When the family trustee can no longer serve

A multi-generational family business, four family trusts, and a trustee whose health was failing, brought back under a structure built to last.

Key Takeaways

Trustee succession is the gap most families have

Provisions written years earlier made no allowance for it, and the trustee's health was failing.

Where a trust is administered changes what it pays

The trusts were paying state income tax they did not have to.

Insurance is a planning decision

Converting rather than lapsing was the better bet once it was actually modeled.

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Key facts and numbers.

Proven results across every engagement.

$84.0M

Total Family Wealth

$35.0M

Business Value

$20.0M

Investable Assets (2nd & 3rd generation trusts)

$9.0M

Family Charitable Foundation

How Colony supported the situation.

Fiduciary

Replacing a trustee arrangement that had quietly stopped working, and moving administration somewhere more favorable.

Client Issues

Trust provisions were dated, with no trustee succession or trust protectors, and the family wanted better fiduciary risk management for children facing substance abuse and mental health conditions.

Colony’s Solution

Administration moved to a more tax-favorable state with Colony Trust Company as sole trustee or co-trustee. Counsel decanted the trusts to add silent-trust provisions and a trust protector, and to enhance the conditions governing distributions.

Wealth Planning

Converting trusts to mitigate state income tax, and modifying documents so appointments matched the family’s intent.

Client Issues

Significant state income tax was accruing at the trust level, the family wanted the ability to appoint assets to their foundation on a child’s death, and expiring term life policies needed a decision.

Colony’s Solution

The trusts were converted from grantor to non-grantor status, and modified without court approval to allow appointment to the family foundation. Colony analyzed the term-to-permanent conversion and implemented it with the carrier.

Family Office

Coordinating the transition of voting control while protecting the branches of the family that stay passive.

Client Issues

The first generation’s lifestyle portfolio, the family foundation, and each child’s trust each needed management on their own risk parameters and time horizons.

Colony’s Solution

Colony continues to test the first generation’s lifestyle capital against their spending and giving plans, monitors the foundation’s endowment model, and reallocated up to $2 million per trust toward growth once the death-benefit floor was secured.

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What changed

The outcome.

Converting the policies beat letting them lapse

Colony Trust Company modeled both and found conversion gave the better expected ending trust balance.

A $2M guaranteed floor under the downside

The death benefit is what made repositioning the trust portfolios defensible.

Each trust invested for its own horizon

Portfolios repositioned toward higher long-term risk-adjusted returns.

Family Outcomes

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Total Net Worth

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When the family trustee can no longer serve

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Important disclosures

This material is for informational purposes only and does not constitute investment, legal or tax advice, and should not be used as a substitute for the advice of a professional legal or tax advisor. It does not constitute an offer to sell, or a solicitation of an offer to buy, any interest in any investment vehicle. Targets, ranges and expectations set out here are approximations; actual results may differ. This information is limited in scope and is not intended as an exhaustive analysis. Colony Family Offices and its directors, officers, agents and employees are not permitted to render tax or legal advice; please consult your own tax and legal advisors before entering into or implementing any financial transaction. Any tax-related material here is subject to IRS Circular 230: any tax advice contained in this communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another person any tax-related matter. Colony Family Offices is a registered investment advisor; more information, including investment strategies and objectives, is in our Form ADV Part 2, available without charge on request. Client circumstances described are illustrative and individual results vary.

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