the startup founders' guide to wealth management

The Startup Founder’s Guide to

Wealth Management

Darin Donovan, Esq.ShareholderHopkins & Carley

Glenn McCraeChief Strategy OfficerEarly Growth Financial Services

#wealthmanagement

Personal Planning Opportunities During Startup Phase

• While moving your company toward an IPO or M&A, keep in mind that there are personal planning opportunities available

• These opportunities are time sensitive• Know and understand what you have

Know Your Assets

• To understand your personal planning opportunities, you must understand your assets– Stock Options: ISOs, NonQuals– Restricted Stock– Founder’s Stock– Vesting

• Professional Income Tax planning assistance

Transfer Tax Landscape

• Income Tax compared to Estate/Gift Tax• Federal Estate/Gift Tax: $5.34 million

lifetime exemption; 40% tax rate• Transferring assets before event can

make gifting much more effective than after

• Capturing post-transfer appreciation

Gift Tax Exemptions

• Marital Deduction• US Citizens – unlimited deduction• Non-US Citizen – $145K annual deduction

• Annual exclusion – 14K/donee• Medical/education – not gifts• Lifetime exemption – 5.34 million• File gift tax return – FMV at time of

complete transfer• Hard to value assets

Gifting: Types of Assets

• Stock: private/public• Stock options• Disqualifying dispositions • Vesting

• Partnership/LLC/carried interest• Real property

Gifting: Methods

• Outright• Custodial Accounts – 18/21• Irrevocable Trusts

Simplest Strategy: Outright Transfers of Stock

• Best for siblings, parents, responsible children over 18 (or older)

• Not appropriate for stock options• Annual Exclusion/Lifetime exemption• Gift tax filings/valuation

Transfers into Irrevocable Trusts

• Best for minor children, grandchildren other beneficiaries where financial abilities are questionable

• Annual Exclusion gifts; use of lifetime exemption

• Trust structures – funds available on timetable client determines

Leveraging Gift Transfers

• Grantor Retained Annuity Trusts (GRATs)

• Sales to Defective Grantor Trust

More Sophisticated TechniquesGrantor Retained Annuity Trust (GRAT) – future appreciation to beneficiaries

•Government set “hurdle” rate” (July of 2014: 2.2%)• Timing of transfer• Asset selection• Diversification of transfers over time• Limitations

More Sophisticated TechniquesDefective Grantor Trust – out of estate, but liable for Income Tax

•Growth/appreciation• Nonrecognition Transactions• Safety valve for Income Tax Liability• Generation-Skipping Transfer (GST)

Planning

Post-Liquidity Event

• CRTs/CLTs • Family entities• Charitable giving

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Thank You and Q&A

Hopkins & Carley, A Law Corporation200 Page Mill Road, Suite 200

Palo Alto, CA 94306T: (650) 804-7600

www.hopkinscarley.com

@HopkinsCarely

Darin Donovan, Esq., Shareholderddonovan@hopkinscarley.com

Glenn McCraegmcrae@earlygrowthfinancialservices.com

EGFS Headquarters2033 Gateway Place, 5th Floor

San Jose, CA 95110T: (415) 234-3437

www.earlygrowthfinancialservices.com

@EarlyGrowthFS