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:
- 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.
- 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.
- Introduce successors to the property management team, leasing agents, and other important partners.
- Minimize misunderstanding and potential disputes among beneficiaries by delivering and modeling clear communication about ownership, expectations, and long-term vision.
- 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.
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