Private Equity, Business Interests and Digital Assets: The Changing Shape of High-Net-Worth Estates
For generations, the traditional picture of an estate might have included a home, investment accounts, retirement assets, and perhaps a closely held family business.
For many high-net-worth families today, that picture looks considerably different. Private equity interests, multiple business entities, investment real estate, cryptocurrency, valuable collections, and other alternative assets may represent a significant part of a family’s wealth.
Unlike cash or publicly traded securities, however, these assets can bring their own rules, restrictions, valuation questions, and practical challenges. As a result, the estate planning questions surrounding them often go well beyond simply deciding who inherits what.
Not Every Asset Transfers the Same Way
One of the fundamental questions in estate planning is deceptively simple: What do you own?
The answer matters because different assets may require very different planning.
An interest in a privately held company, for example, may be governed by shareholder agreements, operating agreements, buy-sell provisions, or transfer restrictions. Real estate may be held individually, through partnerships, LLCs, or other structures. Private investments may have limited liquidity and their own rules governing transfers.
Digital assets introduce another set of considerations, including access, control, security, and the authority of a fiduciary to manage them.
Simply identifying a beneficiary does not necessarily resolve all of those issues.
Valuation Can Become Part of the Estate Planning Conversation
Publicly traded securities generally have a readily identifiable market price. The value of a private business interest, partnership interest, real estate holding, collectible, or other alternative asset may be much less obvious.
That can matter for lifetime transfers, charitable planning, estate and gift tax reporting, and ultimately the administration of an estate or trust. It can also create a practical challenge for families trying to divide wealth fairly.
“Equal” and “equitable” are not always the same thing when one beneficiary receives a liquid investment portfolio and another receives an interest in a business or property that cannot easily be sold.
Thoughtful planning can address not just who receives an asset, but how that asset fits into the overall distribution of family wealth.
Liquidity Matters, Too
A valuable estate is not necessarily a liquid estate. A family may hold substantial wealth in businesses, real estate, private investments, or other assets without having a corresponding amount of cash readily available.
That distinction can become important when an estate needs liquidity for taxes, expenses, distributions, or ongoing management.
Selling an asset quickly may not be desirable—or even possible. Anticipating liquidity needs before they become urgent can therefore be an important component of planning for complex estates.
Who Will Manage What You Leave Behind?
Complex assets also make the selection of fiduciaries particularly important.
Managing a traditional investment account is different from overseeing an operating business, evaluating a private investment, managing commercial real estate, or safeguarding digital assets.
Families may need to think carefully about the expertise, judgment, and authority that will be required after incapacity or death. In some situations, the best person to make family or distribution decisions may not be the best person to oversee a particular asset.
Estate planning can provide opportunities to build a structure around those differences rather than expecting one individual to be everything to everyone.
Wealth Has Evolved. Estate Plans Need to Evolve With It.
The growth of alternative assets does not change the fundamental purpose of estate planning. It does, however, make coordination increasingly important.
Estate planning documents, business agreements, ownership structures, beneficiary designations, tax planning, and succession plans should work together rather than operate independently. That is particularly true as families accumulate assets that may be difficult to value, difficult to transfer, or intended to remain in the family for another generation.
For high-net-worth individuals and families, understanding what is owned is only the beginning. The larger question is how each asset should be managed, transferred, and ultimately incorporated into the legacy the family intends to leave behind.
If your assets, business interests, investments, or family circumstances have changed since your estate plan was created or last reviewed, it may be time to make sure your plan has kept pace. Contact Law Stein Anderson to schedule a consultation and review your estate plan with an experienced estate planning attorney.