Tag: Estate Planning

Nov 5th

Don’t Let ‘Em Buy the Ferrari

Exploring trustee discretionary distributions:

Trustees are often given discretion over the circumstances under which a distribution may be made from a trust to a beneficiary. This article explores some of the factors that are important to consider when giving your successor trustee this power. 

There are many reasons people place money in trust for their heirs. Trusts provide professional management of assets for beneficiaries who either do not want to spend their time on such matters or perhaps do not possess the required skills. Trusts may also provide a level of asset protection from the beneficiary’s creditors. Finally, trusts often protect the beneficiary from their own impulses to spend recklessly. By naming a successor trustee to control distributions from a trust, the protective nature of a trust is more easily preserved.

Most people who place money in trust for heirs want the funds to be available for certain things and not available for others. Frequent reasons for distributions include paying health and education expenses, starting a business, or buying a home. The common joke is that Mom and Dad want their children to be able to buy a car—just not a Ferrari! The challenge is that a successor trustee, particularly a corporate trustee (such as a bank or trust company) is not going to know the beneficiary as well as a family member and may have a harder time weighing the decision to distribute or withhold funds.

Disbursements for health and educational expenses are quite common and straightforward. Absent contrary language in the trust agreement, health expenses would include doctor bills, pharmacy invoices, and health insurance premiums. Educational expenses would typically include tuition, materials, room and board, and even travel expenses. Medical and education expenses that may be considered “alternative” may also be covered unless the trust agreement contains restrictions.

What about funds to start or buy a business? If the grantors are entrepreneurs themselves, they may want to make money available to their heirs for such purposes. In such cases, a good trustee will want the beneficiary to present more than just an idea. At Whittier Trust, we ask the beneficiary to have a business plan and financial projections. An important consideration will be how quickly the business will get to break-even status. It’s best to avoid a situation where the trust will be asked to support future distributions without limitation, or“throwing good money after bad.” While the nature of start-ups is always uncertain, it is good for the beneficiary to be aware of the limitations of the trust.

A similar business plan analysis should be undertaken when the beneficiary wants to buy an existing business or invest capital in a friend’s business. Most corporate trustees will be leery of the latter and often can play the role of “bad cop,” allowing the beneficiary to keep the friendship intact. In such cases, we are happy to let the friend know that the proposed investment is not aligned with the trust’s overall investment philosophy. This has saved more than one beneficiary from making an investment in a pal’s bar or movie.

Many parents and grandparents want the trust funds to be available for the purchase of a home for the beneficiary. In such cases, we will weigh the choices between buying the home in the trust or making a distribution directly to the beneficiary for that purpose. If the house stays in the trust, the trust is often responsible for things such as property taxes, insurance, and capital improvements. The house, as an asset of the trust, remains safe from potential creditors of the beneficiary.

If the funds are given to the beneficiary for the purpose of buying the home, it is important to consider the beneficiary’s ability to support the normal carrying costs of real estate. Will the trust need to make further distributions for insurance and property taxes, or does the beneficiary have resources outside of the trust to handle these? If the home is in a community property state, is there a risk of inadvertently converting the real estate from separate property to community property?

What about the Ferrari? We have yet to meet a grantor who is in favor of the Ferrari-type purchase. After all, if the desire is to let the beneficiary do whatever they want with the money, there is not much need for a trust.

What is the best way for a grantor to convey their wishes to the successor trustee? Trustees are duty-bound to follow the specific terms of the trust agreement, so it’s possible to include very specific distribution provisions. However, given the ever-changing nature of life and the longevity of many trusts, handcuffing a trustee is not optimal. We often recommend that the trust language be broad enough to accommodate unforeseen circumstances, giving future trustees plenty of latitude. The trust agreement can be supplemented by a “letter of wishes” in which the grantors spell out their desires for the use of the funds. While these letters are not legally binding, trustees will look to them for guidance. Most trustees find these very helpful when making distribution decisions.

When looking for professional trustees, it is important to ask them about their practices and procedures when it comes to entertaining a beneficiary’s request for distributions. Some corporate trustees are relatively inflexible and only review requests monthly by committee. At Whittier Trust, we look at requests on a case-by-case basis as they are made since time is of the essence in certain situations. Also, ask if the main objective of the trustee is strict preservation of the trust for future generations or if they are willing to accept a letter of wishes or trust language that favors the current beneficiary. Any good trustee will welcome these conversations in advance of being named in the trust.

For the grantor who is afraid of a recalcitrant trustee, including language allowing the beneficiary or another family member the ability to remove the current trustee and replace them with another trustee may provide additional comfort.

Like with all estate planning, professional advice from a capable attorney is the best place to start. Your lawyer will have had experience with different trustees and will be able to provide a perspective on what they have seen.

Written by Tom Frank, Executive Vice President and Northern California Regional Manager at Whittier Trust. Tom is based out of the San Francisco Office and oversees the investment team for multiple Whittier Trust offices.

Featured in Mountain Home Magazine. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Oct 15th

Real Estate Wealth Management

The right investment and estate strategy can help create a legacy of real estate holdings that will benefit your family for generations.

In 1891 just before the turn of the century, a young man from Maine named Max Whittier rode a train cross-country to California to seek his fortune. Nearly a decade later, after several failed attempts to find oil, he risked his life savings of $13,000 on land along the Kern River in the southern Sierra Nevada mountains northeast of Bakersfield. By 1903, the area was the top-producing oil field in the nation. Whittier kept the land rather than selling it for a quick profit, and today Kern River remains one of the largest oil fields in the continental U.S. 

Out of the wealth Max Whittier created as a pioneer in real estate, oil, and gas, Whittier Trust was established in 1935 to manage the family’s assets for his four children. In 1989, the company expanded to serve other families, ultimately creating a platform that comprises five core pillars of wealth management:

“These five pillars give us great latitude to tailor investment strategies to individual client goals as part of our multifamily office services,” says Andrew Paulson, who manages a $2B real estate portfolio of diverse asset classes across the U.S. as Vice President of Real Estate at the Whittier Trust Pasadena office. “Many wealth management firms specialize and don’t provide real estate services. But at Whittier, active investment and management of real estate has been part of our platform for over 100 years.”

The Rewards of Real Estate

Real Estate is a unique investment class that performs differently from stocks, bonds, or other investment vehicles. Here are some of the primary reasons why Whittier Trust encourages clients to invest in real estate:

  • Investors have much greater control over property ownership than owning a small sliver of a company through shares of stocks.
  • Although real estate is considered illiquid, real estate values are much less volatile than share prices.
  • Real estate is a good hedge against inflation as rents and values typically increase with inflation.
  • Real estate requires local knowledge. Understanding what is happening on Main Street is as important as what is happening on Wall Street.

“A major differentiator for Whittier Trust is that if a client comes to us with an extensive real estate portfolio our team can hold those real estate assets as a fiduciary, or we can serve as an investment advisor over those assets,” explains Paulson. “In addition, for trusts with real estate assets, we have the ability to serve as trustee, which is a rare advantage among asset management firms.” 

“At the same time, our real estate group actively sources new investments that clients can add to their overall real estate allocation,” Paulson continues. “Our firm portfolio consists of Multifamily, Industrial/Commercial, Office, Retail and Flex Space properties, and we have a broad list of qualified sponsors who are sourcing deals across the country. Throughout the history of the firm client demand has remained very strong for these direct real estate investments and all recent opportunities have been oversubscribed. We are currently focused on sourcing more acquisition opportunities for multifamily and industrial assets to continue to broaden our list of experienced partners and sponsors.”

Estate Planning to Preserve Your Real Estate Portfolio

We’re all taxed on our possessions when we die, and there are only two ways to reduce that tax. You can have fewer possessions, or you can decrease the value of those possessions. Real estate owners are uniquely situated to do both, and Whittier advisors have unique expertise in this area, from initial planning to settling the estate. 

Reducing what you own is the first step. Under current law, an individual can give away $11.5 million of assets without incurring gift (or estate) tax. A married couple can give away twice that amount, or $23 million. So if a real estate owner had a property worth $11.5 million, he or she could give the entire property away within the amount of his or her exemption. That exemption amount is scheduled to be cut in half in 2026.

That brings us to the second step: reducing the value of what you own. Whittier Trust helps real estate owners use another advantage related to estate planning—owning assets inside of entities. We help owners make gifts of their interests in entities while taking valuation discounts for lack of control and lack of marketability (which appraisers typically discount in the range of 30 to 40%). For example, a real estate owner holding a building in an LLC, structured with a typical 1% managing member interest and a 99% non-managing member interest, can gift their 99% non-managing member interest with a 30% discount. 

When a real estate investor passes away, even though estate taxes can often be paid over a 14-year period, the cash flow needed to make those tax payments can greatly reduce the cash available to provide for the family. Or worse, for investors with significant portfolios, such assets may need to be sold to pay estate taxes, and the owner's efforts in putting together a real estate portfolio can be lost—often a lifetime accumulation of irreplaceable assets. With proper estate planning, however, those assets can be maintained to provide support for future generations.

The Nevada Advantage for Multigenerational Wealth

If properly planned, real estate assets can pass not only from the real estate owner to his or her children, but also on to his or her grandchildren by taking advantage of the generation-skipping transfer tax exemption. Whittier Trust helps real estate investors use strategies of gifts or sales to trusts for family members to allow the real estate assets of those trusts to be properly administered for beneficiaries in the future.

“In California, most trusts have termination clauses that restrict a family’s sharing of legacy assets,” Paulson says. “Under state law, trusts have a maximum duration of 90 years (or no more than 21 years after the death of an individual alive at the time the trust was created). Whittier Trust Company of Nevada was specifically created to help California families protect their wealth with the Nevada advantage. Residency is not required to transfer those assets to Nevada-domiciled trusts which under Nevada law permits a trust to remain in effect for 365 years.”

In keeping with Max Whittier’s vision for the land he invested in more than a century ago, Whittier Trust believes real estate is an important component in building lasting family wealth. For clients wanting to pass a portfolio of properties down to children and grandchildren, these long-term trust strategies are just a few of the ways that we help you share that wealth with successive generations. 

To learn more about how the right estate planning strategies and real estate portfolio management can help benefit your family for generations, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Oct 8th

DAFs vs. Private Foundations

Is there a “best” way to give?

“When I speak with a client about charitable giving, the most common question is whether they should create a private foundation or use a donor-advised fund,” says Ashley Fontanetta, Senior Vice President, Client Advisor at Whittier Trust. “Unfortunately, there’s no quick and easy answer except this: It depends on your priorities.” 

A simple conversation with the Whittier Trust Philanthropic Services Team can help a client get to the heart of those priorities. Our advisors might begin, for example, by asking who will be involved in your charitable giving and in what capacity. They’ll need to know what types of assets are being used to fund the entity and in what amount. And they’ll want to discuss how much importance you place on control.

The answers to these and related questions will typically point to which charitable structure is the best fit for a client. But first, let’s make sure everyone understands the essential differences between DAFs and private foundations.

Private Foundations 

“Private foundations are often the go-to choice because they are the best-known option,” says Fontanetta.“But that doesn’t necessarily make them the right choice for you.” Charitable foundations are governed by legal rules that are too restrictive or cumbersome for some clients. The key rule is that a private, non-operating foundation has the legal obligation to distribute no less than 5% of its average asset value to qualified charities each year. So, to give a simplified example, if your family created a private foundation that averaged total assets of $10 million, you would be obligated to distribute $500,000 per year for charitable purposes.

Private foundations can be created as a corporation or a charitable trust. They are often governed by a board of Directors or Trustees and can either be set up to last in perpetuity, or to sunset and shut down after a certain period of time. “One of the unique advantages of private foundations is that they can pay for expenses related to their charitable purpose,” Fontanetta adds. “For example, family members might travel to visit a grantee for a site visit or attend a conference to learn about an issue area. The foundation can even pay stipends or salaries for people who serve as board members or staff. In contrast, donor-advised funds cannot be used for any such expenses.”

Donor Advised Funds

A donor-advised fund, or DAF (pronounced as a word, daf, not the initials D-A-F) is like a checking account for charitable giving, Fontanetta explains. “Once a donor places money into the DAF, they receive an immediate charitable deduction for the contribution. After that, the donor can advise (request) charitable distributions to be made to any 501(c)(3) public charity in good standing.” 

Much like a checking account is held at a banking institution, DAFs are held at a sponsoring organization, such as a community foundation, financial institution, or large nonprofit. A key difference, however, is that as soon as funds are placed into a DAF, the sponsoring organization owns those assets. The sponsor might have certain rules about how they operate their DAFs, but generally, they allow for the donor and any other individuals named by the donor to advise as to where charitable distributions should be made. This is an important distinction: Since the money in the DAF technically no longer belongs to the donor, they are not directing grants, simply advising as to who the charitable recipients should be. Sponsoring organizations differ in the ways they handle investments, succession, and acceptance of certain assets, so it’s very important to interview sponsoring organizations before deciding where to open your DAF. 

Best Fit

Returning to the original question—private foundation or DAF—we hope you might now be seeing some distinctions that might make the answer more readily apparent for you. 

“The best piece of advice I can give is don’t go it alone,” says Fontanetta. “There are multiple resources and forums for philanthropy to help guide your journey, whether you’re considering a private foundation or a donor-advised fund. Of course, the credentialed professionals on our team at Whittier Trust are always at your service.”

Over the last four decades, Whittier Trust has advised several generations of affluent families on their philanthropic choices. Philanthropy is a key component in the overall financial management and estate planning services Whittier provides and can also be a cornerstone of your family’s personal relationships and legacy.

For more information on charitable giving vehicles or to learn more about Whittier Trust's Philanthropic Services, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Oct 2nd

The Hard Work of Inheritance

Preparing for the Personal Process of Estate Settlement

Boomers, Gen X, Millennials, and Gen Z: No matter where an individual sits on the family tree, they all need to be planning—together—for the inevitable death of a family member. 

When an individual loses a parent, sibling, or child, there are so many emotions at play. Few people even have the capacity to even think about estate affairs. They need time to reflect, grieve and heal; and yet, the bills must be paid, life insurance claims must be filed, and inheritances must be sorted. That’s where a multi-family office comes in—they are there to help individuals cope with the tangibles and intangibles, before, during, and after significant life events.

Preparing for death and facing its aftermath presents two of life’s most uniquely challenging moments—where complex legal requirements collide with intensely personal decisions and responses. As a multi-family office manages the legal and organizational intricacies of estate settlement, they are uniquely equipped to guide families through the six steps of this highly personal process with compassion and thoughtful consideration for family dynamics. 

Step 1: Consulting with Legal and Financial Experts

This first step can be both the simplest and the hardest: contacting an attorney and CPA. It may only require one short phone call, but even that can seem impossible when an individual is in shock or despair. A multi-family office can act as the trustee, executor, advisor, or simply an administrative team, but no matter which role they assume, they can help an individual take that first step—and they’ll do it with complete professionalism and empathy. 

 Step 2: Locating Critical Paperwork

If an individual or family has a prior relationship with a multi-family office, they’ll most likely have their will, trust, and other legal documents on file. If not, the multi-family office team will begin the process of locating and verifying those files as well as identifying trustees, beneficiaries, and heirs while the individual or family tends to more personal matters. A multi-family office will track down outlying assets and papers, such as a military discharge or marriage certificate, and they’ll manage the many legal forms required for complex estates. Every item in the estate will be secured, inventoried, and properly distributed. 

Step 3: Managing Everyday Business 

In this stage, a multi-family office tends to do everyday business that an individual or family is too busy to handle. They’ll ensure bills are paid, appointments are canceled, and all pending items on an individual or family’s checklist are processed, down to that credit still owed at the country club. Acting with the legal authorization of the estate trustee, a multi-family office can file insurance claims and close out accounts in the name of the deceased, while also checking off the minor stuff, like notifying the personal trainer or rescheduling the dog groomer. Nothing is too small. A multi-family office understands what an overwhelming checklist an individual or family faces when there’s a funeral to plan and relatives to contact, on top of the everyday complexity of affluent households. 

Recently, Whittier Trust had a client who asked just one thing: to get their mother’s car title transferred to the Department of Motor Vehicles. Everyone knows that there’s no such thing as a simple transaction with the DMV, but for a client advisor, making those phone calls and filling out all that paperwork with the necessary documentation and signatures—is rewarding as they know they helped someone when it was needed most.

Step 4: Overseeing the Allocation of Assets 

After resolving debts and establishing the full scope of all financial accounts and other assets, a multi-family office can manage the distribution of personal property—anything from who gets granddad’s favorite rocking chair to how multimillion-dollar assets will be divided, including vacation houses and art collections. In addition to making sure the income and estate taxes are paid, a multi-family office can help facilitate family interactions at these tough times, sensitively but methodically executing the instructions of the trust instrument while ensuring everyone understands the outcomes.

 Step 5: Finalizing An Estate

An individual may have heard that it can take years to fully settle an estate—and that if even one item is overlooked or mishandled, it can cause months of delays. This is all true. 

Even when an individual has a trust in place before death, there are courts involved, and it’s almost always a drawn-out process. On average, it takes nearly 600 hours and more than 16 months to settle an estate. However, a multi-family office can take this immense burden of time off of an individual and follow every detail through to completion with a loving heart. An individual or family doesn’t have to put their lives on hold trying to figure out whether Form 709 comes before or after probate notifications, because a multi-family office will be handling it with an experienced and comprehensive team including an attorney and accountant for as long as it takes to finalize the estate. 

Step 6: Preserving Family Inheritance

This final stage encompasses the ongoing administration of family legal and business affairs as needed. Clients are often surprised to find that closing the estate doesn’t necessarily give them personal closure. Inheritance can be complicated. An individual’s life has been disrupted, and they might not know how to manage new wealth, or they might be feeling certain pressures from other family members. Perhaps an individual inherited their father’s mint-condition 1958 Corvette, but they have no space or use for it. Maybe their sister is upset that they were given the pearl earrings she wanted. A multi-family office can provide support to beneficiaries, who may have inherited assets they’re not sure how to handle. They can help newly minted decision-makers with stewardship of family assets and take the worry out of investing, so an individual and the whole family can move securely into this new phase of their life.

For more information about Estate Planning, Trust Services or what a multi-family office can do for you, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Sep 24th

Whittier Trust Elevates Dean Byrne to Executive Vice President

Whittier Trust, the oldest multi-family office headquartered on the West Coast, is pleased to announce that Dean Byrne, CFA®, has been promoted to Executive Vice President, while continuing to serve as Senior Portfolio Manager and Regional Manager of the Whittier Trust Company of Nevada, Inc. In his role, Dean is responsible for leading a team of experienced professionals in delivering customized wealth management services to high-net-worth clients while advancing initiatives to further Whittier Trust’s growth strategy.

Dean Byrne has been with Whittier Trust for more than 20 years, playing an integral role in advising clients on holistic asset allocation, risk assessment, efficient wealth transfer strategies and charitable giving, always emphasizing after-tax performance. As part of Whittier Trust’s Investment Committee, Dean contributes to shaping the firm’s investment strategies and client solutions.

"Dean’s advancement to Executive Vice President acknowledges his exemplary leadership in Nevada and his steadfast focus on delivering personalized, high-caliber service to our clients," said David Dahl, President and CEO of Whittier Trust. "Under his strategic guidance, our Nevada office has seen significant growth and a deepening in the quality of the services we provide to our clients. Nevada, with its unique trust and estate planning capabilities, is a key part of our strategic vision, and we are eager for Dean to continue driving our future efforts there."

Dean Byrne’s extensive background includes his designation as a Chartered Financial Analyst (CFA®) and his involvement with the CFA Society of Nevada. He is deeply connected to the University of Nevada, Reno (UNR), where he received his bachelor’s degree in Finance. Dean serves on the Board of the University of Nevada Foundation and is a member of their Investment Committee. He is also an active member of the University’s Silver and Blue Society and sits on the Advisory Board for the school’s College of Business.

In addition to his professional achievements, Dean contributes to the community as the Treasurer and a member of the Board of Directors of Classical Tahoe, a premier cultural event in the region.

Dean’s promotion is a testament to his expertise, leadership, and unwavering dedication to Whittier Trust’s mission of providing personalized, comprehensive, and local wealth management services. 

 

For more information about Whittier Trust's wealth management, estate planning and family office services, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Sep 17th

Whittier Trust Elevates Brittany Renna to Vice President

Whittier Trust, the oldest multi-family office headquartered on the West Coast, is pleased to announce the promotion of Brittany Renna, CFP®, APMA®, CTFA®, to the role of Vice President, Client Advisor, with the firm’s Newport Beach office.

In her new role, Brittany will deliver a holistic and customized approach to managing clients' wealth and estates, helping them navigate complex financial landscapes and plan for the future. Brittany is known for her deep commitment to working with business owners on pre-liquidity and succession planning strategies. By collaborating closely with estate planning attorneys, tax advisors, and portfolio managers, she creates tailored solutions that address her clients’ specific needs and ensures smooth wealth transitions across generations.

“With the growth we’ve been seeing in the time since Brittany has joined Whittier Trust, we anticipate that she will play a pivotal role in the company’s Newport Beach office, contributing significantly to not only this office but the company’s continued success,” said Lauren Peterson, Senior Vice President, Client Advisor at Whittier Trust. “Her expertise and passion for helping clients with intricate financial strategies make her an invaluable asset to our team. I’m so proud to work alongside Brittany and am excited to see the remarkable things she’ll achieve in this new role.”

In addition to her role at Whittier Trust, Brittany serves on the board of Impact Giving, a women’s collective giving nonprofit based in Orange County. Brittany holds a Bachelor of Arts degree in Economics with an emphasis in Accounting from the University of California, Los Angeles, and a Master of Science in Personal Financial Planning from the College for Financial Planning. Brittany is also a Certified Trust and Fiduciary Advisor (CTFA), Certified Financial Planner (CFP), and Accredited Portfolio Management Advisor (APMA).

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For more information about Whittier Trust's wealth management, estate planning and family office services, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Aug 28th

Don’t Wait For The Sunset

The November election will impact whether the 2017 Tax Cuts and Jobs Act expires as scheduled, but the time to act is now.

Ultra-high-net-worth individuals (UHNWIs) are anticipating the sunset of the 2017 Tax Cuts and Jobs Act (TCJA), which is set to expire at the end of next year. The TCJA was enacted to address both individual and corporate taxes. The corporate tax cuts and changes were made “permanent,” while the individual tax changes were approved through a congressional process known as reconciliation, requiring an eight-year sunset.

The scheduled expiration of the TCJA's tax provisions would significantly influence tax and estate planning decisions for UHNWIs. The planned increase in the highest individual income tax rate, for example, would impact cash flow, tax strategies and many other aspects of a UHNWI's finances, while changes in exemptions would significantly affect estate planning.

We work with several families that view the upcoming tax uncertainty as a catalyst to create and implement important multigenerational plans. The unpredictability of future changes makes it essential to plan ahead and consider the legacy and values of the family that transcend one single generation. This is a critical time to make important decisions that will last for decades and compound over time.

Overview of the 2017 TCJA

The 2017 TCJA brought significant changes to the tax landscape, reducing income tax rates for individuals and corporations. The top income tax rate was lowered from 39.6% to 37%. The lifetime unified estate and gift tax exemption increased to $13.61 million (as of 2024), meaning a married couple could have an exemption of up to $27.22 million.

The TCJA significantly reshaped the U.S. tax landscape for pass-through entities as well. It accelerated depreciation for business equipment, modified the Alternative Minimum Tax and introduced a deduction for pass-through entities.

A cornerstone of the TCJA was the Qualified Business Income (QBI) deduction, offering a 20% deduction on business income from pass-through entities. This provision aimed to level the playing field between C corporations and pass-through entities. Prior to the TCJA, C corporations faced a higher combined tax rate due to corporate and dividend taxes, making pass-through entities like LLCs more attractive for small business owners.

The TCJA’s corporate tax rate reduction made C corporations more competitive. However, the QBI deduction often tipped the scales in favor of pass-through entities, resulting in lower effective tax rates. While the TCJA narrowed the tax gap between C corporations and pass-through entities, it did not entirely eliminate it. Factors such as business size, industry, and individual circumstances continue to influence the optimal entity choice. Potential individual tax rate changes may cause small business owners to reconsider their corporate structure once again.

What's Next?

While the corporate tax rate of 21% will continue beyond the expiration date for the personal tax policy, the highest individual income tax rate will revert back to 39.6% after 2025 — the “Great Tax Sunset.

The TCJA's roughly doubled unified estate and gift tax exemption amount will return to the pre-TCJA level as of Jan. 1, 2026, which, indexed for inflation, is expected to be approximately $7 million. Post-TCJA, a married couple's lifetime exemption will drop to around $14 million, with the estate amount over the exemption subject to a 40% federal estate tax. Starting in 2026, the $10,000 itemized deduction cap for state and local taxes (SALT) will also expire.

The Reality of the Situation

If you're an UHNWI, you may be asking what the likelihood is of the government actually sunsetting the TCJA, and whether the November election will have any effect on that decision. We don't and won't know those answers for certain for a number of months. What we do know is that The University of Pennsylvania Budget Model projects the budgetary impact of extending the TCJA policy to be $4 trillion over the next decade — presenting a challenge for any divided government. That said, both political parties want to extend some of the policies, including the higher standard deduction and tax breaks for those making less than $400,000 per year.

While the election outcome will materially impact the probability of the tax law extension, those who would act in the event of a tax law change should prepare well ahead of time. Don't wait for the election outcome to start thinking seriously about important family and legacy decisions.

How UHNW Families Should Prepare

UHNW families will require more proactive and forward-thinking advice from their tax advisors. Keeping abreast of legislative changes and planning ahead will be critical to minimize tax implications and build flexibility into financial and business plans. Developing long-term plans that account for the possibility of further changes in tax laws beyond 2025 and emphasizing sustainability and resilience in tax strategies will also help weather future legislative shifts.

Considering a transition between different business structures, restructuring ownership and management of family businesses, and exploring options like trusts, charitable donations and lifetime gifting to reduce taxable estates are all tools on the table. Every family requires a uniquely tailored strategy.

 

Written by Caleb Silsby, Executive Vice President of Whittier Trust and the Chief Portfolio Manager at Whittier Trust since 2006. Caleb is based out of the Newport Beach office and oversees the investment team for multiple Whittier Trust offices.

Featured in the Family Business Magazine. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Aug 26th

Transparency in Family Financial Matters

Choose the right time and tone for topics such as money and succession issues in family-run companies.

The last thing you need in your family business is a disruption caused by miscommunication over crucial decisions such as promotions, the succession plan, or division of ownership. But in the absence of deliberate, scheduled discussions, people tend to make assumptions, and resentments can build. One of the best ways to avoid surprise issues is by planning regular family meetings so that everyone will know there is a time and place when important matters are disclosed, discussed, and settled.

How Family Retreats Simplify Communication

At Whittier Trust, we’ve helped orchestrate and facilitate hundreds of such family business meetings. Many of our clients hold annual or biannual family retreats that involve several generations, and we encourage this methodical, structured approach to keeping everyone informed. 

One client recently planned a particularly tough retreat after the family patriarch and company founder had passed away. In addition to having their Whittier Trust advisors there to moderate, they brought in an attorney and a counselor to help everyone understand the changes in both business and personal matters after the loss of the head of their family. 

Although there were multiple generations and more than 30 family members present, discussion at the retreat was wholly transparent. In the most loving way, family leaders conveyed how the business would go forward and shared their vision for the family’s legacy. They emphasized how they were reinvesting profits and building reserves for inevitable downturns, like the challenges the company had faced during the pandemic. They made it clear that the goal was to preserve the family’s legacy and assets for future generations.  

They also made sure that the third and fourth generations understood they had access to education to better their lives through a protected education fund. An education fund was a gift from the patriarch and matriarch, structured so that funds would be replenished in perpetuity, promising all family members the tools to better themselves through unlimited access to education and training.

The retreat concluded with a discussion of their personal philanthropic legacy. Each family member would have input on charitable causes to support, and they reviewed the process for collaborative decision-making. The final takeaway was the reassurance that family leaders were working hard to ensure a continual transfer of wealth for future generations. As the retreat drew to a close, moderators circled back to be sure everyone understood the key points and that all issues were resolved.

Anticipating Communication Challenges

Sometimes the hardest work of a retreat is done on the front end before even setting a date. If significant tension exists between any family members, you run the risk that your time together will be consumed by grievances; or worse, that someone will refuse to attend or be a last-minute no-show. This type of family discord is not uncommon and can be managed with the help of a neutral, third-party facilitator who will ensure that every concern is brought to the table. 

Working with the facilitator, the Whittier Trust team of advisors can organize individual interviews for each family member before specific retreat planning has even begun. This is everyone’s chance to make sure their voice is heard and that every complaint or worry, no matter how small, is taken seriously. The facilitator then works with the Whittier team to set a strategy for family discussion at the retreat with the goals of transparency, inclusiveness, and empathy. 

Although heads of families are sometimes hesitant to bring in an outside party, they inevitably realize that relationships are unlikely to improve without specialized help. After all, if the family hasn’t achieved effective communication while the matriarch and patriarch are alive, how much worse might it become when that leadership is gone? To safeguard their own legacy, they must allow for a new approach, knowing it's their best chance at more trusting communications in the future.

The Five Rs of Family Retreats

If you’re looking to organize your own family business meeting, you can use this “Five R” structure as a starting point:

RETREAT

Schedule at least two days away from home and work, rather than simply holding a meeting at the office, or trying to combine a meeting with a family vacation. A retreat allows members to arrive mentally and emotionally prepared to engage in productive conversations, knowing they’re coming to a focused environment in a space with few distractions.

RESOURCES

Communicate the goals of the retreat from the outset and bring all the reinforcements you need, including documentation and professional assistance. Our Whittier Trust team not only helps facilitate family meetings, but also coordinates with lawyers, accountants, moderators, or anyone else needed. The retreat is another chance to reinforce family values, work ethic, and healthy attitudes about wealth, so it’s essential to factor in individual personalities and each member’s familiarity with the status of the business and your wealth. 

RESPECT

Although you don’t want a casual conversation, you also don’t want to be too formal. Discuss the importance of listening and learning from other family members’ perspectives at your initial gathering and approach all conversations with trust and empathy. Be inclusive and bring in spouses and younger generations at appropriate times, giving them specific ways to be involved, such as philanthropy or education discussions. 

RESOLVE

Be prepared to pronounce final decisions for the present, while staying committed to further discussion in the future. If a family member is suggesting an alternate direction for some aspect of the business or their own life choices, hear them out, give a specific and respectful response, and if necessary, propose a later date to continue talking after everyone has had time to consider all options.

REPETITION 

Plan on getting together every year or at least every two years. Circumstances change and the company may have ups and downs, but communication should be a constant. Having a date on the schedule lets everyone know that you are invested in consistent, transparent discourse and that even if day-to-day operations are too busy for meetings, they will always have that chance to ask questions and present ideas at the annual retreat.

How Whittier Trust Can Help

As a multi-family office for more than 35 years, Whittier Trust is an expert in guiding families through multiple generations—protecting and enriching the family legacy while encouraging stewardship among newer members. We bring your investments, real estate, philanthropy, administrative services, trust services, and more under one roof, letting you maintain control, while your personalized, trusted team of advisors helps ensure the strength and success of your portfolio and your family. For more information about Whittier Trust’s services, visit www.whittiertrust.com.

 

Featured in the Los Vegas Review-Journal. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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Aug 19th

Maximizing Your Legacy: A Look At Minimizing Estate Tax Liabilities

The specter of estate taxes can loom large for ultra-high-net-worth individuals. For those with an estate in excess of $13.61 million (or couples with a combined estate in excess of $27.22 million) in 2024, this tax can significantly reduce the amount of wealth passed on to heirs, making it crucial for families to take proactive steps in their estate planning. Understanding the complexities of the estate tax, including the current exemption limits and the 2025 sunsetting of those estate tax exemptions, is essential for anyone looking to preserve their wealth.

To navigate these challenges, individuals and families facing this situation often turn to sophisticated estate planning tactics. These can include gifting vehicles, the use of trusts, charitable donations, and other techniques designed to minimize the taxable value of an estate. Here at Whittier Trust, we tailor teams made up of internal and external professionals to employ the right strategies that fit your specific needs. It's never too early to start looking ahead to the inevitable transition of your estate. Here are insights into some of the tools and tactics our clients use to preserve their legacies.

Harnessing the Power of Trusts

Trusts are the bread and butter of effective estate planning, offering a versatile tool for safeguarding assets and ensuring a smooth wealth transfer across generations. While our trust services advisors consider all possible trust options for a client, here are a few examples of the structures that our clients often consider: 

Grantor Retained Annuity Trusts (GRATs)

A GRAT is an irrevocable trust that allows the transfer of asset appreciation to beneficiaries free of gift and estate taxes. The grantor retains the right to receive annuity payments during the trust term, and only the appreciation of the trust assets is transferred to the beneficiaries. This makes GRATs particularly useful for those who have exceeded their lifetime gift tax exemption, as it can help reduce estate tax liabilities by removing the appreciation of assets from the estate. GRATs are most effective when there is an asset (or assets) that are likely to grow in value.

Irrevocable Life Insurance Trusts (ILITs)

ILITs are trusts that own a life insurance policy, either purchased by the trust or gifted to it by the grantor. Ordinarily, the proceeds of life insurance, if directly owned by the insured, are included in the insured’s estate for estate tax purposes. By having the ILIT own the insurance policy, the proceeds are moved out of the insured’s estate. The life insurance proceeds may replace assets inside the estate that will be used for estate tax payments. The trust can be structured to last for generations, particularly if the trust is sited in a state, like Nevada, where trusts can last for hundreds of years.

Qualified Personal Residence Trust (QPRT)

A QPRT is a so-called “split-interest” trust in which the parents contribute their home into the trust and are the initial beneficiaries for a set period of years. After this period, the heirs become the beneficiaries. This type of trust allows parents to significantly reduce the transfer value of their residence, as only the “remainder” interest is considered a gift for transfer purposes. The parents may continue to live in the home, paying rent to the trust which can then be distributed to the heirs as distributions of trust income. 

By establishing a trust, our clients can provide for the management and protection of their assets during their lifetime, dictating specific terms for distributions and working towards reducing eventual estate taxes.

Maximizing Gift and Estate Tax Exemptions

Perhaps even more critical to estate planning is fully utilizing available gift and estate tax exemptions to reduce your taxable estate and preserve wealth for beneficiaries. This proactive approach minimizes tax burdens and allows for effective asset distribution according to personal wishes. Staying informed on estate tax exemption amounts is also essential. By leveraging lifetime and annual exemptions, ultra-high-net-worth individuals can transfer significant assets out of their taxable estates. The annual gift tax exclusion has increased to $18,000 per recipient ($36,000 if coming from married couples). The current lifetime estate tax exemption is at $13.6 million for individuals and $27 million for married couples. 

For more detailed information on the current estate tax provisions, check out Whittier Trust's Federal Tax Updates.

Leveraging Charitable Giving

Another cornerstone of Whittier Trust's approach is maximizing the benefits of charitable giving. Charitable contributions can serve a dual purpose: fulfilling philanthropic goals while also providing significant tax advantages.

Qualified Charitable Distributions (QCDs)

Those 72 or older must annually withdraw from their IRAs. If this income isn't needed,  individuals required to take these Required Minimum Distributions (RMDs) from their retirement accounts can donate it directly to charity through QCDs. Taxpayers can contribute up to $100,000, reducing their income tax burden as these distributions are typically treated as regular income.

Donor-Advised Funds (DAFs)

DAFs are charitable accounts within a pre-existing public charity and provide a flexible vehicle for charitable giving. Contributions to a DAF receive an immediate tax deduction, while the donor may advise over how and when the funds are distributed to charities. This can offer estate tax benefits by removing assets from the taxable estate. DAFs also allow for strategic philanthropic planning and the potential growth of donated assets before distribution.

Charitable Trusts

There are two different types of charitable trusts that are used as strategies for those wanting to benefit a charity or charities while still having the family enjoy the benefits of the assets. 

Charitable Lead Trusts (CLTs) are irrevocable trusts that provide for an amount to go to charity (or charities) during an initial term of years. After the charitable term is over, whatever is left in the trust goes to family members, either outright or in further trust for multiple generations. Because there is a charitable beneficiary upfront, the amount of the taxable gift made to the family is reduced, leveraging the donor’s available gift and estate tax exemption.

Charitable Remainder Trusts (CRTs) are the opposite. The donor (or donors) receive a stream of income, often for life, and anything left in the trust at the end goes to charity. CRTs work a little like an IRA or an annuity in that the income paid to the donor is generally taxable but the income (capital gains) inside the trust remains tax-deferred. There is an additional benefit to a CRT in that the donor receives a charitable income tax deduction for the actuarial amount passing to charity.   

The Importance of Personalized Guidance

While these strategies offer a glimpse into Whittier Trust's approach to estate tax mitigation, it's crucial to recognize that each estate is unique. What works for one individual may not be optimal for another. Whittier Trust offers a holistic approach, considering multiple factors like financial goals, desired legacy, family dynamics, tax sensitivity, and more to develop tailored strategies that meet clients' specific needs. Our professionals work directly with clients and their attorneys and accountants to help each individual and family achieve their goals.

 

To learn more about how working with experienced professionals at Whittier Trust can help you gain confidence in your estate plans and take steps to protect your wealth for future generations, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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Aug 15th

Life, Death, and Taxes

Strategic preparation helps ensure your family won’t be caught off-guard.

Benjamin Franklin knew a thing or two about many topics, including, as it turns out, estate planning. As he famously warned, In this world nothing can be said to be certain, except death and taxes.

If you’ve diversified your investments, stayed up to date on insurance coverage, and prepared a will, trust, power of attorney, and medical directive, you’ve checked off most of the steps people take against life’s uncertainties. But there’s one additional precaution that can often be the most critical: designating someone you trust to manage all the components of your estate and be a reassuring partner to your family when settling estate matters. “Knowing what to expect long before a big life change can help alleviate stress for everyone involved,” says Libby Baeza, Officer and Client Advisor at Whittier Trust. “And that’s where it’s really helpful to have a trusted family office by your side.”

Estate Planning

Baeza has helped dozens of clients navigate the minutiae of estate planning and wealth distribution. “Your Whittier family office team will simplify all the intricate details,” she explains. “We also facilitate discussion among family members, helping you set clear expectations and making sure everyone understands all the factors involved.”

Whatever the status of your estate, Whittier Trust meets you at your current stage in the planning process. Some clients already have strategic plans in place and are looking to stay current on changes in tax laws. Others may have no plan at all. Recognizing the uniqueness of each client’s assets, lifestyle, and objectives, Whittier’s team of expert fiduciaries works hand-in-hand with clients and their attorneys to create a personalized and tailored estate plan. Relationships begin with the Client Advisor and Portfolio Manager, but as they evolve, so does the composition of your team. The highest priority is to ensure that the goals you envision for your legacy are realized and that you rest easy knowing your family has direct access to all Whittier team members whenever needed.

Estate Settlement

“With unexpected life changes, people are often overwhelmed by the alteration of their family structure and the complexities of the estate settlement process,” says Baeza. “One of the reasons Whittier excels in this area is our ability to retain, maintain, and organize the essential documents needed to settle the estate properly.”

Baeza notes that many clients make Whittier the go-to emergency contact for their families. “A while back, a couple called to tell me about an overseas vacation they were planning. They wanted to confirm the best contact number for their daughters to call in case anything happened, and Whittier was at the top of that list. Like many of our clients, they instructed their children to call us first (after emergency services, of course) in the event of an emergency, because they knew it would be the only call necessary; we would take care of everything after that,” she says. 

It’s an ethos that’s baked into Whittier Trust’s core values. “Our culture and values are all about getting to know our clients and their families, giving them the confidence that we’ll look after their families through multiple generations, even after they no longer can,” Baeza explains.

Tax Planning and Gifting

Part of Whittier’s holistic approach to estate planning is to develop proactive strategies to mitigate the tax burden as life changes and families evolve. “Working collaboratively with your accounting and legal teams, we tailor your tax strategy to your values and objectives,” explains Baeza. “While options such as tax loss harvesting, gifting assets, and charitable donations should all be considered, the chosen course of action is based on the client's ultimate goals, seeking to reap the greatest benefits for both the grantor and the succeeding generation of beneficiaries.” 

By analyzing clients' balance sheets, the Whittier team can aid in identifying opportunities to leverage the lifetime gifting exemption. “We often uncover assets that extend beyond marketable securities, such as ownership in a limited partnership or family-owned business, that can be strategically used for gifting to the next generation,” Baeza says. “In such cases, we work alongside appraisers and legal counsel to obtain valuations and discounts when applicable.” 

Whittier’s goal is to make a meaningful and lasting difference in all aspects of your wealth, family, and legacy, Baeza says, “and to be the first call you make, whether in good times or challenging ones.” Understanding what matters most to you is the key to both smart estate planning and a successful, long-term relationship—one where everyone in the family knows who they can turn to in uncertain times.

Featured in Family Business Magazine. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

From Investments to Family Office to Trustee Services and more, we are your single-source solution.

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