The Startup Founder’s Guide to
Wealth Management
Darin Donovan, Esq.ShareholderHopkins & Carley
Glenn McCraeChief Strategy OfficerEarly Growth Financial Services
#wealthmanagement
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
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
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
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
Gifting: Types of Assets
• Stock: private/public• Stock options• Disqualifying dispositions • Vesting
• Partnership/LLC/carried interest• Real property
Gifting: Methods
• Outright• Custodial Accounts – 18/21• Irrevocable Trusts
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
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
Leveraging Gift Transfers
• Grantor Retained Annuity Trusts (GRATs)
• Sales to Defective Grantor Trust
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
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
Post-Liquidity Event
• CRTs/CLTs • Family entities• Charitable giving
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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
