Client Overview

After selling their firm to a private equity group, a successful business owner sought Provenio Capital’s expertise to design a comprehensive wealth strategy. The client needed a structured plan to manage their newfound liquidity, optimize income generation, secure their family’s financial legacy, and ensure sufficient risk mitigation through tailored insurance solutions.

Client Goals

1. Manage Business Sale Liquidity: Effectively manage the liquidity from the business sale, which included a rollover structure permitting liquidity over time (one-third per year). 

2. Establish Trusts and Accounts: Collaborate with tax and legal advisors to establish trusts for the client’s four children, set up education trust plans for each child, and initiate a Donor-Advised Fund (DAF) with an initial contribution of $1 million.

3. Meet Income and Liquidity Needs: Achieve a target monthly income as the portfolio grows. Focus on tax-efficient, income-producing alternatives, combined with liquid cash management solutions using treasuries and municipal bonds.

4. Diversify for Growth and Tax Efficiency: Pursue investment opportunities that maximize returns while minimizing tax liability, including exploring Opportunity Zone real estate, tax-advantaged real asset leasing strategies, tax-loss harvesting and life insurance. 

5. Simplify and Consolidate Financial Reporting: Utilize Provenio’s platform to provide consolidated reporting for all assets, ensuring full transparency into the family’s balance sheet, including legacy holdings.

Challenges Identified

• Liquidity Management: Balancing immediate liquidity needs with long-term wealth preservation, ensuring sufficient cash flow for living expenses without overexposing the portfolio to lower yielding cash.

• Tax Liability: The sale of the business significantly increased the client’s tax liability. The client also faces estate tax challenges that require careful planning.

Provenio’s Approach

1. Tailored Asset Allocation: Developed a customized asset allocation to help harness the power of alternatives while incorporating the liquidity of public securities, including municipal bonds and tax-aware equities. 

2. Sustainable Income Generation: Designed a portfolio in furtherance of generating a reliable, sustainable income stream aligned with the client’s annual spending and charitable giving objectives. Investment focus tailored for advantageous after-tax returns.

3. Optimized Estate Plan: Collaborated with the client’s existing estate attorney to implement a comprehensive estate plan, including revocable living trusts, generation-skipping trusts (GSTs), and charitable trusts (DAFs). Developed a strategy to minimize estate and gift taxes while ensuring the creation of a path for transfer of wealth to future generations.

4. Life Insurance Strategy for Estate Tax: Conducted an extensive review of existing insurance policies to identify coverage gaps and provide sufficient protection for the client’s expanded wealth. Recommended additional coverage, including life insurance policies owned by individual kids’ trusts designed to align with estate planning objectives and risk mitigation plan. 

5. Simplified Financial Management: Provided a holistic and centralized approach to managing the client’s financial needs, acting as the primary point of contact for all aspects of their wealth management strategy developed by Provenio.

6. Second Generation Education: Conducted tailored educational sessions for the client’s children, including guidance on investment principles, tax implications, and estate structures to help with a smooth transition of wealth and family legacy continuity.

Moving Forward

Provenio continues to work with the client to:

• Periodically review and adjust the portfolio to align with evolving market conditions and personal goals.

• Deepen estate planning by refining charitable giving strategies and exploring additional legacy-focused solutions.

• Monitor insurance coverage to ensure ongoing alignment with the client’s wealth and risk profile.

Disclosures: The case studies presented on this site depict the strategies employed by Provenio, are based on a point in time and are representative samples of an actual client implementation whose circumstances are different from yours and are thus being presented for illustrative and informational purposes only, and accordingly should not be relied upon in making any investment decision, as past performance should not be taken as an indication or guarantee of future performance. The numbers presented are not actual client numbers but are based on an actual client's situation. By receipt of this case study, you hereby acknowledge that no recommendation, representation, express or implied, is made regarding future performance or that Provenio’s investment or risk management process will be successful, follow this process or match the results depicted in the case studies on this site. Recommendations made throughout the case studies are based on the original implementation strategy and should not be considered a recommendation to any recipient.