the startup founders' guide to wealth management
DESCRIPTION
Young entrepreneurs often don’t give enough (any!) thought to managing their personal wealth and how to best transfer that wealth. Wealth transfer planning is best to consider during the startup phase and will be most effective if you deal with it early on. In this presentation, Darin Donovan, Shareholder for Hopkins & Carley, and Glenn McCrae, Chief Strategy Officer for Early Growth Financial Services discuss the simplest strategy for wealth transfer, the transfer tax landscape, trust structures, and more.TRANSCRIPT
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The Startup Founder’s Guide to
Wealth Management
Darin Donovan, Esq.ShareholderHopkins & Carley
Glenn McCraeChief Strategy OfficerEarly Growth Financial Services
#wealthmanagement
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Personal Planning Opportunities During Startup Phase
• While moving your company toward an IPO or M&A, keep in mind that there are personal planning opportunities available
• These opportunities are time sensitive• Know and understand what you have
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Know Your Assets
• To understand your personal planning opportunities, you must understand your assets– Stock Options: ISOs, NonQuals– Restricted Stock– Founder’s Stock– Vesting
• Professional Income Tax planning assistance
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Transfer Tax Landscape
• Income Tax compared to Estate/Gift Tax• Federal Estate/Gift Tax: $5.34 million
lifetime exemption; 40% tax rate• Transferring assets before event can
make gifting much more effective than after
• Capturing post-transfer appreciation
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Gift Tax Exemptions
• Marital Deduction• US Citizens – unlimited deduction• Non-US Citizen – $145K annual deduction
• Annual exclusion – 14K/donee• Medical/education – not gifts• Lifetime exemption – 5.34 million• File gift tax return – FMV at time of
complete transfer• Hard to value assets
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Gifting: Types of Assets
• Stock: private/public• Stock options• Disqualifying dispositions • Vesting
• Partnership/LLC/carried interest• Real property
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Gifting: Methods
• Outright• Custodial Accounts – 18/21• Irrevocable Trusts
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Simplest Strategy: Outright Transfers of Stock
• Best for siblings, parents, responsible children over 18 (or older)
• Not appropriate for stock options• Annual Exclusion/Lifetime exemption• Gift tax filings/valuation
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Transfers into Irrevocable Trusts
• Best for minor children, grandchildren other beneficiaries where financial abilities are questionable
• Annual Exclusion gifts; use of lifetime exemption
• Trust structures – funds available on timetable client determines
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Leveraging Gift Transfers
• Grantor Retained Annuity Trusts (GRATs)
• Sales to Defective Grantor Trust
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More Sophisticated TechniquesGrantor Retained Annuity Trust (GRAT) – future appreciation to beneficiaries
•Government set “hurdle” rate” (July of 2014: 2.2%)• Timing of transfer• Asset selection• Diversification of transfers over time• Limitations
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More Sophisticated TechniquesDefective Grantor Trust – out of estate, but liable for Income Tax
•Growth/appreciation• Nonrecognition Transactions• Safety valve for Income Tax Liability• Generation-Skipping Transfer (GST)
Planning
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Post-Liquidity Event
• CRTs/CLTs • Family entities• Charitable giving
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15
Thank You and Q&A
Hopkins & Carley, A Law Corporation200 Page Mill Road, Suite 200
Palo Alto, CA 94306T: (650) 804-7600
www.hopkinscarley.com
@HopkinsCarely
Darin Donovan, Esq., [email protected]
Glenn [email protected]
EGFS Headquarters2033 Gateway Place, 5th Floor
San Jose, CA 95110T: (415) 234-3437
www.earlygrowthfinancialservices.com
@EarlyGrowthFS