Estate Planning for Transfers of Hedge Fund and Private Equity Interests

Hedge fund managers and private equity interest holders have tremendous planning opportunities for their interests if properly structured. Estate planners must identify potential income, estate, and gift tax issues for holders of these interests and implement effective techniques to minimize or avoid unintended tax consequences.

Most private equity or hedge funds use carried interest--a share in the fund's profits more than a minimum return--as part of its economic structure. Because carried interest can appreciate substantially if a fund is successful, it is an ideal asset to plan for use in various estate planning techniques.

Careful planning is required to take advantage of the opportunities that carried interest offers for transferring wealth. IRC Chapter 14 governs the valuation of certain lifetime transfers to family members. A founder's transfer of carried interest to one or more family members may trigger gift tax consequences under Chapter 14 as well as under traditional gift tax principles.

Trusts and estates counsel must implement planning techniques to assist owners of hedge funds or private equity firms geared toward facilitating the transfer of wealth, including common techniques such as GRATs, installment sales, intra-family loans, the use of vertical slice safe harbor rules, and other available options.

Listen as our experienced panel discusses estate planning challenges for hedge fund and private equity interest holders. The panel will discuss planning techniques that take advantage of wealth transfer opportunities while avoiding unintended adverse tax consequences.

I. Income, estate, and gift tax issues

II. Use of GRATs, CLATs, and defective grantor trusts

III. Planning with carried interests

IV. IRC Section 2701 and "vertical slice" planning

V. Valuation issues

The panel will review these and other key issues:

• What are the income, estate, and gift tax ramifications of hedge fund transfers and private equity interests?
• What are the available planning techniques for fund managers and limited partners?
• How can GRATs, CLATs, and defective grantor trusts be utilized to minimize taxes, and what are the challenges?
• What are the key planning considerations for carried interest, and what is the impact of recently finalized regulations?
• What are the issues stemming from Section 2701 and the use of "vertical slice" transfers?
• What are the valuation issues and their impact on overall planning?

Learning Objectives

After completing this course, you will be able to:

• Identify the income, estate, and gift tax ramifications of hedge fund transfers and private equity interests
• Ascertain tax planning techniques for fund managers and limited partners
• Understand how GRATs, CLATs, and defective grantor trusts are utilized to minimize taxes
• Recognize key tax planning considerations for carried interest
• Identify tax issues stemming from Section 2701 and the use of "vertical slice" transfers

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business, legal or public firm experience at mid-level within the organization, involved in sophisticated tax planning and reporting; supervisory authority over other attorneys/preparers/accountants. Knowledge and understanding of partnership and other pass-through entities, IRC §1061, §1231; familiarity with tax planning for hedge funds, private equity, and real estate professionals.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).