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Generational Wealth Following A Business Sale

Preservation, Protection, Legacy.


When a family experiences a liquidity event that will impact the lives of generations to come, it is crucial to have a capable advisory team in place. A few key objectives may include income tax mitigation, estate tax mitigation, asset protection, estate liquidity, cash flow management, tax-efficient investment management, as well as family charitable strategies. What ultimately determines the structures and vehicles employed are the values and objectives of the first generation. Effective planning up front can remove some of the burden surrounding the wealth created, and refocus the resources as a tool to help the family realize their objectives and goals. Financial education and training for younger family members is also important to get them acclimated and prepared for future wealth transfer.

Key Challenges

Our client founded a nationally recognized financial services firm that he built from the ground up. He spent his career building the business and was fortunate to be recognized as one of the top firms in the industry. When the transaction occurred, the clock started running to get his financial house in order. Though he had completed some risk management and estate planning years ago, he had outgrown the strategies which were once adequate. In addition, the sale graduated him into the spectrum of wealth where he would be certainly subject to estate taxes without implementing any advanced planning techniques. One of the first things our client wanted to do with his windfall was to give back through gifts to build and improve regional facilities for high school students. We always get excited when a client has both the intent to minimize taxes and the heart to be generous – because it is easy to accomplish both at the same time. With such a large tax year ahead of him, we knew we had some great solutions to maximize his tax savings and impact the organizations important to him. Lastly, our client wanted us to begin working with his adult children to set up accounts and acclimate them to the process of investing. 

Client Objectives

It’s no secret that selling a business generates complexity and new a new type of asset to manage. Many business owners had capable teams supporting them over the years while they lead their business – it should be no different after a sale. Our client desired actionable and consolidated financial information at his fingertips, with a single advisory team to quarterback his planning. He also wished to maximize tax savings, his impact on the community, and set up structures to benefit his family for a long period of time. With a son and daughter in college, he asked our team to step in to start independent wealth management relationships with each of them. In order to make the most effective decisions on his charitable endeavors, our client asked the Benchmark team to quarterback the framing of the family charitable strategy in addition to the creation of the vehicles to carry out their wishes.

We Step In...

Results and Impact

Historic Audit and Data Gathering

When a client graduates to a new threshold of wealth, a new level of scrutiny will fall on their finances. As a result of this sale, our team completed a detailed review of his entire financial situation, both currently and historically. After reviewing previous tax returns including gift tax returns, and irrevocable trust tax returns, we discovered errors in GSTT allocation, tax filing status of irrevocable trusts, as well as documentation of previously made lifetime gifts.

Risk Management

When evaluating the risk management plan, we found errors made in the structure of life insurance policies, gifts of premiums, as well as several policies that no longer fit his situation.We streamlined the insurance policies in force to target the objectives of estate liquidity at the second death, instead of death benefit at the first spouses death. After the business sale, there was no longer a liquidity issue in this situation. In addition, when we reviewed the estate documents, we worked with the estate attorney to add provisions for asset protection and estate tax mitigation within existing documents.

Charitable Strategy

After finalizing the family's charitable plan, we went to work and created the appropriate structures, and moved funds to seed a charitable foundation for our client. We ended up utilizing a Charitable Lead Trust combined with a Donor Advised Fund to capture the up front tax benefit in the year of the sale.

Strategic Execution

After a full review of the current tax strategy, estate plan, as well as investments and cash, Benchmark outlined a detailed list of recommended action for the client to evaluate. We discussed the pros and cons of various strategies as well as modeled out what the long-term impact would look like for the family and charities they had chosen to benefit. Our client selected the strategies they thought best fit their situation and our team worked diligently through the end of the year to execute the plan.

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