PW Adviser professionals began management of the investments of an estate to insure the proper handling of the investment assets for the beneficiaries. Efforts were coordinated with the trustee to insure the smooth transfer and reinvestment of assets.
Issues: Individuals are subject to long term capital gains taxes, and thus it is difficult to sufficiently diversify personal assets that have enjoyed substantial returns. Since assets contributed to an estate receive a "step-up in basis" to the current market value, there is an opportunity to rebalance estate assets and diversify without creating capital gains tax liabilities. Often, the assets of an individual are liquidated and held in cash until the heirs or trustee can determine how to make necessary disbursements. Disbursements from a trust are taxable to the beneficiaries at their personal tax rates; undistributed income is taxed to the trust at the highest corporate rate.
Solutions: PW Advisers worked with the bank trust department and the executor of the estate to create an investment policy consistent with the instructions set forth in the will of the donor establishing the trust. As the trust had limited required disbursements and a long term time horizon, the investment policy called for a large equity allocation and the use of tax-managed mutual funds that reduce the ongoing tax-liability created by the investments and enhance the after-tax return of the trust assets.
Results: PW Advisers serves as the investment advisor to the Trustee and works with the bank custodian to implement the investment policy. The investments are adjusted based on the disbursements of the trust, some of which are not always predictable. The trustee receives quarterly investment reports and performance analysis based on the periodic reports provided by the custodian.
