Insurance, guided by sensibility–not sales quotas.

Background

• Large real estate developer with low-cost basis portfolio with acquisitions dating back to the 1980’s.
• 7 Figure Capital Gain Liability if the assets were sold.
• 8 Figure Estate Tax Exposure

Family’s Goals

• Tax-efficient transfer to their son who was taking over the management of the real estate portfolio
• Elimination of a potential 8 figure estate tax liability for the parents.
• Elimination of estate tax exposure for the son who would inherit the assets.
• Elimination of capital gains taxes on the son’s sizable real estate portfolio.
• Desire to transfer the management and ownership of the portfolio to the son, while still deriving a fixed-income stream from the cash flow of the properties
• Desire to maximize the family’s legacy despite tens of millions of dollars of ‘dead equity’ in their real estate portfolio
• Maintain or improve ability to obtain financing / Maintain a Strong Balance Sheet (had to be careful about shifting assets out of the estate)
• A myriad of other family dynamics.

The need for insurance:

• Create liquidity upon the patriarch/matriarch’s passing to reduce the opportunity for family conflict around the real estate portfolio and other assets – or pay potential estate taxes.
• Maximize the use of ‘dead’ equity in the properties that was not being utilized except for cash flow production (which was unaltered).

Background

• C-Suite Executive’s company was recently acquired by a new parent and generated a liquidity event in excess of $100 million
• Additional stock grants that were to be issued for several years beyond creating a multi-million dollar tax liability annually
• Anticipated income tax liability was in excess of $24 million
• 8 Figure Estate Tax Exposure
• Family’s Goals:
• Eliminate capital gain liability.
• Retain control over wealth while alive.
• Evaluate using lifetime exemption in the changing tax climate.
• Eliminate estate tax exposure.
• Conservatively diversify investments.
• Maximize legacy for children.

The need for insurance:

• Estate liquidity
• Hedge against portfolio performance to maximize estate.
• Slow growth of cash given a low fixed-income environment (bond coupons very low).
• Eliminate the need for annual gifting to be used for insurance purposes.
• Move life insurance outside the estate (it was presently subject to estate taxes).

Background

• Wealthy business owner with dual citizenship.
• 3^rd Marriage – Blended family with conflict
• Subject to estate tax issues in US and offshore jurisdiction (they were unaware)
• Subject to forced heirship issues in offshore jurisdiction (they were unaware)
• 7 Figure Estate Tax Exposure
• Privately held business valuation concerns – could he sell for what it’s worth?

Family’s Goals

• Transfer assets 100% to spouse and not children from outside the marriage until the death of the surviving spouse.
• Reduce litigation exposure to children from outside the marriage.
• Avoid forced heirship.
• Avoid foreign estate/gift taxes.
• Increase available liquid assets to produce retirement/survivor income for spouse who was 20+ years younger.
• Maximize step-up in basis on 100% of the estate given the large age difference.

The need for insurance

• Increase Survivor Income
• Provide Estate liquidity
• Hedge against capital gains / step-up in basis and what may be included in the taxable estate.
• Shelter/Protect assets from anticipated litigation (in an irrevocable trust)

Background

• Wealthy business owner with dual citizenship.
• Subject to estate tax issues in offshore jurisdiction (they were unaware)
• Subject to forced heirship issues in offshore jurisdiction (they were unaware)
• $160 Million Estate Tax Exposure at age 85
• $25 Million Capital Gain Tax Exposure
• Highly over concentrated stock position
• Very Aggressive Investor

Family’s Goals

• Eliminate capital gains to the greatest extent possible
• Establish and fund a private foundation.
• Use assets to maximize philanthropic efforts.

The need for insurance

• Wealth replacement trust to reposition assets to avoid $25 Million+ in capital gains tax liability.
• Lever assets to maximize philanthropic efforts.
• Maintain maximum control over assets while alive – did not want to use Irrevocable Trusts.