Client Scenario: Managing Wealth from the Sale of the Family Business

Sale of the Family Business - Family Discussion

Client Scenario: Managing Wealth from the Sale of the Family Business

Making Thoughtful Decisions at Their Own Pace


Ted and Mary had plans to sell their family-owned business. Their financial situation would soon become much more complex with a significant cash influx from the sale. They were interested in working with a financial advisor who could provide them with not only investment management, but also advice related to tax, estate, and philanthropic planning. Ted and Mary wanted an advisor who would work at their pace in making important decisions.


Ted and Mary first met a few members of the SWP team for breakfast. This meeting, along with the next few, focused on getting to know each other. SWP began to develop a solid understanding of Ted and Mary’s interests, priorities and goals, as well as the underlying complexity of their particular situation. SWP educating them on their range of options, and made sure each decision was strategically planned out.

Ted and Mary had clear plans and values, but prioritizing and identifying the timeliness of these goals would be important:


  • Minimize future estate taxes
  • Give generously to many charities
  • Create a simplified investment strategy

Ted and Mary knew that the sale of their business would provide ample wealth for them to have a comfortable retirement. SWP worked with Ted, Mary and their estate planning attorney to help transfer wealth to their children in a tax-efficient manner.

Tax-Efficient Wealth Transfer

For closely-held companies like theirs, the appraised value is often lower than its actual value due to perceived challenges in the ability to sell the company. SWP explained to Ted and Mary how they could minimize future estate taxes by transferring pre-sale shares (or a portion of the ownership) of the business into a Grantor Retained Annuity Trust (GRAT).

Sale of the Family Business - GRAT

The GRAT would allow Ted and Mary to take advantage of this initial low valuation if, in fact, the business sold for a higher value. SWP helped facilitate the transfer of 25 percent of the business at the appraised value into the GRAT. Later, while the shares were in the GRAT, the business was sold for five times more than the appraised value. When this happened, the GRAT did not have to give this sudden appreciation back to the donor. Instead the increase in value stays in the GRAT and will be passed to Ted and Mary’s children, without needing to pay gift or estate tax.

Ted and Mary wanted to take their time in deciding the charities to which they would give and the frequency with which they would contribute. They expressed interest in a private foundation and asked SWP questions about starting one.

An Advantageous Charitable Vehicle

SWP looked at the client’s options and found a significant drawback in setting up a private foundation. Because Ted and Mary planned to fund the charitable vehicle with a gift of company, they would receive minimal tax benefit when gifting these private shares to a private foundation. SWP suggested that Ted and Mary instead use a donor advised fund.

CLIENT STORY business graph 2

In addition to being much easier to set up and maintain than a private foundation, a donor advised fund would allow Ted and Mary to:

  • Receive a charitable tax deduction equal to the value of the shares
  • Use the proceeds from the sale of these shares to give to the charities of their choice
  • Maintain the flexibility of choosing different organizations over different time periods

Ted and Mary are extremely philanthropic and wanted to give to future generations. But they also wanted to ensure their own financial security in retirement.

Aligning Portfolios with Goals

Since the business was sold, SWP now helps manage three distinct portfolios for Ted and Mary. These portfolios have different allocations and strategies. Each is constructed to help Ted and Mary achieve their varying goals.

Sale of the Family Business - Investment Advisory


At such a significant life milestone, Ted and Mary worked with a team of advocates to help them make thoughtful decisions.  SWP adapted to the client’s desired pace and level of involvement in those decisions.

Recently, two of SWP’s investment analysts met with the client’s adult children to educate them about investment concepts and strategies.   One outcome of this meeting was that the donor advised fund was split in two, with a small portion managed directly by the children.  They now have complete oversight of investment management and charitable decisions.

Moving forward, SWP has created a long-term agenda for issues that should be addressed, including long-term care and other insurance strategies.  By spreading these issues out over a period of time, SWP strives to not overwhelmed them with too much at once, and make the most informed decisions possible.


Strategic Wealth Partners (“SWP”) is an SEC registered investment advisor with its principal place of business in the State of Illinois. The case study described herein is included for illustrative purposes only and no portion of this writing is to be interpreted as specific investment advice, a testimonial or endorsement of SWP’s advisory services as it is not known whether the client referenced approves of SWP’s services. Investing involves risk, including the potential loss of principal, and investors should be guided accordingly.

Past performance of investments is not indicative of their potential future performance. Reading or utilizing information in this presentation, or contacting or responding to our offices or Registered Investment Advisers does not create an advisory relationship of any kind. An advisory relationship can be established only after the following two events have been completed: (1) our thorough review with you of all the relevant facts pertaining to a potential engagement; and (2) the execution of a Client Advisory Agreement.

Date published: 3/22/2017

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