The Special Assets Team: Closely Held Business Interests

Oct 28, 2019 | For Professional Advisors, Special Assets

The Special Assets Team at Cumberland Trust, consisting of Dayton Hale, April Drennan, Natalicia Hosseinzadeh, and David Shetler, brings together their collective expertise in all matters of unique, illiquid, and hard-to-value assets held in trust.  This installment of the Trusted Ideas blog, written by the Special Assets Team, focuses on closely held business interests, another one of the largest dollar-value holdings in Cumberland Trust’s portfolio.

As mentioned in previous blog posts, the “hidden half” of client wealth is often overlooked.  Most families who have accumulated significant wealth have done so through family businesses, real estate, natural resources, or other industries.  In many cases, their trust assets consist of these non-conforming or illiquid holdings.  Notably, trusts prove to be an efficient vehicle for holding interests in entities such as LLCs or Limited Partnerships and closely held stock.

Cumberland’s directed trust platform allows for effective administration of these types of trust assets by enabling professional managers and, in some cases, family members to put their expertise to work in managing these holdings.  Below is a description of these common business interests held in trust, as well as a few notes on Cumberland’s unique approach to administering these assets.

LLCs and Limited Partnerships:

LLCs and Limited Partnerships have become preferred entities for housing trust held assets.  Whether the entity holds an operating business or real estate, this structure (with the trust as a member or limited partner) allows for protection of the corpus of the trust from liability as well as consolidation in entity management.  LLC managers and general partners can be unrelated third parties or family members, while Cumberland serves as trustee of the member/limited partner trust(s).

Closely Held Stock:

Trusts are also a preferred tool for housing closely held corporate stock in family businesses or other operating companies.  Cumberland’s unique approach to trust-held special assets allows a knowledgeable family member, individual, or committee, designated by the family, to exercise any decision related to the stock on behalf of the trust.  This gives trust beneficiaries more direct involvement with assets that in many cases have value to the family beyond their monetary worth.

Cumberland’s directed trust platform creates a “best of breed” asset management structure and allows families to have a role in how those trust assets are managed.  For many families this is an effective and desired arrangement for managing certain types of illiquid assets.