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How multiple non-marketable assets can work in a trust

Situation

Marvin is unmarried with two young children. He started his career at an investment firm, developing a proprietary trading system, and later left to manage his own company. Marvin put a majority interest of his company along with other investments he made throughout the years—such as private equity, real estate and other non-marketable securities—into a trust for the benefit of his children. The trust is now valued at 10 times more than when initially funded. His children are just out of college and pursuing their own careers, and are not interested in the business. Marvin is worried about who will manage the trust and his company if something were to happen to him. 

Our Approach

Marvin met with his J.P. Morgan banker who mentioned that J.P. Morgan could become the trustee and be involved with the investments as little or as much as Marvin wanted. His banker explained that many other clients with similar concerns moved their trusts to Delaware and modified them to separate the trust administration from the investment responsibilities. This would allow J.P. Morgan to take over administration, while Marvin could continue to manage the company and other assets. The banker explained that they could structure the trust so that if Marvin was incapacitated or passed away, either a successor individual could be named to oversee the assets or J.P. Morgan would become full discretionary trustee and manage the company, the real estate and the financial portfolio. If J.P. Morgan had full investment responsibility, the firm’s Closely Held Asset Management team could oversee the company and assist as needed. They would not take over the day-to-day operations of the company but would monitor operations as the current management keeps it running. J.P. Morgan’s Real Estate team would oversee the residential real estate by managing the finances, making repairs and capital improvements, if needed, and selling properties when appropriate.  

Outcome

Once Marvin opted to appoint J.P. Morgan as trustee, his mind was put at ease knowing that when he was no longer able to manage his company or other assets, there was a plan in place to ensure a smooth transition—allowing his children to benefit from his legacy.

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Important Information

All case studies are shown for illustrative purposes only, and are hypothetical. Any name referenced is fictional. Information is not a guarantee of future results.

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