WEALTH INSIGHTS

Unique trifecta creates wealth transfer opportunities

Wealth transfer strategies families are deploying during the COVID-19 pandemic.

Rising federal transfer tax exemptions, declining asset valuations and historic low intra family lending rates have created a unique wealth transfer opportunity for entrepreneurs and family offices. Wealthy families can implement strategies that preserve, protect and pass their wealth, while maintaining significant access, control and flexibility.

Rising federal estate tax exemptions

  • Amounts individuals can shelter from estate taxes are at all-time highs, scheduled to be reduced by 50% on 1/1/26 (or 1/1/22 if legislative proposals are enacted)
  • Exemption may be used during lifetime to create “Access Trusts” with each generation of a family retaining significant access, control and flexibility
  • Properly structured Access Trusts protect the asset base, and all future appreciation from estate tax for multiple generations
  • Access Trusts can also be structured to protect assets from creditors, predators and lawsuits (including divorcing spouses)

Declining asset valuations

  • Recent market turbulence has significantly depressed asset values
  • Gifting at low values significantly leverages federal exemption amounts
  • Marketability and minority discounts available when gifting closely held business interests can even further reduce valuations
  • Sales of assets to Access Trusts can further leverage the federal exemption amounts

Historic low intra family lending rates

  • Intra family lending rates at a historic low (0.91% as of 10/21)
  • Allows senior generation to sell assets at low valuations to Access Trusts and finance the purchases with sub 1% intra family loans
  • No capital gain recognized on sales of assets to Access Trusts
  • Loans can be structured as interest only with balloon payments to meet cash flow needs of family member

This trifecta of circumstances creates a once in a lifetime opportunity for wealthy families to significantly leverage the effectiveness of multi-generational wealth preservation strategies. However, there is significant pressure in Congress to eliminate these and other wealth planning techniques. If enacted, families will have a very small window during the remainder of 2021 to act. To learn more about how SVB Private can help you and your family please reach out to your SVB Private relationship manager or Jason M. Cain.

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Jason Cain

Jason Cain is Chief Wealth Strategist, Senior Managing Director, MFO, responsible for developing and delivering comprehensive, advice-based solutions for ultra-high-net-worth clients, family offices and their professional advisors.

This publication discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice and does not represent a complete analysis of every material fact with respect to the economy, financial markets, interest rates, and any industry or sector mentioned in the publication. The graphs and charts presented were created for informational purpose only and may use data sourced from third parties. The accuracy and completeness of sourced data is believed to be reliable, but has not been independently verified. 

Any investment idea or strategy discussed herein is provided for information purposes only. There is no guarantee that a strategy will achieve its objective and the readiness and efficacy of such strategy will depend on your particular facts and circumstances. Please consult with your independent professional advisers for final recommendations before changing or implementing a financial strategy. 

Investment products mentioned herein, including stocks, bonds, and mutual funds may lose value and carry investment risks. Due diligence processes seek to diminish, but cannot eliminate risk, nor do they imply low risk. Asset allocation, diversification and rebalancing do not guarantee a profit or protect against a loss in declining markets. Past performance is not indicative of future results, which may vary.

The views expressed in the article are those of the author and/or person interviewed and do not necessarily reflect the views of SVB Private or other members of Silicon Valley Bank and SVB Financial Group. The materials on this website are for informational purposes only, are subject to change and do not take into account your particular investment objective, financial situation or need. Since each client’s situation is unique, you should consult your financial advisor and/or tax planning professional before acting on any information provided herein.