Some studies show that illiquid assets make up approximately 55% of the portfolios of high-net-worth individuals. These assets could represent an initial source of a family’s wealth or an important part of the family’s history. When these assets are placed in trust to preserve them for future generations, finding a trustee with the depth and experience to administer non-conforming assets can be daunting, as many traditional corporate trustees may not administer illiquid assets.
If your client holds a special asset, liquidating it may not be an option. Cumberland Trust helps keep these valuable assets in the family by partnering with a family’s preferred asset manager to help administer trusts of even the most complex special assets.
What are Special Assets?
At Cumberland Trust, we define special assets as illiquid asset(s) not traded on a stock exchange or held outside of a brokerage account.
Common Types of Special Assets
- Real estate, including a beneficiary-occupied home, both primary and secondary residences,
- Commercial property
- Closely-held businesses such as LLCs, limited partnerships, etc.
- Promissory notes and loans
- Oil, gas, and mineral interests
- Timberland, agricultural land, and raw land
- Private investments such as hedge funds, private equity, etc.
- Intellectual property
- Fine art, jewelry, and collections
These assets are as unique as the families to which they belong. Many families want to make sure management and ownership of these holdings are responsibly transferred to the next generation. Each asset and trust is unique, which leads to distinctive solutions for administering a trust with special assets. However, managing or administering special assets can be complicated and overwhelming for some clients and their families.
Some finance or banking professionals might suggest a trust liquidate special assets to make the wealth transfer process easier and result in more straightforward asset management for the trustee. However, this is not always an option if all beneficiaries do not agree or they desire to keep special assets in the trust.
Cumberland Trust’s Unique Trust Solution
Our directed trust structure sets us apart when it comes to administering trusts with special assets. Many corporate trustees do not administer trusts holding special assets or if they do, they insist on fully managing the special assets, so the family has little or no say in how the assets are handled.
At Cumberland Trust, special assets comprise over a third of our $9 billion+ in assets under administration. Our team is well-positioned to understand and help families retain unique assets held in trust. We coordinate with the client’s chosen external asset manager(s) to carry out decisions. A family can have an independent corporate trustee and still be able to manage and run their entity, property, etc. We work alongside the external asset manager(s) selected by the client to help them execute any decisions that need to be made, as well as provide administrative support, such as paying taxes, insurance, regulatory filings, and other necessary procedures.
How Cumberland Trust Administers Trusts With Special Assets
Once Cumberland Trust is named trustee, our team steps in to administer the special assets held in the trust. We provide key administrative tasks that allow the external management of a special asset to proceed smoothly.
Our team works with external special asset managers, ranging from family members to property managers to oil and mineral interest managers. Depending on the asset type, Cumberland Trust can administer trusts holding the following illiquid or non-conforming assets:
Real Estate
- Serve as liaison with property/business manager, family attorney, or family members
- Obtain appraisals and yearly inspection
- Coordinate repairs
- Manage insurance and file claims
- Facilitate sales, leasing, and purchases of property
Closely Held Business Entities
- Review organizational documents for compliance purposes
- Process capital calls and track total committee capital investments of private equity funds
Promissory Notes
- Review, collect, process, and or issue promissory note payments
Mineral Interests
- Receive and process royalty payments
- Review, negotiate, and approve leases and re-leases
- Review mineral rights accounting reports
Real-World Example: Trust Purchases Special Asset
A trust was funded with the proceeds from a medical malpractice settlement for the minor beneficiary who had suffered a birth injury. The family wanted to purchase a home that would support the beneficiary’s needs.
In an effort to achieve this goal, Cumberland Trust’s special assets team worked with a realtor to find a home, contractors to make ADA-compliant renovations, and ensure all relevant inspections were completed. The special assets team helped the family with this project from initial negotiations to their move-in date. Now the client has a suitable home that the beneficiary can grow and thrive in.
Real-World Example: Creating a Trust for Private Company Shares
A family has shares in a private company that is getting ready to go public. Once the company goes public, the shares will be worth considerably more and create significant estate taxes that would impact what the family can pass down to their heirs.
The client decided to create a trust for their shares in the company. Cumberland Trust worked with the family under the direction of the named external special asset advisor to get the shares into the trust, ultimately saving the grantor a significant amount of estate tax at their death. The grantor now has appreciating assets in a trust that can provide for countless generations after them.
Working with Cumberland Trust can help your clients with burdensome administrative tasks without losing control of managing their illiquid assets. To learn more about how we’ve helped our clients, read our latest case study.