BluePointe Capital – BluePointe Capital Management

Family legacies don’t just happen.

Building generational wealth itself is a painstaking task – one that generally requires decades of sweat equity, inspiration and discipline.

However, once you have accumulated that wealth, you’ll encounter new challenges: managing that wealth, continuing to grow it and dispersing it among a few or many family members in a way that allows them to pass it down to future generations.

This is where family governance comes in.

Family governance is a structured framework and set of practices implemented by affluent families that enables them to optimally manage their wealth and assets. It involves processes, rules and communication channels that help the family make decisions, determine who is responsible for what, and – when done correctly – fosters an environment of transparency and collaboration.

The goal: Prepare your family not just to manage money now, but navigate potentially complex issues, such as succession planning, wealth transfer, philanthropy and the preservation of family values and legacies.

Establishing Decision-Making Processes

While the family head might make many key choices throughout the process, one aspect of family governance is establishing family-wide decision-making processes.

This typically will involve creating regular family meetings or councils to discuss (and agree upon) financial decisions. It also helps establish exactly who will be involved in certain matters – for instance, some decisions might be open to a wider number of family members, while others might only involve the nuclear family.

Defining Roles and Responsibilities

Family governance also defines the roles and responsibilities of each family member within the wealth management framework. A few examples of these responsibilities include:

Overseeing investments
Managing day-to-day family enterprise operations
Philanthropic activities

Responsibilities should not be assigned based on perceived importance or seniority. Instead, families should assign roles based on each family member’s qualities and strengths.

Mitigating Risks and Ensuring Continuity

A family governance plan also needs to focus on mitigating risks and ensuring that the wealth is appropriately transferred across generations.

Naturally, succession planning plays a central role. Families will need to determine their path on issues such as:

Estate planning
Family governance leadership transition
Business leadership transition (if applicable)

By proactively identifying and addressing risks now, families can navigate uncertainties with confidence and precision later.

The Role of Transparency and Communication

A family governance plan will quickly fray at the edges without transparency and clear communication.

The best guidance is for families to establish open channels of communication and share relevant information with all family members. This will promote trust and cooperation – qualities that won’t just empower informed decision-making and ensure all choices align with family goals, but that will also strengthen family relationships.

Implementing Family Governance

Implementing family governance requires commitment, collaboration and professional guidance.

At BluePointe Capital Management, we partner with entrepreneurial families to develop customized governance plans tailored to their unique needs and circumstances. Our team of experienced advisors provides expert guidance and support every step of the way, helping families establish robust governance structures that promote unity, resilience and long-term prosperity.

Being a part of a company that goes public brings with it myriad changes and new tasks to address.

The following action items are often overlooked by executives and employees when preparing their company for a public listing.

Understand your vesting schedule, holding period, etc. for your non-qals and ISOs.
Have a thorough understanding of the parameters you are operating in regarding your non-qualified stock options and incentive stock options (ISOs). With a stock option, you are given the ability to buy a certain amount of stock at a certain price before expiration. This is dictated by a vesting schedule.

Design a plan for exercising your options and maximizing your tax efficiency (capital gains, ordinary income, AMT).
Proper tax planning is critical before, during and after you contemplate exercising any options. The spread between the market price and exercise price for any stock grant is taxable income. It is important to be conscious of the tax liability you are incurring. Familiarize yourself with the different types of tax liabilities and different treatments under the IRS code.
Know your Section 16 insider considerations, such as short swing profit rules, trading windows, 10b5-1 trading plans and company trading policy.
These rules are important for all insiders to know as there are strict regulations governing trading actions. These may impact your liquidity, the timing of your transactions and your overall financial planning.

Know your rights as a shareholder, and obtain copies of your shareholder rights agreement and right of first refusal. These documents aren’t always the easiest to track down, but if you ever need them, you don’t want to have to scramble to locate them.
Evaluate your 83(b) elections. An 83(b) election is a way to pre-pay tax on the fair market value of an option within 30 days of your grant. As this is an irrevocable decision, it must be strategically thought out, considering all pros and cons.
Design a comprehensive plan for liquidating your options.When selling options, an effective strategy includes a plan to pay for the exercise itself and tax implications of the exercise. You will also need to address any lock-up periods.

Assess your concentration risk and risk tolerance, and diversify over time. An equity award may lead you to an overconcentrated position in one company. This can be risky. It likely makes sense to create a plan to diversify out of a concentrated stock position slowly over time.

BluePointe Capital Management offers a comprehensive suite of investment advisory services to entrepreneurs, VC/PE professionals, executives and family offices.

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The net investment income tax (NIIT) has been a weight on the back of high-income earners for a little more than a decade, but that long time in force has provided tax professionals with ample time to formulate strategies investors can use to reduce the impact of this levy.

A Quick History

The NIIT is a revenue-raising offset that was put into place by the Health Care and Education Reconciliation Act of 2010 to help fund Medicare. The NIIT – which applies to passive income from stock dividends, bond interest, rental income and more – is a 3.8% tax on the lesser of net investment income or the excess of your modified adjusted gross income (MAGI) over your applicable threshold. Those thresholds are:

$200,000 for single filers and heads of household.
$250,000 for married couples filing jointly and widow(er)s with a dependent child
$125,000 for married couples filing separately.

The tax also applies to the lesser of undistributed net investment income or the excess of adjusted gross income (AGI) over the beginning dollar amount of the estate or trust’s highest tax bracket ($15,200 in 2024).

Strategies for Minimizing NIIT

High-income earners who want to reduce the impact of net investment income tax have a few methods at their disposal, primarily revolving around either reducing MAGI or effectively managing investments. These options include:

Investing in tax-exempt debt: Municipal bonds are exempt from federal income taxes – and, depending on where you live and the issuer of the municipal bonds, state and local taxes. But municipal bonds have another advantage: Their interest income isn’t subject to the NIIT. (Also, munis’ interest doesn’t increase AGI, so it’s helpful from that tax perspective, too.)
Using tax-efficient investments: Normal buying and selling within many mutual funds often results in capital gains, which tax regulations dictate must be distributed to the fund’s shareholders. However, tax-managed mutual funds and exchange-traded funds (ETFs) minimize or eliminate capital gains distributions, helping you minimize these taxable events.
Tax-loss harvesting: You can sell investments that have experienced a decline in value to below their original cost basis, thus offsetting some or all of your capital gains and reducing AGI. (If you do use this strategy, make sure you comply with the IRS’s wash-sale rules.)
Contributing to retirement accounts: Contributing to retirement accounts, including 401(k) plans and individual retirement accounts (IRAs) can reduce your MAGI. However, this does not apply to Roth versions, such as Roth IRAs or Roth 401(k)s. Also worth noting for investors in retirement: Distributions from these vehicles aren’t subject to NIIT, either, but they can increase your MAGI.
Donating appreciated assets: Donating appreciated assets, such as stocks or mutual funds, directly to charity or donor advised funds can provide double tax benefits. Donors receive a charitable deduction for the fair market value of the donated assets, which reduces taxable income subject to the NIIT. They also avoid paying capital gains tax on the appreciation.

Navigating the complexities of the NIIT requires a strategic approach, especially for high-income earners looking to minimize their tax liabilities. BluePointe Capital specializes in providing tax-efficient investment advice and planning that enables high-income earners to optimize their investment outcomes while contributing to their long-term financial health and stability.