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Case Studies

Click on a case study below to discover how Diversified Trust can make a significant impact.

The Tyler Family, which is headed by three siblings — Jack, Susan and Tom — needed to gain a better understanding of their shared wealth.

With combined assets exceeding $100 million, the family members have achieved significant success in their professional careers. None of them, however, works in finance, so they saw the need to gain a better understanding of the mechanics of their shared wealth, including investment management, working with advisors and more. Because the family is spread across the country, they also wanted to create an opportunity to bring everyone together to raise questions, share concerns and build a common understanding of wealth management.

A significant portion of the Tyler family’s shared wealth is through an LLC that is owned proportionately by each branch of the family. Financial education would help them optimize and leverage this structure by gaining a better understanding of sophisticated investments, tax planning and other opportunities.

They called on Diversified Trust to develop an ongoing process for education to improve their financial knowledge and prepare future generations for the responsibilities of wealth.

Our Approach

  • Establishing Goals

    We began by assisting Jack, Susan and Tom in establishing the overarching goals they hoped to achieve and the lessons and the legacy that they wished to share. We then asked their children what results they hoped to attain from the education program. Other family advisors were also involved in the planning process, including those who have been instrumental in creating the existing family trusts and overall financial structure. The input from all parties was used to prepare the curriculum, which was personalized to include family history, explanations of prior wealth transfers and significant financial events and education on how each individual fits into the larger family financial structure.

  • Designing a Curriculum

    The input from all parties was used to prepare the curriculum, which was personalized to include family history, explanations of prior wealth transfers and significant financial events and education on how each individual fits into the larger family financial structure. Topics for the curriculum included investments, taxes, trusts, estates and wealth transfer, how
    to work with advisors, philanthropy, family dynamics and what it means to be a beneficiary. In addition to developing curriculum to address these topics, we engaged each family unit in lifestyle planning which provided a greater understanding of their individual financial situation and how the larger family structure impacts each individual. This planning also provided the basis for developing a global spending policy for shared family trusts which would support the needs of each individual while sustaining the trusts for future generations

  • Ongoing Education

    Ongoing education was delivered during the semi-annual LLC meetings where all family members were in attendance, at smaller family gatherings and one-on-one sessions. The Tylers also attended a series of wealth management seminars that Diversified Trust presented in conjunction with a local university, where they had the opportunity to interact with and learn from other families facing similar issues.

The Results

The family gained confidence in making financial decisions and working with advisors.

The education program met several key goals identified by the family. It not only provided education to give the Tylers more confidence in making financial decisions and working with advisors, it also paid tribute to the legacy of prior generations, celebrated family values and improved family harmony. Through lifestyle planning and development of a global spending policy, a greater understanding was gained of how the family wealth can provide financial freedom for each individual to pursue their passions and attain their unique goals. Overall it provided peace of mind — the Tylers are now better prepared to manage their family wealth and continue the family legacy.

The Simmons, a couple with roughly $40 million in assets, had just sold their family manufacturing business and were ready to retire, but they faced a significant challenge.

They wanted to maintain the quality of their lifestyle as they transitioned from business owners to living off their investment portfolio. At the same time, they wanted to be able to transfer wealth to their heirs and meet their philanthropic goals, including major gifts to their church and the local symphony. And all this had to be accomplished as tax efficiently as possible.

They called on Diversified Trust to help them with a plan.

Our Approach

  • Capturing the Full Picture

    Gaining a complete understanding of the couple's financial picture, including the makeup of their assets, sources of income, existing estate planning documents, lifestyle needs and tax situation.

  • Building a Custom Model

    After setting goals for the efficient transfer of wealth and charitable giving, we built a comprehensive model with multiple scenarios to identify the best plan to achieve the clients' goals.

  • Affirmation and Integration

    We reviewed our recommendations with their attorney and tax advisor to ensure everyone was in agreement on the proper course of action.

The Results

Our plan achieved immediate income tax savings of $2 million, and future estate tax savings could exceed $10 million.

Based on our cash flow and net worth projections, we established a spending policy that allowed the Simmons to comfortably expand their lifestyle. A $5 million contribution was made to a donor-advised fund to optimize the income tax deduction in the current year and satisfy philanthropic goals in future years.

Estate planning documents were revised to make specific outright bequests to the couple’s parents and siblings, as well as to fund a $10 million trust for each of their two children, with any excess going to charity. And we determined that these wealth transfer goals could be met without purchasing life insurance.

The Jacksons, a couple in their early 50s with a net worth of $25 million, recently sold their business.  Their tax bracket and state presented challenges if they were to maximize their hard-earned wealth .

Selling a family business can be the culmination of a life’s work, the opportunity to reap what you have sewn and retire comfortably. But it can also bring significant tax consequences that can eat into hard-earned wealth. The Jacksons, a couple in their early 50s with net worth in excess of $25 million, faced such a situation when they sold their manufacturing business. They live in North Carolina, where they are in the highest tax bracket in a state with particularly high income tax rates. The Jacksons turned to Diversified Trust for a strategy to minimize their tax exposure.

Our Approach

  • Understanding Objectives

    After meeting with the couple to understand their objectives, we reviewed their recent income tax filings to put together a comprehensive picture of their income sources and deductions.

  • Revewing Existing Assets

    Next, we reviewed their existing investment portfolio to determine their asset allocation, asset location, fee structure, asset turnover patterns and general tax attributes. We found they had approximately 30% of their investments in taxable fixed income mutual funds and 70% in a mixture of individual equities and equity mutual funds.

  • Examining the Code

    We also examined the North Carolina tax code to see if the Jacksons might be able to take advantage of any tax credits and incentives, and we looked at the current legislative climate to see if there were any potential changes on the horizon at the local and federal levels. Finally, based on projections for taxation in future years, we developed a set of recommendations for the Jacksons, which we reviewed with their tax advisor to make sure we were in agreement on a course of action.

The Results

Our planning process identified several opportunities for reducing the Jackson’s income tax burden, which collectively amounted to meaningful annual savings.

First, we restructured their investment holdings to gain tax advantages. We migrated tax-inefficient assets into tax-deferred accounts. In their taxable account portfolio, we replaced national bond funds with more tax-efficient alternatives, including a North Carolina individual municipal bond portfolio. We reduced exposure to capital gains by incorporating managers that emphasize low turnover.

We also identified solar tax credit investment opportunities that were unique to the state of North Carolina and assessed their appropriateness for the Jacksons. The investment resulted in the pre-payment of North Carolina tax at a discount of 20% to the extent of the credits purchased.

The Jacksons’ commitment to supporting charitable organizations created another opportunity to reduce their tax exposure. They had planned to make annual charitable gifts of approximately $500,000 over five years. However, our tax projections revealed that strategy would not have allowed the Jacksons to receive the full tax benefit from their donations, because of much lower taxable income in the years after the sale of their business. As an alternative, we recommended a one-time $2.5 million gift to a donor-advised fund in the year of the sale, allowing them to receive the full tax benefit of $750,000. We further recommended funding the gift using stocks with significant appreciation, resulting in the avoidance of future capital gains taxes on those stocks.

Our comprehensive program not only resulted in immediate tax savings, but will continue to create significant tax savings over time. The Jacksons feel satisfied knowing they’ll keep more of the wealth they’ve earned to support their retirement lifestyle and the charities that mean the most to them.

The Clarks, a couple in their early 70s with roughly $30 million in assets want to provide for their family but also leave a charitable legacy.

Maximum wealth transfer with minimal taxes — that was the goal for the Clarks, a couple in their early 70s with roughly $30 million in assets. They wanted to provide for their children, grandchildren and charitable institutions close to their hearts, including two universities and a community foundation. Of primary concern was a grandson with special needs who requires care — including comfortable living arrangements and other necessities — beyond what government assistance provides.

All this had to be balanced with the couple’s need to maintain their current lifestyle in retirement. They called on Diversified Trust to develop a solution.

Our Approach

  • Listening to the Goals

    We began by sitting down with the Clarks to gain an understanding of their financial picture including the makeup of their assets, their lifestyle needs and their estate and charitable giving goals.

  • Identifying Gaps

    We reviewed their existing estate planning structure to identify gaps between their current plan and their established goals. Numerous recommendations were made including modifications to legal documents, changes to ownership of assets and beneficiary designations, and establishment of new trusts to better align their estate plan with their goals. All recommendations were made with the current legislative climate in mind and the potential for future changes.

  • Building a Model

    Next we built a comprehensive model to illustrate the impact of our recommendations on current and future cash flow, income and estate taxes and distributions to heirs and charity. We reviewed our recommendations with the client’s attorney and tax advisor to ensure all were in agreement and coordinated with all advisors to execute the agreed upon plan.

The Results

Through the use of trusts, retitling of assets and changes to beneficiary designations, we helped the Clarks create a wealth transfer plan that reflected the couple’s charitable giving goals as well as their desire to provide for children and grandchildren.

A life insurance trust was created to remove paid-up policies from the Clark’s taxable estate resulting in significant estate tax savings. A Special Needs Trust was established for the grandson who requires exceptional care and funded with an amount to ensure his ongoing needs will be met.

Generation skipping tax (GST) exempt trusts were created for the grandchildren to shelter the maximum amount allowed from taxes in the estates of future generations. Trusts for children were named as beneficiaries of the remainder of the estate. To accomplish charitable goals and to minimize estate tax and future income taxes, charitable institutions were named as beneficiaries of the couple’s IRAs.

Overall, the plan will save an estimated $5 million in taxes and still allow the couple to make annual charitable contributions of roughly $300,000 while living off retirement income of about $650,000 per year from defined benefit plans. More importantly, the Clarks can feel confident knowing that their heirs and the charities that mean the most to them will be benefit from their wealth.

The Jordan Family, a couple in their early 40s with roughly $3 million in assets, understand the importance of planning for the future.

They wanted to set up a college savings program for their three children, all under age 11. But they had to balance that plan with their need for retirement savings and adequate life insurance, all with enough flexibility to allow for a temporary decrease in income due to a job change and investment in a business opportunity.

They called on Diversified Trust to help them address all these goals.

Our Approach

  • Capturing the Full Picture

    Our first step was to gain a complete understanding of the Jordans’ financials, including the makeup of their assets, sources of income, living expenses, current savings for education and existing life insurance. Next, we analyzed the financial feasibility of a temporary reduction in income due to a job change and investment in a business. The analysis incorporated estimated costs of investing in a business and future business value to illustrate the impact on short and long-term cash flows and projected wealth.

  • Education Planning

    We then helped the couple set education funding goals including type of education (private vs. public) and the number of years of college the funding would need to cover. A variety of education funding options were presented to them for consideration.

  • Retirment Projections

    Based on the couple’s target retirement age of 60, we helped them define the cost of living for their desired post-retirement lifestyle. We built a comprehensive model that included multiple scenarios for cash flow and projected wealth, which helped identify the optimal plan to achieve the couple’s retirement goals. Finally, we performed a detailed analysis of the Jordan's life insurance needs to ensure that coverage complemented their plan.

The Results

With the assurance that their personal cash flow needs would be met and that a plan was in place to reasonably achieve their other financial goals, the Jordans were confident in their decision to move forward with a job change and business investment.

A 529 plan was established for each child that will fund four years (approximately $150,000) of public undergraduate education. To support the client’s anticipated retirement lifestyle, which will include the continuation of generous charitable contributions, our plan maximized 401(k) contributions and set a disciplined savings strategy to build an investment portfolio that will provide the desired level of retirement income. Additional term life insurance was purchased to close a gap in survivor income needs relative to resources.

Today, the Jordans are ready to face the future with a comprehensive, coordinated plan that provides them with peace of mind about the attainment of their most important goals.