Using Trusts to Unlock Opportunities
A growing business or recent sale can bring big opportunities, but without the right guidance, you can miss key strategies. See how one business owner's loan challenge could have been avoided with a more strategic approach, leveraging trust to drive long-term success.
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We all make plans, whether it's for the weekend to achieve financial goals, secure our retirement or execute a business succession plan. Trust can serve a multitude of purposes to help you achieve your objectives.
A while back, I met with a client of a former employer who had recently sold his business. He chose not to bring in his commercial or private wealth bankers during the sale, because he trusted his independent financial planning team. He agreed to meet with us because he wanted to obtain a loan to start a new venture, one his children would be a part of. As collateral, he would use his one half interest in a commercial warehouse, and unfortunately, that bank would not accept that as security. He and his outside trusted advisors had assumed he could secure a loan using that asset.
So to explore other ways to help him, we inquired about the sale proceeds. We learned, based on the advice of those trusted advisors, the sale proceeds were used to pay off his low-interest mortgage, and the rest went into fund an irrevocable asset protection trust. Absent his home, he had no other assets to secure a loan. Had he consulted with us, we could have guided him regarding the loan and provided him with alternative solutions, giving him the opportunity to adjust his plan in order to meet all of his objectives. For example, instead of putting all of the net proceeds into an irrevocable trust, put some into a revocable trust managed asset account. Pledge that trust account for the loan. The revocable trust could have served to meet other long-term goals. Simply put, we could have provided the client with tangible value in his decision-making process.
Trust can provide creditor protection, mitigate estate taxes or provide income during retirement. Trust can provide financial continuity for a client's family after their death and in some cases, avoid an unnecessary fire sale of their business. Understanding how various trusts can be used to align with your client's objectives allows them to achieve the successful outcomes they've worked so hard to achieve.
I'm Whitney Blair, Chief Fiduciary Officer at Texas Capital Private Bank. Our team is excited to assist you in achieving your family's financial objectives and realizing your asset protection goals.