An integrated approach to optimization
 An entrepreneur in his 50s was at a crossroads and in the process of evaluating his goals. Although he was considering selling his medical devices company, he discovered that his greatest passion remained unchanged: He loved new ventures, and he wanted to start another company. There was, however, one key change: his appetite for risk. He wanted financial stability to sustain his family's lifestyle, provide for his children and grandchildren and build a significant philanthropic legacy.
A year before he received a $600 million combined cash-and-stock offer for his company, a plan was already in place. An advisor had assembled a team of specialists in financial, tax, estate, philanthropy and investment planning. In partnership with his accountant and attorney, the team created a comprehensive, customized strategy to help fulfill the entrepreneur's goals of generating income, providing for his children and sustaining his philanthropic commitments.
Well in advance of the sale, the advisor helped him establish a grantor retained annuity trust. Funded with stock from the private company the entrepreneur had founded, this trust enabled him to pass future appreciation to his children in a tax-efficient manner. When he subsequently received the offer for his company, we helped with the second part of the strategy: a charitable remainder trust that was funded with shares of the publicly traded acquiring company.
This trust allowed for tax-efficient diversification of the concentrated stock position resulting from the sale, and it provided additional potential income for life. Upon his death, the principal would revert to a private foundation he had established to further medical research and to provide a vehicle for his children and future generations to play active roles in philanthropy.
The investment strategies for both trusts as well as his personal portfolio incorporate a carefully selected mix of proprietary and external managers. They are designed to further enhance after-tax return potential and help manage risk by integrating hedge funds across all asset classes. These hedge funds were carefully analyzed and selected to complement and balance his other holdings. Any short-term capital gains generated by the hedge funds could mitigate utilizing tax losses from a customized indexing strategy.
Our Family Office professionals help to oversee not only trusts but all of the family's complex financial affairs. And we plan to develop cash flow analyses as he crafts a business plan for an entirely new venture.
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