Understand you are buying a business, not trading a stock.
The casual investor tends to focus on the wrong thing when investing. Most will think of the stock as the investment while forgetting the most important part.
The most important thing to remember about investing in stocks is that you are not just buying a stock. Rather, with every purchase, you are investing in a business. Investing in businesses and owning companies is at the heart of how we at Whittier Trust think about investing.
Too often, I hear analogies that try to equate investing with throwing darts or, even worse, gambling. If you divorce stock prices from business fundamentals, it is easy to understand how the average person can be confused by short-term volatility. However, conflating short-term price movements as markets digest new information with the odds at a roulette table can lead to suboptimal outcomes. This is one of the reasons we eschew even using gambling terms such as “going all in” or “double down.”
This subtle shift in mindset about owning a business allows us to truly think about the long-term consequences of our decisions and not react to the “daily gyrations of Mr. Market,” as Professor Benjamin Graham famously described the erratic swings of optimism and pessimism.
Owning Stock is Business Ownership
Thanks to this simple mindset shift, we can begin to do our homework. Understanding a business means understanding how a company actually makes money, so we need to have a very strong understanding of how a dollar of revenue translates into a dollar of profit. This basic act of tracing revenues through the income statement will elicit questions and allow us to understand the fundamentals of how a business operates. Things like margins and how they are impacted by both fixed and variable costs will allow us to understand the health of the business and the dynamics of the industries in which they compete.
On the other side of the ledger, we also need to focus on how a business and management team has decided to fund operations. Debt levels and borrowings need to be understood and analyzed. People often think of higher debt loads as universally being a bad thing, but for us, debt financing is a function of the certainty and consistency of cash flows. Said another way, if market cycles will dramatically impact cash flows, as is the case with semiconductors, then those companies should have a more appropriate level of debt financing. When thinking about fundamentals, we look for quality companies that have strong operations, and we think about how they will function during different economic cycles.
Finally—and most importantly—we need to assess the quality of the management team. Quality businesses do not happen accidentally; it’s a consistent and continuous process that allows a culture to take shape. However, this most important component is the most difficult to quantify, and we think this helps give our active approach a very significant edge.
Exchange-traded funds (ETFs) and mutual funds have their place in the investing universe. However, we at Whittier Trust believe that investing in a company where you can actively analyze long-term viability and the quality of management, rather than blindly investing in a stock, will ultimately lead to a much better outcome. We make it our mission to do that kind of deep due diligence on behalf of our clients, so that our investment strategies are just that—strategic, based on data and our expectations for the future.
So much has been written about investing in stocks, bonds, and a myriad of other asset classes. It seems a new way of increasing wealth is created with each new generation of investors. Yet if you look through so much of the noise and focus on what is actually driving the value of the investment, you can begin to form a track record of success. For us, understanding that a stock price is the outcome of the health of a business has allowed us to focus on creating wealth for the long term.
Written by Teague Sanders, CFA, Senior Vice President and Senior Portfolio Manager at Whittier Trust. Based in our Pasadena office, he is the co-manager of the company’s Small Cap and SMID investment strategies.
If you’re ready to explore how Whittier Trust’s tailored investment strategies can work for you, start a conversation with a Whittier Trust advisor today by visiting our contact page.
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The first half of 2025 delivered all the thrills and scares of a turbocharged roller coaster. The twists and turns were sudden and startling; the ups and downs were vicious and violent. The ride left investors shaken from a potentially calamitous experience where mistakes would have been easy to make and expensive to stomach.
Three factors converged to spark the second quarter storm of volatility.
Trade and Tariffs
Israel and Iran
Deficits, Dollar and Treasuries
The first two factors appear to have petered out in terms of significance at this time in early July. The jury is still out on elevated fiscal risk from the high deficit and its impact on the U.S. dollar and Treasuries. We briefly summarize the first two topics and devote most of our attention in this article to the third theme above.
Trade and Tariffs
The initial trigger for the second quarter turmoil was the unexpectedly large “reciprocal” tariffs announced by President Trump on April 2. The administration had long signaled its desire to reshape the order of global trade and restore balance between tariffs on U.S. exports and imports. Even though higher baseline tariffs of 10% had already been priced in by then, the large additional reciprocal tariffs stunned markets and set off historic selloffs in the stock, bond and currency markets in early April.
Our last Market Insights publication in mid-April had forecasted the likely impact of tariffs on the economy and markets. We believed then that the threat of tariffs was more likely to be used as a negotiating tactic than implemented ideologically regardless of economic and market disruptions.
Even as we indulgently observed the sharp market declines in early April, we had high conviction that the trajectory of tariffs would NOT lead to a recession, a bear market or even a prolonged correction. Markets reversed from the April 8 lows as tariff deadlines were extended and the worst fears on trade wars did not materialize.
Rapid inflections in the trade narrative created a historic gut-wrenching rollercoaster ride in the stock market. We share some remarkable data points to highlight the extreme volatility.
The S&P 500 index fell by -10.5% over two trading days on April 3 and 4. It was the third worst 2-day decline in this century and only the sixth time in the last 75 years that the index lost more than -10% in 2 days. The S&P 500 index fell by about -19% from its previous high on February 19 to its low on April 8. In an unprecedented turnaround, it regained all of those losses to make a new all-time high on June 27. Figure 1 shows the 5 fastest recoveries on record after stock market declines in excess of -15%.
Figure 1: 2025 Is the Quickest Recovery Ever after a Decline of -15%
Source: FactSet
At 87 trading days, 2025 marks the quickest recovery back to a new all-time high in the history of the U.S. stock market.
While very few trade deals have actually been signed and trade uncertainty continues to linger, we still maintain that trade and tariffs have largely become non-events for financial markets. We are also pleased that the second quarter rebound in the stock market validated our original thesis on the topic.
Israel and Iran
Geopolitical tensions also flared up in the Middle East during the second quarter. Iran’s rapidly advancing nuclear program, which Israel views as a threat to its existence, was the main catalyst for the escalation. Iran is deemed to have long been in breach of its 2015 nuclear agreement that limits its enrichment of uranium in exchange for relief on economic sanctions.
Israel’s long-standing conflict with Iran and its proxies escalated in June when it launched attacks on Iranian nuclear facilities and military targets. Iran retaliated with missile and drone strikes against Israeli military sites and cities. The U.S. supported Israel in its defense against the Iranian attacks and eventually brokered a cease-fire between the two countries that has since held. In between, the U.S. separately initiated offensive strikes on Iranian nuclear sites to establish credible military deterrents.
Such a brief summary hardly captures the troubled history and future instability of this conflict. However, we believe that the worst of this crisis is behind us at this point. Even as it unfolded in June, we stood by our long-standing belief that geopolitical crises rarely have a lasting impact on markets. Almost on cue, oil prices have receded as geopolitical risks in the Middle East have dissipated.
Deficits, Dollar and Treasuries
The large U.S. debt burden has worried investors for quite some time. At the surface, many of these concerns appear to be well-founded. High and rising debt can lead to higher inflation, higher interest rates, slower growth and a weaker currency. Investors have harbored a chronic fear that U.S. interest rates may spike above 5% and that the U.S. dollar may eventually lose its status as the world’s reserve currency.
The topic of deficits and the outlook for Treasuries and the U.S. dollar remained in focus throughout the second quarter. The market turmoil from tariffs saw a historic breakdown of correlations between U.S. stocks, bonds and the dollar. When investors sell U.S. stocks during periods of stress, they normally seek out the safe havens of Treasury bonds and the U.S. dollar. When stocks go down, bonds typically go up and so does the dollar.
In early April, we saw exactly the opposite outcome. The 10-year Treasury bond and the U.S dollar both fell even as stocks sold off. The pursuit of isolationist trade policies and a willingness to disrupt global alliances cast doubts on the continued demand for Treasuries and the U.S. dollar. The 10-year Treasury bond yield rose from 4.0% to 4.5% as bonds sold off during the week of April 7. Investors worried that foreign holders of U.S. Treasuries would cut back their holdings as a result of dwindling trade surpluses or in retaliation for the trade war.
The fiscal deficit also came back to the fore when Republicans pushed through their signature tax legislation by the narrowest of margins. With the passage of the tax bill, the fiscal deficit is projected to rise by an additional $3.5 to $4 trillion. Investors now worry that a big problem just became a whole lot bigger.
While the bond market has since stabilized, the U.S. dollar has continued its remarkable downward slide. And even as stocks trade at new highs, there are still unanswered questions about the yet-to-be-seen inflationary impact of recent new tariffs, the festering risk of higher interest rates and the possible end of dollar hegemony.
We narrow our focus from here on to briefly answer the following questions.
How has the trade war changed the short-term and long-term outlook for the U.S. dollar?
What are the likely effects of the dollar weakness in 2025?
Is there any relief for short-term policy rates or long-term interest rates in the next 12 months?
Secular Outlook for the Dollar
Recent Concerns
2025 has seen a reversal in the performance of U.S. assets across the global landscape. U.S. stocks and the U.S. dollar have significantly underperformed their international counterparts. By the end of June, the dollar had declined by more than -10%. The last time the dollar fell so much at the start of the year was 1973, soon after its decoupling from the price of gold. We show this year’s historic dollar weakness in Figure 2.
Figure 2: Dollar Has Worst Start to a Year in Recent History
Source: FactSet, as of June 30, 2025
Both stocks and the dollar had soared after the Republican clean sweep in the 2024 elections. The early optimism was based on the pro-business campaign promises of fiscal stimulus and deregulation. This enthusiasm soon reversed as more restrictive policy initiatives such as government spending cuts and tariffs leapfrogged the administration’s pro-growth plans.
The unexpectedly chaotic launch of government cuts and tariffs soured global sentiment and perceptions to such an extent that investors were forced to ask themselves an existential question. Is this the end of U.S. exceptionalism? And more specifically, is this also the end for the dollar as the world’s reserve currency? We answer these questions in the next section.
U.S. Exceptionalism and Exorbitant Privilege
U.S. exceptionalism was founded on the basic principles of democracy, freedom and justice, and then carefully built over many decades through enterprise, innovation and capitalism. We understand the recent concerns about U.S. exceptionalism but have high conviction in defending its survival and longevity. We reiterate our key foundational arguments to support continued U.S. exceptionalism well into the future.
Technological innovation that contributes to both productivity growth and disinflation
Institutional support and personal initiatives to pursue risk-taking
Strong economic growth and incomes driven by sound macroeconomic policies
Low inflation from credible monetary policy
Well-regulated capital markets
Government and institutional adherence to the rule of law
Strong and credible military presence
As a result, the U.S. dollar also enjoys unparalleled dominance in currency markets and global trade. The U.S. dollar currently accounts for more than 80% of foreign exchange transactions, almost 58% of global central bank reserves and over 50% of global trade invoicing.
The U.S. enjoys an “exorbitant privilege” from the dollar’s status as the world’s reserve currency. The term, first coined by the then French Finance Minister, Valery d’Estaing, in the 1960s, refers to the unique benefits the U.S. enjoys as a result of dollar hegemony. The world’s demand for dollars and U.S. debt securities reduces government borrowing costs and increases consumer purchasing power. It also insulates the U.S. from a balance of payment crisis because it can purchase imports in its own currency.
We observe that U.S. dollar dominance is being gradually whittled away in both central bank reserves and global trade. The dollar’s share of global currency reserves has fallen from above 70% in 1999 to below 58% now. A mere two years ago, it was above 60%. The euro’s share is now above 20% and gold continues to become an increasingly larger reserve asset for central banks. We expect the gradual attrition in the dollar’s share to continue but still expect it to be around 50% several years from now.
The U.S. dollar’s enduring safety, stability, convertibility and liquidity will serve it well for a long time. Despite the 2025 blip, we believe that secular U.S. exceptionalism and dollar hegemony are still intact.
We address the recent weakness in the U.S. dollar next, both in terms of causes and effects.
Dollar Weakness in 2025
Cause, Effect or Coincidence?
We begin our review of recent dollar weakness by posing a couple of additional questions. Did the trade war affect the dollar in 2025? And what are the implications of today’s weak dollar on growth and interest rates?
The answers to these questions are neither simple nor verifiable by hard evidence. We use a mosaic approach of inferences and interpretation to offer insights that may spark interest and reflection.
We believe the administration’s main goals for global trade are to: 1) increase demand for U.S. goods overseas through more balanced trade agreements and 2) reduce the U.S. deficit with higher tariff revenue. The administration clearly wants to address asymmetrical tariffs on U.S. exports and imports; we pay higher tariffs on our exports to other countries than they pay on our imports from them. It also wants to target other unfair trade practices such as currency manipulation that hurt our global competitiveness.
Let’s introduce a new concept which is the polar opposite of “exorbitant privilege.” We might call it an “exorbitant burden” or “handicap” or even “freight.” The burden or handicap of a perennially strong currency is that it also makes U.S. goods perennially more expensive and less competitive. Both Treasury Secretary Scott Bessent and Head of White House Council of Economic Advisers Stephen Miran have made several references to this dichotomy in 2025.
Clearly, a weaker dollar and lower interest rates help achieve the policy goals mentioned above. The weak dollar increases international demand for U.S. goods and any decline in interest rates slows down the growth of the federal deficit. Figure 3 shows how these outcomes have been meaningfully achieved as of June 2025.
Figure 3: Weaker Dollar and Lower Treasury Yields in 2025
Source: FactSet, as of June 30, 2025
While this convenient alignment of desired 2025 outcomes and stated policy goals may be just a coincidence, we do not rule out a more causal dynamic at play here. We find other similar, but more nuanced, effects in our later discussion of U.S. inflation and interest rates.
Global Growth Dynamics
The implications of a weak dollar for global growth are quite intuitive to understand.
One of the more immediate effects of a weak dollar is an increase in commodity prices. Commodities are a critical source of exports and revenues for many emerging economies such as Mexico, South Africa, Brazil and Chile. Higher commodity prices improve balance sheets for many emerging market commodity exporters. Emerging countries also get a reprieve from lower debt repayment costs since most of their external debt is U.S. dollar-denominated.
Foreign currency gains also increase purchasing power in developed international economies. In fact, this rise in foreign demand comes at the same time that U.S. goods become more competitive because of the weak dollar. Higher U.S. exports help U.S. GDP growth at the margin. And more importantly, foreign profits of U.S. multi-national companies get restated in U.S. dollars at a more favorable exchange rate. These foreign currency translation effects become a tailwind for S&P 500 earnings growth in the near term.
U.S. Inflation and Interest Rates
We first address concerns about the yet-to-be-seen inflationary impact of recent new tariffs. There are many points in the supply chain where the impact of tariffs can be absorbed (e.g. foreign manufacturer, foreign exporter, domestic importer or the U.S. consumer). Supply chains can also be realigned with more favorable foreign domiciles. And finally, consumers can adjust their own preferences to buy cheaper substitutes. We believe that recent new tariffs will not materially affect U.S. inflation or growth. And to the extent that they do, the July legislation on tax cuts will more than offset the negative impact of tariffs.
We close out our discussion with some of the less intuitive effects of a weak dollar on U.S. interest rates. We offer our more esoteric insights here more as food for thought instead of a definitive theory or a high-conviction view on transmission mechanisms.
The role of a weak dollar in potentially reducing interest rate appears counter-intuitive at first glance. We lay out the framework and outline the process step by step.
We begin with short-term interest rates.
Let’s start with the implication of a weak dollar for U.S. import inflation. Just as a weak dollar makes U.S. exports cheaper, it makes U.S. imports more expensive. Import inflation ticks higher as the dollar declines. A straightforward extension of this theme is a marginal decrease in consumer spending because of higher import prices. One more relevant detail on import inflation. Higher import inflation increases headline inflation more, and sooner, than it does core inflation. Policymakers also deem many volatile headline components to be transitory and, therefore, less relevant for core inflation.
We take these building blocks to make a plausible argument for how a weak dollar may induce the Fed to lower policy rates more quickly. Assume that the economy weakens a tad because of higher import inflation. Evidence of the slowing economy will be easily visible in a weaker job market and lower consumer spending. While this is going on, the real Fed funds rate (nominal rate minus core inflation) remains essentially unchanged. Why? Core inflation does not change as import inflation rises because of muted and lengthy lag effects.
Imagine the Fed’s position in this setting. With its real policy rate essentially unchanged in the midst of slowing growth, the only way to ease monetary policy is through rate cuts. Needless to say, lower short-term rates are a desired outcome for the administration.
The scenario outlined above is also conducive to a decline in long-term interest rates. Investors quickly price slower growth prospects into lower long-term interest rates.
We can also think of another, even more nuanced, mechanism through which long rates may come down. As foreign economies grow faster in the near term, foreign central banks are more likely to raise their policy rates. As our Fed funds rate remains fixed and then drifts lower, the differentials between foreign and U.S short-term rates will decrease.
The next link in this chain of logic is that this smaller interest rate differential reduces currency hedging costs for foreign investors. And finally, armed with lower hedging costs, more foreign investors may find hedged U.S. Treasuries to be an attractive investment. This incremental demand for long-duration Treasuries can also bring long-term interest rates down at the margin.
We swiftly switch gears from the theoretical back to the practical in conclusion.
Summary
We offer a number of practical takeaways in our summary.
Trade, tariffs and geopolitical tensions no longer present material risk to the economy and the markets.
We believe that the underperformance of U.S. stocks and the dollar is more cyclical in nature than secular.
We believe that U.S. exceptionalism will continue for a long time.
The exorbitant privilege that the U.S. enjoys from the dollar’s status as the world’s reserve currency will persist well into the future.
The recent dollar weakness may achieve several desired outcomes for the administration.
Increased international demand for U.S. goods
Imminent rate cuts by the Fed
Lower long-term rates at the margin
In the calm after the storm, we anticipate more stable market conditions and significantly lower volatility in the second half of 2025. Even as chaos transitions to calm, we remain vigilant and prudent in managing client portfolios.
To learn more about our views on the market or to speak with an advisor about our services, visit our Contact Page.
Whit Batchelor sat down with the San Diego Business Journal to discuss Whittier Trust's newest office.
Whittier Trust, a Pasadena-based wealth management company that serves "ultra-wealthy" clients, is opening a San Diego County office in Carmel Valley.
Founded in 1989 by the Whittier Family, which includes Helen Woodward of the animal shelter fame and philanthropist Paul Whittier, the firm has signed a three-year sublease for about 7,000 square feet of space on the second floor of an office building at One Paseo. "It will be our first brick-and-mortar office in San Diego (county)," said Whit Batchelor, the Whittier Executive Vice President who heads the San Diego County office.
"We're super excited about having a more visible local presence," Batchelor said.
Managing $25 billion in assets, Whittier Trust serves more than 600 families in 48 states, according to Batchelor, with about a dozen clients in San Diego County.
"They're all some of the most affluent families in San Diego," Batchelor said.
Whittier chose One Paseo for its San Diego County office because its local clients are concentrated in North County, primarily Rancho Santa Fe, Del Mar, La Jolla and Solana Beach, Batchelor said.
The firm is spending $400,000 to $500,000 on tenant improvements, most of which Batchelor said will be for redoing the lobby.
He said his goal is to add two to three new San Diego clients annually and gradually expand the San Diego office from its initial staff of six to seven professionals to about 30 over the next 10 years.
"We want to grow and partner with the right families in San Diego," Batchelor said. "One thing our clients all have in common is that they have big balance sheets."
Whittier Family History of Giving Back
To become a Whittier client, someone must have liquid assets of at least $15 million and pay annual dues of $150,000, Batchelor said.
"We think that San Diego is a fantastic market for our services," Batchelor said, adding that they include everything from real estate investments to managing stock portfolios and charitable donations.
"For us, being part of the community means giving back to the community. A big part of what we do is facilitate our clients' philanthropy," said Batchelor, who lives in Point Loma.
Paul Whittier, who died in 1991, focused much of his philanthropy on such San Diego institutions as Scripps Memorial Hospitals, the San Diego Maritime Museum, the Zoological Society of San Diego, and the Aerospace Museum.
Whittier Trust traces its history back to the early 1900s when Max Whittier, a former Maine potato farmer, moved west and made his fortune in real estate and petroleum.
His company, Belridge Oil Company, was sold to Shell Oil in 1979 for $3.65 billion, which was a record at the time, according to the Whittier Trust website.
Featured in San Diego Business Journal. Author Ray Huard interviews Whit Batchelor, Executive Vice President, Client Advisor, San Diego Regional Manager.
For more information on the new office or to start a conversation with a Whittier Trust advisor today, visit our contact page.
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Whittier Trust further strengthens its rapidly growing San Diego team with veteran trust and estates advisor, Kiley Barnhorst MacDonald.
Whittier Trust is pleased to welcome Kiley Barnhorst MacDonald as Senior Vice President and Client Advisor, based in the firm’s new San Diego office. With more than 30 years of experience at the intersection of the legal, corporate, and nonprofit sectors, Kiley is a trusted advisor to ultra-high-net-worth individuals and families. She is widely respected for her ability to navigate complex family dynamics and multigenerational planning with a steady hand and thoughtful, practical insight.
A San Diego native and fifth-generation Southern Californian, Kiley brings a coveted combination of legal acumen, strategic planning, and financial analysis to her work, tailoring each relationship to reflect the specific values and goals of the individuals and families she serves. Her multidisciplinary background allows her to approach wealth management with both technical depth and a personal touch.
“Kiley brings the kind of deep expertise and authentic connection that makes a lasting impact,” said Whit Batchelor, Executive Vice President, Client Advisor, and San Diego Regional Manager at Whittier Trust. “She’s already a trusted voice in our community, and her arrival is a meaningful step forward in building our San Diego presence with intention and care.”
Before joining Whittier Trust, Kiley served as Senior Vice President, Senior Trust Advisor at Northern Trust Wealth Management. She also practiced in La Jolla at Albence & Associates and the Law Offices of W. Neal Schram. Kiley holds a JD from UCLA School of Law and a BA in Economics from Dartmouth College. She is a California State Bar Certified Specialist in Estate Planning, Trust, and Probate Law.
Beyond her professional accomplishments, Kiley is a dedicated community leader who has served on the boards of several nonprofit and educational organizations. She has been recognized by the Legal Aid Society for her pro bono efforts supporting families in probate court.
Whittier Trust opened its San Diego office earlier this year to meet the needs of a growing client base in the region. With Kiley now on board, the firm continues to build a team of top-tier professionals who combine technical excellence with an unwavering commitment to client service.
For more information about Whittier Trust, start a conversation with an advisor today by visiting ourcontact page.
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Beginning January 1, 2022, a flat 7% tax on net long-term capital gains went into effect. Many advisors believed the tax to be unconstitutional and that it would be repealed if/when challenged. However, the WA Supreme Court upheld the tax in March of 2023 in Quinn v. Washington. Additionally, the public had a chance to repeal the tax in November of 2024, but approximately 63% of the voters opposed repealing the tax. Regardless of the questionable legality and polarizing nature of this tax, it is here to stay.
On May 20, 2025, Senate Bill 5813 was signed into law, creating a new tier to the capital gains tax, adding 2.9%, for a total of 9.9%, for gain exceeding $1m. The change is retroactive to January 1, 2025.
Summary of the Washington Capital Gains Tax
A full explanation of the Washington Capital Gains Tax is beyond the scope of this update; however, several key items are highlighted here:
Only individuals are subject to the tax. This includes any gains that flow through to individuals from pass-through and/or disregarded entities such as LLCs and S corporations.
Taxable trusts are currently exempt.
Gains recognized by grantor trusts, being disregarded entities, will flow through to the grantor(s) and may be subject to the tax.
Additionally, beneficiaries of taxable trusts who receive allocations of long-term gain may be subject to the tax.
Only long-term capital gains are subject to the tax. Ordinary income, short-term capital gains, qualified dividends, tax-exempt interest, etc., are all exempt.
Taxpayers have an annual standard deduction ($250,000 originally but adjusted for inflation. The 2024 deduction was $270,000. The 2025 amount has not yet been released.) With the recent update, the new effective tax brackets are:
The deduction is per taxpayer. Married couples are considered one taxpayer. Therefore, married couples have just one deduction.
Generally, only individuals who are domiciled in Washington (on the date of sale) are subject to the tax. Gain from the sale of certain tangible property is subject to the tax for those domiciled outside the state.
The tax is calculated by starting with the taxpayer’s federal net long-term capital gain for the year and then modified for gains and losses excluded from the tax. The following are excluded (this is not a complete list):
Gain/Loss from the sale of all real estate (which includes gain from the sale of real estate flowing through pass-through entities).
Sales of entities that own real estate, as opposed to the sale of the real estate itself, will likely not qualify for the real estate exemption.
Gain/Loss from the sale of depreciable property under IRC §167(a) or under §179 (i.e. business property such as equipment).
Gain/Loss from the sale of qualified family-owned small businesses:
What constitutes a family-owned small business and how to calculate the related deduction is complex and beyond the scope of this article.
Alternative minimum tax adjustments associated with the gain.
Qualified opportunity zone gain exclusions (this is an add-back for Washington tax).
Like California, gain recognized federally by an incomplete non-grantor trust (ING), regardless of situs, is pulled back into Washington, and taxed as part of the grantor’s individual capital gain.
The taxable gain is reduced by charitable gifts, but only gifts made to charities principally managed in the state of Washington. Additionally, only gifts exceeding $250,000 (also adjusted for inflation, so it tracks with the standard deduction) are deductible, and the total deduction is limited to $100,000 (adjusted for inflation, $108,000 in 2024).
For example, if a taxpayer made $300,000 of charitable gifts in 2022 (before the inflation adjustments), they would deduct $50,000 from their taxable gains, producing $3,500 of tax savings.
Charitable gifts to donor-advised funds (DAF) would only be eligible if the DAF is directed or managed in Washington (even if the DAF distributes grants to organizations outside Washington).
The tax is relatively new, and there remain several complexities and uncertainties beyond the scope of this article. These include, but are not limited to:
Consideration of capital loss carry forwards
Qualified family-owned small businesses
Qualified small business stock
Charitable remainder trusts and how the tax may impact both the grantors and beneficiaries
Allocation of the $250,000 deduction between spouses who file separately
Credits related to:
B&O Tax
Taxes in another jurisdiction related to the same gain
Planning Opportunities
The recent update has not materially changed the existing tax, so the same planning strategies remain. What the increase has done is further clarified the direction and plans of Washington State’s legislature as it relates to tax policy. Along with recent increases in Washington’s Estate Tax, the state has broadened sales taxes and expanded interpretations of B&O Tax. It appears likely the state will continue to create and increase taxes on individuals and businesses residing and doing business in Washington.
There are several strategies for avoiding Washington capital gains tax, including:
Domicile Planning – The Washington capital gains tax is primarily a tax on gain associated with the sale of intangible assets, like marketable securities. This type of gain is sourced to a taxpayer’s state of domicile. Depending on the facts and circumstances of each taxpayer, being thoughtful about the timing of a domicile change may be worth consideration. This is also a powerful planning tool for estate tax avoidance.
Spreading Gain Across Years – Each taxpayer has a $250,000 (inflation-adjusted) annual deduction, and being thoughtful about the timing of sales can be meaningful, as well as specific strategies like installment sales to spread receivables and gain over several taxable years.
Spreading Gain Across Taxpayers – Because every taxpayer has the standard deduction and Washington state has no gift tax, outright gifts to individuals (other than spouses), while being mindful of the federal gift tax implications, can multiply the exemption. This is even more powerful if the gift recipient is domiciled outside of Washington state, making any gain for them fully exempt.
Taxable Trusts – Other than INGs, taxable trusts are exempt from the tax. Once again, being mindful of federal gift tax implications, gifts in trust can completely avoid Washington capital gains tax. Additionally, converting grantor trusts to non-grantor trusts is also potentially a viable strategy.
Washington Capital Gains Tax currently has a maximum rate of 9.9%, and although this is only one aspect of any planning, and although it is unlikely that this tax would be the defining factor in decision making, nearly 10% tax is likely not immaterial. With the state of Washington creating higher taxes across the board, this is a good time to consider both your short-term and long-term planning.
Washington Estate Tax
Recent Update
In addition to an increased capital gains tax, there were two, potentially more impactful, changes to the Washington Estate Tax, impacting estates of decedents dying on or after July 1, 2025:
Estate tax exclusion is increasing from $2.193m (which has been static since 2018) to $3m. Additionally, the exclusion will be adjusted annually for inflation going forward.
Tax rates are increasing dramatically as detailed below, with the top rate growing from 20% to 35%.
To demonstrate how meaningful these changes are, consider the following examples:
Similar to the changes for the Washington capital gains tax, the changes in estate tax do not fundamentally change how the tax works but rather increase the negative outcomes. The same strategies advisors have been using to avoid the estate tax are all still viable, simply more effective now. Common strategies include shifting growth assets out of large estates, domicile planning, employing multi-generational GST-exempt trusts, charitable giving, and so on. With these radical rate increases, it’s the perfect time to have conversations with your advisors.
One planning item that is often overlooked is entity structuring related to real property. Washington estate tax excludes real property outside of Washington, but intangible assets are sourced to the state of domicile. This creates a valuable planning opportunity to categorize assets as intangible or tangible based on the location of the asset and the domicile of the taxpayer. For example, if you are a Washington domiciliary and you directly own a house (i.e. not through an LLC or corporation), or other tangible property, outside of Washington, upon death, Washington will exclude this asset from estate tax because tangible assets located elsewhere are not subject to WA estate tax.1 However, if a Washington domiciliary owns units of an LLC, which owns that house, the value of those LLC units is included in that decedent’s estate tax because LLC units are considered an intangible asset.
To plan for this situation, a Washington domiciliary can own real property located outside the state either directly or in a revocable trust. Conversely, if a non-WA domiciliary owns real property in Washington, that property can be owned in an LLC to ensure that the property is sourced to the non-WA decedent’s state of domicile. This planning should consider non-tax issues, such as any liability concerns, as well.
To learn more about our views on the market or to speak with an advisor about our services, visit our Contact Page.
Whittier Trust Grows San Diego Team and Fortifies Its Commitment to the Entrepreneurial Spirit with the Addition of Ted Fogliani.
Whittier Trust is pleased to announce the addition of Ted Fogliani as Vice President of Business Development in the firm’s San Diego office. A veteran entrepreneur and former CEO with over 25 years of experience building successful companies in eCommerce, SaaS, manufacturing, and logistics, Ted brings a dynamic mix of strategic vision, operational leadership, and a deep-rooted commitment to client service.
Ted joins Whittier Trust after serving as Founder and CEO of ShipCalm, a tech-enabled logistics company supporting eCommerce brands. There, he played a critical role in shaping the company’s growth strategy, culture, and customer-centric approach to supply chain management. Prior to ShipCalm, Ted spent two decades as Founder and CEO of a leading electronics manufacturing company, overseeing the production of medical devices, consumer electronics, and critical national defense systems.
“Ted’s background as a founder and operator gives him a unique lens into the needs, concerns, and aspirations of the entrepreneurs and business owners we serve,” said Whit Batchelor, Executive Vice President, Client Advisor, and San Diego Regional Manager at Whittier Trust. “He’s walked in their shoes. That perspective, combined with his strategic acumen and leadership experience, makes him a powerful advocate for our clients and a natural fit for our team.”
Throughout his career, Ted has championed the idea that long-term value is built by hiring great people and rallying them behind a clear vision. At Whittier Trust, he’ll focus on fostering meaningful relationships with families and founders across Southern California, helping them navigate the complex intersection of personal wealth and business leadership.
A lifelong Californian and long-time resident of the San Diego area, Ted and his wife Monica have raised their four children in Carmel Valley and Del Mar. They remain active in the community and are passionate supporters of organizations such as the San Diego Police Foundation and Boys to Men Mentoring.
For more information about Whittier Trust, start a conversation with an advisor today by visiting ourcontact page.
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Celebrating its 25th anniversary in 2025, the Whittier Trust Seattle Office continues to grow and strengthen its family office services with experienced CPA, Philip Cook.
Whittier Trust is proud to welcome Philip Cook as Vice President and Client Advisor in the firm’s Seattle office. A seasoned advisor with more than 18 years of experience in tax, estate planning, trust administration, and family governance in both California and Washington State, Philip joins the Pacific Northwest team of The Whittier Trust Company of Nevada, where he will serve ultra-high-net-worth families in both Seattle and Portland.
Philip brings to Whittier Trust a distinctive blend of technical expertise and personal insight, shaped by 12 years in public accounting with time at Deloitte and Andersen Tax, followed by six years as Director and Senior Director at Pacific Trust Company. There, he led the firm’s consulting practice, guiding families through the most complex aspects of estate structures, fiduciary oversight, and multi-generational planning.
“Philip's background as a CPA, combined with his leadership in trust and estate advisory work, aligns perfectly with Whittier Trust’s integrated and personalized approach,” said Nick Momyer, Northwest Regional Manager, Senior Vice President, and Senior Portfolio Manager at Whittier Trust. “He has a great ability to balance analytical rigor with a deep understanding of family dynamics, qualities that are central to the work we do.”
As Whittier Trust celebrates 25 years of service in Seattle and 60 years of dedication to the Pacific Northwest in 2025, Philip's arrival underscores the firm’s continued investment in its Seattle office and long-standing commitment to delivering comprehensive family office solutions across the region.
Philip holds a Bachelor of Arts in Economics from the University of California, Santa Barbara, and a Master of Accountancy from California State University, Fullerton. He is a licensed Certified Public Accountant (CPA) in Washington State. Originally from Southern California, Philip has called Seattle home since 2014, though he continues to spend time in Southern California working with clients and visiting family.
For more information about Whittier Trust, start a conversation with an advisor today by visiting ourcontact page.
From Investments to Family Office to Trustee Services and more, we are your single-source solution.
JoshElcik’s appointment reflects continued growth and a firm-wide commitment to a secure and seamless digital experience for Whittier Trust clients.
Whittier Trust is pleased to announce the addition of Josh Elcik as Senior Vice President and Director of Information Technology. A seasoned technology executive with more than two decades of experience leading at the intersection of innovation and operational strategy, Josh brings a depth of expertise in designing and implementing enterprise technology systems. He will be based in the firm’s Pasadena office.
Josh’s appointment comes at a time of meaningful expansion for Whittier Trust. As the firm continues to grow, so too does the demand for technology that is not only secure and scalable but also intuitive and responsive to the evolving needs of clients and their advisors.
“Josh joins Whittier Trust with a mandate to further modernize and fortify the systems that underpin our business,” said Thomas J. Frank Jr., Whittier Trust Executive Vice President and Northern California Regional Manager. “His leadership will help ensure we continue delivering the high-touch service our clients expect, supported by the kind of thoughtful, future-ready infrastructure that quietly powers it all.”
Over the course of his career, Josh has led large-scale digital initiatives across diverse industries, including financial services, energy, and media, each with a focus on long-term efficiency and enterprise agility. He is known for building high-performing global teams, championing cross-functional collaboration, and architecting integrated platforms that elevate both performance and compliance.
“I’m drawn to Whittier Trust’s legacy of excellence and its culture of precision and care,” said Josh Elcik. “Technology is most effective when it disappears into the background, empowering people to do their best work, and enabling clients to experience a seamless, secure relationship with their advisors. That’s the standard, and that is what we’re always building toward.”
Josh earned his degree in Management Information Systems from Texas Tech University. He maintains a deep interest in emerging technologies, data governance, cybersecurity, and adaptive organizational strategy.
Josh’s appointment reflects Whittier Trust’s ongoing investment in people, systems, and strategies that sustain exceptional client service in a complex and fast-moving world.
For more information about Whittier Trust, start a conversation with an advisor today by visiting ourcontact page.
From Investments to Family Office to Trustee Services and more, we are your single-source solution.
Be sure you understand your charitable options before committing.
A $1 billion dollar donation is always a big piece of news, and when an ultra-high-net-worth individual or family makes such a gift, the world is sure to take notice. Within the last year, such donations have been made to community foundation donor-advised funds (DAF). No doubt, these gifts are generous and can move the needle philanthropically for causes dear to the hearts of the donors, but digging into the fine print on the fund establishment documents can reveal some drawbacks. For example, many community foundation DAFs stipulate that the power to direct those assets moves from the original donor's family to the foundation after the donors’ or their children’s passing. However, there are options for perpetual funds that are every bit as impactful, while offering more control for donors and their families for generations to come.
As the number of high-net-worth Americans has grown in the 21st century, the popularity of DAFs has soared. According to the National Philanthropic Trust, total grants from DAFs have been on the rise for over a decade, more than doubling in the past five years alone.
So why are so many people choosing DAFs as their giving vehicle? Whittier Trust’s Jeff Treut, Vice President, and Pegine Grayson, Senior Vice President and Director of Philanthropic Services, discuss the benefits, limitations, and misconceptions.
Why DAFs?
“Immediate tax benefits are a primary reason most of our clients choose a DAF,” Treut says. “The tax deductibility rules for DAFs are much more favorable than those for private foundations, especially when it comes to appreciated alternative assets like real estate and private equity. You get the write-off. Then, you can support your preferred charities on your own timetable. The second reason is that a DAF is a much simpler and less costly vehicle to establish and manage than a private or family foundation.”
While a private foundation requires ongoing management, a DAF requires only a few steps:
Complete a simple form on which you name your fund, advisors, and any successors. You can also spell out your wishes for grantmaking after your passing.
Make a contribution (typically, cash, stock, or real estate) and receive an immediate tax deduction for the fair market value. No capital gains tax is due.
Recommend grants from your account to qualified charities at any time.
Other benefits of DAFs include the ability to make anonymous grants (not possible with foundation grants) and to use the word “foundation” in the DAF name, if desired.
Choosing The Right DAF Platform
All DAFs are not created equal, and it can be confusing to know which one is best for your needs. There are essentially four types of DAF sponsors from which to choose:
Community foundations: A good choice if you want a sponsor with deep knowledge of a particular community. But beware the fine print: Because their mission is to grow their own endowments to benefit their local regions, they often limit the number of successor advisors that can be named (after which time the funds roll over into a general fund) and often aren’t comfortable accepting alternative assets.
Large nonprofits, such as hospitals and universities: These “proprietary” DAF platforms make sense for donors who know they primarily or exclusively want to benefit a particular nonprofit and trust it to manage their charitable funds.
Institutional DAFs: Examples of this type include Fidelity, Vanguard, and Schwab. “For donors who are fee-sensitive and tech-savvy, these can be a good choice,” says Treut. “But they tend to be very low-touch, high-tech operations. Most don't provide you with a dedicated advisor. They basically say, ‘Here’s your DAF, here's the portal; it’s up to you.’”
White-labeled platforms for wealth management firms: This is the Whittier Trust model, and for the reasons discussed below, it is the fastest-growing segment of their philanthropic services offerings.
“We developed our donor-advised fund platform intentionally to provide the flexibility and responsiveness that our ultra-high-net-worth clients need,” says Grayson. “We’re comfortable accepting gifts of real estate, and we can hold private equity and stock concentrations. We don’t limit the number of successor advisors our clients can name, because we have no mission other than helping our clients achieve theirs. We can also treat your DAF like a private foundation, providing you with a dedicated grantmaking portal and customized grant-related correspondence, facilitating meetings with your family and helping you clarify your mission and values, setting charitable giving goals, and identifying and vetting nonprofit grantees. We offer our DAF services to unlimited generations of family members, which is important to our clients.”
“The reason our clients love this model is because our philanthropic team provides that extra layer of support and quality control, which is only possible when your advisory team knows you intimately,” says Treut. By way of example, he notes that one of Grayson’s clients decided to move her DAF from a community foundation to Whittier Trust when the community foundation sent a $30,000 grant to the wrong organization because the staff wasn’t familiar with her grantmaking patterns.
Whittier Trust also attracts clients who have needs that other firms might find too difficult to manage. “We had a family from Houston who wanted to contribute shares of a single publicly traded stock valued at over $1 billion into a DAF,” Treut recalls. “By the time they found us, they had been turned down by several platforms that were either unable to accept that large of a stock concentration or unwilling to hold it because they insisted on liquidating the shares so the assets could be put into proprietary funds. The client was understandably concerned about moving the market with a sale of that size. Because of the structure of our platform and because we have no proprietary equity funds, we can manage stock concentrations like this.”
Making a Move
Moving a DAF from one provider to another isn’t difficult. You simply recommend a grant for the entire amount of the existing fund to the new fund. In the same way, it’s also possible to convert a private foundation to a DAF (although you’ll incur some legal fees along the way to dissolve a corporate foundation). One thing you cannot do, however, is convert a donor-advised fund to a private foundation.
If you’re ready to learn more about the charitable vehicle options available to you and your family, start a conversation with a Whittier Trust Advisor by visiting our contact page.
Why a long-term approach is a smart strategy, regardless of the economic outlook.
It’s nearly impossible to turn on the television or read an economic journal without being confronted with news about stock market volatility and concern about interest rate fluctuations. Ultimately, market factors are always in play. Economies, and the components that make them up, are always fluid.
“While the uncertainty in the interest environment has affected our ability to buy properties, the fundamentals of the properties haven't changed much,” says Whittier Trust Vice President of Real Estate Jorge Ramos, 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. The properties are just more of a challenge to identify.” Here are some of the reasons why a long-term approach is a winning strategy for real estate investments.
A Good Buy
When Whittier Trust’s real estate division evaluates a prospective investment opportunity, they are looking for population and job growth over time. While any location is open for consideration, Whittier tends to focus on major cities that have a long-term track record, as opposed to small towns with sudden surges. “We want to invest in locations that will do well over a long period,” Ramos says, which can translate into more secure investments for Whittier Trust’s clients.
Although the team reviews various property types, most of Whittier Trust’s recent investments have been in multifamily properties. The team has been focused on investments between $15-30M in client equity. Investigating whether rents are increasing in the market, along with occupancy rates and demand for housing, are key to our evaluation. Whittier Trust’s investment group becomes the sole limited partner, holding 90-95% 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 day-to-day management. Key elements are investigated and evaluated to determine whether a project has the potential to be a viable and opportunistic investment.
Patience for the Long-Haul
When Whittier Trust embarks on a new real estate investment, the team generally looks at investments on a 5 to 10-year horizon, although they are flexible should the right opportunity present itself. 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. A long-term strategy is important because it makes you less susceptible to economic cycles,” Ramos 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. We gravitate towards markets that demonstrate greater staying power,” Ramos 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 real estate investors are aware, 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 amid higher interest rates, 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,” Ramos explains, adding that interest rates have increased by approximately three and a half 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, leaving you in a position where you have 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 of generating 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 tenets: legacy-building by passing wealth intergenerationally. “We know that there is staying power in real estate. History favors the patient investor,” Ramos 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 optimizing the debt on the property. When Whittier Trust closes any deal, “we thoroughly understand the market conditions that will make the property perform well,” Ramos says.
If you’re ready to explore how Whittier Trust’s real estate services can work for you, your family, and your portfolio, start a conversation with a Whittier Trust advisor today by visiting our contact page.
From Investments to Family Office to Trustee Services and more, we are your single-source solution.
The casual investor tends to focus on the wrong thing when investing. Most will think of the stock as the investment while forgetting the most important part.
Thanks to this simple mindset shift, we can begin to do our homework. Understanding a business means understanding how a company actually makes money, so we need to have a very strong understanding of how a dollar of revenue translates into a dollar of profit. This basic act of tracing revenues through the income statement will elicit questions and allow us to understand the fundamentals of how a business operates. Things like margins and how they are impacted by both fixed and variable costs will allow us to understand the health of the business and the dynamics of the industries in which they compete. 
Finally—and most importantly—we need to assess the quality of the management team. Quality businesses do not happen accidentally; it’s a consistent and continuous process that allows a culture to take shape. However, this most important component is the most difficult to quantify, and we think this helps give our active approach a very significant edge.
“The reason our clients love this model is because our philanthropic team provides that extra layer of support and quality control, which is only possible when your advisory team knows you intimately,” says Treut. By way of example, he notes that one of Grayson’s clients decided to move her DAF from a community foundation to Whittier Trust when the community foundation sent a $30,000 grant to the wrong organization because the staff wasn’t familiar with her grantmaking patterns.
