Interchange Capital Partners was engaged to help a multigenerational family-owned business address estate planning challenges. The patriarch, in his 80s, held a $6 million promissory note within his estate, posing a potential $2.5 million estate tax liability. The family also sought to incorporate their philanthropic values into the estate plan while maintaining financial flexibility.
The family needed a strategy that would:
Mitigate the estate tax liability tied to the promissory note.
Avoid the immediate liquidation of assets during estate transitions.
Incorporate their desire to leave a philanthropic legacy.
Coordinate with other advisors to ensure proper documentation and execution.
Interchange collaborated with the family’s legal team to incorporate a donor-advised fund (DAF) into the estate plan, reducing tax exposure while supporting the family’s philanthropic goals. Key steps included:
Philanthropic alignment: Directed the promissory note to a DAF upon the patriarch’s passing. This required identifying a fund willing to accept illiquid assets like promissory notes.
Customized structuring: Structured the note’s payment terms with the DAF to provide the family with flexibility, allowing them six months to a year to fund the obligation. This alleviated the need to immediately liquidate assets.
Legal coordination: Worked closely with the family’s attorney to update the will and trust documents. A codicil was added to clearly designate the DAF as the recipient of the note.
Risk consideration: Addressed scenarios such as simultaneous deaths of the patriarch and spouse by preemptively establishing protocols to reduce unnecessary complications.
This approach reduced estate tax liabilities, provided liquidity flexibility, and aligned the family’s philanthropic vision with their estate plan. Interchange collaborated closely with advisors to implement a plan tailored to the family’s unique needs.
For personalized guidance on your family business philanthropic needs, contact Interchange Capital Partners.
Interchange Capital Partners, LLC is registered as an investment adviser with the Securities and Exchange Commission (SEC). This communication should not be deemed as an offer or solicitation to buy or sell any product. Interchange Capital Partners, LLC does not provide legal, tax or accounting advice. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.
