How we've helped other entrepreneurs realize their vision

How Presidio Partners identified estate-plan gaps and tax-saving opportunities

The Situation

Our client, a co-founder of a venture-backed company, was expecting a liquidity event of approximately $75 million from an upcoming acquisition. Knowing the transaction would create a large tax event, the client was interested in strategies to minimize the overall tax liability to him and his family.

The Strategy

At Presidio Partners, we have deep experience with helping entrepreneurs through sales of their businesses. We coordinate the expertise our clients need to understand their options and optimize their liquidity events. In this case, we brought together UBS Senior Wealth Strategists, CPAs and estate attorneys and held a roundtable discussion among them to educate our client and his family. This discussion included considerations ahead of the sale and allowed us to identify gaps in the client’s existing financial plan and estate documents.

A key component of our recommendations was a strategy involving the qualified small business stock (QSBS) tax exemption. Many entrepreneurs are familiar with the personal exemption but not the concept of QSBS “stacking,” which is also called trust stacking.

We discussed this solution with the clients in detail, including how the QSBS exemption works, how to stack QSBS exemptions across multiple irrevocable trusts (one for each of his three children), the individuals/roles involved in administering the irrevocable trust into the future, and how to best structure those trusts to guard against the concern that their children might not share their values of independence and hard work.

The Result

A tax advisor provided a QSBS opinion letter, and a trust/estate attorney helped to establish the trusts and execute the gifting of shares. Multiple irrevocable trusts were established, one for each child, thereby multiplying the amount of federally tax-free income realized during the transaction—a tax savings that helped the client to preserve generational wealth for his family.

In total, the client received an additional $30 million in QSBS exemptions (three trusts x $10 million per trust), ultimately resulting in about $7.14 million of total tax savings for the family.

How Presidio Partners' guidance helped make it happen

The situation

We met our client, the founder of a company, when he was just beginning to consider a company sale. In his 40s, with a young family, he had been hyper focused on growing the company, so had done little in terms of personal financial planning. With a liquidity event on the horizon, our involvement helped him simplify his finances, address potential risks and create a smooth transition with our end-to-end process.

The strategy

We have experience working with many entrepreneurs through the sale of their businesses, we know how to coordinate the specialists our clients need to ensure they optimize their event.

The result

With a successful sale, our client is now an executive for the acquirer with another venture on the horizon. He has a new home, a heightened level of comfort with his finances and we continue to provide support and advice as their needs evolve.

How Presidio Partners and innovative financing helped

The situation

Our client was on the founding team of a digital media start-up. As part of their Series D round, he had an opportunity to take $10m off the table. This allowed him to purchase his dream home in Santa Monica. But he had several concerns:

- Having taken a smaller salary while growing the business, his income history limited the amount he was approved via a traditional mortgage to $2m.

- He didn’t want to have to use all of the proceeds for a down payment.

The strategy

Our client needed more flexibility than traditional banks offered, so we worked with our UBS Private Mortgage Banker to provide a truly customized solution. We recommended that he:

- Move his assets to UBS, which qualified him for the UBS Premier Pricing¹ rate on a jumbo loan.²

- Use the UBS Mortgage Plus program to pledge his eligible securities as collateral. While this program allowed him to finance up to 100% of his home’s value and keep his portfolio working for him, if the value of the pledged securities decreases below a certain level, the deposit of additional securities and/or the sale of securities may be required. Additionally, a default on the mortgage loan could result in both the loss of the home and pledged securities.

The future

As his company keeps growing we continue to uncover ways to add value with personalized advice and solutions.

^{1 Required minimum assets must be held at UBS at least 10 days prior to closing. UBS Bank USA Premier Pricing only applies to loans up to $10 million. For loans over $10 million, consult your Banking Solutions Consultant. UBS and its affiliated companies offer various investment products and banking products into which the net new money you deposit in your UBS account can be invested. Banking products include, but are not limited to, loans and certificates of deposit. Please consult your Financial Advisor for more detailed information on each product available.}

^{2 Jumbo loans are generally above $417,000 (or in certain locations, $625,500).}

How Presidio Partners made enhanced returns a reality

The situation

Our client’s company had recently closed a large Series B. To date, they hadn’t been concerned about cash yields, but with a much larger balance now sitting in his corporate account, our client wanted to ensure they were being smart with the new monies.

We were introduced to the company’s CFO and discussed ways to increase their yield while maintaining daily liquidity for operational needs.

The strategy

1. Based on our advice:

• The company opened a UBS corporate account and linked their day-to-day company checking account so they could easily move money between the two accounts.
• This created a structure that allowed higher yields provided by a UBS asset management suite of high-quality, short-term financial instruments.

2. When the company raised a $50M Series C, we referred them to UBS’s Corporate Cash Management Group.

• We helped the company develop a formal investment policy statement (IPS) to clearly define the management of their cash assets.
• Corporate Cash Management Group then worked with them to create a customized portfolio of individual securities designed to meet their cash flow, risk tolerance and time horizon.

The result

With the higher yield from his investments, he has been able to hire valuable additional employees.

We consult with this client and his CFO on a regular basis as the business continues to grow. They know they have a trusted, thoughtful advisor who will serve as a sounding board when new challenges arise and help navigate future events, such as pre- or post-sale liquidity planning.

How Presidio Partners and tax-efficient financial planning helped make it happen

The situation

Our client was the co-founder of a software as a service company that was going to be acquired for $500m. With a 10 percent ownership stake in the company, she faced a large tax liability.

With this event on the horizon, we began strategizing for ways to optimize the outcome. Through our conversations we came to find out that she had a passion for helping at-risk youth finish high school and attend college. Knowing she wanted to make a significant contribution towards this cause, we introduced a great solution: donating shares prior to the deal closing, as opposed to donating cash afterward.

The strategy

We first met with the UBS philanthropy team to educate our client about a Donor-Advised Fund (DAF). We then introduced her to a CPA to model her tax liability based on various sale scenarios.

Next, we did the math to fully evaluate potential impacts:

- Our client's gross proceeds at sale were going to be approximately $50m, 100% of which would be taxable as long-term capital gains.

- By planning ahead and donating 10% of her shares to a DAF before the deal was completed, our client was able to pay less in taxes and increase her net proceeds.

Through the DAF, our client then had the ability to recommend grants to charities of her choosing over the course of several years.

The future

We helped our client achieve her goal of supporting her passion while also receiving over ~$1.19m more 'after-tax' dollars for herself and her family.