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Estate Planning for Private Equity & Hedge Fund Managers


Members of Loeb & Loeb’s Trusts and Estates Practice are recognized authorities in the specialized area of estate planning for private equity and hedge fund managers. We have expertise and intimate knowledge of the structure of private equity and hedge funds, which allows us to navigate the complex intersection of the estate, gift and income tax rules (as well as the securities law constraints) that apply to transfers of fund interests. Our attorneys have pioneered the development of sophisticated techniques to transfer the economic interests of private equity and hedge fund principals in various estate planning contexts.

Our capabilities in this area include:

  • Counseling clients on the application of the so-called “vertical slice” rule, which generally requires principals to transfer a fractional share of all their interests in a fund (carried interests, capital interests and synthetic capital) in order to avoid adverse gift tax consequences. Depending on the structure of a particular fund, this rule may require the transfer of interests not only in the fund GP but in other fund entities as well.
  • Advising on the income tax issues that arise in connection with transfers of management company interests for estate planning. In the uncommon cases where such transfers are advisable, our attorneys have developed structures that avoid the minefields.
  • Advising on the transfer techniques that are best suited to the economics of different types of investment funds. For example, installment sales work well for transfers of private equity fund interests because installment notes can be structured to accommodate the timing of cash flows that are typical in such a fund, while transfers of hedge fund interests lend themselves well to the use of grantor retained annuity trusts.
  • Working with appraisers on the valuation of fund interests and reviewing appraisal reports to make sure they will withstand IRS scrutiny.
  • Advising clients on new techniques such as synthetic derivatives, which can allow fund principals to, in effect, transfer a portion of their carried interest in a fund (through the use of options that track the economic performance of the carry) without transferring a corresponding portion of their capital interest.
  • For firms that are restructuring their fund management arrangements, we advise on alternatives to facilitate future estate planning. On occasion, we have devised mechanisms for clients to reverse or cap previous estate planning involving fund interests to accommodate new business, family or tax circumstances.