Oct 1, 2009 12:00 PM

Quick, think about using deflated interests in hedge funds for tax-efficient transfers of wealth to heirs

By Brian W. Formento, David C. Jacobson & Espen Robak

Treasury Secretary Tim Geithner told Congress and the nation on Sept. 10, 2009, that the credit crisis was abating. But before the market fully recovers, individuals holding hedge fund investments should consider acting fast to take maximum advantage of potentially heightened valuation discounts.1 Indeed, discounts for hedge fund interests may be historically large due to their unprecedented illiquidity. That makes this a unique moment to use deflated asset values in hedge funds to transfer wealth to heirs and minimize transfer taxes.

Blocked at the Gates

Estimates suggest that there were roughly 8,000 to 9,000 hedge funds in 2008, with about $1.8 trillion in funds under management.2 The market crisis in 2008 left many individuals invested in these hedge funds dissatisfied with performance — and deeply frustrated with their inability to pull their initial investments out of the funds.

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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