-liability corporation.  

Founder and President Stephen Trefts says the firm, having been evaluated by the Washington State Department of Financial Institutions, now is state chartered and soon will change its name to Northwest Trustee & Management Services LLC.

“We approached the Department of Financial Institutions, in order to become regulated in the same manner as other trust companies or trust departments,” Trefts says. 

He says the firm’s processes, procedures, and policies were evaluated by the DFI, which granted it a state charter in March. The change makes Northwest Trustee one of relatively few independent nonbank trust operations in the Northwest, he says.

“The state will now periodically examine our company, and their oversight will give our clients added reassurance, and increase the services we can offer them,” he says. “Also, we will now be governed by a board of directors with at least two independent board members at all times.”

Prior to becoming state chartered, Trefts says Northwest Trustee was required to follow Washington State statutes in its role as a trustee, judicial standards in its role as a certified professional guardian, and its attorneys also were subject to the Washington State Bar Association’s code of ethics.  

“Those general regulations will continue, but in addition, we will also be regulated by the Department of Financial Institutions,” he says. 

Founded by Trefts in 1989, Northwest Trustee employs 12 people at its Spokane offices, located in a 4,000-square-foot leased space on the third floor of the North Spokane Financial Center, at 7307 N. Division. 

Trefts says one of the benefits Northwest Trustee gains by becoming state chartered is that it will be able to expand some of its services into other states, specifically Idaho and Oregon. 

“Estate planning attorneys in those states frequently desire to use our services,” says Trefts. “While we can offer these services from our offices in Washington, the DFI’s reciprocity agreements between states provide us the opportunity to apply for trust offices located in Idaho and/or Oregon.”

He says the company is currently going through the process of opening a trust office in Boise. 

“We’re waiting on approval of some of the final processes, but we hope to open that office by the end of the summer,” he says.

Northwest Trustee offers a range of trust and estate management services, some of which involve ongoing services for clients while they are still living, and others pertain to handling of assets after a client’s death. 

Trefts says that services the company offers that benefit living clients specifically are agency agreements, in which the beneficiary specifies certain duties for the firm to handle such as filing tax returns or paying expenses, power of attorney, and estate guardianships. 

“For trust management work, the firm can act as a trustee or a personal estate representative while the client is alive,” he says. “However, we can also be designated as executor of an estate, to ensure the client’s assets are protected and used for the good of their beneficiaries after they’ve passed.” 

The firm serves clients throughout the U.S., but mostly in Washington and Idaho, and most of its clients are referrals from financial advisers and attorneys. 

Trefts says the firm currently serves between 300 and 500 clients, with accounts ranging from $500,000 to $1.5 million. He declines to disclose the company’s revenues, but says it’s on target to reach its 2016 financial goals.

According to Trefts, the move to becoming state chartered was strategically planned to coincide with recent changes in Washington state trust laws this year, specifically regarding directed trustees and statutory trust advisers. 

He says that while it’s hard to say what types of trusts the firm sees most often, recently its work with directed trusts has begun to pick up. 

 “We recognized early on that a change in these laws was coming, and we felt it was important to find ways to broaden our services to accommodate that change and continue to grow,” he says. “Becoming state chartered was a part of that.”  

The state’s new laws concerning directed trusts went into effect last July and allow for separation of certain trust duties to third parties. 

Trefts’ son-in-law, Greg Bowman, serves as vice president of finance and business development for Northwest Trustee. 

Concerning the changes in directed trust laws, Bowman says, “It’s interesting to see a situation in which changes in laws and regulations can actually help a company grow. We’re excited to see what the future holds.” 

He says before the change in the law, trustees could retain specialists to assist with things such as investments, farm management, or medical issues, but the trustee was always responsible and liable for the decisions made. 

“The new law makes it possible for specific duties and liability to be shifted from the trustee to a third party known as a statutory trust adviser,” says Bowman. Those duties could include management of property, discretionary distributions to heirs, or even replacing a trustee. 

He says some situations in which a client might desire to create a directed trust include the following:

•The client wants to retain control of a privately held family business, or designate another family member to do so. 

•The client wishes to name a specific investment adviser in the trust document.

•The client has someone in mind with specific expertise to manage and run a farming operation.

•The client determines that a third party is best able to manage all real estate held inside a trust.

•The client wants to retain a large concentration of publicly-held stock.

Bowman says the new law makes Washington the first state in the Northwest to adopt directed trust laws, putting it on equal footing with states such as Delaware and South Dakota, where similar laws previously have been enacted. 

“As a company, we’re uniquely positioned to take advantage of these laws for clients across the Northwest,” he asserts. “Previously clients would have had to outsource those services to those states with laws allowing for them.”

Bowman says clients desiring a directed trust are often individuals with higher net worth, which also gives the company access to a new source of high-profile clients, and those living out of state who may be attracted to the company’s directed trust offerings.

 “This allows us to offer a new type of trust solution we weren’t previously able to provide, as well as access to more clients,” he says. 

In addition to its new state-chartered status, and directed trust service offerings, Bowman says the company is investing in its infrastructure, adding new software to help manage client needs.