Holistic wealth planning for your assets and liabilities

Significant funding needs can often arise quickly. Tax payments, real estate opportunities, charitable gifts, or a family obligations may be needed at a time when selling assets could create an unwanted tax impact or disrupt your investment plan. In those moments, comparing the cost of borrowing with the cost of selling investments can help clarify the best path forward.

For example, a family that has recently sold part of a business may face a large tax bill while also holding a concentrated stock position or other appreciated assets. Instead of selling additional assets or depleting cash reserves, they may be able to borrow against eligible securities or other collateral to access short-term liquidity. This approach offers flexibility by giving the family more time to consider additional funding options.

“Strategic financing may help avoid selling appreciated assets solely to meet a short-term need, but it should be evaluated carefully,” says Charles Doepken, National Lending Director with Wealth & Investment Management, Wells Fargo Bank, N.A. “Lending requirements, tax considerations, the anticipated benefit of remaining invested, and the family’s comfort with leverage all need to be part of the discussion.”

This coordination is especially important when wealth is held across trusts, business entities, real estate, or other illiquid assets, as borrowing decisions can affect both liquidity and estate planning.

Family needs may also arise unexpectedly, or you may be planning to offer support for important milestones. For example, a parent may want to help an adult child buy a home, fund education for grandchildren, invest in a new business, or advance a shared philanthropic goal. You may also want to provide support while maintaining control over your assets, either by borrowing against them yourself or creating a loan structure where the family member is the borrower.

“Securities-based lending can provide flexibility while helping to maintain your long-term investment strategy rather than accelerate a wealth transfer,” says Doepken. “This can also create a more intentional legacy planning conversation: Is the support a gift, a loan for the near term, or an advance on a future inheritance? Addressing these questions now can help set expectations and reduce misunderstandings later.”

Securities-based lending has risks. If the market value of pledged securities declines below required levels, you may be required to pay down your line of credit or pledge additional securities in order to maintain it; otherwise, the firm will require the prompt sale of some or all of your securities. The sale of securities may cause adverse tax consequences.

A family can have substantial net worth and still face a short-term liquidity challenge. This is common when wealth is concentrated in a privately held business, commercial real estate, or other assets that may not be easy to sell quickly.

If a death, ownership change, business transition, or tax obligation creates immediate expenses, the family may need cash before assets can be sold or transferred. Without proper planning, that pressure can lead to a rushed sale resulting in reduced value or disagreements among heirs.

“Reviewing potential or planned liquidity needs, along with your long-term investment strategy and estate planning goals, gives you the advantage of holistic wealth management planning to help you make more strategic decisions,” says Knake.

A year-end review conversation with your advisor can help align your investment strategy, taxes, liquidity needs, and wealth planning goals. A financing solution may not be the right choice in every case, but evaluating it alongside other options can help clarify trade-offs before decisions become time sensitive.

Talk with your advisor about whether strategic borrowing options could support your broader wealth management strategy.

Wealth & Investment Management (WIM) offers financial products and services through bank and brokerage affiliates of Wells Fargo & Company. Bank products and services are available through Wells Fargo Bank, N.A.

Wells Fargo & Company and its affiliates do not provide tax or legal advice. This communication cannot be relied upon to avoid tax penalties. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your tax return is filed.

Any estate plan should be reviewed by an attorney who specializes in estate planning and is licensed to practice law in your state.

Securities-based lending has special risks and is not appropriate for everyone. If the market value of a client’s pledged securities declines below required levels, the client may be required to pay down the line of credit or pledge additional eligible securities in order to maintain it, or the lender will require the sale of some or all of the client’s securities. For Wells Fargo Bank Priority Credit Line, Wells Fargo Advisors, on behalf of Wells Fargo Bank, N.A., will attempt to notify clients of maintenance calls but is not required to do so. For Priority Credit Line, Wells Fargo Advisors will attempt to notify clients of maintenance calls but is not required to do so. Clients are not entitled to choose which securities in their accounts are sold. The sale of their securities may cause clients to suffer adverse tax consequences. Clients should discuss the tax implications of pledging securities as collateral with their tax advisors. An increase in interest rates will affect the overall cost of borrowing. All securities and accounts are subject to eligibility requirements. Clients should read all Wells Fargo Bank Priority Credit Line and Priority Credit Line documents carefully. The proceeds from the Wells Fargo Bank Priority Credit Line may not be used to purchase or carry margin stock or pay down a margin account debit (talk to your financial advisor about additional restrictions on the use of proceeds). Margin stock is defined in Regulation U and includes, principally: (1) stocks that are registered on a national securities exchange or any over-the-counter security designated for trading in the National Market System; (2) debt securities (bonds) that are convertible into a margin stock; and (3) shares of most mutual funds. The proceeds from the Priority Credit Line may not be used to purchase additional securities or pay down a margin account debit(talk to your financial advisor about additional restrictions on the use of proceeds). Securities held in a retirement account cannot be used as collateral to obtain a securities-based loan. Securities in a Wells Fargo Bank Priority Credit Line or Priority Credit Line collateral account must meet collateral eligibility requirements.

Wells Fargo Bank Priority Credit Lines are offered by Wells Fargo Bank, N.A. as the lender, in partnership with Wells Fargo Clearing Services, LLC as agent, servicer and intermediary holding the collateral accounts. Priority Credit Lines are provided by Wells Fargo Advisors and carried by Wells Fargo Clearing Services, LLC, as the lender. 

There are conflicts of interest when Wells Fargo Advisors recommends that you use a loan secured by your Wells Fargo Advisors account assets as collateral. Wells Fargo Advisors and its financial advisors have a financial incentive to recommend the use of securities-based lending products rather than the sale of securities to meet client liquidity needs. Financial advisors will receive compensation on the outstanding loan balance in your Wells Fargo Bank Priority Credit Line or Priority Credit Line account. In addition, your financial advisor’s compensation will be reduced if your interest rate is discounted below a certain level. There is an incentive for financial advisors to recommend the Wells Fargo Bank Priority Credit Line, Priority Credit Line, and other securities-based lending products, such as Margin, as well as an incentive to encourage you to maintain a larger loan balance and to discourage interest rate discounts below a certain level. The interest you pay for the loan is separate from, and in addition to, other fees you may pay related to the investments used to secure the loan, such as ongoing investment advisory fees (wrap fees) and fees for investments such as mutual funds and exchange traded funds, for which Wells Fargo Advisors and/or our affiliates receive administrative or management fees or other compensation. Specifically, Wells Fargo Advisors benefits if you draw down on your loan to meet liquidity needs rather than sell securities or other investments, which would reduce our compensation. When assets are liquidated pursuant to a maintenance call or demands for repayment, Wells Fargo Advisors and your financial advisor also will benefit if assets that do not have ongoing fees (such as securities in brokerage accounts) are liquidated prior to, or instead of, assets that provide additional fees or revenues to us (such as assets in an investment advisory account). Further, different types of securities have higher release rates than others, which can create a financial incentive for your financial advisor to recommend products, or manage the account, in order to maximize the amount of the loan.