Getting the Most Out of Your Advisors. It’s a team sport.

Relationships take work, and your relationships with professional advisors are no different. How a family selects and interacts with its wealth advisory team can mean the difference between best-in-class and off-the-shelf planning. Here are some simple yet valuable tips for assembling and encouraging a winning team.

Make New Advisors, But Keep the Old.

Your needs will change over time;

Keep the sentimental team members; but,

Don’t be afraid to seek additional resources as complexity mounts.

Suit-up.

Shake-off the “I already have one of those” mind-set;

In this complex world, no two advisors are alike; and,

A different perspective can be valuable.

Engage Specialists.

Find advisors that specialize in finite matters;

Access best-in-class ideas; and,

Optimize your planning.

Pick a Team Leader.

Set leadership expectations;

Gain peace of mind that someone is watchful; and,

Enjoy pro-active planning.

Don’t Try This At Home.

Trying to lead your own advisory team in areas outside of your personal expertise can be disastrous;

Spot issues and opportunities on a timely basis; and,

Tackle problems more effectively.

It’s Your Call.

Team leaders are facilitators, not decision-makers;

Take time to understand the issues; and,

Make important decisions yourself.

Use it or Lose it.

Act on advice;

Advice can be time-sensitive - windows of opportunity close; and,

Being receptive to current ideas may give you better access to future opportunities.

The Lone Ranger.

Avoid advisors who act as your “single point of contact”;

Team service ensures that projects are properly communicated, delegated and reviewed; and,

Team players tap internal and external resources when advisable.

The Deal Killer.

Your closest advisors should be willing to entertain external ideas that fit your risk profile;

The occasional skeptic is a good sanity check, but,

The forever idea-smasher may lack team play or sophistication.

Research Your Referrals.

Professional and office politics can play a big part in referral making;

Interview at least three candidates; and,

Pick the one best suited.

Switch a Team Member Not a Team.

Don’t blame an entire firm for a bad experience with one advisor;

Minimize transition errors and costs; and,

Ask for an internal replacement before going outside the firm.

Know Enough to Be Dangerous.

Don’t go forth blindly;

Know enough to ask the right questions; and,

Catch mistakes and avoid misunderstandings.

Get it in Writing.

If it’s an important question, ask for the answer in writing;

Off-the-cuff remarks are often not entirely accurate.

Upgrade Technology.

Keep everyone in-the-loop with electronic file sharing technology;

Get organized with virtual document storage;

Be better informed about your financial position with data aggregation technology; and,

Abandon spreadsheets in favor of accounting software.

Get Your Advisors in a Room Together.

Spot the true leaders, experts, light weights, and team players immediately;

Access collective advice; and,

Be better informed about the pros, cons, and alternatives in any situation.

Participate or Get the Boilerplate.

Abandon the “have your people call my people” mind-set;

With your direct input and close contact, any planning will be customized to suit your individual goals.

Keep Your Team Connected.

Use technology and quarterly meetings to keep everyone in-the-loop;

Get comprehensive advice and service; and,

Rest assured that nothing slips through the cracks.

The key to unlocking a winning team is at your fingertips. Understand what your existing advisors are really good at; add more advisors to round-out the team’s skills set; put the right advisor in charge; and, participate as part of the team.

By: Elyse Germack, President

AVANT FINANCIAL, LLC

Family Limited Partnership Planning. are you "in" or are you "out"?

Families are most familiar with partnerships or limited liability companies in the context of asset protection for business assets. Some families are starting to see the benefits of putting non-business assets like family real estate, hedge funds, and securities portfolios in a partnership or limited liability company as well.

The term family limited partnership refers to a limited partnership or limited liability company structure that is designed specifically with wealth transfer planning in mind. The structure allows the parents to transfer wealth in a tax-advantaged manner, while still retaining some control over the assets transferred.

Example: Parents establish a limited liability company, retaining the voting interests (2% of the company) and transferring the nonvoting interests to their children. The company owns $1 million of publicly-traded securities. A qualified appraiser values the non-voting interests (representing 98% of the company) at only $700,000 for gift tax purposes due to fact that the non-voting members have little control over and marketability of their interests.

The IRS is challenging and Congress is trying to stop taxpayers who take business valuation discounts on the transfer of partnership or limited liability company interests with underlying non-business assets. With so much recent judicial and legislative activity, it is honestly hard to keep-up.

Taxpayers landing in court defending their estate or gift tax business valuation discounts on non-business assets have had about a 40% success rate. These statistics are a bit misleading as the IRS most often challenges taxpayers with really “bad facts” like sloppy formation documents or careless administration.

If valuation discounts are a goal, nothing is more important than having experienced, coordinated, professional advice and oversight.

In each of the following cases, courts found a legitimate business purpose for funding a family limited partnership with non-business assets, and permitted the use of business valuation discounts in valuing partnership interests for transfer tax purposes:

To consolidate undivided interests in real estate (Church); to settle family hostilities (Stone); to pool investment assets, and to provide for active management succession (Kimbell, Murphy and Mirowski); to consolidate company ownership in one entity rather than multiple trusts (Bongard); to perpetuate a specific securities investment philosophy (Schutt and Miller); and, to protect assets from divorce or other dissipation (Keller and Murphy).

Many partnership governing documents contain a list of business purposes in an effort to document its reason for existence. But, actions speak louder than words, and if subsequent actions don’t prove these purposes valid, the list will not have much effect. For example, if a stated partnership purpose is to pool family investments to access certain asset classes (e.g., private equity), and the manager never alters the partnership’s asset allocation, this purpose will likely be disregarded.

With all the pending legislation attempting to halt discounts on non-business assets, time is certainly “of the essence” if gift tax planning is warranted. Savvy estate planners know how to mitigate the effects of potential IRS valuation challenges on lifetime transfers.

Because of all the IRS valuation challenges, some advisors have declared they are officially out of the family limited partnership “game”. Others were never in the game in the first place – a trust being their “go-to” vehicle for transferring non-business assets. Advisor sentiment may largely explain why many high net worth families are not using partnerships to manage non-business assets.

Those advisors that continue to embrace them know that a partnership is often a good alternative to a trust, offering asset protection with more flexibility. And, a partnership, when combined with a trust, can improve a trust’s tax-related performance and may even reduce the Trustee’s administrative duties. Some advisors recommend “wrapping” securities in a partnership before making transfers to an irrevocable grantor trust or charitable trust for these reasons.

Now that the estate tax exemption is at $3.5 million, the family limited partnership, viewed primarily as an estate & gift tax planning vehicle, will likely get even less attention from advisors. This would be unfortunate, as less tax should result in more wealth to manage, either responsibly or irresponsibly.

Families and their advisors should take a fresh look at the family limited partnership as a wealth management tool, not a tax planning device. Managing wealth can be a tremendous emotional and administrative burden for ill-prepared family members. Partnerships can help a family transition wealth and management duties responsibly and effectively.

The primary wealth management benefits of forming a family limited partnership are as follows:

 Centralize asset management with the most capable family member;

 Simplify investment reporting and recordkeeping;

 Simplify inter-family gifts and transfers;

 Provide parental control over assets gifted or transferred;

• Limit access to assets for children who can’t control their own spending habits;

 Encourage communication about cash-flow and financial planning;

 Encourage respect for wealth as a family enterprise, not a personal pocketbook;

 Diversify and optimize family asset allocation based upon a “total view” of family assets;

• Meet accredited investor hurdles to take advantage of more asset classes;

• Make investments in nontransferable assets (e.g., private equity) inside a partnership to enable asset transfers;

 Protect underlying assets from future claims in the event of divorce or bankruptcy;

• A convenient means of segregating assets to avoid inadvertent commingling of marital property and separate property;

• An alternative to a prenuptial agreement, when a child is opposed;

 Assist the family in conflict resolution through arbitration, buy-sell and personal asset usage provisions;

 Create a “holding company” to reduce tax compliance requirements; and,

 Facilitate the appointment of a professional advisor (like a family office representative) who can serve as a liaison and support for an entire family.

We all know families tangled-up in the web of an active business, where emotions run high about salaries, management and ownership succession, and what is or isn’t fair. Non-business assets do not present the same challenges; they can be consolidated with a much greater success rate.

As an aside, most active family businesses do not start out as wealth transfer vehicles, and therefore its owners could benefit from incorporating more comprehensive family limited partnership “style” conflict resolution and ownership transfer provisions into governing documents.

Most high net worth families can better manage family cottages and family farms, access more investment options, temper family hostilities, reduce gift administration costs and duties, and mitigate financial risks by consolidating non-business assets under the watch of the most capable member, or an external advisor.

For families who are looking for a way to manage wealth responsibly and efficiently, a family limited partnership is a good play to make. Partnerships can ultimately improve the odds that a family’s hard-earned wealth is sustained.

By: Elyse Germack, President

AVANT FINANCIAL, LLC

Elyse Germack is a CPA, licensed in Illinois and Michigan and an attorney, licensed in Illinois and Michigan. In addition to running the multi-family office, AVANT FINANCIAL, Elyse also helps form and manage nonprofit organizations.

AVANT FINANCIAL, LLC is a Multi-Family Office located in Birmingham, Michigan, providing estate planning, trust administration, nonprofit management, partnership accounting, tax compliance, and family office services.

Please visit us at www.avantadvisors.com to learn more about our organization. To download future monthly wealth reports please visit our blog at avantadvisors.blogspot.com. Last month’s report was “Test-Drive the Family Office Model”.

Test-Drive the Family Office Model

A Family Office serves as a family’s personal financial and administrative office, overseeing every aspect of a family’s financial affairs with the same degree of professionalism as a family business.


Family Office services vary depending upon the personal needs and professional expertise of the family members, and the nature of a family’s assets. The range includes everything from sophisticated strategic investment, tax and financial planning to concierge services. Most Family Offices provide trust administration, foundation management, personal tax planning and compliance, estate planning, investment recordkeeping, property management, and financial reporting services.

Most advisors to the high net worth community would agree that the Family Office model is the optimal wealth management model. Because the specific family members are central to the entire operation, a Family Office delivers advice and services that are most aligned with a family’s goals, needs and desires.

A Family Office does not replace a family’s existing team of professional advisors, but can make the team better coordinated, more efficient and more effective. By centralizing and organizing financial data, Family Offices can help a family and its team of advisors move from a “need to know” to a “can know” environment. With a Family Office, a family also benefits from:

• Leadership and coordination of a team of third party wealth advisors;

• One central source for information on, advice about or oversight of all of a family’s financial matters;

• Sophisticated professional advice that is unbiased, and based upon a total view of a family’s dynamics and financial situation;

• A completely confidential, family-focused environment;

• Continuity for managing multi-generational family entities, and perpetuating family values; and,

• Access to professional advisors who can help the family understand and assume the responsibilities associated with business succession, asset ownership, trusteeship, and corporate governance.

According to research done by the Family Office Exchange, a typical Family Office is overseeing at least $100 million. Most Family Office advisors would agree that the primary factor which justifies the existence and overhead of a Family Office is not net worth, but rather complexity – sheer numbers of transactions, entities and family members.


For the vast majority of the high net worth community, family net worth is below the $100 million “sweet spot”, and operating a Family Office is viewed as a time consuming endeavor that is simply not cost effective. The time requirements and operating costs parallel that of any other active business.

In recent years the concept of a “Multi-Family Office” (MFO) has gained considerable momentum as a Family Office alternative. The idea is that a small group of families can share personnel, technology and office space, but still access a high level of day-to-day personal attention and professional expertise. The typical point of entry is a much lower net worth of about $20 million.

Some law firms, accounting firms, and investment management firms are now offering “Family Office services” to their clients. The vast majority of firms that offer Family Office services to multiple families fall into one of two categories; the Chief Investment Officer (“CIO”) model, or the Chief Financial Officer (“CFO”) model.

• Under the CIO model, the core competency is investment strategy and asset management, with limited other wealth management services offered as both a convenience and a “loss leader”.

o Families most attracted to (and most eligible for) this model are those facing a liquidity event that results in an immediate need for portfolio strategy and management.

• Under the CFO model, the core competency is financial strategy and financial management: tax, estate, business and financial planning; recordkeeping, and reporting.

o Families most attracted to this model are those with established wealth that requires a significant amount of recordkeeping and sustainability related strategy (e.g., asset protection, tax minimization, governance, and family dynamics).

The skills and experience required to be a CIO are vastly different than that of a CFO. While some MFOs attempt to offer both, families often get stuck with a “single point of contact”. It may be best to engage two different firms that both get access to the entire family balance sheet – one to provide comprehensive investment strategy, and one to provide financial strategy and management.

An MFO can successfully replicate the benefits of a Family Office without some of the associated costs and administrative burdens under certain circumstances. With an MFO, a family is positioned more like a client than an employer. This seemingly subtle distinction can be dramatic, unless these critical Multi-Family Office attributes exist:

• The MFO must not sell any financial products;

• The family to advisor ratio must be very low - a dozen families, not a hundred;

• The MFO must charge fees on a fixed retainer, or based upon a percentage of assets under advisement - not hourly;

• The MFO must have experienced staff, capable of providing advisory services - not just administrative support;

• The MFO must have experienced staff, capable of leading a specific family’s existing team of wealth advisors; and,

• The MFO must have superior technology to handle complex financial transactions, to protect data, and to connect advisors.

Families looking for a Family Office experience must align themselves with an organization that can provide leadership and won’t ultimately leave them feeling either “sold” or “on-the-clock”. Professional guidance, open communication and mutual trust will drive-home the family-centric benefits of the Family Office model.