Finding the right Private Wealth Manager or Multi Family Office can be a daunting task. At Bespoke, we help our clients understand all the nuances of wealth management and how to plan for a legacy that endures.

A Partnership Built on Trust

The value of a Private Wealth Manager is not just the returns they can provide through investment strategies, but it is the relationship and planning process which secures your confidence, the confidence that your time, energy, wealth, and values will persist into the future. The relationship that you build with your Private Wealth Manager should have a foundation of respect, trust and alignment, which can only be garnered through a deep understanding of the things in life that are most important to you and ensuring that your vision is protected within and beyond your lifetime.

Large institutions often promote services like specialized advisors who can provide unique and focused planning support and access to exclusive investment opportunities. The reality is that many of these services fall short of expectations. Attempting to meet the needs of thousands of clients often comes at the cost of personalized wealth planning support. At Bespoke, we are able to prioritize a client-first approach, where we can truly understand the needs of each client and work together to create the most optimal wealth management strategy.

Taking a Generational Perspective

Strategic investing is often front and center of the conversation for many PWMs, but at Bespoke, we help our clients understand that, while strategic investing is an essential part of a family office’s role, it’s probably the 4th most important part. Generational wealth requires a generational perspective, and Bespoke is an expert at mapping out your wealth management strategy by going beyond strategic investing. In his article Navigating the Maze, Matt McClintock describes why it’s important to fully understand all of the intricacies of this process.

At Bespoke we work with our clients to focus on four key areas, including 1) HOW you own your assets, 2) WHERE you own your assets, 3) WHY inheritance planning is so important, and 4) WHAT you own.

The Core Questions behind Proper Wealth Planning

1) HOW you own your assets is crucial to the overall success of your wealth management strategy and protecting your legacy. All the portfolio performance in the world is useless if you haven’t planned to mitigate litigation risk, regulatory risk, tax erosion, or failed inheritances (assuming there are people you care about). Growing your wealth strategically is an additional layer that is only possible once your wealth is firmly protected. How have you ensured that your existing wealth persists into the future? The best way to do this is by understanding all the risks associated with wealth preservation.

Your wealth management partner should be acutely aware of all these factors, and if you’re having these conversations with your partner, then you’re on the right track.

2) WHERE you own your assets is the second most important consideration. Opportunistically leveraging the laws of favorable jurisdictions is an area that even most law firms overlook. Bespoke works diligently with our clients to fully understand their investment needs and desired outcomes and to identify jurisdictions that best serve these goals. In conversations on the Stephan Livera Podcast (9:40 & 14:05), as well as The Last Trade (39:55), Matt McClintock explores the concept of favorable jurisdictions and how to use them as an advantage. These same themes are outlined in his article Choosing Favorable Trust Jurisdictions for Maximum Benefit.

3) The “WHY” – What’s it all about, anyway? (This may actually be #1). What does wealth mean to you? What do you want your legacy to be after you’re gone? How do you want to impact/inspire/motivate the people you leave behind? Is there anything about you other than your balance sheet? (Of course there is.) How do you reflect that through your investments and your broader planning.

The time, energy and value that you provide to the world today has the potential to persist and positively impact future generations. This is only possible with intentional planning, and Bespoke helps encourage deep consideration and thought to the long-term impact of your wealth on family, friends, and community.

4) WHAT you own (your investments) should be a manifestation of your WHY and must be established in context of #1 and #2. It’s about smart investments in public or private markets, domestic and/or international, that deliver alpha, are consistent with your worldview, don’t put essential capital at risk, provide adequate liquidity if markets turn on you, and are fee efficient for you.

These four questions provide the foundation for a robust wealth management framework, which is why we emphasize this approach. Working through and finding the solutions to these questions will help you build confidence in your strategy and ensure your wealth is properly secured for your life and future generations.

If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.

Thank you for considering Bespoke as your partner in wealth management. We look forward to the opportunity to work with you.

The following information is intended for general educational purposes only and should not be construed as legal or investment advice.

Through this work, I’ve come to understand that philanthropy is not just about changing the world; it’s about changing ourselves. Philanthropy is a journey that transforms the giver, shaping our relationship with money and ultimately, our legacy. Here’s why philanthropy matters more than ever, and how it influences not only family dynamics but also your vision for the future.

Find comprehensive questions to help you define your family legacy at the bottom of this blog post.

Philanthropy: More Than Money

Philanthropy is often misunderstood as merely the act of giving money. However, it runs much deeper. It’s about understanding the various forms of wealth beyond financial assets. What truly matters is the impact we make, not just on the world, but on ourselves. It’s about recognizing the wealth of relationships, talents, and values that define a family.

Family Wealth Beyond Financial Assets

We must ask ourselves: What constitutes our family’s wealth beyond money? It includes the unique talents, strengths, and values that each member possesses. These intangible assets contribute significantly to our family’s legacy, shaping our identity and purpose.

Each member of our family brings something unique to the table. Whether it’s creativity, leadership, or compassion, these talents contribute to our family dynamics, fostering collaboration and growth.

Core Values and Charitable Endeavors

Our family’s core values guide our charitable endeavors and vision for the future. Whether it’s integrity, generosity, or empathy, these values shape our impact on the world and ensure that our giving reflects who we are.

Envisioning each family member’s involvement in our legacy planning is essential. Their perspectives and wisdom contribute to a holistic vision for the future, ensuring that our values and goals are passed down for generations to come.

Wealth and Relationships

Reflecting on our experiences, we must acknowledge the influence of wealth on relationships. While it can strengthen bonds and enable positive change, it can also pose challenges if not managed wisely. Personal insights into this matter help us navigate these complexities and build meaningful connections.

Even beyond our family, there are key individuals who significantly impact our happiness and well-being. Nurturing these relationships requires time, effort, and genuine care to maintain a strong support network.

Values and Vision as a Founder

As a founder, husband and a parent, I’m often asked about my values and vision for the future. Here’s what I believe:

• My Values: Integrity, empathy, and resilience are at the core of everything I do. These values drive my actions and shape my relationships, both personally and professionally.
• Where They Come From: My values are rooted in my upbringing, experiences, and the lessons I’ve learned along the way. They are a reflection of who I am and what I stand for.
• Why They Matter: These values guide me in making decisions that align with my principles and contribute to a better world. They define the kind of leader, parent, and individual I strive to be every day.
• The Kind of People I Want My Kids to Be: I want my children to be compassionate, resilient, and driven by purpose. I envision them leading fulfilling lives, making a positive impact, and embodying the values that define our family.
• Their Future: If my children embrace these values and lead with integrity, their lives will be filled with meaning and fulfillment. They will navigate challenges with grace and leave a lasting legacy of goodness in the world.
• Impediments to Success: To help my kids achieve success, we must remove or avoid impediments such as entitlement, complacency, and a lack of empathy. By instilling a strong work ethic, fostering resilience, and nurturing their sense of empathy, we can empower them to overcome obstacles and thrive in a rapidly changing world.

Define YOUR Family Legacy

1. What do you consider as your family’s wealth beyond financial assets and how do these other forms of wealth contribute to your family’s legacy?
2. Can you share some unique talents or strengths that each member of your family possesses? How do these talents contribute to your family dynamics?
3. Who are the key individuals outside your family that significantly impact your happiness and well-being? How do you maintain these relationships?
4. What core values do you hold dear as a family? How do these values influence your charitable endeavors and vision for the future?
5. Why are these outlined values important to you? Where do they come from?
6. How do you envision each family member’s involvement in your legacy planning? What special perspectives or wisdom do you see them bringing to the table?
7. Reflecting on your experiences, do you believe wealth has the potential to influence relationships positively or negatively? Can you share any personal insights on this matter?
8. What kind of people do you want your kids to be? What will their lives look like if that happens?
9. What impediments need to be removed or avoided to help your kids achieve success?

In conclusion, philanthropy is not just about giving; it’s about personal transformation and legacy building. We have the opportunity to shape the future by instilling values, fostering relationships, and leaving a meaningful impact on the world. Let’s embrace this journey of giving and growth, knowing that our greatest wealth lies not in what we have but in who we become.

If you are a non-U.S. taxpayer looking to build a business or invest in the U.S., it’s essential that you plan carefully before you invest. Failing to plan before you invest may have catastrophic consequences for your family wealth. An irrevocable “Foreign Grantor Trust” may be an appropriate solution.

Key Features of an Irrevocable Foreign Grantor Trust

• Is an irrevocable trust created in a U.S. tax-friendly, private trust jurisdiction with no separate state-level income tax. Common choices include Wyoming, Nevada, Delaware, South Dakota, etc.

• Allows you to place assets into a private, protected structure established on the terms you select for any number of potential beneficiaries, often including you, your spouse or partner, children, other family members, or others.

• The trust is treated as you for U.S. income tax purposes, which has significant income tax advantages under the U.S. tax code. (For example, capital gains on the sale of U.S. securities are exempt for foreign grantor trusts.)

• Non-U.S. source income is not subject to U.S. income tax when earned but will be subject to U.S. income tax if distributed to a U.S. person.

• Is a “completed” gift for federal transfer tax purposes, meaning that all future growth on those assets is out of your U.S. taxable estate … and the increase in asset value can avoid estate tax for many generations.

• Allows you to maintain control over most investment decisions concerning the assets held in the trust and to remove and replace other decision makers concerning the administration of the trust.

• Is one of many potential strategies that can be combined into a comprehensive family wealth strategy set.

A deeper dive: 

An irrevocable foreign grantor trust is designed to be taxed as if it’s you, the trust creator, for U.S. federal tax purposes. You establish the trust in a “U.S. destination jurisdiction” and transfer property to the trust. The property is administered by the trustee in that jurisdiction for the benefit of the trust beneficiaries you choose – which may include yourself and your loved ones – under the laws of the selected jurisdiction. Depending on the jurisdiction selected, the design of the trust, the administration of the trust, and the source of the property placed in the trust, a foreign grantor trust has several key benefits.

Income Tax Opportunities

While the advantages of an irrevocable foreign grantor trust usually dramatically outweigh the disadvantages, you should understand both before proceeding with the strategy.

Irrevocable Foreign Grantor Trust Disadvantages:

1. U.S. source income is – and always will be – subject to U.S. income tax unless an exemption applies. Significantly, under the U.S. tax code, U.S. capital gains (other than for the sale of U.S. real estate) are not subject to U.S. tax if held by a non-U.S. (i.e., “foreign”) person or foreign grantor trust. The estate tax consequences are quite dire for a non-U.S. person with U.S. assets, as there is only a $60k exemption from estate tax – i.e., a non-U.S. person is generally subject to a 40% tax on the value of their U.S. assets above only $60k.
2. The trust must be administered by a trustee in the destination jurisdiction. This requires extra paperwork and adds annual expenses for trustee fees, typically in the range of $5,000 to $15,000 per year.

Irrevocable Foreign Grantor Trust Advantages:

1. Non-U.S.-sourced income held in a U.S. foreign grantor trust is not subject to U.S. income tax when earned. However, this income is subject to U.S. income tax if distributed to a U.S. person.
2. When structured properly, assets in a foreign grantor trust typically enjoy significant protection from your future creditors (and the creditors of other trust beneficiaries).
3. The Settlor of the trust (that’s you as the person establishing the trust) selects the Trustee and the individual or committee who is empowered to determine when and in what amounts to distribute property from the trust.
4. Foreign grantor trusts are usually very private. The trustee of the trust is responsible for preparing accountings and tax returns, and the Settlor of the trust and the beneficiaries are typically not disclosed other than to the trustee and tax authorities. They often provide a high level of “curiosity protection” by removing individual beneficiaries’ names from public view.
5. Unlike some other trust structures, you can direct who will make all investment decisions concerning trust property as the Investment Trust Adviser.
6. Even though the trust is “irrevocable,” it remains flexible. Advanced trust design techniques allow the trust to evolve as laws and circumstances change.

Irrevocable Foreign Grantor Trusts are advanced techniques. They are complex and powerful, and they aren’t right for everyone. But in the right circumstances they are compelling solutions to complement a more comprehensive tax efficient legacy plan.

If you would like to discuss whether an irrevocable foreign grantor trust will help you accomplish your family’s legacy planning goals, please reach out to your Client Ambassador to discuss.

This information is intended for general educational purposes only and should not be construed as legal or investment advice.

On July 10, 2023 California Governor Gavin Newsom approved Infrastructure and Budget Legislation. The bill, SB 131, relates to taxation and includes several amendments to the Government Code, Revenue and Taxation Code, and Welfare and Institutions Code and thus changes the law in California to cause income in INCOMPLETE non-grantor trusts to be counted as California income. Importantly, the new law is limited to non-grantor trusts that are “incomplete” for gift and estate tax purposes. The law does not apply to COMPLETED GIFT non-grantor trusts.

California clients with Incomplete Grantor Trusts: It’s time to replan. 

Here’s what you need to know. 

• Estates and trusts under the current Personal Income Tax Law are subject to taxation on their taxable income, similar to individuals. This is true under both state and federal tax law.  If a trust is classified as a “grantor trust,” where the grantor or another individual is treated as the owner of a portion of the trust, then the trust’s income, deductions, and tax credits are included in the grantor’s taxable income. The grantor will report the trust’s income on his or her personal income tax return and will be responsible for payment of tax liability.
• The proposed bill is RETROACTIVE taking effect on January 1, 2023, and would include the income of an “incomplete gift nongrantor trust” in the gross income of the grantor. This means that if the trust’s income would have been considered in the grantor’s taxable income had it been treated as a grantor trust, it will now be included in the grantor’s gross income.
• However, certain conditions can exempt a trust from this provision, such as the fiduciary making an irrevocable election to be taxed as a resident nongrantor trust, as specified in the bill.

Starting from January 1, 2023, the new Section 17082 is added to the Revenue and Taxation Code, which outlines the treatment of income from an incomplete gift nongrantor trust for qualified taxpayers.

More specifically…

• For taxable years beginning on or after January 1, 2023, the income of an incomplete gift nongrantor trust will be included in the gross income of a qualified taxpayer. The inclusion will be to the extent that the trust’s income would have been considered in the taxpayer’s taxable income if the extent of the trust were treated as a grantor trust under Section 17731.
• There is an exception to the income inclusion. The income of an incomplete gift nongrantor trust will not be included in a qualified taxpayer’s gross income if the following conditions are met: 

1. 1. The fiduciary of the trust files a timely original California Fiduciary Income Tax Return and makes an irrevocable election to be taxed as a resident nongrantor trust under Chapter 9 (starting from Section 17731). This election must be made using the prescribed form and manner by the Franchise Tax Board.
   2. The incomplete gift nongrantor trust is considered a nongrantor trust according to Chapter 9 (starting from Section 17731), which in essence follows the Federal rules.
   3. At least ninety percent of the distributable net income of the incomplete gift nongrantor trust, as per Chapter 9 (starting from Section 17731), is distributed or treated as being distributed to a charitable organization defined under Section 501(c)(3) of the Internal Revenue Code. This includes provisions like Section 17752 or 17731(a) within Chapter 9 (starting from Section 17731).

Definitions for the Infrastructure and Budget Legislation SB 131 Bill

“Incomplete gift nongrantor trust” refers to a trust that meets two conditions: (A) It doesn’t qualify as a grantor trust as defined by Subpart E of Part I of Subchapter J of Chapter 1 of Subtitle A of the Internal Revenue Code. (B) The transfer of assets to the trust by the qualified taxpayer is treated as an incomplete gift under Section 2511 of the Internal Revenue Code concerning transfers in general.

“Qualified taxpayer” means the grantor of an incomplete gift nongrantor trust.

“Resident nongrantor trust” means a trust that is not a grantor trust and where the tax applies to the entire taxable income of the trust based on the residency of the fiduciary or beneficiary as per Section 17742.

California clients: reach out to your Bespoke contact immediately to connect you with a trusted colleague. Those based in California who are interested in Incomplete Non-Grantor Trusts reach out to a Bespoke team member for more information.  

This information is intended for general educational purposes only and should not be construed as legal or investment advice.

Bitcoin, Estate Planning, and Trustee Responsibility

Matt first spoke with Frazer Rice on his “Wealth Actually” podcast in October 2020 to explore some of the intergenerational wealth transfer issues for individuals with large cryptocurrency holdings.

Specifically, Matt shared his thoughts about:

• the importance of creating a mechanism for the succession of cryptowealth (if a crypto owner becomes incapacitated or dies, and doesn’t have a reliable mechanism to make sure their private keys are passed on to a trusted individual – that wealth will be lost!)
• the necessity of naming a savvy fiduciary who can properly manage the many issues unique to cryptowealth
• planning for physical custody of a hardware device and planning for custody of a private key to unlock a replacement device
• planning for trustee succession to secure these unique digital bearer instruments
• tax planning and sophisticated trust design based on the desired jurisdiction from a legal and tax perspective

Listen to the podcast here: https://frazerrice.com/blog/ep-66-matthew-mcclintock/

The following information is intended for general educational purposes only and should not be construed as legal or investment advice.