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Success Stories

Featured Success Stories

From Burning Out To Chilling Out
Minimizing Taxes In Retirement
Using Equity Comp To Launch Into Entrepreneurship
Case studies are based on hypothetical situations, not on actual client interactions. The outcomes presented are not a promise or guarantee of similar results as actual client experiences will be unique to each clients' circumstances, as well as their own motivations, effort and discipline.
Woman ImageAmanda
Age: 58
Objective

Convert her biggest asset into a retirement income stream while retaining job continuity for her employees and minimizing taxes on the sale of the business.

The Situation

Amanda had built her successful veterinary practice from the ground up.  It was hard, but she grew the practice to a staff of 8, with enough cash flow to afford a very nice lifestyle.  But the years had worn on Amanda.  Stressors from the business started to layer on top of one another, and she soon realized she was losing the passion she had when she started the business two decades before.  As the stress began to impact her health she knew she needed a change, but didn’t know where to start.

The Strategy

We started by exploring what was most important to Amanda and what she really wanted from her resources.  While her love for animals never waned, her love for her career did.  She realized that it was time to transition away from the business, but was concerned about her employees’ jobs if she sold to a competitor or private equity firm.

Once Amanda knew it was time for her to sell the business, we built a retirement plan that quantified exactly what she needed from the sale of her business to live comfortably for the rest of her life.  This plan included distributions to support her need to travel and see family, as well as fund health insurance costs until she turned 65 and later once she enrolled in Medicare.

Since she had saved diligently in her practice’s 401k plan, we also mapped out an income plan that incorporated strategic Roth conversions.  She’d be giving up an income stream by selling the practice, and would most likely fall into a lower tax bracket.  That being the case, she had a great opportunity to convert her retirement savings to tax free Roth accounts, providing substantial long term tax savings.

The Results

We then worked with her attorney and CPA to clean up the business’s books, remove her personal expenses from the P&L, and prepare to put the practice on the market.

When the offers started to come in, an experienced private equity firm with national presence posted the highest initial bid.  They were willing to secure the employees’ jobs for a short period of time, and Amanda proceeded to close the transaction several months later.

We put her investment and retirement plan to work, and set aside ample cash for Amanda to pay tax on the transaction.  The rest was invested according to plan, and we continue to convert her retirement savings to Roth accounts in years Amanda remains in the lower tax brackets.

Case studies are based on hypothetical situations, not on actual client interactions. The outcomes presented are not a promise or guarantee of similar results as actual client experiences will be unique to each clients' circumstances, as well as their own motivations, effort and discipline.
Senior BackpackersRay & Linda
Ages: 65 & 63
Objective

Transition smoothly into retirement, minimize taxation on their savings, maximize the bequest to their kids & several charitable organizations.

The Situation

Ray was a partner in a successful real estate firm, and was approaching the retirement date specified in his buy/sell agreement.  Ray was confident he had plenty of resources to fund a comfortable retirement, but he was very concerned about taxation.  He’d accumulated substantial savings in the company 401(k) plan, and would trigger income streams from deferred compensation and deferred sales payments once he left.  Ray and his wife Charlotte needed help reducing the tax bite, both now and in the future.

The Strategy

By virtue of Ray’s deferred compensation & deferred sales agreements he and Linda would remain in a very high tax bracket for a few years after Ray’s retirement.  Since they sorely needed tax deductions in these years, we set up a donor advised fund.  This allowed them to make contributions and claim substantial deductions in their high income / high tax bracket years, and then trigger distributions to their charities of choice later on. 

Additionally, Ray & Linda held a large portion of their portfolio in taxable corporate bonds.  Given that they’d likely remain in a high tax bracket for the foreseeable future, we replaced these holdings with municipal bonds that produced tax free interest.  Since the municipal bonds had a similar credit rating this changed maintained a similar risk exposure in their portfolio. 

Ray & Linda also happened to live in a state with an estate tax threshold of $1 million per person ($2 million combined).  Since Ray & Linda’s combined estate exceeded this amount by quite a bit, the state’s estate tax would take a large chunk from their kids’ inheritance.  To reduce this liability we worked with Ray & Linda’s attorneys to set up a series of trusts.  Ray & Linda then placed assets inside the trusts to shield the future growth of some of their investments from estate taxation.  

The Results

On top of this, once Ray & Linda turned 72 they were required to begin distributing money from their retirement savings.  We were able to direct these distributions to charitable causes via Qualified Charitable Distributions, which helped to reduce taxable income from that point forward.

Ray & Linda were never in doubt about their ability to retire.  But with some thoughtful planning we were able to dramatically reduce the amount they’ll pay in taxes - now, throughout their retirement, and after their death.

Case studies are based on hypothetical situations, not on actual client interactions. The outcomes presented are not a promise or guarantee of similar results as actual client experiences will be unique to each clients' circumstances, as well as their own motivations, effort and discipline.
Happy working man at a workstation setupMike
Age: 50
Objective

Use stock compensation from a prior career to purchase an established small business in a tax savvy manner.

The Situation

Mike had been the director of a major, publicly traded company for the last ten years.  Throughout his career he’d been paid in company stock in addition to a cash salary.  It was time for a change, and he’d always wanted to run a small business.  Rather than launch one from the ground up, he wanted to use the equity compensation he’d accumulated to purchase an existing business.  He had a substantial mix of restricted stock units, incentive stock options and non-statutory options.  While he had substantial resources, he had no idea how to minimize taxation while maximizing the benefit of the shares.  Nor did he know how best to structure the purchase of the business he wanted to pursue.

The Strategy

Mike’s stock compensation consisted of a mix of restricted stock units (RSUs), performance share units (PSUs), and non-statutory options (NSOs).  Of all the vested shares he could take with him after departing, the vast majority were RSUs and PSUs.

We started forecasted Mike’s income over the subsequent 10 years and laying out a cash plan for his personal expenses.  While Mike didn’t quite know the exact purchase price he’d be looking at in the business purchase, he estimated it’d be between $2 million and $4 million.

When he found a suitable deal brought to him by his business broker, Mike quickly went through discussions with the seller & signed a letter of intent with a $3 million purchase price.  He put down earnest money soon after & began going through due diligence.  He’d need to put $500,000 down, and the remaining $2.5 million would be financed by the seller.

While Mike had plenty of RSUs and PSUs available to sell, we decided to sell only $200,000 worth of recently vested shares.  These recent lots could be sold with minimal capital gains, reducing taxation.  The remaining $300,000 he needed for the down payment would be borrowed, using the other shares as collateral.  While he’d need to pay interest on the loan, it was far less expensive than selling older lots and triggering capital gains taxation.

The options needed to be exercised over the subsequent four years before they’d expire.  We mapped out a plan to do so in a way that minimized tax impact but provided the cash flow he’d need to pay his personal expenses.  While he was confident in his ability to draw an income from the newly purchased business, this was new to Mike and he wanted a reasonable margin for error.

The Results

Mike closed on the purchase of the business six months after beginning discussions with the seller.  He was able to use his company shares as collateral for the down payment, which helped him avoid triggering substantial capital gains.  And even though a drop in the value of his shares could impact the value of the options he hadn’t yet exercised, he had a sizable cash emergency fund he could use if necessary.

Once Mike settled into his role running the new business, we helped him set up a 401(k) plan and other employee benefits.  This had the dual benefit of helping Mike defer salary and profits from taxation, but also help retain employees after the transition.

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