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UHNW Individuals and Families

You’ve created enough wealth to last a lifetime, and for generations to come. While this is a “dream scenario”, there are a complex set of issues that need to be addressed and continuously monitored. Ferris Capital has been working with top executives for decades, and has a great deal of familiarity with the issues these individuals and families face.

Common Questions

You don’t need to navigate these waters alone.

Ferris Capital’s consultative, comprehensive approach to working with you and understanding your needs can help you craft an investment policy, design a portfolio using Modern Portfolio Theory, select managers and allocations, monitor results, and keep you abreast of the issues affecting your goals. We can also share the best practices of similar entities and attend board meetings. Below is a summary of our non-profit services.

Strategy Development
Mission and goal planning Investment policy statement Investment guidelines Fiduciary governance Gift acceptance parameters Donor development plan Liquidity analysis.

Investment Management
Open investment architecture Fiduciary asset management Portfolio construction Manager analysis and selection Asset class re-balancing Performance reporting Gift transfer assistance.

Review goal progression Review portfolio risk Meet and present to board Provide gift valuations Board Education.

What are some “value-add” tax strategies Ferris Capital can provide?

Another component of Ferris Capital’s family office approach, is our firm’s ability to consider the tax implications our clients face as a result of their entire financial picture. Our team works hand in hand with our clients and their CPA’s to ensure we are being as thoughtful and thorough as possible when it comes to minimizing tax liabilities for clients. 

Every family’s situation is unique, and is taken into consideration. However, our firm has found there to be some core strategies in adding value for clients in this area. The most direct way in which Ferris Capital adds value for clients is tax loss harvesting. 

Tax loss harvesting is a strategy that takes your current investment losses and uses those to reduce your tax bill for the year. The strategy attempts to do this without disrupting your asset allocation. In short, you can take some of your investing lemons and make lemonade. 

The Tax Benefit

Tax loss harvesting allows you to use current, taxable investment losses to pay less in taxes now and defer taxes on capital gains and income. When you realize a capital loss (by selling the position), you can offset capital gains you’ve realized for the year on your tax return. If you have a net loss, you are allowed to offset up to $3,000 of income. If you still have excess losses, those are carried forward onto future tax returns. 

When you sell a security but repurchase shortly after, you are effectively trading paying taxes now for paying them later. The reason has to do with your cost basis in the security. For instance, if you purchase a single stock for $100, your initial cost basis in the security is $100—the amount you paid for it. Then, when you sell and repurchase it for $80, your cost basis becomes $80 rather than $100. Let’s say the stock then increases to $150. Without tax loss harvesting, you would be paying capital gains on $50 dollars of gains ($150 minus $100). With tax loss harvesting, you get an initial tax benefit, but then pay taxes later on $70 ($150 minus $80) worth of gains. 

For many, there is great value in deferring taxes on their investments. Generally, money now is worth more than money later because you have the power to invest it. Furthermore, many people anticipate being in a lower tax bracket in the future because they will be earning less or will be in a more advantageous tax situation for other reasons. In these cases, it makes sense to defer taxes so that you can pay them at potentially lower rates.

The Strategy

Tax loss harvesting goes beyond a simple sell strategy and attempts to take losses in your portfolio while not significantly disrupting your overall investment strategy. To do this, you would sell a security to capture the loss, then buy the same amount back shortly after in order to return to your original position. For example, if you originally purchased one share of stock for $100 and it is currently worth $80, you would sell the stock, taking a $20 loss, and then buy one share of stock shortly after, likely at a similar price. This gives you the capital loss for tax purposes, but then returns you to your original position in your portfolio. 

In the meantime, however, you will have been out of the position you sold, so you may have missed out on potential gains made during that time. To alleviate this issue, an additional step would be to invest in a different, but correlated investment during the 30 days you are not invested in the sold position.

Avoiding Wash Sales 

You must wait 31 days to repurchase a security after selling it due to the IRS wash sale rule, which disallows a loss on a “substantially identical” security purchased 30 days after or before the sale. This means that purchasing the same security you just sold within 30 days would violate the rule. As a result, the safest way to avoid a wash sale is to simply repurchase the stock 31 days later without replacing it in the meantime. 

If you are going to replace the sold security with another during those 30 days, it’s best to be cautious when choosing a replacement security. For instance, if you sell an S&P 500 index fund and replace it with another S&P 500 index fund from a different company, it is possible you may have violated the wash sale rule. The IRS does not clearly define a “substantially identical” security and hasn’t issued any guidance on this specific example, but it would be a risky move nonetheless. Work closely with your financial advisor and accountant to determine the best course of action.


Because tax loss harvesting is not an exact science, there are risks to be aware of. One is that if you use the strategy to effectively defer paying taxes, there is a chance that your tax situation in the future may not be as favorable as it is now. Whether it’s because you are earning more than expected or because future tax law changes will increase tax rates, a less favorable tax situation can mean paying more in capital gains taxes rather than less. While no one can tell the future, it’s best to discuss this issue with your financial planner and accountant.

Another issue that can arise is due to switching to a temporary investment during the 30 days after you harvest your losses. If the temporary investment gets significant gains and is then sold, you’ll be subject to short-term capital gains, which are taxed at higher rates than long term gains. Granted, you’ll receive a net benefit from selling at a gain, but it would mean a higher tax bill for the year. Of course, the opposite result is possible as well; that the temporary investment drops, creating greater losses. 

Tax Gain Harvesting

While tax loss harvesting is helpful when you want to reduce the impact of a large tax bill, tax gain harvesting can be helpful when your tax situation is unusually good. The same general principles apply but in reverse. You would sell the security to realize gains for the year and then repurchase the security to be in the same position but with a higher cost-basis. You will pay less in taxes later because of the higher cost basis but will pay them this year when your tax situation is potentially more favorable. One major difference is that there are no “wash sale” rules for realizing gains. You may repurchase the security immediately after selling.

Ultimately, tax loss and gain harvesting can be powerful strategies when used well. However, there are risks involved, and because the future is unpredictable, the strategies may not end up being as effective as you intended. That is where Ferris Capital’s family office approach can look at each client or family as a unique case, and evaluate the merits of such strategies accordingly. 

Please reach out to Ferris Capital in order to cover the entire list of other tax advantage strategies, and see which may apply to your specific situation.

What are the essential concepts and steps of trust & estate planning?

While the thought of having a personal “estate” may conjure images of Vanderbilts, Rockefellers and the other wealthy elite, an estate is probably the most common thing for a person to have. By definition, an estate is simply the property under an individual’s name. It can include everything from a home or business, to bank accounts and retirement funds.

Taking steps to plan for the future of your estate can be one of the most important things you do. In fact, dividing and bequeathing your property is the very last official action you make. To ensure that loved ones can make the most of what you are able to leave them, it is important that you learn the different parts of estate planning and consider how they might affect you.

How much planning is enough? That depends on the goals you want to reach. Using a variety of methods, there is no limit to the amount of control you can put on your estate. And while not every estate requires every method of planning, it can be helpful to know the steps of planning available to you.

Benefits to Beneficiaries
The first and easiest step to planning an estate is establishing beneficiaries of private funds or policies, like life insurance policies, 401k plans and pensions. 

This is the easiest step in estate planning because it is typically requested by most plans that a primary and secondary beneficiary be listed to receive funds in the event of a death. Though some plans, like life insurance, will require the beneficiary at signup, others may make it optional to do later. People often put off establishing beneficiaries, creating problems if they die suddenly. Whenever an option to name beneficiaries is offered, it should be handled immediately. 

The next major step in estate planning is establishing a last will and testament. While a person who dies without a will (dying “intestate”) still has his or her property divided up among family, there are no guarantees over who gets what. A will is a simple way to make sure specific items get to the people who ought to have them. 

If children are involved, a will becomes a necessity for a responsible parent. Wills determine who gets legal guardianship over the surviving children. Though a court will take this process seriously if the decision is left up to them, it is far better for the parents to designate the people they would like to raise their children. A will stating guardianship should be top priority for anyone with children.

Though useful for declaring who should receive property, wills do not automatically guarantee another person can receive it. If property is owned jointly with a right of survivorship or is kept as “community property” between a married couple, ownership may be transferred before a will goes into effect. Though most state’s marital property is not treated this way, individuals should be aware of their state’s marital property laws prior to creating a will.

Handing Over Power
Potentially as difficult as a death, the medical incapacitation of an individual can cause huge amounts of stress for a family. Living wills give instructions for the medical care of an individual given they are in an incapacitated, terminal condition. Though limited to these specific situations, living wills can spare a surviving family from difficult decisions and prevent conflict between members who have different views on treatment. 

A more in-depth approach to prepare for sudden incapacitation is the creation of “power of attorney,” a document that gives a named individual the ability to act on behalf of the disabled in legal matters. Drafted for both medical and financial decision making, power of attorney documents can be extremely difficult to detail and should only be created by a legal professional.

Though many people think trusts are financial bodies that are only meant for the wealthy, the truth is they can be used by most people to create detailed control over an estate. A trust is simply a legal entity that holds property for the benefit of a few named individuals. Though the major advantages of a trust are deferring probate fees and having circumstantial control over property distribution, trusts are also useful for couples who have children from prior marriages. In a trust, a person can place property that would pay interest to help support the surviving spouse, but ultimately distributes property to his or her children, guaranteeing they receive some of the inheritance. 

Individuals looking to reduce their estate before death should consider simply giving money away to loved ones later on in life. Each year, a person can give up to $14,000 tax-free to each unique individual or institution they choose. As long as the gifts stay below this amount, they will remain tax-free and still not count against the lifetime gift tax exemption. There are no transfer taxes on gifts made to public charities, regardless of size.

Securing Estate Documents
After necessary estate documents are prepared, they should be adequately stored and protected. Wills are the most difficult to protect. Most states recognize only the original signed document as having any legal power. If the original is destroyed, a new will must be drafted. Typically, the law firm where the document was created will offer to keep the will in an extremely secure safe.

Other documents, such as living wills and power of attorney, can typically be copied and notarized to create duplicates that carry the same legal power as the original. As with wills, loved ones should be informed of the documents’ location so they can be accessed when needed. 

Estate planning can be a difficult process for people. The concept of preparing property for an accident or death is hardly something people want to spend time considering. Though its creator will never see it used, a well-written, well-conceived estate plan can make all the difference for friends and family. 

Who Owns What?
An important aspect of estate planning is determining the state of ownership of all property associated with the estate. Wills and probate only deal with the property officially belonging to the testator. Joint-ownership of property through marriage or another arrangement keeps property out of probate because it is already owned by another person.

Joint-ownership, marital property or “life tenant” policies combine the ownership of property so that a surviving partner gains full control after a death. It is important to know the details of ownership because it affects how property is handled after a death.

Filing for joint ownership seems like a great method to bypass probate and probate costs, but it comes with inherent risks. People added to a joint ownership have as much legal control of the property as the original owner. Bank accounts can be accessed and emptied by either party, causing problems if the money was relied on for future plans. Similarly, property that is jointly owned often cannot be sold or altered without permission of both owners. Because of these risks, joint-ownership titles should only be sought if both parties have similar plans for the future and trust each other implicitly. 

Death and Taxes
While people make efforts to avoid probate costs and court fees for the estates they leave behind, taxation is a much more encompassing process. Probate only handles property that needs to be distributed by a will or intestate laws. Taxation looks at all property that an individual held at death and shortly beforehand. The taxable estate includes all property (owned outright and joint-owned), investments, recent donations, trusts and life insurance policies. While much of an estate can be declared either tax deferred or tax exempt if passed on to a spouse or charitable donations, estate and gift taxes on inheritances can be extremely high. Local estate taxes can vary greatly from state to state. Research and legal advice should be sought to protect against any unexpected estate taxes. 

Simplifying the Future
Many people avoid estate planning because of the inconvenience of cost and the uncomfortable concept of their death. The simple fact is that death or serious accidents cannot be controlled; however, if the proper steps are taken, almost everything legally associated with an unfortunate event can be organized. A plan and proper legal arrangements keep unnecessary fees, taxes and court battles from plaguing a family after the death of a loved one. 

Ferris Capital can help craft or review the plans you have laid down for the future and what else you can do to ensure property moves seamlessly between the survivors of a death in your family.

One of the bigger rewards of financial success is the ability to “give back” to others. What are some factors I need to be aware of?

Many people assume that the hardest part of donating is the choice of charity or maybe even the decision to part with the money in the first place. However, when presented with all the ways to give, donors often find the world of charitable giving to have more choices than they anticipated. See below to easily compare various methods of charitable giving and determine which method(s) may work best for your charitable giving strategy.

Elements of Charitable Giving Methods 
Different giving methods can provide a variety of benefits to both donor and charity. A number of factors affect each method’s potential and limitations. 

Size of Gift
While charities appreciate any gifts they receive, not every giving method fits every donation size. Some methods require thousands of dollars to setup and should not (or cannot) be used for smaller gifts. On the other end, giving a very large gift through an inappropriate method might prevent it from reaching its full potential value. Small gifts are those under $5,000 while mid-sized gifts start at $5,000 and go up to around $50,000. A large gift will typically be anything greater than a mid-sized one. Each method lists a common, efficient size but is not strictly limited to it; likewise, the cash values of each size listed here are generalizations. It is always wise to ask a financial advisor for recommendations on the giving method best suited for your prospective donation.

How it works
The key operations of the charitable method. The descriptions given in the chart are only a primer and are in no way exhaustive. Giving methods (particularly trusts) can be extremely complex and several require legal guidance when being established.

Typical time of gift
The period when a gift can be made or goes active. For some giving methods, timing doesn’t matter (provided taxes are taken into account); in other cases, your financial circumstances or life stage may dictate when it’s most advantageous to give. For two methods, both involving life insurance policies, the process can be set up and managed at any time, but the gift cannot.

Though hardly exhaustive, the major feature listed is typically the most appealing aspect(s) or greatest challenge of a giving method while it is being set up or carried out.

Tax deduction
Government-provided tax deductions are one of the most important aspects of giving. A charitable tax deduction allows you to remove your donation from your income (or estate) so that you are not taxed for money you did not keep. Depending on the type of charity, these deduction limits are either 50 percent of adjusted gross income when making standard gifts and 30 percent of income when donating capital gains property or 30 percent and 20 percent, respectively. In the case of appreciating trusts, a deduction can be made for the charity’s “present interest” in the gift – the part of the initial gift that will grow into the amount the charity will ultimately receive. 

Retained benefits
Some donations (through trusts and private foundations) can give back to a donor. Money returned to the owner from a donation is referred to as “retained interest” or “retained benefits.” The retained benefits of trusts are the monetary distributions given back to donor (or other beneficiary). The retained benefit of private foundations is the ability to distribute some fund resources as payment to individuals who provide services for the foundation, including, in special cases, family members. Tax deductions are never given for any retained benefits. made until the donor’s death.

What are some business succession options?

Creating a business succession plan may be one of the most difficult management challenges of your professional career. Juggling the selection and preparation of successors with tax and estate concerns makes succession planning a complicated endeavor, as evidenced by the failure rate of second and third generation businesses. The best way to successfully send your company into the future is to start forming a plan now.

Transfer Ownership to Next Generation
When choosing and grooming successors for your business, you must consider their business strength and savvy, and the psychological and emotional impacts of any decision on employees and family members. Children who are active in the family business present both unique opportunities and potential pitfalls. You have the opportunity to take advantage of gifting and valuation discounts when transferring the business to family members. A Family Limited Partnership often works well in these circumstances. However, there is always the risk of family disagreements and the challenge of balancing the estate with family members who are not active in the business. 

Whether your successors are family or not, it’s important that you begin the succession process early. The first step is to recruit talented employees from the beginning and help them develop their leadership skills within the company. You should also get them comfortable with taking over long before they actually have to step in, to ensure a smoother transition. It may also be helpful to get clients used to the new leadership before they take office. Adequately preparing your successors is one of the best things you can do to maintain your company’s success in the next generation.

If you choose to transfer the business to your employees, an Employee Stock Ownership Plan (ESOP) may be the solution. An ESOP is a qualified plan designed to benefit all employees and must be non-discriminatory (in other words, it must not provide a greater benefit to one class of employees over another). Unlike other qualified plans, an ESOP can borrow money to purchase investments in the stock of the sponsoring corporation. An ESOP is an excellent method for business owners to plan for the transfer of ownership. In addition, an ESOP provides tax advantages to the selling shareholders that assist in maximizing the value of the business. 

With an ESOP, the business owners sell their shares to an ESOP trust. The trust in turn makes annual contributions to the accounts of the employees. One key issue that must be addressed with an ESOP is the concept of repurchased liability. The sponsoring corporation must create a market for the employees to redeem their vested shares upon certain events (e.g. death, retirement). It’s important to give careful attention to this issue.

Public Offering
An alternative to the ESOP is to go public. Using this method, corporate shares are offered to the public and traded on the stock market. Going public is usually an expensive option that requires a sufficient revenue base and a strong business plan. It is not optimal as an exit strategy if you are near retirement; rather, this strategy is best employed early in the succession planning process while you are still very active in the business. This option is most useful to provide growth capital for the business; however, it can provide liquidity to you in the long run. 

If you would like to begin to transfer the business value while retaining control of the company, recapitalization may be the answer. Using this method, the business issues two classes of stock: voting preferred and non-voting common stock. The non-voting stock is transferred either through sale or gift to the successors. The business retains the voting preferred stock until the owners are ready to transfer control. This is more commonly appropriate when transferring a business from parents to the next generation and may be most useful as a means to provide growth for the business. 

You may choose to sell your business to someone who is not currently involved in the company—a competitor, an existing customer or supplier, for example. This can be done as a lump sum sale or in the form of an installment sale that spreads the payments and tax implications over a number of years. The sale of the business may be structured as an asset sale, a sale of stock or a combination of both. As a business owner, you are motivated to sell the stock in your business in order to take full advantage of the lower capital gains tax rates (a sale of assets usually subjects a portion of the gain to ordinary tax rates). However, the market and other factors may dictate the nature of the sale. You should discuss the options available to you with your advisors. 

If there is no market for the business as an ongoing entity and other options are not available, you may choose to close the business and liquidate its assets.

Buy-sell agreements
What will happen if you or a business partner wishes to retire, dies prematurely, becomes permanently disabled or gets divorced? Most closely held businesses need to have a buy-sell agreement in place when other partners, principals or shareholders are involved. Most commonly, this agreement states what occurs in the event that a partner/shareholder should die, but it should also include provisions for retirement or other departure, disability and for the divorce of a partner.

If you are an individual business owner, many of these items still apply; you simply have the added challenge of determining who will purchase your business in the occurrence of one of these events.

Who Can Help You

David Ferris, ESQ.

Chief Executive Officer / Chief Investment Officer

Matthew Elsenbeck

Executive Vice President – Client Services

Andrew Vernazza

Senior Vice President – Portfolio Management