Real Estate Succession Planning

Who will manage your real estate portfolio when you’re no longer able to?

Families with significant real estate holdings tend to have complex wills and trusts, and transitioning a real estate portfolio after the head of a family passes can be an intricate and stressful process.

“At Whittier Trust, our goal is to help families hold on to their assets, not just sell them,” says Thomas J. Frank, Executive Vice President. “We want to build a relationship, understand your portfolio and intentions for the future, and get plans in place long before succession becomes an issue, while the wealth builder of the family is still alive and running things.”

While many asset managers avoid direct ownership of real estate assets, the Whittier team has decades of experience in a wide variety of property ownership scenarios and structures. “For example,” Frank says, “Sometimes real estate is owned directly in the family trust. By moving the assets into structures like LLCs, we add a layer of liability protection and more easily segregate ownership interests.”

Charles Adams III, Executive Vice President and Manager of Whittier Trust’s Real Estate Department, provides some other examples. “Some families have vacant land,” he says, “and then we have to decide whether that’s a long-term hold because it’s not creating income. It might be a liability, or it might be a very productive property with a good tenant and strong rental income, but the lease will be expiring soon. Then we’d need to discuss whether the family wants to sell it or retain it depending on the tax situation, cost basis, and the market.”

The Next Best Thing to Family

Whether you hope to have a family member take over the business or you need an unbiased fiduciary partner like Whittier-or both-the time to start making a plan is today. “We work with your attorney and accountant to ensure the properties are owned in flexible yet durable entities,” Frank explains. “We sit beside you as you manage the business so we can understand your style and priorities and be ready to step in if necessary.” Whittier Trust is primed to communicate with beneficiaries, tailoring conversations and reports to each family member’s level of involvement and interest. When necessary, the team of advisors oversees property managers, making sure leases are renewed, repairs are made, capital improvements are considered, and new tenants are found.

“You need to have a capable, engaged team in place,” Adams adds. “You need brokers, appraisers, leasing agents, salespeople, and financing people, just to name a few, and Whittier can provide all of those with appropriate oversight. A lot of times, the family patriarch or matriarch has been serving in all these roles themselves. That’s fine, except that it may not provide for succession in the family.” 

Adams notes that there are often differing levels of interest from the next generation-some may never have had an interest in the business or the opportunity to learn the business. “That’s where Whittier Trust comes in,” he says. “We have a strong network of resources and systems for handling these affairs, no matter how complicated. We offer whatever level of support is needed, from full management oversight to simply serving as backup. As one client recently told me, Whittier is ‘the next best thing’ to family.”

Tailored to Each Family’s Capacity

One example Adams shares is of a family who owned a number of industrial properties. The parents, in their late 80s, had named a daughter to act as successor co-trustee alongside Whittier Trust. But in private, the daughter asked the Whittier team to do all the decision making, saying she would sign off on whatever was recommended. Although that request didn’t align with Whittier’s goals to keep family involved, Adams and his team understood that she was overwhelmed-that she didn’t know as much about real estate as her parents might have assumed. So they set up a de facto board that she could be a part of to gradually learn about the business while also having voting rights. 

“We’re also happy to work with families that haven’t managed to plan ahead, though of course it’s much more difficult,” Adams says. One client, for example, came to Whittier Trust when the patriarch was already experiencing memory loss. They owned an office building with nearly 50 tenants, but the tenants were no longer getting consistent services because the father didn’t realize he couldn’t manage it by himself anymore. The two adult children relied on the income from this property, but that income was drying up because tenants were leaving or simply not paying rent. So the Whittier team had to go in, sort it out, and get everything running smoothly again.

No matter what the situation, when Whittier Trust serves as a trustee, our role as a fiduciary means we will implement what’s in the best interest of all the beneficiaries and the properties without bias. Our deep experience working hand-in-hand with real estate-owning families is a proud distinction of Whittier’s 40-year history as a boutique multi-family office, and our very favorable client-to-advisor ratio is the hallmark of our business. We take pride in our role as stewards of your family’s legacy.

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To learn more about how Whittier Trust can make a difference for you and your loved ones, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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