Tag: Estate Planning

Aug 19th

Maximizing Your Legacy: A Look At Minimizing Estate Tax Liabilities

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

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

Harnessing the Power of Trusts

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

Grantor Retained Annuity Trusts (GRATs)

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

Irrevocable Life Insurance Trusts (ILITs)

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

Qualified Personal Residence Trust (QPRT)

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

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

Maximizing Gift and Estate Tax Exemptions

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

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

Leveraging Charitable Giving

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

Qualified Charitable Distributions (QCDs)

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

Donor-Advised Funds (DAFs)

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

Charitable Trusts

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

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

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

The Importance of Personalized Guidance

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

 

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

 

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Aug 15th

Life, Death, and Taxes

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

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

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

Estate Planning

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

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

Estate Settlement

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

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

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

Tax Planning and Gifting

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

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

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

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

 

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Aug 13th

Whittier Trust Office Recognized as the #12 Best Place to Work in Los Angeles

Whittier Trust Celebrates Third Consecutive Year on the Los Angeles Business Journal’s Top 100 Workplaces List.

For the third year in a row, Whittier Trust has been named one of L.A.’s 100 Best Workplaces by the Los Angeles Business Journal.

Whittier Trust was proud to be recognized at the 18th Annual Best Places to Work Awards as the 12th best workplace among midsize companies in the Los Angeles area. Moving up 13 spots from #25 in 2023, this achievement reflects the company's commitment to creating an outstanding work environment. As the oldest multifamily office headquartered on the West Coast, Whittier Trust is thrilled to see its continued rise in the Top 100 rankings for the third consecutive year.

This award highlights the company's remarkable growth, marked by the opening of new offices and other Best Workplaces Awards, including recognition in the Puget Sound and Orange County Business Journals.

"It's a privilege to work with such a talented team," said David Dahl, CEO & President of Whittier Trust. "Being named a top 100 workplace for three consecutive years, and now reaching the top twelve in this exceptional list and within this great city, shows we're living our promise to our clients and colleagues. Whittier Trust is a place where legacy grows not just for our clients, but for our team members as well. We prioritize our people, fostering a culture of passion, collaboration, and dedication to our clients. Their collective efforts and belief in our core values and vision drive our success and positive impact on the families and communities we serve."

The Los Angeles Business Journal created the Best Places to Work program to identify, recognize, and honor the best employers in Los Angeles County. Companies considered for this prestigious list must meet a range of criteria, including having a physical operation in Los Angeles County and employing at least 15 full- or part-time permanent staff members.

The Workforce Research Group conducted a thorough two-part assessment process to judge each company under consideration. The first part evaluated each company’s benefits, policies, practices, and demographics, accounting for 20% of the total score. The second part, an anonymous employee survey measuring the employee experience, contributed the remaining 80% of the score. The combined results determined the final rankings, with the top companies celebrated at a special event on August 7, 2024, at the Biltmore Hotel. 

The recognition by the Los Angeles Business Journal reaffirms Whittier Trust’s mission to create an environment where employees feel valued, empowered, and inspired. It highlights the company's commitment to prioritizing people, which fuels exceptional client service through the recruitment of passionate teammates and the cultivation of this outstanding work environment.

The complete rankings were published in the August 12, 2024, issue of the Los Angeles Business Journal. To see the rankings, visit labusinessjournal.com/events/bptw2024.

For more information on the Best Places to Work in Los Angeles program, visit bestplacestoworklosangeles.com.

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If you're interested in a career at one of the top workplaces in Los Angeles, visit our Career Page to learn more and find a position that may fit you.

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

 

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Aug 5th

Ensuring a Smooth and Successful Transition of the Family Business

Five key questions to ask your advisor if you're mulling an exit.

In my role at Whittier Trust, I've seen firsthand how critical it is for ultra-high-net-worth individuals (UHNWIs) to have a well-thought-out exit strategy for their family businesses. Despite the intensive planning that typically goes into wealth management, recent research from the Exit Planning Institute suggests that a staggering 80% of business owners lack solid exit strategies, leaving their wealth in limbo and risking economic continuity for future generations.

The planning process of an exit strategy can often be fraught with uncertainty and potential pitfalls, making it a critical issue for business owners nearing retirement or a transfer of ownership or leadership. Here are the five key questions UHNWIs should ask their advisors to ensure a smooth and successful transition.

1. How many different exit strategies are available to me?

Understanding the various ways you can exit is fundamental to choosing the right path for your business. Each exit strategy has unique implications and suitability depending on your business's circumstances and your personal objectives. Here's a breakdown:

Generational Family Transfer

When multiple generations of a family are actively involved in the business, an owner might prioritize business legacy and family engagement over the sale price. If the objective is to keep the business in the family, the exit plan might involve transferring company stock, often at a discount, to direct heirs over many years. While keeping a majority stake in the company and control over operations, the owner can transfer assets to the next generation while still mentoring and training the next leader.

A generational family transfer can play out in a variety of ways: The owner may ultimately sell stock in the company to family, retire holding minority ownership or gift all stock to heirs. A successful transfer will take at least three to five years to accomplish and will position the business for success, meet the owner's liquidity and financial needs after the transfer, and leave the new owner(s) financially stable after the transaction.

Management Buyout

An owner who wants to sell all or part of the company to existing management might favor a management buyout. This type of ownership transition involves structuring a deal in which management uses the assets of the business to finance a significant portion of the purchase price. This can work for an owner who believes in the management team and thinks it will be able to keep the business thriving when he/she exits. However, if the management team lacks adequate liquidity, the seller may have to accept a lower price or unattractive deal terms, including heavy seller financing.

Sell to Partners

When the owner has partners and a quality buy-sell agreement, a sale to partners may be the only selling option. A buy-sell agreement generally articulates a controlled process for transferring ownership. Since the buyers fully understand the business and it's a planned process, selling to partners generally isn't too expensive. Common challenges in selling a business to partners include a lower sale price, slow transfer of proceeds and potential disagreements among partners.

Sell to Employees (ESOP)

When an owner wants to sell the company to its employees, an employee stock ownership plan (ESOP) might be the answer. In this type of sale, the company uses borrowed funds to acquire shares from the owner and contributes the shares to a trust on behalf of the employees. ESOPs require a securities registration exemption and are classified as an employee benefit, so it's an involved process. An ESOP sale takes many years to complete and is generally more expensive and complicated than other options. However, it can be a way to reward valued employees with company ownership. The tax savings to the seller can be substantial as well.

Sell to a Third Party

When the business is healthy and the owner wants to cash out, selling to a third party could be a good option. Whether the interested party is a strategic buyer, a financial buyer or a private equity group, the owner should expect to pay some big up-front costs to engage experienced professionals to guide the owner and company through the selling process. Having the right partners attending to the owner's interests, negotiating with the buyer and structuring deal terms are crucial to achieving the best outcomes.

Although the payoff can be attractive, third-party sales are not for the faint of heart. The process takes at least nine to 12 months and can be intense and emotional for the seller. Often, the seller retains some obligation to the business beyond the sale but has to be ready to give up control entirely. A third-party sale is ideal for an owner who is open to having the buyer bring new energy, ideas and change to the business.

Recapitalization

An owner who is open to having outside investors fund the company's balance sheet might consider bringing in a lender or equity investor to act as a partner in the business. By selling a minority or majority position, the owner can partially exit, monetize a portion of the business and reduce ownership risk in the company. New growth capital can bring more earnings to the original owner. When ready to exit the company completely, the original owner might sell the remaining shares through further recapitalization or another exit option.

Selling any portion of the company to an outsider can precipitate a loss of control and a cultural shift within the company. An owner who is not ready to be accountable to partners should consider this before opting to recapitalize.

2. How long before retirement should I begin thinking about my exit?

Ideally, business owners should start thinking about their exit strategy at least five to 10 years before their intended retirement. This period allows for comprehensive planning that can influence key outcomes of the eventual sale. Value-building initiatives need time to succeed and show results before they can impact sale proceeds (valuation optimization). Identifying and grooming a successor — whether a family member, a key employee or an external buyer — is generally most effective over an extended period (succession planning).  Structuring the business and the sale to maximize tax efficiency and comply with legal requirements is an involved process (legal and tax planning). Finally, strengthening the business's operations and financial health can make it more attractive to potential buyers (operational improvements).

3. What steps should I take to optimize valuation and transition?

Optimizing your business's valuation and ensuring a smooth transition involves several strategic steps. First, conduct regular financial audits to present clear and accurate financial statements; transparency is key to attracting serious buyers and securing a favorable sale price. Next, take a look at opportunities to enhance operational efficiency to demonstrate the business's profitability and growth potential. This might involve adopting new technologies, improving processes or cutting unnecessary costs. Another crucial step is to develop a strong management team that can operate independently, as a business that doesn't rely solely on the owner is more attractive to buyers. Solidifying relationships with key customers and suppliers is also important, since long-term contracts and stable relationships add value and stability to the business. Finally, ensure the business complies with all legal and regulatory requirements. Any outstanding legal issues can deter buyers or lower the sale price.

4. What if a big part of my exit is going to be a sale or a partial sale?

If you are leaning toward a sale, either partial or complete, several considerations come into play. Engaging professionals is one of the first and most crucial steps. Working with experienced legal, financial and business advisors helps owners navigate the complexities of the sale process. Those professionals can also help with due diligence. Buyers will conduct thorough examinations of every facet of your business, including financial records, legal documents and operational data. Being prepared with detailed and organized documentation can facilitate a smoother due diligence process and instill confidence in potential buyers. This preparation not only expedites the sale process but also helps in presenting your business as a well-managed and transparent entity, which can lead to a more favorable sale price.

Identifying potential buyers is also a strategic consideration that can greatly influence the sale’s success. Depending on your business's nature and industry, potential buyers could be competitors, private equity firms or even international investors. Identifying and approaching the right buyers ensures that you attract parties who see the most value in your business.

5. How should I structure sale deals?

Structuring a sale deal requires careful planning and negotiation to balance your needs with the buyer's. This involves key elements like payment terms, which can be a one-time lump sum or installments. You might even consider seller financing, which can make the deal more attractive but comes with the risk of the buyer defaulting. Another option is to structure earn-out payments tied to the business’s future performance, which can bridge valuation gaps but require clear metrics and timelines. Noncompete agreements are often requested by buyers to prevent owners from starting a competing business post-sale, so ensure the terms are reasonable and don’t unduly restrict future options.

The structure of the deal can also significantly impact your tax liabilities. Understanding the tax implications of different payment structures is crucial, as installment payments may help spread the tax liability over several years. Work with wealth management advisors to explore strategies that could mitigate your tax burden. Experienced legal counsel can help you draft and review all agreements, focusing on representations and warranties to minimize future liabilities and ensuring provisions for indemnification to protect against potential future claims or disputes.

You will also have to decide whether you'll stay involved in the business after the sale, in either a consulting capacity or a more formal role. This can ease the transition and provide additional income, but it might also limit your ability to fully step away. Don't forget to consider how the sale aligns with your personal and family goals. Reflect on how the sale proceeds will be integrated into your overall estate plan, ensuring the structure supports your legacy and philanthropic goals. Also assess how the sale structure impacts your lifestyle and plans, whether it involves retirement, new business ventures or other personal endeavors.

The transition of a family business is a complex process that requires careful planning and execution. By asking your advisors the right questions, you can ensure a smooth and successful exit that secures your legacy and financial future.

Written by Elizabeth M Anderson, Vice President, Business Development at Whittier Trust. Featured in Family Business Magazine. For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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Aug 2nd

Guardians of Wealth: Navigating the Cybersecurity Landscape in Family Offices

In an era where digital threats are a constant worry, cybersecurity has emerged as a critical concern for family offices entrusted with managing substantial wealth on behalf of affluent clients. Despite the financial stakes and heightened awareness of cyber threats, a concerning gap persists between the recognition of risks and the implementation of robust defense mechanisms. As family offices like Whittier Trust navigate this complex landscape, their commitment to security and strategic focus on overcoming evolving challenges remain paramount.

The Escalating Threat Landscape

Family offices, by managing significant assets and sensitive personal information, are lucrative targets for cybercriminals. The nature of these entities—often small, privately managed, and lacking the extensive security infrastructure of large financial institutions—makes them particularly vulnerable. Cyber-attacks have been steadily climbing for four consecutive years, with a notable surge in targeting smaller businesses, reaching as high as 36%. Cybersecurity threats range from phishing attacks and ransomware to more sophisticated tactics such as insider threats and spear-phishing (a malicious email that specifically targets an individual or organization). The risk is compounded by the interconnected nature of digital systems, where a single breach can cascade into widespread damage.

Despite growing awareness of these risks, many offices struggle with the actual readiness to confront them. Limited internal resources, both in terms of technology and specialized personnel, hinder the ability to implement comprehensive cybersecurity measures. This gap between perceived risk and actual preparedness is a significant vulnerability that needs urgent attention.

Proactive Cybersecurity Measures

To safeguard sensitive financial data and uphold fiduciary responsibilities, family offices must adopt proactive cybersecurity measures. Here are several best practices that can bolster their defenses:

  1. Develop Comprehensive Information Security Policies: Establishing and enforcing robust information security policies is foundational. These policies should cover data encryption, secure communication protocols, regular audits, and employee training programs. A well-defined policy framework helps ensure that everyone in the organization understands their role in maintaining security.
  2. Invest in Advanced Cybersecurity Technology: Leveraging cutting-edge technology can significantly enhance a family office's security posture. This includes deploying firewalls, intrusion detection systems, and advanced endpoint protection. Regular updates and patches are essential to keep these systems effective against emerging threats.
  3. Conduct Regular Security Audits and Penetration Testing: Periodic security audits and penetration testing can identify vulnerabilities before cybercriminals exploit them. These assessments should be conducted by third-party experts to provide an unbiased evaluation of the family office's security infrastructure.
  4. Enhance Employee Training and Awareness: Employees are often the weakest link in cybersecurity. Regular training sessions on recognizing phishing attempts, handling sensitive information, and following security protocols can significantly reduce the risk of human error. Creating a culture of security awareness is crucial.
  5. Implement Multi-Factor Authentication (MFA): Multi-factor authentication adds an extra layer of security by requiring users to provide two or more verification factors to gain access to systems. This makes it much harder for attackers to compromise accounts, even if they have obtained passwords.
  6. Engage Cybersecurity Experts: Hiring dedicated cybersecurity professionals or engaging reputable cybersecurity firms can provide the expertise needed to stay ahead of threats. These experts can help develop strategies, respond to incidents, and ensure compliance with relevant regulations.

Overcoming Resource Constraints

Implementing cybersecurity measures is crucial for family offices, but these efforts often encounter challenges due to limited resources. Family offices, typically smaller in scale than larger organizations, must navigate these constraints while still ensuring the security of their assets and data. To effectively address these obstacles, family offices can employ several strategies.

One key strategy is prioritizing critical assets and data. Not all data and systems hold the same level of importance, so by identifying and focusing on the most valuable assets, family offices can allocate their resources more efficiently. This targeted approach helps protect what matters most without overextending their capabilities. Additionally, adopting a risk-based approach tailored to the specific threats and vulnerabilities unique to the family office can further streamline resource allocation. This method ensures that efforts are concentrated on areas with the highest potential impact, maximizing the effectiveness of their cybersecurity measures.

Another effective tactic is leveraging cost-effective solutions that do not compromise on protection. Collaboration and knowledge sharing with other family offices can be incredibly beneficial. Engaging in industry forums and collective bargaining can lead to better cybersecurity solutions and services, while also fostering a community of shared best practices and insights.

Commitment to Security

Whittier Trust, recognizing the importance of cybersecurity, has recently hired a new Chief Information Officer to bolster its security efforts. This strategic move underscores a commitment to staying ahead of cyber threats and ensuring that the families they serve can trust in the security of their assets and information.

By addressing cybersecurity concerns head-on, family offices can not only protect against unauthorized access and theft but also uphold the trust and confidence of the families they serve. Proactive strategies, ongoing investment in technology and expertise, and a steadfast commitment to security are essential in navigating the increasingly digitized landscape and fulfilling fiduciary responsibilities effectively.

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Protect your family's legacy with robust cybersecurity measures. Discover more about safeguarding your wealth by exploring our comprehensive resources and start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

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

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Jul 25th

Baby Boomers Passing the Torch: Navigating the Challenges and Opportunities of Wealth Transfer

As the Baby Boomer generation ages, a significant wealth transfer is expected to occur over the next few decades. This phenomenon has prompted discussions among financial planners and investors about the best practices for transferring wealth to the next generation. Understanding the intricacies of generational wealth transfer is crucial for ultra-high-net-worth individuals (UHNWIs) to ensure their assets are preserved and efficiently passed on, minimizing tax liabilities and fulfilling their legacy objectives. 

The Importance of Protective Planning

Generational wealth transfer encompasses various strategies and considerations to establish a smooth and efficient passing of assets from one generation to the next. Proactive planning is essential in this process. By taking early and strategic steps, individuals can mitigate estate taxes, avoid probate, and provide financial security for their heirs. One of the primary tools in wealth transfer is the use of trusts, which can help manage and protect assets while confirming their distribution according to the benefactor's wishes, all without the need for probate—a process that can be both time-consuming and costly.

Utilizing Tax Advantages

Another critical aspect of proactive planning is understanding and utilizing the various tax advantages available. For instance, the annual gift tax exclusion allows individuals to give a certain amount each year to as many people as they wish without incurring gift taxes. However, it's important to stay informed about upcoming changes to the gift tax rule, which are set to take effect soon and could impact the amount that can be gifted tax-free. Additionally, establishing and funding education savings accounts or medical trusts can provide significant tax benefits while directly supporting the next generation.

Potential Challenges: Family Disputes and Complexity

However, the process is not without its challenges. One significant hurdle is the potential for family disputes. When large sums of money and valuable assets are at stake, differing opinions and expectations among heirs can lead to conflicts. Clear communication and detailed estate planning documents can help mitigate these risks. It is essential to have open discussions with family members about the benefactor's intentions and expectations, potentially facilitated by a neutral third party such as a family office.

The Intricacies of Estate Planning

The complexity of estate planning is another challenge that cannot be underestimated. Crafting a comprehensive estate plan involves more than just drafting a will. It requires a detailed understanding of various legal and financial instruments, as well as the ability to foresee and plan for potential changes in the benefactors' and beneficiaries' circumstances. This is where the need for continuous adjustments comes into play. Laws governing estate taxes, gift taxes, and trusts are subject to change, and family dynamics can evolve. Regularly reviewing and updating the estate plan is crucial to verify it remains aligned with current laws and the benefactor's wishes.

Securing Financial Stability for Future Generations

Properly managed, generational wealth transfer can secure financial stability for future generations. It can provide heirs with the resources they need to pursue education, start businesses, or support charitable causes, thereby extending the benefactor's legacy beyond their lifetime. However, the success of this process hinges on careful planning, transparent communication, and professional guidance.

The Role of Professional Guidance

Professional guidance is indispensable in navigating these complexities. Estate planning attorneys, financial advisors, and tax professionals bring expertise and experience that can make a significant difference in optimizing wealth transfer strategies. They can provide personalized advice tailored to the individual's financial situation, goals, and family dynamics. Additionally, professionals can help in identifying and addressing potential issues that the benefactor might not foresee, safeguarding a more robust and resilient estate plan.

Advanced Estate Planning Techniques for UHNWIs

For UHNWIs, the stakes are particularly high, and the opportunities for optimization are significant. By leveraging advanced estate planning techniques such as charitable remainder trusts, family-limited partnerships, and generation-skipping trusts, UHNWIs can achieve substantial tax savings while preserving their wealth for future generations. Involving heirs in the planning process and educating them about financial responsibility can help make certain that the wealth is managed wisely and lasts through multiple generations.

The generational wealth transfer expected as Baby Boomers age presents both challenges and opportunities. Proactive planning, clear communication, and professional guidance are key to navigating this complex process. By addressing potential challenges head-on and taking advantage of available strategies and tools, UHNWIs can optimize their wealth transfer, ensuring that their legacy endures and provides financial security for their heirs. The Great Wealth Transfer is not just a financial event; it is an opportunity to shape the future and make a lasting impact on the lives of loved ones and the community at large.

Safeguard your family's legacy with Whittier Trust. Discover our comprehensive resources and expert insights to learn how to protect your wealth.

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For more information, start a conversation with a Whittier Trust advisor today by visiting our contact page.

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

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Jul 16th

Whittier Trust Honored as a Finalist for ‘Multi-Family Office Team of the Year’ for the Second Consecutive Year at the 2024 STEP Private Client Awards

Whittier Trust, the oldest multi-family office headquartered on the West Coast, has been named a Top 5 Finalist in the 2024 STEP (Society of Trust and Estate Practitioners) Private Client Awards in the category of

Multi-Family Office Team of the Year for the second year in a row. This recognition is a testament to Whittier Trust's commitment to prioritizing clients' needs, goals, and legacies and providing the utmost professional service in wealth advising.

"It's a true honor to be recognized by STEP for a consecutive year," said David Dahl, CEO at Whittier Trust. "Relationships are everything in family office services, and we would not serve our clients as faithfully as we do without the exceptional and tireless work of our energetic, passionate, and dedicated team of professionals. They think like true entrepreneurs, deliver exceptional service and investment results, and take the time to get to know our clients. We take pride in often being our client's second call (after their spouses) in times of both triumph and challenge, and we will continue evolving as a company to meet our clients' changing needs."

The STEP Private Client Awards celebrate firms' and professionals' achievements and outstanding performance worldwide. With a record number of entries, Whittier Trust's nomination as a finalist in the Multi-Family Office Team of the Year category for a second year further solidifies its position as a leader in delivering exceptional service to clients. It highlights the company's expertise in serving multi-generational families with complex wealth management needs.

Whittier Trust is dedicated to providing personalized and tailored wealth management services and is proud to be recognized among the Multi-Family Office Team of the Year category. The nomination serves as a testament to its culture of internal promotion, mentorship, open communication, professional growth, and dedication to clients by meeting their everyday needs.

The recognition from STEP comes on the heels of unprecedented growth from the company, having opened three new offices in the last three years, and relocating the company's headquarters to a larger office in Pasadena, CA, to better serve an expanding client base locally. Several Whittier Trust offices were also recently recognized as top places to work by the Puget Sound, Orange County, and Los Angeles Business Journals.

A panel of judges will decide upon a winner for each category. The honorees will be announced at the black-tie dinner and awards ceremony, hosted by Susie Dent, writer and broadcaster, on Sept. 19 at the London Hilton on Park Lane.

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

 

 

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Jul 12th

Estate Planning for Trusts with Real Estate Assets

Future generations can gain the full benefit of your business legacy with a seamless transition to a successor trustee. 

Investors with significant real estate portfolios often have an enterprising spirit to grow net worth through real estate, and succession planning may be difficult for this type of successful wealth builder. Many are reluctant to relinquish control to a successor, and some never do—until it’s too late. 

“You shouldn’t wait to pass down practical knowledge of real estate assets in your trust,” advises Whittier’s Chuck Adams, Executive Vice President, Real Estate. “Whether your successor is going to be a family member, corporate fiduciary, or both, everyone needs to understand your business strategy and history. Even in a business with perfectly maintained files, much of the valuable information regarding ownership and operation of properties can be lost when the family’s wealth creator dies or is incapacitated.”

Partners in Planning

Preparation is imperative to an organized and efficient transfer of family assets, particularly for real estate owners who have been actively involved in property acquisitions, development, and management. Although there’s no blueprint for passing down that kind of hands-on knowledge, working with a corporate trustee can facilitate the transition and ensure that your estate plan will be carried out as intended. This is especially helpful if family members have no interest or aptitude to learn the ins and outs of the business, or if they are overwhelmed at the prospect of inheriting a multi-property portfolio. 

“Bringing on a corporate fiduciary who understands the asset class prior to the transfer of holdings can reduce stress and confusion among family members,” says Adams. “We work with the wealth creator to gain valuable knowledge of their portfolio, along with any family dynamics or issues, then create a comprehensive plan documenting their intent for both the assets and the beneficiaries.”

Facilitating the Transfer

Assuming your heirs are likely to keep any or all the property you plan to leave them, even for a short period of time, it is important to share your business history and strategy. Here are five steps Adams recommends:

  1. Provide any successors the opportunity to earn your trust by learning about the real estate, along with your values and goals, to ensure continuity in how the portfolio is managed.

  2. Map out your portfolio's composition—locations, property types, and challenges—so successor trustees are ready to make informed decisions and can begin to assess, for example, the asset’s potential for development or sale or measures they should take to maintain value and avoid costly surprises.

  3. Introduce successors to the property management team, leasing agents, and other important partners.

  4. Minimize misunderstanding and potential disputes among beneficiaries by delivering and modeling clear communication about ownership, expectations, and long-term vision.

  5. Foster confidence in the next generation by involving them in asset management discussions and helping them understand the complexities of the unique assets, which will continue to provide family wealth.

Sharing your knowledge will empower your heirs to become responsible stewards of your legacy, and partnering with an experienced corporate fiduciary with significant real estate expertise will ease your mind through this process. The partnership can provide security for family members as the wealth creator’s role evolves, helping to ensure the family’s personal and financial prosperity in the future.  

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For more information about real estate assets within estate planning, start a conversation with a Whittier Trust advisor today by visiting our contact page.

 

 

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

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Nov 20th

Providing for Pets in Your Estate Plan

In 2022, the United Kingdom’s Queen Elizabeth passed away at 96 years old, leaving behind four beloved dogs, Candy, Lissy, Sandy and Muick. The Queen, famous for being a dog lover, worried about the fate of her pets and planned ahead for her children and staff to adopt them after her death. Ultimately, it was a happy outcome for the royal pooches. 

Many of us can relate to pets feeling like full-fledged family members. In fact, according to the American Veterinary Medical Association, in the United States, 85% of dog owners and 76% of cat owners consider their pets to be a member of the family. Those numbers are huge since, according to the American Pet Products Association, as of 2023, 66% of U.S. households have at least one pet. Still, the overwhelming majority of pet owners neglect to plan for their animals in their estate plans (Everplans reports that only 9% of people with wills include provisions for their cats, dogs, or exotic birds). 

More and more Whittier Trust clients have questions about how best to provide for their fur babies and feathered friends. Whittier Trust Senior Vice President and Director of Philanthropic Services Pegine Grayson sat down with Christine Chacon, a partner at Best Best & Krieger LLP. Chacon has extensive estate planning experience in the areas of trusts for individuals and pets, wills, powers of attorney and healthcare directives.

Pegine Grayson: Why do you believe it’s important for people of means to engage in advance planning for their pets?

Christine Chacon: Our pets are like family members. And despite their shorter life expectancy, it’s actually very common for pets to outlive their owners. Most of us can’t imagine a scenario in which our beloved animals are just dropped off at the nearest shelter with no idea how they would fare. Even if you have a family caregiver in mind, pets are expensive and most of us don’t expect others to have to shoulder the costs of caring for our pets into the future.

Pegine Grayson: That makes sense. What can we do to ensure the best outcome for our pets after we’re gone?

Christine Chacon: I usually begin by asking my clients whether or not they have a successor caregiver—a family member, friend or a neighbor—in mind. Their options will be different depending on how they answer.

Pegine Grayson: Then let’s take those one at a time. What are the options for people who do have a specific caregiver in mind for their pets?

Christine Chacon: First, make sure they know of your intention and agree to serve in this capacity. Consider naming a second person in case something happens to the first one or they become unable or unwilling to serve. The next step is to craft a letter with instructions to guide them (the pet’s medical history, medical conditions, vet contact, special dietary restrictions, habits, etc.). In short, these are tips for success. Finally, ensure your chosen caregiver will have enough resources to care for your pet in the way that you would want them to. This can be accomplished as a simple, outright bequest to the caregiver for this purpose or by arranging a pet trust. The best option depends on the pet owner’s assets, other chosen beneficiaries and circumstances.

Pegine Grayson: Let’s discuss the bequest first. That sounds easier than establishing a trust. Why not just opt for this solution?

Christine Chacon:  It’s a simpler option, but it may not provide sufficient protection under some circumstances. For example, what if your chosen caregiver falls ill or passes before your pet does? What if he or she turns out to be less financially responsible than you had assumed and squanders the money you leave them on a new car? I always advise my clients to hope for the best outcome but plan for the worst one.

Pegine Grayson: So it sounds like a trust structure would be safer, but is that possible for pets?

Christine Chacon: Absolutely! Many states have provisions in their Probate Codes for this type of structure. For example, in California, it is found in Section 15212. You’ll want to engage an attorney who is experienced in setting up these special trusts. Typically, people name the same personal or professional trustee that they have in place for their other trusts and specify that distributions can be made for all expenses reasonably necessary for the pet’s care. The trustee would be obligated to invest the funds prudently, so they may grow over time. The trust would stay in place even if the caregiver ends up changing over time.  Finally, you’ll need to decide what happens to any fund balance remaining upon the pet’s death. Most people designate a trusted animal shelter to receive the residue.  

Pegine Grayson: How does one determine the right amount of money to put into the trust?

Christine Chacon: I suggest you make a list of your typical monthly expenses (food, grooming, vet bills, walking, toys, medications, etc.) as well as the annual ones (dental cleanings, boarding for vacations, even plane tickets) and come up with an average annual amount. We can specify varying amounts to be transferred to the trust upon the owner’s death, depending on the age of the animal at the time of the owner’s death.

Pegine Grayson: OK, you’ve been talking about the situations where the pet owner has a specific caregiver in mind. What if they don’t have anyone willing or able to step in and take the pet?

Christine Chacon: In that case, most of my clients still opt to establish a trust with a professional trustee and name a trusted animal shelter or other appropriate nonprofit as the beneficiary. For dogs and cats, a local shelter is typical. For horses, they’ll need to find a ranch or stables willing to board them for the remainder of the animal’s life. It’s important to reach out to the organizational beneficiary in advance and get their consent to the arrangement. It would be tragic to make plans that you thought were iron-clad only to have the organization say that they’re not willing to take the animal in. The trust instrument will provide that if the pet is adopted, the organization may retain the funds as a charitable contribution.

Pegine Grayson: Can you share a story of a pet trust you established and how it worked out?

Christine Chacon: I counseled a Trustee through the administration of a pet trust which just ended a few years ago. The decedent left a large portion of her estate in trust for the benefit of her dog. Her dog was young when she died, so the trust lasted for the dog’s lifetime. A friend cared for the dog, and a professional licensed fiduciary managed the trust account. The dog was very well cared for, from grooming to boarding, supplies, food, equipment and anything else you can imagine. When the dog died of old age, the balance of the trust fund was given to a local pet organization. It was a lovely arrangement, because the dog’s life continued as her owner would have liked, and a charity was benefited as well. 

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Nov 16th

Peace on Earth and Goodwill Toward Family

The holidays are a time to be together: Here’s how to ensure family harmony

For many, the holidays are the only time of year when the entire family gets together. From January to October, family dynamics may be easily avoided, but November and December usher in the season of togetherness as well as expectation. Studies show that roughly half of all Americans have increased stress during the Thanksgiving to New Year’s timeframe as they anticipate the minefield of family interactions around planning, travel, food, and gift-giving, combined with conflicts over the most common topics of politics, religion, and money.  

“The strains of family dynamics can be exacerbated by wealth,” notes Whittier Trust Senior Vice President and Client Advisor Brian G. Bissell. “Shared family assets, vacation homes, gift expectations, sibling rivalry, and family business affairs all add complexity and can lead to lingering issues. Addressing these issues and working toward family harmony throughout the year is imperative if the goal is to have a drama-free holiday gathering.”

Bissell recommends a few top tips for holiday family harmony: 

  • Try to have regular family communication throughout the year, especially if you have shared assets or an operating family business. Allow the holidays to be a time where you just enjoy each other’s company rather than talk business. Create opportunities for all family members to express their opinions, concerns, and aggravations separate from holiday gatherings.
  • Respect each individual’s personal version of success and happiness. Everyone is on their own life path and will achieve different levels of financial success. The banker may obtain a higher salary than the artist, though the artist may live a more creative life. Envy and rivalries can only be resolved if both parties put in the work. Parents can help by making sure everyone’s accomplishments are celebrated. Being fair in the amount of praise given can be just as important as fairness in the distribution of financial gifts.
  • If alcohol is prevalent at your family gatherings, it’s extra important to set boundaries. Stress that family Thanksgiving, Christmas, and other celebrations are a time to enjoy each other, not a time for weighty topics. And prepare for intervention if necessary. Plan ahead for what you might need to say or do to defuse a conversation that is headed to the abyss. 
  • Model good behavior. Even in the trickiest family interactions, you should maintain your own high standards. Practice compassion, open-mindedness, understanding, and active listening.   

One of the advantages of family wealth is the opportunity for outside assistance in managing family dynamics. If financial issues are regularly fueling the discontent, families should consider hiring an experienced third-party wealth manager who specializes in working through family dynamics to help keep the peace and build trust with all stakeholders. 

“By engaging the services of wealth management offices that prioritize objectivity and open communication, families can navigate the complexities of wealth and financial matters, ensuring that the holiday season is truly a time to be together in harmony,” Bissell says. Through his work at Whittier Trust, he has seen firsthand the value of three key steps families can take:  

  1. Form a family office to include a non-family wealth management team of advisors. These independent, impartial advisors can manage family estate planning and wealth transfer and deliver sensitive family communications. An advisor also serves as a mediator or unbiased perspective to help resolve conflicts among family members and foster long-term family unity. 
  2. Build a strong foundation of family identity and shared values. Work together to articulate shared goals, philanthropic objectives, and a family mission statement. An advisor can help you establish guidelines for communication, compassion, and conflict resolution.
  3. Design a family governance plan that ensures everyone understands how decisions are made about family financial, legal, and personal matters. The structure of the plan might include agreed-upon principles, conditions, and methods of communication. The family office team of advisors will guide you in creating, implementing, and monitoring the plan.

“Family Thanksgiving and the holidays in general are an opportunity to express your thanks for all that family means to you and strengthen family bonds,” Bissell says. “Families are the most enduring relationships of your life, and it’s worth the investment of time and energy to create family harmony.” After all, what better holiday gift could you ask for?

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