The market pull back in late 2018 reminded investors that things don’t always go up. Still, the long-term view for investors and families remains strong and a renewed focus on fundamentals is welcome.
Here are a few, simple strategies that can have an immediate impact on your portfolio and cash flow and assure positive momentum going forward.
1. Asset location, not just asset allocation
Maintaining a diversified and balanced portfolio with a good mix of assets to buffer market fluctuations remains a focal point for investors. But, more and more HNW and UHNW families are also now concentrated on where they park their money — understanding that geographic location can be as important as asset allocation when it comes to short and long-term tax savings.
Selecting one of a handful of states without a state income tax should factor into a family’s decision about asset planning. Nevada remains a top choice, particularly for West Coast based individuals and families. Currently, Whittier Trust manages 400 + families, 30 organizations and more than $12 billion dollars in assets throughout the U.S. When we established our Nevada office over two decades ago (The Whittier Trust Company of Nevada, Inc.) the array of benefits, strategic and predictive made an immediate impact on clients’ ability to optimize holdings and control assets. That remains true even more so in today’s fluctuating climate.
In addition to offering significant tax advantages and savings, the Nevada office is in a “trust-friendly state,” a proven refuge allowing greater flexibility and maximum protections for financial and estate planning.
A few of Nevada’s benefits for investors and families managing generational wealth include:
- No state income tax on individuals, business entities, or trusts
- No state transfer or inheritance taxes
- Dynasty trust protection through a perpetuity period of 365 years
- Recognition of the use of directed trusts
- Ability to appoint, or “decant” property or assets from one trust to a second trust
Also worth considering regarding the location of key assets:
- Given the large current lifetime gift/estate tax exemption, the income tax owed on the sale of low basis property can wind up being as much or more than the estate/gift tax. Astute families are paying more attention to situating low-basis assets in the hands of the more “senior” generation where they will get a step-up in tax basis upon death.
- We continue to recommend placing high-yielding assets in tax-exempt or tax-deferred accounts like IRAs.
- Nevada’s directed trust laws allow families who still operate a business to gift business interests to irrevocable trusts that may last for several generations.
2. Viewing all your assets at a glance
Whether at home, attending a board meeting or traveling abroad, we rely on our cell phones, iPads and laptops for news, to stay in touch with the office and with family — and for up to the minute information on market activity.
We’ve heard from CEOs to siblings running the family business or foundation, keeping track of assets from multiple sources can overwhelm. Clients are more interested in seeing all of their assets — even if they’re spread among a variety of managers or custodians — in one place. Whether facilitating a transfer or determining the timing of an acquisition, a digitally delivered, single report, organized with daily account values and recent transactions, can help investors and families stay on the same page and make informed decisions in real time.
In fact, the ability to aggregate family holdings — across the asset allocation spectrum — has become essential. Whittier Trust is actively rolling out robust, new technology and tools to customize the look and feel of the information clients consume. This holistic approach is a game-changer for clients like “Natalie” from Newport Beach. In the midst of a divorce, the information she was receiving from each set of her advisors (legal, accounting, investment) was siloed, each entity not communicating with the other nor helping assimilate the disparate data. This caused additional stress and confusion during an already trying time. She came to Whittier Trust where our team put a comprehensive plan in place, coordinated her assets, and along with the agility of our software program, created a custom view in one easy to understand document that allowed her to make the best, most informed decisions with the greatest efficiency while maximizing her benefits.
Our ability to gather comprehensive data, visually design and customize it for your family’s unique holdings continues to evolve, and allows us to provide clients with the most up-to-date wealth-building advantages.
3. Getting paid for cash
Optimize interest. We are advising clients to pay closer attention to what is happening with their cash funds. Most brokerage firms are now “sweeping” client cash into very low-yielding “bank rate” accounts with some gaining less than 0.25%. Meanwhile, U.S. Treasury bonds currently pay over 2.3%. That’s ten times the income you could be receiving.
Even if the right long-term investment opportunity is just around the corner, take control of maximizing your liquid funds today by knowing and assuring the best possible dividends and rates you’re paid on your cash.