Preserving your assets and wealth

If outsiders take aim at your wealth, there are planning tools and strategies that can help protect your family’s assets.

What is asset preservation?

A top priority for many wealthy families is finding ways to help preserve their assets–the adoption of strategies to guard one's wealth. Indeed, it’s one of the most important aspects of wealth planning today. The people we work with almost universally want to protect assets for themselves, their spouses, their children, and their grandchildren. Some of the biggest risks include:

• In a divorce, a child’s ex-spouse may claim entitlement to family wealth.
• Litigation can expose family assets to court judgments.
• Even under the current federal estate tax laws that greatly expanded federal estate tax exclusions, U.S. families paid nearly $18.4 billion in estate taxes in 2021^†.
• Potential errors in planning, such as choosing the wrong estate planning tools that compromise a family’s privacy, risk the tax-efficient transfer of wealth to future generations, or fail to coordinate with other planning tools.
• Choosing the wrong assets to donate to charity can negatively impact the family by reducing the size of the charitable donation and limiting the tax benefits.

The good news is that early and ongoing planning can help you avoid common mistakes. When we understand the full scope of what you’re trying to accomplish, we can work with you and your legal and tax advisors to find ways to help meet those goals. Your broad goals will be at the heart of your plan to protect your legacy.

Asset preservation planning and strategies

Preservation starts with a competent trustee

Failing to appoint executors and trustees who place the family’s interests at the forefront can take an emotional toll on everyone from the wealth creators, whose cherished hopes may be dashed, to the intended beneficiaries, whose own future may be upended.

Rather than appointing family members as fiduciaries, consider the benefits of a professional corporate trustee. It offloads family members from liability and hassle, and increases the odds of competent preservation and growth of family assets.

Asset preservation and control

For many people, a primary objective is to structure their wealth using trusts to help make it off limits to the future generation’s creditors and “predators,” while leaving the current generation with a say in how the family business is run or how the family’s assets are invested or used.

With careful planning, you can retain some degree of control over assets without complete ownership. This common desire for control leads to a delicate balancing act because many trusts require the grantor or settlor—the person establishing the trust—to cede control of trust assets to a trustee.

Family privacy

Many people don’t understand that passing assets through their Will makes them part of the public record. If someone puts a bequest into a Will, that information will be available to anyone looking to find out who the heirs are and how much they’re getting. Someone who has just inherited a large amount of money could be an attractive target for all kinds of predators.

In most jurisdictions, a revocable trust structure will help protect assets in an estate plan from public view. However, failure to fund the trust or neglecting assets that are located in another state could still leave part of your estate exposed to public view.

Tax-efficient structures

The 2017 federal tax law included major changes both to rules that govern lifetime gifts as well as money passed through your estate at death. Today’s higher tax exemptions mean that many families no longer have to worry about federal estate and gift taxes–at least until 2026. But for families with large enough estates–especially those with business interests–federal estate tax may remain a looming issue. And not getting the planning right can be very costly.

I recently reviewed a family’s trust created to help protect and preserve a very large estate. While the trust seemed perfectly fine in isolation, it failed to consider the other planning that had been done by the family. The language of the trust inadvertently created an imbalanced distribution of wealth among the children and was entirely due to a lack of coordination.

Estate and gift taxes are not the only concern. Capital gains tax has become a major focus of planning in recent years, particularly preserving basis adjustment where appropriate. When assets are included in a person’s estate at death, basis is adjusted (usually a step up, but sometimes a step down) to date of death values for purposes of calculating capital gains, rather than retaining the asset’s original value‡. A higher tax basis will greatly reduce capital gains when the asset is sold. That basis adjustment could be significant for someone who started a business for, say, $10,000 many years ago, and grows it to $5 million at death.

Preserving basis adjustment where appropriate may be more important than estate tax savings and could mean substantial savings for that person’s heirs. Because tax laws seem to constantly change, it’s important to revisit all tax-related aspects of an estate plan frequently with knowledgeable tax and investment advisors.

Inadequate or misguided tax planning can reduce a family’s wealth, threaten a business’s future, and expose beneficiaries to drawnout litigation.

Charitable objectives

For those with philanthropic goals, there are several ways to structure charitable gifts to provide possible benefits for the family.

For example, it might make sense to gift an appreciated asset such as a building or a stock holding either directly to the charity or through a charitable remainder trust, which lets you retain an interest in the trust as long as you’re alive and then sends the remainder to charity.

It’s also possible to use either Qualified Charitable Distributions from IRAs, or annual required minimum distributions from IRAs and other retirement accounts, to make charitable gifts.

Communicate and adapt to shifting needs

None of your goals should be considered in isolation. Talking with your advisors and your family will help you to understand and accommodate their shifting needs.

I worked with a family where the father had died, the mother was elderly, and the two daughters were concerned about the future of an extremely valuable family business.

The situation ultimately called for a very specialized solution—the sale of a majority interest in the business to a grantor trust. But the big point is that this planning both saved the family a large amount in taxes and helped preserve the family’s legacy for multiple generations.

Paying attention to the considerations described above allows you and your advisors to create an estate plan that helps preserve and protect your family’s wealth with minimal disruptions and maximal impact.

Huntington is here to help

Connect with your Huntington Private Bank^® advisor to outline a plan that can help alleviate your concerns. To learn more, please contact your Huntington Private Bank team to see how we can help, or find a Huntington Private Bank Office near you.