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| Scenario Planning |
A Family Way
Rosario J. Ruffino, M. Cullen Thompson and Justin McCarthy
11/01/2007
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Based on their experience in providing comprehensive financial counseling to corporate executives, entrepreneurs and professional athletes,
Worth’s editors asked executives at RR Advisory
Group to respond to our hypothetical scenario.
Rachel Altman is a young Wall STreet professional who stands to inherit in excess of $10
million in liquid investments, as well as more than $10 million in illiquid real
estate that has been passed down across several generations in her family. Her
current assets are approximately $5 million. Additionally, she is a highly
sophisticated and well-compensated professional, with annual earnings ranging
from $1 million to $3 million.
Altman is engaged to be married and plans to start a family
within the next two years. She has no life insurance, nor does she have a will
in place. Because of the potential size of her estate, she is understandably
concerned about estate tax exposure, as well as asset protection. Additionally,
the real estate she will inherit will likely never be sold, and therefore no
income will be generated to pay property and estate taxes.
Altman has asked for advice regarding a prenuptial agreement in
order to protect the family land. Her assets are invested primarily in long-only
U.S. equities. She is concerned about the correlation of the stock market and
economy with her annual compensation and is curious about opportunities in
portfolio structuring to diversify the risks.
Because of her large earnings potential, long time horizon and
high level of absolute wealth, the client is opportunistic with regard to her
investments. She would like to continue to grow the principal on a real
(inflation-adjusted) basis. Altman suspects that the cost of services,
healthcare and travel—where the wealthy spend a disproportionate amount of their
wealth—are appreciating considerably faster than the consumer price index in
general. -The Editors
At RR Advisory Group, we focus on
integrated solutions in order to develop a cohesive strategy that addresses the
many facets of wealth management: estate and tax planning, insurance advisory
and investment strategy—all of which are inherently linked.
Customized and integrated planning is especially critical for
Wall Street professionals. Annual incomes are generally correlated with
financial markets, and estate tax planning generally must begin at a
surprisingly early age. Additionally, high marginal tax rates require an
emphasis on after-tax returns. Developing effective strategies requires a
long-term perspective combined with a comprehensive approach.
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