Wealth Transfer Strategies for Illiquid Assets

Feb 1, 2022 | Special Assets

Often called the hidden half of client wealth, recent studies suggest that on average, special assets, or illiquid assets held in trust (e.g., residential, or commercial real estate, oil, gas, or mineral interests, farmland, timberland, and closely held business interests), make up as much as 55 percent of the asset portfolio of high-net-worth individuals.

These assets are frequently an integral part of a family’s history—with sentimental value that might even outweigh monetary value. Special assets are not simply items on a spreadsheet—they are often the initial source of a family’s wealth and generational legacy—from the business built from the ground up by parents and grandparents to the home where multiple generations of family members were raised. In the case of mineral rights or oil and gas interests, these can be assets that have not only been in the family for many years, but also hold value and generate excellent return.

As Baby Boomers (people born in the United States between 1946 and 1964) approach their retirement, they must consider how best to transfer their wealth to the next generation. There are some 12 million Baby Boomers who own a business, and 70 percent of them will retire over the next 15 years. Estimates of the total wealth locked up in these companies run in the trillions of dollars. Some in banking and finance might suggest these assets be liquidated to make the wealth transfer process easier; however, this solution does not necessarily serve the needs or wants of every individual or family. Many families have a desire to ensure these holdings are responsibly managed under a trustee structure that not only maximizes the value of these assets, but also promotes good stewardship.

As an independent, directed trustee, Cumberland Trust is well-positioned to understand and help families retain unique assets held in trust. We specialize in education, administration, and client service, while the client’s chosen professional advisors manage the trust’s assets. This distinct difference sets Cumberland Trust apart from other corporate fiduciaries and allows us to focus on providing our clients with high quality, personalized trust and estate administration services.

Cumberland Trust has a dedicated Special Assets team comprised of professionals with years of experience administering these holdings. Often, our team coordinates the special asset management in conjunction with an external asset manager selected by the client(s). This arrangement empowers clients to remain involved in the asset management. For example, if a family has a commercial property held in trust, Cumberland Trust’s directed trustee platform allows the family to be involved in selecting the property manager— whether that person is a local property manager or a family member who possess the knowledge and expertise required of the role. A similar arrangement could also apply to the management of a family’s tract of timberland, a working farm in Mississippi, or mineral interests in West Texas. The level of involvement of Cumberland Trust’s Special Assets Team depends on the type of asset held in the trust. Even when an external property manager is involved, the Cumberland Trust team continues to assist in the administration of the asset.

Whatever your family’s goals; Cumberland Trust is committed to helping you reach them. We offer the expertise, unbiased support, and the consistency you deserve, and are devoted to helping you protect your family’s legacy.