How Whittier Trust’s real estate expertise can ensure your real estate investment performs at its peak potential

Three siblings inherited a multi-tenant commercial industrial property that was located in an upscale area a few blocks from the ocean in Northern California. The asset was considered a prime piece of real estate, which produced more than $100,000 in passive income per month. Sounds great, right? 

When the Whittier Trust real estate team began working with the siblings, they discovered that, while the balance sheet looked healthy, rent collections from the fully occupied building were nearly 20% below the market rate for the area. It may seem counterintuitive, but a fully occupied real estate investment with below-market rents can ultimately hurt your bottom line. 

“We knew we had to create a strategy that would usher in market-rate rents, while preserving the consistent income our clients relied on and expected,” explains Jorge Ramos, Real Estate Vice President at Whittier Trust. Here are a few of the smart strategies and factors a savvy real estate portfolio manager will evaluate to ensure clients obtain the best return on their investment. 

Know the Market

“As a real estate fiduciary, we see this often: our clients inherit income-producing assets, but the beneficiaries may not be well-versed with the nuances of overseeing real estate,” Ramos says. “The portfolio may be located in a highly sought-after market, but the beneficiaries may not be familiar with the location, market rents or even local city ordinances that may impact future development.” That can mean that the new owners don’t have an evidence-based sense of what the property is worth, how much rent should be (particularly if tenants have long-term leases) and what improvements need to be made to keep the property competitive. 

“We start to understand our clients’ real estate holdings by evaluating the market in order to maximize profitability,” Ramos explains. The Whittier Trust team also spends time with clients to address their concerns and financial needs before recommending any changes to the overall management plan. 

Make Incremental Adjustments

When tenants have long-term leases, it’s impossible to change lease terms mid-stream. It’s also difficult to bring significantly below-market rents up to the market level all at once—in our California example, 20% more in rent per month. Such a large increase will likely induce serious sticker shock on the part of the tenant. Instead, it can be a smart strategy to make smaller incremental increases over time—which are easier for many tenants to swallow but can still induce some to look elsewhere. 

Whittier chose this approach in the example of the Northern California siblings. Approximately one-fifth of tenants chose to vacate the property when the rents were raised by 3 to 5% during the renewal period. While this did cause a dip in the monthly income generated by the property, it also created an opportunity to freshen the vacant spaces and raise rents by a larger percentage to bring them more in line with the market as new tenants signed on. “In a strong market, owners can maximize revenue as units turn and you experience a significant increase in rent collections from new tenants and leases,” Ramos says. Those new tenants with higher rents proved more profitable in the long run. 

Manage Wisely

In some instances, a property may be underperforming as a result of lax oversight on the part of the hired property management group or because of an owner who has too much else on their plate to be vigilant. Perhaps they’re not being as diligent as they should be about day-to-day maintenance, or are less-than-responsive on tenant-related issues. These seemingly small infractions can have an impact on the overall satisfaction of existing tenants and a future impact on the building’s reputation in the community when it’s time to fill a vacancy. “When our team of real estate professionals conduct a due diligence review, we’re looking at every detail to make sure the investments are well-preserved and their value is appreciating,” says Ramos, whose team at Whittier Trust handles the portfolio and advisory side of things, rather than tasks on-site. If the existing management is a risk rather than an asset, it might be time to upgrade or search for a different company to handle the day-to-day administration of the property. 

Know When to Make a Change

While it’s rare that a well performing property turns into a liability—particularly when maintained commercial real estate tends to appreciate and residential occupancy rates in urban areas remain high—sometimes divesting of a property can be a smart strategy. “In those uncommon instances, we look at all options for our clients,” Ramos explains. 

If a client wanted to divest themselves of a poorly performing asset, an advisor might recommend a 1031 exchange—particularly if the client wants to retain regular cash flow from real estate investments. A 1031 is essentially a swap of one real estate investment property for another, deferring costly capital gains taxes. 

Regardless of the nuances of each client’s portfolio, the real estate asset management team at Whittier Trust is ready to explore any and all options to obtain the best outcome. “We look at every possible opportunity to maximize their investment returns, analyze their portfolio, minimize stress and achieve their overall goals,” Ramos says.

The benefits of engaging in professional real estate portfolio management

Real estate investments can be a powerful tool to grow and maintain a thriving portfolio. Whether real estate holdings—from commercial properties to residential ones—are acquired through strategic purchases or inherited, it’s important that they’re managed well to maximize their returns.

To that end, Whittier Trust’s Real Estate division’s work is twofold: they find and vet real estate investment opportunities on behalf of their clients and they oversee the assets clients already own. Whittier Trust Senior Vice President of Real Estate Juliana Ricks takes a holistic approach to all of her client relationships and notes that engaging a real estate portfolio manager can provide significant peace of mind. “Whether they’ve purchased the holdings or inherited them, their portfolio is a legacy they want to be able to pass to the next generation,” she says, noting that her goal is to make that happen through strategic planning and oversight. 

Some investors start small, with turn-key properties that practically run themselves. For example, a savvy investor might buy a shopping center in a thriving area where all of the storefronts have long-term leases. In a case like that, Ricks says, many clients think, “Why would I pay someone to manage my holdings?” However, as the demographics of an area change, it might be prudent to consider selling to maximize profits or when all of the leases roll over, what once required almost no day-to-day management could become a time-consuming headache. Aside from this dramatic situation, there are myriad reasons and benefits for engaging a professional real estate asset management team to maximize your investments and minimize the challenges. Here are just a few. 

Management Efficiencies

While most commercial properties engage a property manager or management firm to handle the day-to-day management and maintenance of any given property, third party asset managers for real estate are focused on strategy. Instead of having to build out a full staff or managers, strategists and executives, Whittier Trust’s team acts as your real estate holding company’s C-suite. It’s almost like an agency dedicated to maximizing profits—all without you having to handle any hiring for those roles.

“We focus on thinking and acting strategically for the good of the assets,” Ricks says. “If the property management firm isn’t performing, we can help make a change. If a lease proposal needs to be improved, we help with that. If the debt is coming due on the property, we can either refinance or find a replacement lender. We focus on the bigger picture items.” 

Dedicated Expertise

Whittier Trust’s real estate investment management clients have wholly owned properties spread across the country, including shopping centers, office buildings, development projects, hotels, apartment buildings, industrial properties and more. The Whittier Trust Real Estate team of seven seasoned professionals has worked in markets around the country and makes it their business to stay current on all of the factors (including interest rate fluctuations, individual market conditions and more) that could impact the performance of a property. “We bring a knowledge base that no individual would have on their own,” Ricks says.  

Family Harmony

Sometimes, within a family, the division of labor and effort can become unbalanced when it comes to managing real estate holdings. Perhaps one family member was appointed the trustee or another has a natural aptitude for the tasks at hand and spends a significant amount of time working on the project. Such a scenario can cause unintended strife in family relationships. “Having a third party corporate trustee can be helpful for family dynamics because it lifts the burden off of a particular family member,” Ricks says. “We’re always looking to minimize tension by taking that burden away.” 

Better Performance 

While no third-party investment advisor should guarantee a higher return from working with them, properties and portfolios managed by an expert often see higher returns over time. “We have a system that improves the performance of the property and accountability of the onsite managers, as well as the information flow to the client,” Ricks says. “We’re able to present information to our clients in a clear manner and that can help streamline their decision-making process.” 

Peace of Mind

Perhaps the best reason to work with an expert real estate portfolio manager is the peace of mind that comes from knowing that there’s a team wholly dedicated to helping your portfolio achieve peak performance. “Our team is committed to maximizing the performance of the properties and we have more access to real-time market conditions, so we can best advise our clients,” Ricks says. “Our services as professional third party asset managers really gives clients peace of mind that someone is watching over those properties.” 

By Whittier Trust

It’s nearly impossible to turn on the television or read an economic journal without being confronted with news about stock market volatility, inflation and the possibility of rising interest rates. Ultimately, market factors are always in play. Economies, and the components that make them up, are always fluid.  

“While interest rate hikes during the first six months of 2022 have affected our ability to buy properties, the fundamentals of the properties haven't changed much,” says Whittier Trust Senior Vice President of Real Estate Juliana Ricks, who advocates a long-term approach to real estate investing. “We're still finding quality properties that we like and ones we feel could ride out any cycle in terms of valuation.” Here are some of the reasons why a long-term approach is a winning strategy for real estate investing. 

A Good Buy

As with any potential investment, vetting every element of not only the property itself but also the environment around it can help predict whether the investment will pay off in the long run. 

When Whittier Trust’s real estate division evaluates a new piece of multi-family real estate in which to invest, they are looking for population growth and job growth over time. While any location is open for consideration, Whittier tends to be most focused on major cities that have a long-term track record, as opposed to small towns with sudden surges. “We want to be invested in places that we think will do well over a long period. It’s less speculative,” Ricks says, which can translate into more secure investments for Whittier Trust’s clients. 

Although the team looks at all property types, most of Whittier Trust’s recent investments have been in multifamily properties. Since the three to five real estate investments each year involve between $15M and $20M in client equity, their team investigates whether rents are increasing in the market and occupancy rates and demand for housing are high. Whittier Trust’s investment group becomes the sole limited partner, holding 95% of a project’s equity, while an operating partner familiar with the market and property type typically holds a 5-10% investment and the responsibility of the day-to-day management. Key elements are investigated and evaluated to determine whether or not a project has the potential to be a smart long-term investment. 

Patience for the Long-Haul

When Whittier Trust embarks on a new real estate investment, they generally look at investments on a 10 to 12 year horizon, although they would sell sooner if a great opportunity comes along. It’s a vastly different approach than the goal of making a quick return or planning to “flip” a property. “Within that range, there will likely be an opportunity to have a good outcome for the asset. That sort of staying power in real estate is important because it allows us to ride out the economic cycles,” Ricks explains. 

With housing costs—both for single-family homes and rents—on the rise across the United States and interest rates climbing, it’s vital to look toward markets that have a proven track record. “While everything's fair game, there are certain markets that have fared better [during economic downturns]. We certainly think about which markets would be okay if there were a down cycle,” Ricks says. Even with some market volatility, planning to hold onto a piece of real estate for a decade or more gives the investment time to produce solid returns for Whittier’s clients. 

Interest Rates’ Impact on Real Estate Investing 

As any real estate investor knows, a property is worth what someone is willing to pay for it. However, during a period of ultra-low interest rates, buyers could afford to pay more for properties in some cases. That’s changing as interest rates rise, and it requires a nuanced approach to get the best result for Whittier Trust clients. 

“We're at a certain place in terms of valuation based on cap rates,” Ricks explains, adding that interest rates have increased by two full percentage points since the beginning of 2022. “Valuations haven’t necessarily gone down as quickly. Interest rates are significantly higher than the cap rates on many properties, which means that the unlevered yield would be lower than the interest you're paying. You're back in this position where you're having to fund debt service initially, as the property stabilizes.” 

Whittier Trust’s Real Estate division looks for investments that are both solid buys and growth opportunities, with the objective to generate lucrative returns, even in the face of interest rate fluctuations.  And, should interest rates drop over the life of a property, refinancing for a more advantageous position is possible. 

Building a Legacy 

This long-term approach perfectly aligns with one of Whittier Trust’s core focuses: legacy-building by passing wealth intergenerationally. “We know that there is staying power in real estate. If you can hold on to assets, historically they tend to recover their value” Ricks says.  

Approaching real estate investments conservatively so that they will perform well over time includes going back to basics to make sure the fundamentals are solid, choosing a good location, partnering with top-notch management and not putting too much debt on the property. By the time Whittier Trust closes any deal, “we've researched the market to understand the conditions that will make the property perform well,” Ricks says.

Death and Taxes are two certainties in life, but specific details are lacking leaving them uncertain. The current estate tax exemption is sitting at $11.7 million for singles and $23.4 million for married couples and is set to expire in 2026. While the future of the exemption rate remains uncertain, few advisors are anticipating that tax rates will go down. As the new administration has taken place, along with a pandemic and stimulus payments, it’s likely that tax payments will go up, generating more revenue for government tax revenue.

Derek Hamblet, Vice President and Client Advisor at Whittier Trust says that “It’s all up in the air at this point; we really don’t know what’s going to happen … but at some point, if you don’t use it, you’re going to lose it.”

With uncertainty in tax exemptions, people with more than $5 million in assets will most likely be looking for a way to maximize giving while minimizing taxes. Below are common estate planning techniques for those nearing estate tax exemption limits.

Use The Annual Exclusion

According to Hamblet, one of the simplest methods to lower your taxable estate is to maximize the yearly exclusion limit, which is presently set at $15,000 every year. The donation might be made to a person or a trust. If someone has three children and six grandkids and wishes to give each of them the maximum amount per year, the total would amount to  $135,000 per year without paying gift taxes.

Donate To Charity

Philanthropic individuals can give to charity in their lifetime. Donors overlook donating to appreciated assets like stock by transferring assets from the estate to a charity. Donating in this capacity avoids capital tax gains as the donor is not exclusively selling the assets.

There are other methods of donating to charities including:

– Donate Required Minimum Distributions To Charity (Qualified Charitable Distributions) 

This method includes the IRS requiring those 72 years of age or older to draw annually from their IRAs. Those who do not require this income can make a direct donation to charity with their necessary minimum payout. Taxpayers can contribute up to $100,000 of their dividends to charity under current standards. The contribution also decreases the income tax burden since necessary minimum distributions are normally treated as regular income.

– Use A Donor-Advised Fund

A donor-advised fund consists of qualified charity donations that are exempt from estate taxes, but some contributors prefer more flexibility in their philanthropic contributions. Perhaps they wish to be able to donate to multiple organizations in the future or spread out their contributions over several years rather than in one big payment. These possibilities are available through donor-advised funds, which are flexible accounts dedicated only to philanthropic giving.

Donors contribute a tax-deductible amount to the fund, which grows tax-free.

After that, the donor can make any number of payments from the DAF to any qualifying charity at any time.

– Use A Charitable Split-Interest Trust 

The taxable estate can also be reduced in the situation where giving to charity is to use a more charitable remainder trust or charitable lead trust. A charitable lead trust is a good option for those who want to give to charities in their lifetime to provide for their heirs. A charitable remainder trust operates in another manner. It first benefits a non-charitable beneficiary, such as the donor or a family member, and then provides the remainder to charity at the conclusion of the trust period.

Use A Grantor-Retained Annuity Trust 

Transferring assets to a grantor retained annuity trust—another form of irrevocable split-interest trust—can effectively lower a wealthy person’s taxable estate and bring it closer to the lifetime exemption limit. The assets are no longer considered part of the estate after they have been transferred to the GRAT. In exchange, they will receive an annuity payment from the trust for a certain period of time. The appropriate federal rate, or AFR, is connected to the annuity and any return above AFR can be transferred to a beneficiary tax-free.

The grantor, or the individual who creates the trust and gets the annuity, is still responsible for the trust’s income tax. Hamblet notes, “you’re getting more money out of your estate by paying income taxes rather than reducing the value of the trust.”

GRATs are only valid for a certain number of years. After the GRAT has ended, the assets can be transferred to the recipient or used to fund another GRAT. If the grantor is to die before the trust expiration date the assets don’t revert back to the estate for estate tax purposes. Advisors recommend shorter terms for older clients to avoid this from happening.

While the tax exemption beyond 2026 remains uncertain it is anticipated that it won’t stay at its current value. As wealthy individuals begin nearing the exemption limits, consideration of reducing the size of their taxable estate may be the best option.

For more information, you can download the full report here or visit Forbes to read more.

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To keep everything in working order, any real estate, whether it’s a multi tenant building, warehouse, or office, needs regular maintenance. Routine maintenance is usually sufficient, but every now and again, a large investment is required for bigger problems like a new roof or air conditioning replacement.

As a real estate owner, it’s vital to prepare for things that aren’t considered routine maintenance or recurring costs.  Without the proper preparation landlords and owners could be forced to pay cash, cutting into their distribution funds or requiring a capital call. Preparing for unforeseen problems now will help save you in the long run.

Real estate is an asset plan that is commonly passed down from generation to generation and often needs ongoing maintenance, on top of nonrecurring maintenance due to the age of certain assets. The need to set aside money for capital expenses is often overlooked, especially when high net-worth families own properties without debt.

Without having a constant reminder or someone looking over the shoulder of high net-worth assets without debt, capital reserves and regular inspections are not always a priority for these types of properties. This is a key component in why budgeting for these items is detrimental.

Creating A Plan

A new roof or HVAC unit is not common capital costs, but when they arise, they are big. A roof, like an HVAC system, may endure 25 to 30 years. However, if they do need replacement it can cost up to hundreds of thousands of dollars, leaving unprepared property owners an unpleasant surprise.

To minimize these shocks and surprises, Ricks recommends including a five-year capital plan. Creating this plan and setting aside 20 cents per square foot per year, will give plenty of room if these capital costs are to ever come up.

When building a reserve for your real estate you’ll be protecting your distributions in the long run, providing a consistent cash flow for all the beneficiaries of every property. In your reserve for capital, the funds could be allocated towards property improvements that would increase the value of a property for sales and/or refinancing purposes. Using these allocated funds on the upkeep of the property would help ensure that it’s not devalued due to deferred maintenance.

Getting A Good Deal

After having ownership of the property for so long, family owners don’t always realize every expense that goes into maintaining it. Property must be taken care of and treated differently because you can’t just go off and sell a portion of it as if it was a stock. Securing bids for every project ensures you’re getting the most cost-effective work on all properties.

Nobody wants to deal with the shock of having to pay for unexpected capital expenses, make sure to plan and prepare so your property and expenses don’t have to suffer. Continue to maintain and uphold your property by creating a capital plan.

For more information, you can download the full report here or visit Forbes to read more.

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

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Best Practices When Making a Residency Change

In today’s world, with state tax rates varying widely, more individuals and families are considering moves out of high-tax states. For example, California’s highest income tax rate is currently 13.3%. Other jurisdictions, like New York City, impose a city income tax of as much as 3.876%, on top of a state income tax rate of 8.82%. High taxes are not just limited to the income variety — currently, fifteen states impose an estate tax, and six states impose an inheritance tax. State estate and inheritance tax rates vary from 10% to 20% and some states have exemption amounts as low as $1 million.

The state-by-state variability of residency and tax laws underscores the importance of comprehensive tax planning services. Our tax management services can help you navigate the potential pitfalls of changing residencies, and our experts have provided their thoughts on tax planning strategies to help you manage this transition.

Although the rules vary among states, generally speaking, most states define a “resident” as an individual who is in the state for other than a temporary or transitory purpose. States consider a person’s “domicile” to be the place of his or her permanent home, to which he or she intends to return to whenever absent from the state for a period of time. Most states claim the right to tax an individual’s income if they are believed to be a resident and domiciled in that state. Usually, they also impose tax on 100% of a resident’s income from all sources. Many states have exceptions for military personnel in active service and for individuals receiving medical treatment for an extended period of time.

For those contemplating a change of residency, careful planning should be undertaken so as to clearly and properly establish a new state of residence. What follows is a checklist of items you may want to consider. Although there’s no explicit guidance on what must be done in order to guarantee a change in residency, the more tasks from this list you can implement, the more likely it is that you will be deemed to have changed your state of residence for tax purposes:

  • Change your driver’s license to your new state and cancel your old state’s driver’s license.
  • Change your passport to reflect your new state.
  • Register your car in your new state and notify your insurance company of the change.
  • Register to vote in your new state and cancel your old state’s registration.
  • Move your religious affiliation and membership to a local group or house of worship in your new state; make local contributions.
  • Buy a home in your new state — and if possible, sell your home in your old state (or transfer it to family members or other entities). If you can’t buy a home right away, rent with a long-term lease.
  • Claim a homestead exemption in your new state (if applicable) and relinquish any homestead claim in your old state.
  • Revise your estate planning documents (wills, trusts, powers of attorney, health care powers of attorney, advance care directives, etc.) to recite your new state and use your new state’s forms.
  • Change your bank accounts to your new state without retaining bank accounts in your former state.
  • Move your safe deposit box to your new state.
  • If you plan on working, secure employment in your new state.
  • Obtain a library card in your new state.
  • Change social clubs and service clubs (Rotary, country club, Kiwanis, golf club, etc.) to your new state; serve on local charitable boards.
  • If you have school-age children, enroll them in your new state’s school as soon as possible.
  • Engage local medical professionals; send your medical records to them.
  • Change your address with the IRS — list your new address on your returns.
  • Notify vendors (credit cards, etc.) of your new address.
  • Generally, focus your activity (economic, social, financial) in your new state.
  • Change other local service providers to your new state, such as tax advisors and attorneys.
  • Have your family visit your new home state for important occasions, or have other family members move to the new state, too. The more family activities in the new state, the stronger the evidence that the new state is really your new domicile. Be careful of supporting a spouse or children located in your old state, which could be used as evidence against you in an audit.
  • Active business involvement in your old state is evidence that there has been no change in domicile. Work as much as possible in the new state and set up a “real” office in the new state, not just a home office. If you own the business, consider moving the principal place of business to the new state and withdrawing any business registration in the old state. Consider reorganizing the business entity in the new state.
  • Move items of personal or sentimental value to your new home. This includes photos, trophies, yearbooks, collections and the like. Funeral and burial arrangements should be made in the new state.
  • Keep a daily calendar (with receipts, if possible) showing that you were outside your former state for each day.

Keep in mind that the list above is not exhaustive and the burden is on the individual claiming the new domicile to prove a change from the former state to the new state; keeping documentation of all of these actions is vital to establishing a new domicile.

As a general rule, you want to stay out of your former state more than 183 days in each calendar year.

Although you don’t have to be in your new state for more than 183 days, your former state will look at how many days you spent in your new state as one factor in determining whether you have in fact established residency in the new state. The closer you are to the 183-day threshold, the more likely your former state will initiate a “residency audit,” requiring you to prove that you were not in your former state for more than 183 days.

Increasingly, states are challenging former residents who attempt to change their domicile to another state. Residency audits are on the rise, particularly in states where larger numbers of residents are more likely to spend winters elsewhere. Some states are so aggressive in their pursuit of those relinquishing residency that they will conduct a residency audit after the first year an individual claims non-residency, regardless of how close the individual is to the 183-day threshold. In a residency audit, an auditor will focus on a number of factors, including where you spend your time (days in your former state, days in your new state, and elsewhere), the number of residences you own and their respective values, where you claim a homestead exemption for property tax purposes, and other factors.

Highlighting the importance of tax management services, just about everything in your personal life can be relevant in determining the true location of your tax home, and taxing authorities will focus on where you spent your money and your time. Auditors will review credit card statements to determine where charges were incurred, and can also look into cell phone records and application data that tracks your time in different jurisdictions. They will examine freeway fast-lane pass charges and records of airline frequent-flyer miles. Given the pervasiveness and personal nature of the evidence needed, it follows that a residency audit can be much more intrusive than a traditional income tax audit.

Changing your residence can be complex. We recommend as part of your planning process, and as you build tax planning strategies, that you consult with your Whittier Trust team, as well as your legal and tax planning services before undertaking any action.

A pile of boxes.


  1. Defining Residency
  2. Change of Residency Checklist
  3. 183-Day Threshold
  4. Residency Audits

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When it comes to estate planning, not having a plan is a plan. But not a good one.

That warning, according to Thomas Frank, executive vice president at Whittier Trust, goes for all ages. The wealth management and investment firm has high-net-worth clients in their thirties and forties who have yet to create an estate plan.

“Your assets can go to one of four places: family, friends, charity or the government,” said Frank, noting that’s a reminder that can give people the needed push to sit down and ensure their assets are being allocated how they wish.

Making sure your plan is optimized—so your beneficiaries can avoid probate and make the most of the gifts you plan to leave them—is crucial. Here are some tips on how to make sure your estate is as planned as possible.

Schedule Regular Check-Ins

“Estate planning isn’t a ‘set it and forget it’ task,” said Frank.

Think of your estate as constantly evolving. That means regularly sitting down with your advisor to make sure all your assets, plus circumstances such as the birth of a grandchild, are accounted for in your will. Ideally, these check-ins should be about every two years—but may be more frequent due to occurrences such as a birth or divorce.

Think Toward the Future

Of course, it’s not pleasant to think about what would happen if you were no longer around. But forecasting into the future can give you peace of mind in the present—and make things simpler for your beneficiaries. Not planning now can create problems down the line for your heirs.

“Estate and trust litigation is a booming field for attorneys, mostly because someone didn’t want to spend the time and money on legal fees to get it right and keep the plan up to date,” said Frank.

While a professional trustee typically charges a percentage of the assets of the trust, using a trustee may also mitigate the need for your beneficiaries to use additional professionals—such as investment managers or bookkeepers—regarding your estate.

Consider Your Options

As you set up your trust, know your options and discuss different setups—and their tax implications—with an estate planner. Irrevocable trusts, for example, cannot be altered or amended by a grantor and may offer tax benefits that a revocable trust—one that can be edited—may not. Talking through the pros and cons of options can help you figure out the best option for you.

“An irrevocable trust can be an effective asset protection vehicle, as well as a long-term management tool,” said Frank. On that note, it’s important to understand the laws of your state, since laws differ regarding who can and can’t modify a trust agreement.

You may also wish to assess whether lifetime gifting makes sense. This conversation is especially relevant now that the unified exemption amount is at $23.16 million per couple of lifetime and at-death gifts. For individuals and families with estates valued in excess of that per-couple threshold, strongly consider making lifetime gifts now before the possible drop in the exemption—which was temporarily increased through the Tax Cuts and Jobs Act. The IRS has indicated that such gifts will not be “clawed back” into the estate if the exemption amount does indeed drop in 2026, said Frank.

Appoint a Pro

It’s also important to consider the responsibility your estate will bring to your heirs. Are they competent, capable or willing to act in a trustee capacity? Depending on your assets, they may not be, said Frank. For example, your surgeon sister or attorney brother may not have the bandwidth to take on your real estate investments if you were to die. In a case like this, you may wish to consider a professional trustee to manage your complex portfolio.

A professional trustee has a fiduciary duty to do what’s best for the trust and for future generations. Depending on circumstances, it could make sense to give family members the right to remove and replace a trustee, which still gives your family a degree of flexibility and control in how the trust is handled.

Notify Your Beneficiaries of Your Wishes

When it comes to your estate plan, it’s smart to loop in your beneficiaries so there are no surprises or hurt feelings.

“Surprises tend to give rise to old family resentments,” said Frank. “If you’re leaving money to children, whether outright or in trust, a best practice is to give them a heads-up about the general plan.”

This doesn’t necessarily mean divulging all the financial details, just a broad summary of what you anticipate, as well as details about who will be trustees and executors of your estate.

The bottom line: When it comes to your estate, paying for professional services now can help you avoid headache and heartache later. A professional trustee can be a valuable sounding board as your estate evolves. And adding one now can ensure they get acquainted with your assets, your wishes and your beneficiaries.

Written in partnership with Forbes BrandVoice.

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

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Here’s an incentive to move estate planning to the top of your to-do list: The next few years are an opportunity to maximize wealth transfer to the next generation.

The Tax Cuts and Jobs Act of 2017 increased the federal gift and estate tax basic exclusion amount (BEA) to $11.58 million per individual, or $23.16 million per couple, adjusted for inflation. But this increase doesn’t last forever — and in 2025, the exclusion is, as of now, supposed to go back to 2018 levels.

“Under the current tax law, the BEA automatically revert back to $5 million (adjusted for inflation) on January 1, 2026,” said Thomas Frank, executive vice president and Northern California regional manager at Whittier Trust.

For those with estates valued in excess of the current $23.16 million per-couple exemption, it may make sense to consider making lifetime gifts now, before a possible drop, he added. Here’s why you should discuss the opportunity with your advisor—and how it can benefit you and your heirs.

The Current Law May Affect Your Estate

While the law may seem most germane to individuals who have estates in excess of $11 million ($22 million for couples), it’s also relevant for individuals who have estates in the $6 million to $11 million range (double that for couples). That’s because, if the BEA were to fall back in 2025, you may find yourself with an estate that is subject to taxation. Considering gifting now can be a smart strategy to ensure that your estate won’t be taxed upon your death.

Planning Now Gives You Time and Flexibility

“People often wait until the last minute, but it can be smart to start strategizing, even if you’re unsure of your gifting plans,” said Frank. Lifetime gifting may bring up additional complexities to explore.

Many states have their own estate tax laws, most with much lower exemption amounts, added Frank. So while an estate may be tax-free at the federal level, it may be subject to taxes at the state level. Getting your ducks in a row and assessing several “what if” scenarios about lifetime gifting allows you flexibility and time to make sure your plans make the most sense for you and your beneficiaries.

Don’t Fear the “Clawback”

When the BEA was increased, some individuals worried that the BEA would be “clawed back” if the exemption were to drop before the estate owner died. But IRS regulations clarify that the higher BEA will shield gifts made during this time period, regardless of the date of death.

“Moving assets out of an estate during lifetime not only removes the assets from estate taxation, it also removes any future appreciation on the assets from your taxable estate,” said Frank.

Stress-Test How Your Options Affect Your Heirs

As you consider lifetime gifting, it’s important to assess several strategies to figure out the option that makes the most sense for you and your heirs. The current law allows a “step up” in tax basis for all assets included in an estate. “The new basis becomes the value of the asset at the date of death, which helps heirs avoid capital gains taxes on appreciated assets upon the death of a benefactor,” said Frank. “Because of this, lifetime gifting of highly appreciated assets is discouraged.”

Since you can’t predict the future, it’s best to assess several gifting options now and weigh the pros and cons of each. In the case of highly appreciated assets, the cost of capital gains taxes may be more than your heirs would save on estate taxes. A professional can walk you through options to help you find the smartest strategy.

Consult the Pros with Questions

“I like to say, ‘Don’t try this at home,’” said Frank.

Your unique situation—the mix and allocation of assets in your estate and the laws in your state—will affect how wealth transfer occurs. And the best plan is to have a plan. Speaking with an attorney, accountant or financial professional can guide you through all aspects of the process, so there are no surprises—or unexpected tax bills—along the way.

Written in partnership with Forbes BrandVoice.

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

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In the past decade, we have seen an unprecedented era of low market volatility and positive returns. Conversely, what goes up must come down. With the recent return to bear market territory and high volatility, now is an opportune time to consider wealth planning strategies for your family. Although market volatility can be unsettling for investors, this type of climate can also present estate planning opportunities. In fact, when markets enter into correction, there are several estate planning options that become more attractive.

In this webinar, you’ll learn how to:

  • Leverage gifts to avoid taxes
  • Structure your estate plan for maximum flexibility
  • Identify which planning tools are best in times of market volatility

Join Whittier Trust’s Victoria Kahn, Senior Vice President, Nevada Regional Manager, Nevada Office, and Barbara Spector, Editor-in-Chief and Associate Publisher of Family Business Magazine, as they discuss wealth planning strategies for your family in the face of volatile markets.

This webinar is sponsored by Whittier Trust & Family Business Magazine.

Whittier Trust Company and The Whittier Trust Company of Nevada, Inc. are state-chartered trust companies, which are wholly owned by Whittier Holdings, Inc., a closely held holding company. All of said companies are referred to herein, individually and collectively, as “Whittier”. The accompanying materials are provided for informational purposes only and are not intended, and should not be construed, as investment, tax or legal advice. Please consult your own investment, legal and/or tax advisors in connection with financial decisions and before engaging in any financial transactions. These materials do not purport to be a complete statement of approaches, which may vary due to individual factors and circumstances. Although the information provided is carefully reviewed, Whittier makes no representations or warranties regarding the information provided and cannot be held responsible for any direct or incidental loss or damage resulting from applying any of the information provided. Past performance is no guarantee of future results and no investment or financial planning strategy can guarantee profit or protection against losses. These materials may not be reproduced or distributed without Whittier’s prior written consent.
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The down market and low interest rates present significant estate planning opportunities – making this a very favorable time to consider wealth planning strategies for your family.

In the past decade, we have seen an unprecedented era of low market volatility and positive returns. However, in a matter of just a few weeks, the stock market has plunged from record highs back to levels from 2017. This downturn is coupled with a move to record low interest rates. While in the short-term it is unsettling, current market conditions create opportunities for long-term family enrichment. In 2020, an individual can transfer up to $11.58 million ($23.16 million per married couple) during lifetime or at death, free of federal gift and estate tax to children, grandchildren and future generations. Additional amounts transferred are subject to a federal tax at 40%. After December 31, 2025, exemption amounts are set to return to roughly half of that, meaning that any estate valued at over roughly $5.75 million in current dollars ($11.58 million per married couple) may be subject to that 40% tax in future years. For those seeking to transfer wealth over several generations, there is a similar amount available as an exemption from the generation skipping transfer tax (“GST tax”). (It should be noted that these taxes may be seen as convenient sources of tax revenue, resulting in an acceleration in the timing of the return to lower levels, or in a significant reduction in the exemptions to even lower levels, or an increase in rates if Congress and the President choose to do so. Thus, it is appropriate to consider making current use of these exemptions.)

Here are some planning opportunities to consider:

Make Intra-Family Loans

It is now possible to loan money at a nominal interest rate to a family member without being deemed to have made a gift. The IRS requires that the interest rate on loans between family members not be lower than the Applicable Federal Rate (or “AFR”). This rate changes monthly, but can be fixed for the life of the loan. In fact, the rate has fallen dramatically and may continue to decline. By way of example, for April 2020, the “mid-term” AFR (for loans of 3 to 9 years) is 0.99% – declining from 1.53% in March 2020. The loan can be structured as “interest only” with a balloon payment due at maturity.

Make an Installment Sale to an Intentionally Defective Grantor Trust

An Intentionally Defective Grantor Trust (“IDGT”) is an irrevocable trust that is designed to make the grantor responsible for the trust’s income taxes including capital gain taxes (with this tax payment not being deemed a gift). An installment sale to an IDGT is another way to freeze the value of assets in the grantor’s estate, with appreciation above the IRS required rate of interest going to the trust beneficiaries. This appreciation is further enhanced due to the “defective” feature of these trusts which requires the grantor/lender to pay taxes – thus allowing assets in the trust to grow income-tax free.

Create a Grantor Retained Annuity Trust or Charitable Lead Annuity Trust

A Grantor Retained Annuity Trust (“GRAT”) is an irrevocable trust that pays back to the grantor a percentage of the value of the assets contributed for a period of two or more years, and at the end of the term, the assets remaining either distribute to the remainder beneficiaries (i.e. the beneficiaries other than the grantor) or remain in trust for their benefit. With careful planning, a GRAT strategy can work to shift this future appreciation at little or no gift tax cost. For a GRAT to be successful, the appreciation must exceed the IRS’s assumed rate which is based upon (but is slightly higher than) the AFR rate described above. Creating a GRAT and funding it with stocks that have dropped significantly due to the present downturn can be a great way of increasing the potential for a significant transfer of wealth — again, at little or no gift tax cost.

A Charitable Lead Annuity Trust is similar to a GRAT, with the payments over the initial term of years being made to charity (which can include a donor-advised fund created by the grantor) instead of the grantor. Depending on how the CLT is structured, the grantor may receive a current income tax deduction. And like a GRAT, the value of the trust at the end of the initial term of years passes free of gift tax to the remainder beneficiaries. For individuals with philanthropic inclinations, a CLT in the current environment presents an excellent opportunity to benefit both charity and their family.

Gift Interests in Family Businesses

Giving interests in family businesses, including investment vehicles such as family limited partnerships, is another excellent planning tool during times of market volatility. The business itself may be facing issues which have decreased its overall value significantly. And similarly, the value of the underlying assets owned by the business, whether publicly-traded securities, real estate or an operating business, may have been impacted by market swings or other economic factors. Making a gift when the asset has dipped in value can maximize the assets passed to future generations. And if you transfer a partial interest in the business, discount opportunities (sometimes as much as 30% or more) off the pro rata share of the business’s value remain possible under current IRS rules due to the lack of control and lack of marketability associated with the partial interest. An appraisal will be needed to support the valuation.

Establish a Multigenerational Nevada Irrevocable Trust

Now also may be an excellent time to gift securities or interests in a family business through the use of a multigenerational Nevada irrevocable trust. Gifts for the benefit of your family can be made to long-term trusts using your exemption from GST tax (currently $11.58 million per individual). A Nevada irrevocable trust can exist for 365 years, allowing families to pass wealth into the future through many generations, without incurring federal transfer taxes. In addition, Nevada does not impose income tax on individuals or trusts, so income can accumulate and grow over time, free of state income tax – thus further enhancing overall growth over the life of the trust.

Convert a Traditional IRA to a Roth IRA

An individual with a Traditional IRA should consider converting it to a Roth IRA. A Roth IRA is a retirement account that grows income tax free, allows contributions to be made at any age (subject to limitations), generally provides for tax-free withdrawals after age 59 1/2, and has no required minimum distributions (RMDs) – and importantly, future distributions will be income tax free. The cost of Roth conversions amounts to income tax (which can be paid from non-IRA assets) due on the conversion amount. With IRAs at lower values due to the market downturn, the tax bill on Roth conversions will be significantly less than would have been the case just weeks ago and the appreciation in the account following recovery will be tax free.

Substitute Assets in Existing Trusts

If you have previously created an irrevocable grantor trust, such as an intentionally defective grantor trust which permits a substitution of assets, swapping assets with better potential for growth can optimize the ultimate benefit of the trust. This may be an excellent time to review the tax basis and fair market value of the assets currently in a trust and identify those that have low basis and high value – while also reviewing your balance sheet and identifying assets with high basis and low value that will likely appreciate over time. You can then develop and execute a plan to substitute assets with your trustee and tax advisors.

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