Case Study: An Advisor’s Client Journey

To make it easy for advisors and their clients to work with Valur we  have created content and tools like calculators outlining the value Valur brings to the table. In this blog, we will walk through a case study of how we’ve worked with an advisor to help them and their client (Isiah and Janice), to illustrate to you exactly how the process will unfold from the first conversation all the way to the ongoing administration annually. If you are curious about our process we have an outline here (or a detail walk through here of how Valur’s tax/estate planning trust process works with advisors and their clients. If there ‘s one takeaway we would want you as an advisor to walk away with, you should know that your clients are in good hands and we’re here to help them every step of the way. Let’s dive in to the example!

A quick reminder, our process consists of five simple stages (you can learn more about process here):

  • Exploration and Qualification
  • Ideation and Strategy
  • Implementation and Execution
  • Investment Optimization
  • Administration and Filings

An Advisor Example

  • Client – Married couple, Isiah and Janice, ages 55 and 51, respectively. They also have a son, who is 20 years old. They currently live in California, but anticipate moving to Florida in the near future.
  • Situation – Isiah and Janice are selling their business, they’ve spent the past 15 years building a e-commerce consumer business.
  • The Windfall – They’ve just taken the business to market, so they’re not 100% certain, but early indications say the business will be worth ~$18 million.
  • Financial Picture – They have most of their wealth tied up in their business, but they have some other assets, including their home that’s currently worth $1 million, and approximately $2 million between their retirement and other investment accounts. Their current W2 income is $275,000 per year.
  • Liquidity Planning and Goals – Isiah and Janice are mostly interested in having enough liquidity to take some fantastic vacations, purchase a new home on the water in Florida, and set their son up for the future. Isiah is also interested in making some strategic investments in a few businesses, whether that be a start-up or local family owned restaurant chain. Given that they’ll plan on putting enough of their business in to make the trust worth $15 million, and will keep $3 million pre-tax in their own estate.

Now that we’ve identified the client’s situation, why don’t we walk through each step?

Exploration and Qualification

What is the goal?

  • To understand as much as we can about Isiah and Janice’s situation. You may already have all the answers prepared for us, or we may have to walk through the questions together. Regardless, we’ll get all the information we need for our system to provide the right solution.

What sort of questions did we (or you) ask the client, in order to get the answers above?

  • What is your situation?
  • Are you planning to sell appreciated assets?
  • What is your ordinary income per year?
  • Where do you live, are you married, and do you have children?
  • How old are you? And how old are your spouse and, if you have any, your children?
  • Do you have any plans for the proceeds from you liquidity event? (We’re not going to advise your client on how much they should put into a trust, but we ask the thought provoking questions to get them to think it through for themselves.)

How involved were you, the advisor throughout the process? Well you’ll likely go down one of two paths:

  • You might have asked all of these questions up front and collected the information for us. This is most likely the case, given all advisors care about their clients and want to understand their situation ahead of advising them.
  • The other path, is you may have asked the questions, but prefer us to ask them again! Which we’re happy to do so and probe deeper. You can either have a client interact with our technology platform or speak to a dedicated trust strategy representative.

Ideation and Strategy

What is the goal?

  • To take all of the inputs, layout the potential solutions, and explain things along the way like: how much Isiah and Janice can save and earn over time, what sort of liquidity will be available to them, and how the trust structures work.

What work does our technology do? Our technology makes finding and sharing the solutions easy. With the inputs provided, we can share the information you and the client need to make an informed decision, the benefits and trust. “What does that entail?” The client (and you) will receive a fully customized report which includes:

  • the estimated return on investment
  • liquidity at various periods of the trust’s life
  • how much you’ll give to charity by the end.

Want to see an example of this report? Get in touch with our team to receive a custom one for your client scenario. All of this can be found in the report, but the highlights are:

  • Isiah and Janice could earn as much as $45 million more over their life and their sons life. That’s 83% more than if they’d done no tax planning at all!
  • They’d also have $4.3 million of liquidity available to them by year 5.
  • And the charity of their choosing, whether it be their own donor advised fund, private foundation or an outside charity may receive $32 million at the end of the charitable remainder trusts term

How does our team of trust strategists help?

  • We’ll make ourselves available for as many calls as it takes, to explain the different options, how each structures works and walk through the in report explaining the financial implications.
  • These conversations don’t always fly in a straight line. There will be questions, iterations, and sometimes nuances depending on what asset your client is planning for. We narrow down the topics and make sure the important details make it to your ears and theirs. Some common questions that arise are: “How does the structure of my company impact the viability of the trust solution?” and “Are there any risks to contributing my company and then it doesn’t sell?”

How involved will you be?

  • As much as you want! Check our assumptions if you’d like, and advise your client on your perspective of our solutions. You can even play gatekeeper, where we work directly through you and allow you to present the options as you see fit. Again, the choice is yours!

Implementation and Execution

What is the goal?

  • At this stage you’ll have a firm idea of what you’re looking for and so will we. Like other traditional lawyers and trust companies, we’ll implement your client’s chose strategy; we’ll do all necessary payout calculations, draft the trust, and formalize it (including notarization and federal registration). We’ll also open any required custodial accounts and assist with asset transfers.

What does our technology do?

  • Produce the client’s trust – We’ve built a cutting edge, one-of-a-kind platform that can take all of the information provided and produce a legally binding trust document. This process can take as little as 2 hours if needed. Speed wise this is unmatched in the entire industry. Given the information what we’ve learned so far and based on their preferences, they are looking to setup a Net Income Makeup Charitable Remainder Trust, which will allow them to defer their gains for as long as possible. Given their sons age as well, they have four options to choose from for length of the trust: Term, Single Life, Two Life, and Two Life + 20. Now in this situation, they have indicated interested in the longest trust possible, which by default will be the “Two Life + 20”.
  • Setup custodial accounts – The information provided throughout the process will be used to set up the required custodial accounts. Both Isiah and Janice have indicated an interest to invest in public equities, real estate, and private companies once their trust is funded. As a result, we’ll be opening two custodial accounts for them: Schwab (for public assets) and Kingdom Trust (for real estate and private stock).

How does our team of trust strategists help?

  • Notarizing the trust – A dedicated member of our trust strategy team will join a dedicated call with you and a notary, to officially lock in the trust and allow you to begin using it. (Thankfully there’s technology to help with this, but we’ve found it’s incredibly valuable to have someone from our team there to help with the process. So a live agent from our team will join you to notarize and finalize your trust.)
  • Moving your assets – A member of our team will also help move over your assets. Each company is slightly different and so the process may vary, but in this example as founders/owners of a company the process is pretty straightforward given you are typically the only layer of approval unless you have a board of directors.

How involved will you be? Typically, the advisor chooses not to play a major role here. We’ll take care of all the heavy lifting, though we do work with advisors to choose the appropriate custodians based on their practice if they prefer someone other than Schwab and Kingdom Trust. You may also have some prior operating knowledge in these areas, and if you have ideas we’re always happy to listen.

Investment Optimization

What is it?

  • This is the straightforward process of choosing what assets you are invested in within the trust. The client of course will always have a risk tolerance, industry and weighting preferences. Choosing what investments the trust has it’s very important because you can design the trust to meet many different goals depending on the allocation.

How does Valur help?

  • We work with with you, to make sure there’s a complete understanding of trust accounting principals and their implications for your chosen investment strategies. With concepts like trust-specific tax-loss harvesting and distribution targeting, we can help you increase your client’s returns by 30% or more over time.
  • In the case of the Isiah and Janice, they’ve indicated that they’re interested in some form of regular distribution annually with most of it deferred until every 5 years. Given that, we’d communicate that some level of interest paying debt security or dividend paying security would be a good fit for their investment portfolio, with the majority being focused on long-term capital gains appreciating assets.

How involved will you be going forward?

  • You will own your client’s investment strategy, of course — that’s outside of Valur’s purview. We’ll always opine on how certain investments can impact the trust, but of course the decision is ultimately yours.

Administration and Filings

What is the goal?

  • To make sure that every aspect regarding administration of the client’s trust is taken care of 24/7. Each year the trust is required to file a federal tax return, and (depending on the state) a state filing as well. We’ll also provide the required forms a client will need to file their own personal tax return. The most important goal, is that it’s simple, seamless, and requires little to no time for the client each year.

How does Valur help?

  • Accounting and Administration – We’ll keep track of all of the assets, transactions, expenses, and accounting requirements so that you know at any time how your trust is performing and how it intersects the required tax filings. This doesn’t change much per client, in this scenario we’ll work just as hard as we do for the rest of our clients.
  • Federal Tax Filings – We will complete and file your trust’s federal tax return every year. No need to spend your time thinking about these requirements, the most work you’ll have to do is sign the document itself! Each Charitable Remainder trust gets the same federal tax filing known as the Form 5227.
  • State Tax Filings – Our team will also file the state tax return every year. For California this form is known as the 541B, we’ll take care of this as well!
  • Personal Tax Filing Forms – Depending on the type of income you receive from the trust, you’ll receive either a 1099 or a K1 each year. We’ll provide you with these documents to hand over to your CPA or to you for filing each year.

How involved will you be?

  • Thankfully this is the easiest part of the process for Advisors. There’s quite frankly nothing for you to do here. You can always check these documents if you feel so inclined, but there’s no requirement for your time in this portion.

Next Steps

Isiah and Janice have a tremendous opportunity ahead of them when it comes to using the Charitable Remainder Trust. As the advisor, you should know that your clients are in good hands and we’re here to help them every step of the way.

Schedule a time to chat with our team or get started setting up your trust (at no cost and with no commitment)

About Valur

We built a platform to give everyone access to the tax and wealth building tools of the ultra-rich like Mark Zuckerburg (Facebook founder), Phil Knight (Nike founder) and others. Valur makes it simple and seamless for our customers to utilize the tax advantaged structures that are otherwise expensive and inaccessible to build their wealth more efficiently. From picking the best strategy to taking care of all the setup and ongoing overhead, we make take care of it and make it easy.