Asset Location and Integration: Several Old and New Ideas

Abstract

Noting how difficult it is to making up one’s mind when it comes to designing and funding wealth transfer structures, the author proceeds to identify the numerous pitfalls that must be navigated. While being mindful of the fact that simple statements are often inappropriate when applied to the facts of a particular investor, it is possible to consider a few general principles, even though whether a particular investment, tax strategy, wealth transfer strategy, or marriage (between the two) is right for clients depends upon many personal factors and considerations. Yet, one can offer three main conclusions: Use grantor trusts to hold tax oblivious investments and, at times, to increase the income tax basis of the trust portfolio. Consider whether, post-new UBTI rules, charitable remainder trusts should hold higher weightings in hedge funds. Revisit use of charitable lead trusts (CLTs), a fertile area in which to practice asset location and integration activities.

TOPICS: Wealth management, legal/regulatory/public policy, real assets/alternative investments/private equity