Client Overview
Our client, an accomplished entrepreneur and venture capitalist, achieved a significant liquidity event after selling a business they had founded several years prior. With a net worth of over $250 million, the client and their family sought a customized wealth management strategy emphasizing capital preservation, tax-efficient income generation, and long-term intergenerational growth.
Client Goals
Consistent Income: Generate stable net after-tax annual income from the family’s Revocable Living Trust.
Tax Efficiency: Leverage structures such as Private Placement Life Insurance (PPLI) and Private Placement Variable Annuities (PPVA) to compound tax-deferred returns and generate tax-free income.
Portfolio Diversification: Transition from an overweight position in real estate and concentrated venture capital exposure to a more balanced and diversified portfolio.
Generational Planning: Preserve assets for future generations while ensuring a seamless wealth transfer.
Streamlined Reporting: Simplify investment oversight across multiple entities, including a Revocable Living Trust, Children’s Trusts and a Donor-Advised Fund.
Challenges Identified
Fragmented Oversight: Investments managed across multiple advisors and entities lacked a unified coordination and reporting structure.
High Tax Burden: As California taxpayers, the family faced high tax burdens, necessitating strategic planning to mitigate liabilities and maximize after-tax returns.
Provenio’s Approach
Customized Asset Allocation: Designed a diversified asset allocation strategy that incorporated index equities, municipal bonds, private credit, and real assets, emphasizing stable, cash-flowing investments. Reduced real estate concentration while balancing liquidity and tax efficiency through strategic use of depreciation benefits.
Income and Liquidity: Structured the portfolio to generate consistent annual net after-tax income while maintaining principal preservation. Focused on private credit, real assets, and tax-advantaged income-generating investments in furtherance of consistent and predictable cash flow.
Tax Optimization: Initiated PPLI funding with an initial $10M commitment across two policies, with a target of $40M over three years. Maximized tax efficiency through strategic asset class selection, structuring investments to align with the client’s CA tax status.
Consolidated Financial Oversight: Implemented a unified reporting framework integrating oversight across Provenio, other advisors, and family trusts for a comprehensive view of all holdings.
Estate and Generational Planning: Partnered with the client’s estate attorney to ensure trust structures aligned with long-term wealth transfer objectives. Explored PPLI funding for the Children’s Trust to support future generations while minimizing annual tax liabilities.
Moving Forward
Provenio continues to work closely with the client to:
Enhance Liquidity Management: Optimize strategic reallocations from equities and venture capital to fund PPLI and support income generation.
Deepen Generational Planning: Refine and optimize estate planning strategies.
Monitor and Reassess: Conduct periodic reviews of asset allocation, performance, and evolving family goals to ensure ongoing alignment with objectives.
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.