Tony was a successful entrepreneur who owned two interdependent businesses in the same industry, one in sales, the other in service. As Tony grew older, he realized two important things:

  1. He could no longer manage both companies.
  2. The value of the two businesses combined was high enough that leaving them both to his heirs would cost them significant estate tax.

Tony’s son expressed interested in taking over the sales business, but was not in a position to buy it. Tony could afford to gift that business outright to his son, but that would trigger a gift tax liability.

Both businesses had separate retirement plans.

Lastly, the service company generated significant excess cash flow, which was invested in stocks and bonds.

We met with Tony in his office and got the following answers to key questions we asked:

Q: What steps have you taken around estate planning?

A: Tony had not updated any of his estate plans since his divorce 10 years earlier

Q: If you could remove the value of your sales company from your estate without any tax consequences, would you be willing to give it to your son?

A: He agreed that he would be willing to do so.

Q: What is your process for oversight of your companies’ retirement plans?

A: The retirement plans were being handled by an advisor who had not reviewed the investments, and provided minimal education, on an annual basis, at most.

Q: Are you comfortable with the level of risk and return in your corporate investment portfolio?

A: On review of Tony’s portfolio, we found that it was concentrated in high-risk and speculative stocks along with a variety of fixed-income investments.

Armed with this information, we addressed Tony’s three areas of concern as follows:

  1. Estate Planning—We brought in an estate planning expert who helped us restructure Tony’s estate plans: a trust was set up that would, over time, remove the sales business from his estate without generating any gift tax issues.

    Through this process, we were able to greatly reduce Tony’s taxable estate and move one of his companies into his son’s name. Because Tony had other children who would not be involved with the business, we also worked to equalize his estate.

  2. Company Retirement Plan—We helped move the plan to a new record-keeper, incorporating a fiduciary standard of care into the plan that included the ongoing monitoring of the investments along with a comprehensive education strategy for employees.

  3. Investment Portfolio—Finally, we determined that Tony’s portfolio was significantly overweighted and concentrated in speculative positions and corporate fixed-income products with credit ratings below investment grade. In short, the risk level in the investment portfolio was much higher than what Tony had believed it to be. We worked with our team to develop an investment policy for those assets, and reinvested them in a diversified portfolio with a risk profile aligned with Tony’s objectives.


Actual performance and results will vary. These case studies do not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted regarding your specific situation.