Swiss Guard International

Estate Planning

Supermodel
Freezing and Transferring Business Interests

Scenario - Over the course of her career, a supermodel used her earnings to diversify her portfolio in anticipation of an early retirement. She invested in more than 35 businesses outside the media and entertainment sector, many of which tripled or more in value. Expectations remain high for continued growth and she wants to shield any future appreciation from estate taxes.

1.
We worked with a valuation specialist to appraise the model’s equity and determine a value.
2.
We used a derivative transaction to transfer the business interests – worth more than US$28 million – into an intentionally defective grantor trust, thereby postponing the payment of taxes for 20 years.
3.
We facilitated loans for the model’s business partners through special purpose entities, which were used to buy the revenue streams generated from the model’s ownership stake at net present value from the trust.
4.
The liquid assets in the trust, including all future appreciation, were used as collateral for a floating, non-recourse credit line for the model’s family members. The size of the credit line is a function of business profits.

Result – The growth of the model’s business interests, projected to increase 6 percent annually to more than US$100 million, will not be subject to estate taxes. Her obligation will be limited to the taxes due on the “frozen” value.

CEO – Fortune 500 Company
Multiple Charitable Structures

Scenario – A CEO wants to support causes that provide housing, food, education, and medical care to needy children. The substantial tax deduction from an outright contribution is attractive, but he doesn’t want to cede control of his assets since he will have ongoing income needs and hopes to provide generously for his own children after his death,

1.
We reviewed the CEO’s assets to determine those most suitable to fund planned gifts.
2.
We established a private foundation for him and funded it with US$10 million in low-basis stock, creating an immediate tax deduction.
3.
We then established an increasing charitable lead trust and funded it with some of his stock options with a value of US$14 million.
4.
Next we established a charitable remainder trust with a 20-year term using US$9 million in commercial real estate owned by the CEO.

Result – The charitable lead trust and charitable remainder trust will work together to provide the CEO with an annual income of US$850,000 for the next 20 years and a projected US$39 million will pass to his children – free of estate taxes – upon his death. His private foundation will have an endowment of US$86 million in 20 years and will be overseen by his children, ensuring that the charities of greatest interest to him will continue to prosper.

Film Producer
Life Insurance at a Discount

Scenario – A film producer needs US$40 million in life insurance but is balking at the quoted premiums and doesn’t want the value of the policy to increase his estate and the associated tax obligation.

1.
We established an irrevocable life insurance trust so the value and proceeds of the policy are outside of the producer’s estate.
2.
We hedged the producer’s US$12 million single-stock holding, investing the proceeds in a hedge fund derivative that uses a warrant structure.
3.
The producer took a loan against the derivative at LIBOR + 80 basis points and used a split-dollar arrangement to pay for the life insurance.

Result – The life insurance will be paid-up in five years at approximately half the cost of paying for it on an out-of-pocket basis. The producer will have the coverage he needs without negatively impacting his estate, and will likely profit from the investment returns,