Taking this step should lead to
new business for your practice.

Note: This is the third in a three-part series on the growing area of affluent wealth protection services.

    There is a strong correlation between a person's overall level of wealth and his or her concern for the preservation and safety of their fiscal and physical assets. It is this growing demand for wealth protection that creates an opportunity for wealth managers to provide even greater value to their clients. In last month's article we discussed the six-step process a wealth manager can use to assess a client's risk and create a plan of action.
    In this month's article, we will review a blind case study focusing principally on the two elements of wealth protection-asset protection and family security. In this case study we have relied on the Whole Client Model, the holistic client profiling methodology used by many of the most successful financial and legal professionals, to help us develop a broad awareness of the client, his lifestyle, his assets and his objectives. Ideally, the information collected as part of the profiling process is presented on a single page so it is easier to identify the relationships between the various people, assets, products and circumstances in a client's life. Due to space limitations, relevant highlights of the client's profile will be presented in summary paragraphs.

Wealth Protection Case Study Client
    JD is a 51-year old male with a successful real estate development business. He has an annual income of $400,000 and a net worth of roughly $24 million.

    JD's net worth is comprised of the following things: $12 million in equity in the real estate development business which represents 50% of the company's value; the company owns seven apartment buildings; $7.5 million in investable assets; $4 million in personally owned undeveloped real estate; a term life policy with a face value of $3 million nearing expiration; $500,000 in equity in his primary residence; and $300,000 in qualified retirement assets.

    JD is married for the second time to a woman 13 years his junior. He has a 16-year-old daughter with behavioral issues from his first marriage, and a business partner who owns 49 % of the real estate development company.

    JD likes to spend his free time and his discretionary income traveling with his family, golfing with his business associates, clients and friends, and fly fishing.

    JD has a number of existing relationships with professional advisors. He has an advisor managing $1.5 million (for the purposes of this case study, this advisor is the one conducting the wealth protection assessment for JD), a broker with $4 million in assets and a long-term banking relationship that provides him with credit lines, the overall administration and investment management for his company's retirement plan including his $300,000 account, and management of another $2 million in assets. Additionally, he has two accountants who separately handle his personal and business affairs and a real estate attorney who focuses on his business.

    JD is the primary financial decision-maker for his family and his company. Although he responds best to numbers, rather than concepts, and wants information presented in a clear and quantitative fashion, he does not want too much detail up front. Only after he has had a chance to evaluate a broad idea will he request details, and then he wants as much information as possible so he can create an informed opinion.

Goals and Concerns
    Disgruntled tenants have threatened JD and his family, and both he and his company have been named and involved in numerous lawsuits. Additionally, he is concerned that his 16-year-old's new driver's license and social activities will create unwanted exposure. As a result, he has repeatedly expressed a desire to take care of his family, both financially and physically, and wants to find a better way to protect his family and his assets moving forward. Furthermore, he has indicated an interest in selling his real estate development company in a few years, by which time he expects it to double in value.
    Based on the information provided in this article, a number of wealth protection issues can be readily identified, namely shielding JD's business and his real estate assets from creditors and litigants and taking the necessary steps to defend his family against past and future threats to their safety. The following is a short list of the immediate asset protection and family protection solutions that can be presented to JD by an astute wealth manager.

Asset Protection Planning
    Freeze the value of the real estate development company at its current level, enabling JD to sell it at some point in the future and keep his estate tax burden consistent with today's assessment of the company regardless of any increase in the company's value. Freezing the company can be accomplished in a number of ways, including the use of legal structures such as defective grantor trusts or sophisticated financial strategies such as cascading derivative transactions. When properly structured and executed, these freezing strategies can also provide the additional benefit of creditor protection.
    Place the seven apartment buildings owned by his company, and any other properties they may purchase in the future, in a series limited liability company versus the more common approach of separate LLCs.
    Secure JD's personally owned undeveloped property from creditors by placing it in a trust structure or converting it to a security and hedging it.
Family Security
    Immediately conduct background checks on anyone with access to JD and his family, including company employees and service providers to the family, such as housekeepers and gardeners.
    Hire a security specialist to initiate an investigation into the threats.
    Work with personal security experts to construct a crisis intervention plan in the event that one of the threats is acted upon, and determine if more serious, ongoing measures are required.
    Helping JD identify and address his wealth protection concerns will produce two important opportunities for a capable wealth manager. First, both goodwill and trust will be generated through the effort which can, in turn, strengthen the relationship between JD and his advisor and create a favorable environment for business expansion. Secondly, by conducting the Whole Client Model exercise a number of additional opportunities can be identified that are beyond the scope of wealth protection-and once a savvy wealth manager is aware of opportunities an action plan can be developed and implemented. The following is a short list of new business opportunities that were revealed through the profiling effort.

Additional Business Opportunities
    As the advisor with only $1.5 million of JD's assets, there is an opportunity to capture up to $4 million from his broker and up to $2 million from the bank.
    Evaluate JD's satisfaction with the bank's management of his company's retirement plan and, based on this assessment, develop a strategy to take over and manage the plan.
    Get a referral to JD's business partner, who appears to have a similar financial profile and legal risks.
    Review any buy/sell agreements for the business that are in place to be sure they accurately reflect the wishes of the two partners, and update them appropriately.
    Key person insurance should be reviewed and updated to reflect the current status of the two principal partners, and update them appropriately.
    Develop an estate plan as an extension of the asset protection planning process, which may result in providing trust services as well as additional life insurance, including a better solution than JD's current term policy.
    JD has a sizeable estate rife with complexities that will benefit from professional insights, and the practitioner that provides the needed expertise will be the one to capture additional business from him, assume a more central role in his affairs and secure a place on his list of trusted advisors. 

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