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.
Whittier Trust Celebrates Third Consecutive Year on the Los Angeles Business Journal’s Top 100 Workplaces List.
For the third year in a row, Whittier Trust has been named one of L.A.’s 100 Best Workplaces by the Los Angeles Business Journal.
Whittier Trust was proud to be recognized at the 18th Annual Best Places to Work Awards as the 12th best workplace among midsize companies in the Los Angeles area. Moving up 13 spots from #25 in 2023, this achievement reflects the company's commitment to creating an outstanding work environment. As the oldest multifamily office headquartered on the West Coast, Whittier Trust is thrilled to see its continued rise in the Top 100 rankings for the third consecutive year.
This award highlights the company's remarkable growth, marked by the opening of new offices and other Best Workplaces Awards, including recognition in the Puget Sound and Orange County Business Journals.
"It's a privilege to work with such a talented team," said David Dahl, CEO & President of Whittier Trust. "Being named a top 100 workplace for three consecutive years, and now reaching the top twelve in this exceptional list and within this great city, shows we're living our promise to our clients and colleagues. Whittier Trust is a place where legacy grows not just for our clients, but for our team members as well. We prioritize our people, fostering a culture of passion, collaboration, and dedication to our clients. Their collective efforts and belief in our core values and vision drive our success and positive impact on the families and communities we serve."
The Los Angeles Business Journal created the Best Places to Work program to identify, recognize, and honor the best employers in Los Angeles County. Companies considered for this prestigious list must meet a range of criteria, including having a physical operation in Los Angeles County and employing at least 15 full- or part-time permanent staff members.
The Workforce Research Group conducted a thorough two-part assessment process to judge each company under consideration. The first part evaluated each company’s benefits, policies, practices, and demographics, accounting for 20% of the total score. The second part, an anonymous employee survey measuring the employee experience, contributed the remaining 80% of the score. The combined results determined the final rankings, with the top companies celebrated at a special event on August 7, 2024, at the Biltmore Hotel.
The recognition by the Los Angeles Business Journal reaffirms Whittier Trust’s mission to create an environment where employees feel valued, empowered, and inspired. It highlights the company's commitment to prioritizing people, which fuels exceptional client service through the recruitment of passionate teammates and the cultivation of this outstanding work environment.
The complete rankings were published in the August 12, 2024, issue of the Los Angeles Business Journal. To see the rankings, visit labusinessjournal.com/events/bptw2024.
If you're interested in a career at one of the top workplaces in Los Angeles, visit our Career Page to learn more and find a position that may fit you.
For more information about Whittier Trust's wealth management and family office services, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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Five key questions to ask your advisor if you're mulling an exit.
In my role at Whittier Trust, I've seen firsthand how critical it is for ultra-high-net-worth individuals (UHNWIs) to have a well-thought-out exit strategy for their family businesses. Despite the intensive planning that typically goes into wealth management, recent research from the Exit Planning Institute suggests that a staggering 80% of business owners lack solid exit strategies, leaving their wealth in limbo and risking economic continuity for future generations.
The planning process of an exit strategy can often be fraught with uncertainty and potential pitfalls, making it a critical issue for business owners nearing retirement or a transfer of ownership or leadership. Here are the five key questions UHNWIs should ask their advisors to ensure a smooth and successful transition.
1.How many different exit strategies are available to me?
Understanding the various ways you can exit is fundamental to choosing the right path for your business. Each exit strategy has unique implications and suitability depending on your business's circumstances and your personal objectives. Here's a breakdown:
Generational Family Transfer
When multiple generations of a family are actively involved in the business, an owner might prioritize business legacy and family engagement over the sale price. If the objective is to keep the business in the family, the exit plan might involve transferring company stock, often at a discount, to direct heirs over many years. While keeping a majority stake in the company and control over operations, the owner can transfer assets to the next generation while still mentoring and training the next leader.
A generational family transfer can play out in a variety of ways: The owner may ultimately sell stock in the company to family, retire holding minority ownership or gift all stock to heirs. A successful transfer will take at least three to five years to accomplish and will position the business for success, meet the owner's liquidity and financial needs after the transfer, and leave the new owner(s) financially stable after the transaction.
Management Buyout
An owner who wants to sell all or part of the company to existing management might favor a management buyout. This type of ownership transition involves structuring a deal in which management uses the assets of the business to finance a significant portion of the purchase price. This can work for an owner who believes in the management team and thinks it will be able to keep the business thriving when he/she exits. However, if the management team lacks adequate liquidity, the seller may have to accept a lower price or unattractive deal terms, including heavy seller financing.
Sell to Partners
When the owner has partners and a quality buy-sell agreement, a sale to partners may be the only selling option. A buy-sell agreement generally articulates a controlled process for transferring ownership. Since the buyers fully understand the business and it's a planned process, selling to partners generally isn't too expensive. Common challenges in selling a business to partners include a lower sale price, slow transfer of proceeds and potential disagreements among partners.
Sell to Employees (ESOP)
When an owner wants to sell the company to its employees, an employee stock ownership plan (ESOP) might be the answer. In this type of sale, the company uses borrowed funds to acquire shares from the owner and contributes the shares to a trust on behalf of the employees. ESOPs require a securities registration exemption and are classified as an employee benefit, so it's an involved process. An ESOP sale takes many years to complete and is generally more expensive and complicated than other options. However, it can be a way to reward valued employees with company ownership. The tax savings to the seller can be substantial as well.
Sell to a Third Party
When the business is healthy and the owner wants to cash out, selling to a third party could be a good option. Whether the interested party is a strategic buyer, a financial buyer or a private equity group, the owner should expect to pay some big up-front costs to engage experienced professionals to guide the owner and company through the selling process. Having the right partners attending to the owner's interests, negotiating with the buyer and structuring deal terms are crucial to achieving the best outcomes.
Although the payoff can be attractive, third-party sales are not for the faint of heart. The process takes at least nine to 12 months and can be intense and emotional for the seller. Often, the seller retains some obligation to the business beyond the sale but has to be ready to give up control entirely. A third-party sale is ideal for an owner who is open to having the buyer bring new energy, ideas and change to the business.
Recapitalization
An owner who is open to having outside investors fund the company's balance sheet might consider bringing in a lender or equity investor to act as a partner in the business. By selling a minority or majority position, the owner can partially exit, monetize a portion of the business and reduce ownership risk in the company. New growth capital can bring more earnings to the original owner. When ready to exit the company completely, the original owner might sell the remaining shares through further recapitalization or another exit option.
Selling any portion of the company to an outsider can precipitate a loss of control and a cultural shift within the company. An owner who is not ready to be accountable to partners should consider this before opting to recapitalize.
2. How long before retirement should I begin thinking about my exit?
Ideally, business owners should start thinking about their exit strategy at least five to 10 years before their intended retirement. This period allows for comprehensive planning that can influence key outcomes of the eventual sale. Value-building initiatives need time to succeed and show results before they can impact sale proceeds (valuation optimization). Identifying and grooming a successor — whether a family member, a key employee or an external buyer — is generally most effective over an extended period (succession planning). Structuring the business and the sale to maximize tax efficiency and comply with legal requirements is an involved process (legal and tax planning). Finally, strengthening the business's operations and financial health can make it more attractive to potential buyers (operational improvements).
3. Whatsteps should I take to optimize valuation and transition?
Optimizing your business's valuation and ensuring a smooth transition involves several strategic steps. First, conduct regular financial audits to present clear and accurate financial statements; transparency is key to attracting serious buyers and securing a favorable sale price. Next, take a look at opportunities to enhance operational efficiency to demonstrate the business's profitability and growth potential. This might involve adopting new technologies, improving processes or cutting unnecessary costs. Another crucial step is to develop a strong management team that can operate independently, as a business that doesn't rely solely on the owner is more attractive to buyers. Solidifying relationships with key customers and suppliers is also important, since long-term contracts and stable relationships add value and stability to the business. Finally, ensure the business complies with all legal and regulatory requirements. Any outstanding legal issues can deter buyers or lower the sale price.
4. What if a big part of my exit is going to be a sale or a partial sale?
If you are leaning toward a sale, either partial or complete, several considerations come into play. Engaging professionals is one of the first and most crucial steps. Working with experienced legal, financial and business advisors helps owners navigate the complexities of the sale process. Those professionals can also help with due diligence. Buyers will conduct thorough examinations of every facet of your business, including financial records, legal documents and operational data. Being prepared with detailed and organized documentation can facilitate a smoother due diligence process and instill confidence in potential buyers. This preparation not only expedites the sale process but also helps in presenting your business as a well-managed and transparent entity, which can lead to a more favorable sale price.
Identifying potential buyers is also a strategic consideration that can greatly influence the sale’s success. Depending on your business's nature and industry, potential buyers could be competitors, private equity firms or even international investors. Identifying and approaching the right buyers ensures that you attract parties who see the most value in your business.
5. How should I structure sale deals?
Structuring a sale deal requires careful planning and negotiation to balance your needs with the buyer's. This involves key elements like payment terms, which can be a one-time lump sum or installments. You might even consider seller financing, which can make the deal more attractive but comes with the risk of the buyer defaulting. Another option is to structure earn-out payments tied to the business’s future performance, which can bridge valuation gaps but require clear metrics and timelines. Noncompete agreements are often requested by buyers to prevent owners from starting a competing business post-sale, so ensure the terms are reasonable and don’t unduly restrict future options.
The structure of the deal can also significantly impact your tax liabilities. Understanding the tax implications of different payment structures is crucial, as installment payments may help spread the tax liability over several years. Work with wealth management advisors to explore strategies that could mitigate your tax burden. Experienced legal counsel can help you draft and review all agreements, focusing on representations and warranties to minimize future liabilities and ensuring provisions for indemnification to protect against potential future claims or disputes.
You will also have to decide whether you'll stay involved in the business after the sale, in either a consulting capacity or a more formal role. This can ease the transition and provide additional income, but it might also limit your ability to fully step away. Don't forget to consider how the sale aligns with your personal and family goals. Reflect on how the sale proceeds will be integrated into your overall estate plan, ensuring the structure supports your legacy and philanthropic goals. Also assess how the sale structure impacts your lifestyle and plans, whether it involves retirement, new business ventures or other personal endeavors.
The transition of a family business is a complex process that requires careful planning and execution. By asking your advisors the right questions, you can ensure a smooth and successful exit that secures your legacy and financial future.
Written by Elizabeth M Anderson, Vice President, Business Development at Whittier Trust. Featured in Family Business Magazine. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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In an era where digital threats are a constant worry, cybersecurity has emerged as a critical concern for family offices entrusted with managing substantial wealth on behalf of affluent clients. Despite the financial stakes and heightened awareness of cyber threats, a concerning gap persists between the recognition of risks and the implementation of robust defense mechanisms. As family offices like Whittier Trust navigate this complex landscape, their commitment to security and strategic focus on overcoming evolving challenges remain paramount.
The Escalating Threat Landscape
Family offices, by managing significant assets and sensitive personal information, are lucrative targets for cybercriminals. The nature of these entities—often small, privately managed, and lacking the extensive security infrastructure of large financial institutions—makes them particularly vulnerable. Cyber-attacks have been steadily climbing for four consecutive years, with a notable surge in targeting smaller businesses, reaching as high as 36%.Cybersecurity threats range from phishing attacks and ransomware to more sophisticated tactics such as insider threats and spear-phishing (a malicious email that specifically targets an individual or organization). The risk is compounded by the interconnected nature of digital systems, where a single breach can cascade into widespread damage.
Despite growing awareness of these risks, many offices struggle with the actual readiness to confront them. Limited internal resources, both in terms of technology and specialized personnel, hinder the ability to implement comprehensive cybersecurity measures. This gap between perceived risk and actual preparedness is a significant vulnerability that needs urgent attention.
Proactive Cybersecurity Measures
To safeguard sensitive financial data and uphold fiduciary responsibilities, family offices must adopt proactive cybersecurity measures. Here are several best practices that can bolster their defenses:
Develop Comprehensive Information Security Policies: Establishing and enforcing robust information security policies is foundational. These policies should cover data encryption, secure communication protocols, regular audits, and employee training programs. A well-defined policy framework helps ensure that everyone in the organization understands their role in maintaining security.
Invest in Advanced Cybersecurity Technology: Leveraging cutting-edge technology can significantly enhance a family office's security posture. This includes deploying firewalls, intrusion detection systems, and advanced endpoint protection. Regular updates and patches are essential to keep these systems effective against emerging threats.
Conduct Regular Security Audits and Penetration Testing: Periodic security audits and penetration testing can identify vulnerabilities before cybercriminals exploit them. These assessments should be conducted by third-party experts to provide an unbiased evaluation of the family office's security infrastructure.
Enhance Employee Training and Awareness: Employees are often the weakest link in cybersecurity. Regular training sessions on recognizing phishing attempts, handling sensitive information, and following security protocols can significantly reduce the risk of human error. Creating a culture of security awareness is crucial.
Implement Multi-Factor Authentication (MFA): Multi-factor authentication adds an extra layer of security by requiring users to provide two or more verification factors to gain access to systems. This makes it much harder for attackers to compromise accounts, even if they have obtained passwords.
Engage Cybersecurity Experts: Hiring dedicated cybersecurity professionals or engaging reputable cybersecurity firms can provide the expertise needed to stay ahead of threats. These experts can help develop strategies, respond to incidents, and ensure compliance with relevant regulations.
Overcoming Resource Constraints
Implementing cybersecurity measures is crucial for family offices, but these efforts often encounter challenges due to limited resources. Family offices, typically smaller in scale than larger organizations, must navigate these constraints while still ensuring the security of their assets and data. To effectively address these obstacles, family offices can employ several strategies.
One key strategy is prioritizing critical assets and data. Not all data and systems hold the same level of importance, so by identifying and focusing on the most valuable assets, family offices can allocate their resources more efficiently. This targeted approach helps protect what matters most without overextending their capabilities. Additionally, adopting a risk-based approach tailored to the specific threats and vulnerabilities unique to the family office can further streamline resource allocation. This method ensures that efforts are concentrated on areas with the highest potential impact, maximizing the effectiveness of their cybersecurity measures.
Another effective tactic is leveraging cost-effective solutions that do not compromise on protection. Collaboration and knowledge sharing with other family offices can be incredibly beneficial. Engaging in industry forums and collective bargaining can lead to better cybersecurity solutions and services, while also fostering a community of shared best practices and insights.
Commitment to Security
Whittier Trust, recognizing the importance of cybersecurity, has recently hired a new Chief Information Officer to bolster its security efforts. This strategic move underscores a commitment to staying ahead of cyber threats and ensuring that the families they serve can trust in the security of their assets and information.
By addressing cybersecurity concerns head-on, family offices can not only protect against unauthorized access and theft but also uphold the trust and confidence of the families they serve. Proactive strategies, ongoing investment in technology and expertise, and a steadfast commitment to security are essential in navigating the increasingly digitized landscape and fulfilling fiduciary responsibilities effectively.
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Protect your family's legacy with robust cybersecurity measures. Discover more about safeguarding your wealth by exploring our comprehensive resources and start a conversation with a Whittier Trust advisor today by visiting ourcontact page.
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As the Baby Boomer generation ages, a significant wealth transfer is expected to occur over the next few decades. This phenomenon has prompted discussions among financial planners and investors about the best practices for transferring wealth to the next generation. Understanding the intricacies of generational wealth transfer is crucial for ultra-high-net-worth individuals (UHNWIs) to ensure their assets are preserved and efficiently passed on, minimizing tax liabilities and fulfilling their legacy objectives.
The Importance of Protective Planning
Generational wealth transfer encompasses various strategies and considerations to establish a smooth and efficient passing of assets from one generation to the next. Proactive planning is essential in this process. By taking early and strategic steps, individuals can mitigate estate taxes, avoid probate, and provide financial security for their heirs. One of the primary tools in wealth transfer is the use of trusts, which can help manage and protect assets while confirming their distribution according to the benefactor's wishes, all without the need for probate—a process that can be both time-consuming and costly.
Utilizing Tax Advantages
Another critical aspect of proactive planning is understanding and utilizing the various tax advantages available. For instance, the annual gift tax exclusion allows individuals to give a certain amount each year to as many people as they wish without incurring gift taxes. However, it's important to stay informed about upcoming changes to the gift tax rule, which are set to take effect soon and could impact the amount that can be gifted tax-free. Additionally, establishing and funding education savings accounts or medical trusts can provide significant tax benefits while directly supporting the next generation.
Potential Challenges: Family Disputes and Complexity
However, the process is not without its challenges. One significant hurdle is the potential for family disputes. When large sums of money and valuable assets are at stake, differing opinions and expectations among heirs can lead to conflicts. Clear communication and detailed estate planning documents can help mitigate these risks. It is essential to have open discussions with family members about the benefactor's intentions and expectations, potentially facilitated by a neutral third party such as a family office.
The Intricacies of Estate Planning
The complexity of estate planning is another challenge that cannot be underestimated. Crafting a comprehensive estate plan involves more than just drafting a will. It requires a detailed understanding of various legal and financial instruments, as well as the ability to foresee and plan for potential changes in the benefactors' and beneficiaries' circumstances. This is where the need for continuous adjustments comes into play. Laws governing estate taxes, gift taxes, and trusts are subject to change, and family dynamics can evolve. Regularly reviewing and updating the estate plan is crucial to verify it remains aligned with current laws and the benefactor's wishes.
Securing Financial Stability for Future Generations
Properly managed, generational wealth transfer can secure financial stability for future generations. It can provide heirs with the resources they need to pursue education, start businesses, or support charitable causes, thereby extending the benefactor's legacy beyond their lifetime. However, the success of this process hinges on careful planning, transparent communication, and professional guidance.
The Role of Professional Guidance
Professional guidance is indispensable in navigating these complexities. Estate planning attorneys, financial advisors, and tax professionals bring expertise and experience that can make a significant difference in optimizing wealth transfer strategies. They can provide personalized advice tailored to the individual's financial situation, goals, and family dynamics. Additionally, professionals can help in identifying and addressing potential issues that the benefactor might not foresee, safeguarding a more robust and resilient estate plan.
Advanced Estate Planning Techniques for UHNWIs
For UHNWIs, the stakes are particularly high, and the opportunities for optimization are significant. By leveraging advanced estate planning techniques such as charitable remainder trusts, family-limited partnerships, and generation-skipping trusts, UHNWIs can achieve substantial tax savings while preserving their wealth for future generations. Involving heirs in the planning process and educating them about financial responsibility can help make certain that the wealth is managed wisely and lasts through multiple generations.
The generational wealth transfer expected as Baby Boomers age presents both challenges and opportunities. Proactive planning, clear communication, and professional guidance are key to navigating this complex process. By addressing potential challenges head-on and taking advantage of available strategies and tools, UHNWIs can optimize their wealth transfer, ensuring that their legacy endures and provides financial security for their heirs. The Great Wealth Transfer is not just a financial event; it is an opportunity to shape the future and make a lasting impact on the lives of loved ones and the community at large.
Safeguard your family's legacy with Whittier Trust. Discover our comprehensive resources and expert insights to learn how to protect your wealth.
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For more information, start a conversation with a Whittier Trust advisor today by visiting ourcontact page.
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Whittier Trust, the oldest multi-family office headquartered on the West Coast, has been named a Top 5 Finalist in the 2024 STEP (Society of Trust and Estate Practitioners) Private Client Awards in the category of
Multi-Family Office Team of the Year for the second year in a row. This recognition is a testament to Whittier Trust's commitment to prioritizing clients' needs, goals, and legacies and providing the utmost professional service in wealth advising.
"It's a true honor to be recognized by STEP for a consecutive year," said David Dahl, CEO at Whittier Trust. "Relationships are everything in family office services, and we would not serve our clients as faithfully as we do without the exceptional and tireless work of our energetic, passionate, and dedicated team of professionals. They think like true entrepreneurs, deliver exceptional service and investment results, and take the time to get to know our clients. We take pride in often being our client's second call (after their spouses) in times of both triumph and challenge, and we will continue evolving as a company to meet our clients' changing needs."
The STEP Private Client Awards celebrate firms' and professionals' achievements and outstanding performance worldwide. With a record number of entries, Whittier Trust's nomination as a finalist in the Multi-Family Office Team of the Year category for a second year further solidifies its position as a leader in delivering exceptional service to clients. It highlights the company's expertise in serving multi-generational families with complex wealth management needs.
Whittier Trust is dedicated to providing personalized and tailored wealth management services and is proud to be recognized among the Multi-Family Office Team of the Year category. The nomination serves as a testament to its culture of internal promotion, mentorship, open communication, professional growth, and dedication to clients by meeting their everyday needs.
The recognition from STEP comes on the heels of unprecedented growth from the company, having opened three new offices in the last three years, and relocating the company's headquarters to a larger office in Pasadena, CA, to better serve an expanding client base locally. Several Whittier Trust offices were also recently recognized as top places to work by the Puget Sound, Orange County, and Los Angeles Business Journals.
A panel of judges will decide upon a winner for each category. The honorees will be announced at the black-tie dinner and awards ceremony, hosted by Susie Dent, writer and broadcaster, on Sept. 19 at the London Hilton on Park Lane.
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For more information about Whittier Trust's wealth management and family office services, start a conversation with a Whittier Trust advisor today by visiting ourcontact page.
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Future generations can gain the full benefit of your business legacy with a seamless transition to a successor trustee.
Investors with significant real estate portfolios often have an enterprising spirit to grow net worth through real estate, and succession planning may be difficult for this type of successful wealth builder. Many are reluctant to relinquish control to a successor, and some never do—until it’s too late.
“You shouldn’t wait to pass down practical knowledge of real estate assets in your trust,” advises Whittier’s Chuck Adams, Executive Vice President, Real Estate. “Whether your successor is going to be a family member, corporate fiduciary, or both, everyone needs to understand your business strategy and history. Even in a business with perfectly maintained files, much of the valuable information regarding ownership and operation of properties can be lost when the family’s wealth creator dies or is incapacitated.”
Partners in Planning
Preparation is imperative to an organized and efficient transfer of family assets, particularly for real estate owners who have been actively involved in property acquisitions, development, and management. Although there’s no blueprint for passing down that kind of hands-on knowledge, working with a corporate trustee can facilitate the transition and ensure that your estate plan will be carried out as intended. This is especially helpful if family members have no interest or aptitude to learn the ins and outs of the business, or if they are overwhelmed at the prospect of inheriting a multi-property portfolio.
“Bringing on a corporate fiduciary who understands the asset class prior to the transfer of holdings can reduce stress and confusion among family members,” says Adams. “We work with the wealth creator to gain valuable knowledge of their portfolio, along with any family dynamics or issues, then create a comprehensive plan documenting their intent for both the assets and the beneficiaries.”
Facilitating the Transfer
Assuming your heirs are likely to keep any or all the property you plan to leave them, even for a short period of time, it is important to share your business history and strategy. Here are five steps Adams recommends:
Provideany successors the opportunity to earn your trust by learning about the real estate, along with your values and goals, to ensure continuity in how the portfolio is managed.
Map out your portfolio's composition—locations, property types, and challenges—so successor trustees are ready to make informed decisions and can begin to assess, for example, the asset’s potential for development or sale or measures they should take to maintain value and avoid costly surprises.
Introduce successors to the property management team, leasing agents, and other important partners.
Minimize misunderstanding and potential disputes among beneficiaries by delivering and modeling clear communication about ownership, expectations, and long-term vision.
Foster confidence in the next generation by involving them in asset management discussions and helping them understand the complexities of the unique assets, which will continue to provide family wealth.
Sharing your knowledge will empower your heirs to become responsible stewards of your legacy, and partnering with an experienced corporate fiduciary with significant real estate expertise will ease your mind through this process. The partnership can provide security for family members as the wealth creator’s role evolves, helping to ensure the family’s personal and financial prosperity in the future.
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For more information about real estate assets within estate planning, start a conversation with a Whittier Trust advisor today by visiting ourcontact page.
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In a world full of financial uncertainties, tax-sensitivity is one aspect of investing that you can control. At Whittier Trust, we have been laser-focused on after-tax returns—the dollars you keep—since the early 1980s. That focus has become a key differentiator and one of the many reasons clients tend to stay with Whittier from one generation to the next.
Most of the investment industry continues to focus on pre-tax returns, an approach that is woefully inadequate for taxable investors, especially in locations that combine state taxes with Federal tax rates to tax portfolio returns at 50% or more.
We’ve found that there are four elements that allow investors to unlock superior after-tax returns: asset location, time horizon, structure, and a total return approach for income generation. Here’s why.
Asset Location
The first key to consider is asset location. Not to be confused with asset allocation, asset location is the most impactful tactic in maximizing after-tax returns. Assets that are tax-inefficient, such as corporate bonds, private debt, or high turnover strategies, should be placed in tax-deferred accounts where they can generate high returns while compounding tax-free. On the other hand, assets that are tax-efficient, such as high-quality low-turnover stocks, low-dividend equities with long-term growth opportunities, and tax-favored bonds like municipal bonds or preferreds should be held in taxable investment accounts where compounding can still occur tax-efficiently. For our clients, the Whittier team is laser-focused on maintaining the optimal mix of assets and the right asset locations to maximize ROI.
Time Horizon
The second key is the time horizon. Patience is a tax saver. The longer assets are held, the greater the ability to compound returns with minimal tax friction. It is important to let time be your ally. One of the easiest time horizon tax enhancements is to factor in the difference between short-term and long-term capital gains. Over long-term time horizons, the difference between a tax-sensitive investment management style and a tax-agnostic style is stunning. Patient, long-term investors can generate significantly higher after-tax returns than impatient short-term investors without regard to taxes. Having an advisor and portfolio manager who advocates this approach can help temper knee-jerk reactions to market fluctuations and help encourage patience along the way.
Structure
The third key is structure. Structure pertains not only to the entity the investment is formed in, but also the structure of the investment itself. A few key items to consider are whether the entity is an LLC, a Limited Partnership, or a Trust that owns the asset, or whether the asset itself is taxable as ordinary income. The investment may have tax benefits from the structure such as depreciation offsets or preferred returns rather than phantom income. The structure of the investment can be the difference maker when taxes are due. Having tax specialists and attorneys as part of our team at Whittier is key, as we’re always optimizing our clients’ structure in light of changing laws and regulations.
Total Return Approach
Finally, using a Total Return Approach to enhance after-tax wealth. Generating income in a tax-efficient manner will allow for sustainable withdrawals of the portfolio while it continues to grow after taxes and inflation. The adage that more wealth has been lost chasing yield than at a barrel of a gun, holds even more true today than ever before. Legendary investor Warren Buffett never paid a dividend from Berkshire Hathaway, yet the compounding of the company’s stock has more than covered the lifestyle of his early investors. The market has many investments with yields that seem enticing but are not commensurate with the risk incurred. Remember that some companies pay out significant dividends because they have no better reinvestment opportunities.
In today’s world, where every dollar retained counts, embracing a tax-conscious strategy becomes essential for building a resilient and prosperous investment portfolio.
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Written byCaleb Silsby, Executive Vice President, Chief Portfolio Manager at Whittier Trust. To learn more about maximizing after-tax returns, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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Financial planners are charged with protecting the things that matter most to their clients — and those things often include pets.
June is National Pet Preparedness Month, a time for making sure pets are incorporated into emergency plans. It presents a perfect opportunity for advisors and planners to connect with pet-owning clients to help them plan for their beloved pets’ long-term care by incorporating their needs into estate plans.
Below are a few areas to consider and questions to ask to help your clients ensure their pets are cared for after they’re gone.
The importance of pre-planning for pets
Estate plans usually provide for family members, but, incredibly, most of them fail to mention those with fur or feathers. Everplans reports that only 9% of people with a will include provisions for their cats, dogs, horses or exotic birds.
To help a client remember their pet during estate planning, ask toward the beginning of the process: “What can we do now to ensure the best outcome for your pets after you’re gone?”
Determine a pet caregiver — and cover their future costs
Once the conversation is started, the key question is: “Who have you identified as a potential caregiver for your pet, if you were no longer able to care for them?”
For clients who already have a caregiver in mind, advise them to confirm that the caregiver has agreed to accept this responsibility. It’s a big one, and even close friends may be reluctant to take it on.
Once the client has a willing caregiver, advisors should then craft a letter with instructions to guide the caregiver. The letter should include information about the pet’s medical history and conditions, prescription medications and dosage, veterinary contact, special dietary restrictions, habits, etc.
Finally, ensure your client’s chosen caregiver will have enough financial resources to care for the pet (or pets). This can be accomplished either via an outright bequest to the caregiver for this purpose, or by arranging a pet trust. Which option to choose will often depend on the client’s tolerance for complexity and the circumstances of the chosen pet caregiver. Some clients may prefer a pet trust because it helps ensure pets are taken care of and financially secure — even if the selected caregiver falls on hard times, becomes ill, or passes before the pet does.
If the client has no designated pet caregiver, they can instead name a trusted animal shelter or other nonprofit to receive the pet, along with a monetary bequest to cover the care costs until the pet can be re-homed. Larger and/or more unusual pets may require additional legwork upfront. For example, clients with horses may need to contact a ranch or stable to ensure a willingness to accept and board them for the remainder of their life.
Pet-specific financial planning
Once it is determined who will take care of your client’s pets after the client’s death, then you can ask: “Can you estimate how much money needs to be allocated to ensure your pet’s well-being?”
This discussion is significant, as pets can be expensive.
Most pets haven’t amassed their own fortunes (apparently, Taylor Swift’s cat boasts a net worth of $97 million), and providing for their daily care falls squarely on their caretakers’ shoulders. According to the American Pet Products Association, in 2022 Americans spent $136.8 billion on their pets, up nearly 11% from 2021.
Encourage your client to catalog what they spend annually on their pet. The list should include food, grooming, vet bills, walking services, toys and medications, as well as things like dental cleanings, boarding for vacations and even plane tickets. Once you have that number, the estate plan can specify a formula for funding a pet trust or for a bequest amount: e.g., the annual expense amount multiplied by the animal’s life expectancy at the time the owner passes.
Most people who own pets consider them to be integral members of the family. Though advisors can use National Pet Preparedness Month as a reminder to clients to not to overlook pets in the estate planning process, this same reminder can be made at any time of the year. Incorporating pets into estate plans ensures their continued care and well-being and provides clients with peace of mind, knowing that their beloved animal companions will always be protected, no matter what the future holds.
Written by Pegine Grayson, JD, CAP, Senior Vice President, Director of Philanthropic Services with Whittier Trust. For more information on estate planning or to start a conversation with a Whittier Trust advisor today, visit our contact page.
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You don't have to live in the Silver State to benefit from its trust tax advantages.
As a lifelong resident of Nevada, I've welcomed countless new neighbors from California who have discovered the many benefits of my state. Of course, I'm not just talking about fresh powder on the slopes of Lake Tahoe. The absence of state income tax in Nevada regularly brings high-net-worth individuals to our state, as do our numerous tax-friendly laws for trusts and wealth preservation.
But you don't have to reside in Nevada to take advantage of some of these benefits. At the Whittier Trust Company of Nevada, many of our clients live in California, but we serve as their trustee—because what matters is the state in which your trust is administered.
Advantages of Irrevocable Trusts
This geographical choice has the greatest implications when it comes to the benefits incurred through an irrevocable trust. Most people are familiar with revocable, or living, trusts, which are relatively simple to set up and can be modified at any time, changing beneficiaries and managing the assets within the trust as you like. Why, then, would anyone opt for an irrevocable trust, which can't be modified without legal action?
The answer is that an irrevocable trust offers greater protection and tax benefits. It effectively removes your taxable estate assets, freeing them from estate tax after you pass. It also shields your assets from creditors in the event you are sued. This safeguard can be particularly important for attorneys, doctors, and other professionals at high risk of lawsuits.
Because of these significant protections, irrevocable trusts can be difficult to set up. Our Whittier team includes qualified fiduciaries and expert investment advisors to help clients weigh all options. We consider not only state taxes but also other laws, such as privacy issues in regard to public record laws for trusts in different states. We take the time needed to understand each client's lifestyle and long-term goals, applying those objectives to the purpose and implications of the trust.
Nevada 1-2-3
Once a client has decided that an irrevocable trust is the best fit, we often suggest that we administer that trust from Nevada because of the three key benefits: no state income tax, no state estate tax, and no state inheritance tax. In short, you can accumulate wealth in Nevada and pass it to future generations with minimal taxation. In California, any income from your trust could be subject to state taxes. If, for example, you have a $10 million trust in California and it generates $500,000 in annual income, you could lose upwards of $100,000 per year to taxes.
Nevada also allows for the appointment of a trust protector, in addition to a trustee, who can modify your trust terms if your circumstances change. What's more, in Nevada, you can start planning for 25th-century relatives because 365 years is the limit of the "dynasty trusts" offered in our state.
Foreseeing Complications
Estate and trust rules differ significantly from state to state, and it quickly gets complicated. Some states require that a trustee or beneficiary be a state resident, while others tax any trust set up by a resident of that state, no matter where the trustees or beneficiaries live.
As much as I love California, I can't help but use their far-reaching tax laws for comparison (you pay a price to live in paradise!). If you set up your trust in Nevada or some other tax-friendly state, California may try to claim taxes if you use California employees to administer the trust. If a trustee dies and the successor trustee lives in California, the trust is now at risk of getting taxed in California. The bottom line is that it is best to work with your professional advisors to eliminate the possibility of exposing your trust to the long arm of the California Franchise Tax Board.
Tax law is ever-changing as well. For example, beginning in 2024, California was able to tax trusts called Incomplete Non-Grantor Trusts (ING trusts), even when they were managed in Nevada (NINGs), but because we anticipated this change, our team was able to help clients pivot to lessen the impact of the new legislation.
Few trust companies have more experience negotiating the finer points, financially speaking, of the California-Nevada relationship than Whittier Trust. Whatever state you choose, or even if you choose both—living in California with your trust based in Nevada—Whittier Trust will work to safeguard your family's financial future as we have for multiple generations of clients, protecting your assets and your legacy for beneficiaries for many years to come.
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Written by Keith Fuetsch, Vice President with the Whittier Trust Company of Nevada, a CFP and CTFA, providing financial and fiduciary services for high-net-worth individuals and families. He serves on the boards of the University of Nevada College of Business Alumni Association and the Reno Connection Network. For more information on The Nevada Advantage, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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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.
“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.”
