WE HELP PEOPLE JUST LIKE YOU
No two people are the same, so we understand that no two clients should be treated the same. Read our success stories below for a look into how we’ve been able to provide individualized help to people just like you.
Our client is the beneficiary of trusts established by her parents containing $3.5 million in assets, including investment accounts and two residences. The trusts did not benefit her spouse, and were not included in her taxable estate. The couple had excess estate tax exemption available, and the trusts had built-in capital gains.
We modified the trusts, providing our client with a general power of appointment allowing her to make her spouse a lifetime beneficiary of the trusts, and including the trust property in her taxable estate, in order to achieve a stepped-up basis in trust assets without incurring any estate tax.
As a result, if our client predeceases her husband, he can remain in the residences during his remaining lifetime. Furthermore, including the trust assets in her taxable estate eliminates $1.3 million of unrealized gains for a tax savings of $400,000.
Upon review of our client’s current property and casualty insurance policies, it was determined that the client was underinsured. Trust Company partnered with a local high net worth insurance agency to review the current policies and recommend solutions. As a result, the client increased coverage for auto and umbrella policies, moved the homeowner’s policy to a carrier specializing in home values greater than $1 million and upgraded to a more comprehensive policy, and obtained a separate “builder’s risk policy” for an investment home – all at the same total premium cost they had been paying previously.
Paying taxes on your investment income reduces your returns. Trust Company uses several strategies to reduce tax liability and therefore increase after-tax returns:
- Harvesting capital losses to offset capital gains and/or income.
- Selling highest-basis tax lots first.
- Focusing on the type and size of gains, as long-term gains are taxed more favorably.
- Taking care to avoid “buying distributions”.
- Rebalancing selectively by selling overweight assets and investing deposits into underweight assets, as opposed to completely rebalancing.
- Gifting low-basis positions to remove a gain and help rebalance tax-free.
Our client had two unmarried children, ages 58 and 60, and a $14 million estate with $5.1 million remaining in estate exemption. Trust Company recommended that the client make a lifetime gift, in equal parts, of $2.55 million to each child in trust. The gifted assets grew from $5.1 million to $6.2 million at the time of the client’s death, shielding $1.1 million from estate taxes, for a savings of $440,000. The children’s trusts were Defective Grantor Trusts. The client paid income tax on the trusts over his remaining lifetime, shielding another $125,000 from estate tax, for an additional tax savings of $50,000.
We estimated our client would have a $3 million estate residue at death. His desire was to support his two unmarried children, both older adults, for their lifetimes, and the remainder to go to charity. We helped him establish a Charitable Remainder Trust (CRUT), which will provide an annual 5% distribution to each child for twenty years, after which the assets will be gifted to designated charities. The estate received a charitable deduction of $410,000 at the client’s death, resulting in estate tax savings of $164,000.
Our recently widowed client, who had no prior experience handling family finances, lost her father within a year of her husband’s death. Trust Company acted as a full-time financial resource, providing many services over the next twenty years including:
- Mortgage refinancing
- Engaging a tax preparer
- Engaging a property and casualty insurance agent
- Negotiating home repairs
- Negotiating car purchases
Our client received considerable peace of mind knowing she had a trusted advisor to help her navigate unfamiliar responsibilities.
Our 89-year old client was the beneficiary of a grandfathered GST exempt trust and a family trust which together totaled $15 million. At his death, his assets were to be distributed in equal shares outright to his three adult children. One child had significant creditor problems, with judgments in excess of her potential inheritance.
We recommended decanting the trusts to a new trust which would distribute the assets to the children in trust, providing them with a general power of appointment which would include the trust property in their taxable estates, and include an ascertainable standard that would provide creditor protection for their lifetimes.
By doing so, $5 million of one child’s inheritance was protected from creditor claims and thus available to support her for her lifetime. The other children received the benefit of trust protection as well, although neither had creditor problems.
Our 80-year-old client established eight Crummey trusts for his grandchildren. He was especially concerned that these children, aged 15 to 22, embrace the financial habits that had helped make him successful. His Trust Company advisor met with each grandchild to explore his or her understanding of spending and saving. The advisor asked “Why do you think your grandfather accumulated his assets that he’s now giving to you?” “Granddaddy worked really hard”, replied one child. The advisor noted that many people work hard but never accumulate anything, commenting that their grandfather consulted him annually to determine if he was earning more than he spent; having the discipline to save more than one spends is critical to building wealth. The eight grandchildren received valuable financial counseling from an independent source that could affect their long-term financial security.
Two clients (brothers) each had a large life insurance policy issued in the early 2000’s with a variable policy structure (policy cash values were invested in the equity markets). The policy values had underperformed considerably compared to the original policy projections. Significant additional premiums (more than $1 million each) would be required to sustain the policy death benefits.
Trust Company partnered with a local insurance professional to provide a comprehensive review of the options for the life insurance:
- A new policy design was selected to guarantee policy death benefits.
- Optimal premium payment structure was determined to provide the lowest present value outlay for the revised coverage.
- A loan was secured from a separate family trust at a 2% interest rate to provide liquidity to pay the required future premiums.
- The family trust providing the loan received a 2% long-term rate on a portion of the assets allocated to fixed income investments.
- This attractive loan allowed the clients to utilize no personal funds for premium payments, and instead allocate these funds to retain and further their investments and business interests.
As a result, the clients obtained revised insurance policies and death benefit coverages better meeting their objectives and providing long-term peace of mind through not having to worry about future market volatility. The clients also secured attractive financing from a family trust to pay the future premium payments.
Our new clients were in the process of transferring substantial wealth to their children, and were willing to pay some gift taxes in order to complete the process. The transfer was to take place in 2008, just a few months before North Carolina repealed the gift tax. We counseled our client to wait a few months and make the gift in 2009. By doing so, our client saved approximately $80,000 in taxes.
Our client had multiple investment and bank accounts, as well as beneficiary designations that would have resulted in a significant probate estate. We established a list of bank accounts, LLC interests, investment accounts and beneficiary designations and systematically worked with the client’s custodian and attorney to retitle assets into her revocable trust. At the client’s death, probate fees were avoided and the estate administration was significantly expedited.