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A Strategic Road Map for Wealth Disclosure

By Frazer Rice

In the first part of this series, we examined The Architecture of Family Wealth Meetings, exploring how to establish a formal cadence and draft a family mission statement. Once that structural foundation is in place, the next challenge is determining how and when to reveal the scale of family assets to the next generation.

The concern tends to be dual-sided: revealing too much too soon may stifle a child’s ambition, yet waiting too long can leave them unprepared for the responsibilities they’ll eventually inherit. In an era of instant digital access, the “wait and see” approach carries real risk. Children are observant. They notice behavioral cues, lifestyle choices, and what turns up in a search. 

The deliberate wealth disclosure strategy we’ve outlined below is designed to replace accidental discovery with intentional education.

Stage 1: Early Years (Ages 5–9)

The disclosure process begins long before a dollar amount is ever mentioned. At this stage, the focus stays on concepts, not wealth: earning, saving, giving, and spending. Money is a tool, not a scorecard; and that framing, introduced early and reinforced consistently, is more durable than any formal conversation that comes later.

Simple structures work well here. An allowance tied to basic chores, three jars labeled “spend,” “save,” and “give,” and the experience of making small mistakes with their own money all build the habits that matter. 

If a child notices your family’s house or vacations look different from their friends’, they don’t need a balance sheet. What they need is a simple exclamation: “Our family has more choices than some, which means we also have more responsibility to use that wisely and help others.”

Stage 2: Pre-Teens (Ages 10–13)

At this stage, the conversation can move from abstract concepts to something more grounded. Children in this range are ready to hear that your family is comfortable or has more than enough (without numbers attached) and to understand that work, discipline, and time built that position.

Giving them a real role helps. Managing a modest budget for clothes, activities, or charitable giving, with a simple goal-setting requirement before funds are replenished, builds financial judgment in a low-stakes environment. Privacy norms are also worth introducing now: what is appropriate to post or discuss with friends, and why discretion matters both for safety and for basic humility.

Stage 3: Teens (Ages 14–17)

This is where the conversation moves from vague to directional. Teenagers are ready to hear that there are significant assets, that some form of inheritance or trust support exists, and that this can work against them if approached carelessly.

The emphasis at this stage is on structure rather than totals. Explaining that investments and trusts are designed to support education, possibly a first home or a business, but not to fund an unlimited lifestyle, sets realistic expectations without overwhelming detail. Tying that support to expectations—school performance, work experience, responsible social media use, participation in a family giving project—reinforces that access and responsibility are connected.

An example that tends to work well at this age: “We have built enough that you’ll have real options—but options only matter if you’re prepared to make something of them. That part is still on you.”

Stage 4: Young Adults (Ages 18–25)

Before legal documents and trust notices start arriving in their inbox, which they will, it’s worth having a more explicit conversation about what exists, what it’s for, and what the guardrails are. Young adults in this range are ready to hear that specific accounts and trusts exist, what they’re designed for, and what guardrails govern them.

Sharing general ranges or high-level net worth ranges, along with the actual terms of key trusts (e.g., ages of access, co-trustee structures, distribution standards) becomes appropriate once they’ve demonstrated basic financial competence. This is also the right time to begin bringing them into the professional ecosystem in a limited way: sitting in on a portion of the annual advisor meeting, reviewing an Investment Policy Statement summary, or discussing their potential role in a family business.

Hypothetical Scenario: The “Gradual Reveal”

Consider a founder of a successful technology company with two children in their mid-20s. Rather than scheduling a single disclosure conversation at age 25, the founder used a three-year road map.

In year one, the children were invited to a meeting to discuss the family’s private foundation and were given a modest budget to manage. In year two, they sat in on a session with the family’s tax attorney to understand why certain assets were held in trusts. In year three, the founder shared a high-level summary of the total estate and the “in case of emergency” plan.

By the time the children understood the full scale of the wealth, they had already spent two years building the skills to handle it.

Stage 5: Later 20s and Beyond

For mature adults who have established their own professional footing, the strategy moves toward full transparency. This means walking through the complete estate plan, reviewing governance documents, discussing who does what among trustees, directors, and advisors, and having the “if we’re gone tomorrow” conversation directly.

At this stage the process becomes genuinely collaborative. Co-creating a personal plan—how they’ll support themselves, what they can reasonably expect from family structures, how inheritance is staged rather than transferred in a lump sum—brings adult children into the process as participants rather than leaving them to discover the details later. 

Inviting them into leadership roles gradually, whether on a charitable committee, a family council, or an investment education session, allows them to practice stewardship before major distributions arrive. The goal is that by the time full control transfers, it feels like a continuation of something they’ve been building toward for years.

Working With Us

Disclosure isn’t a single conversation. It’s a multi-year process, and the families who navigate it most effectively tend to treat it with the same structural discipline they would apply to any significant business transition. Next Capital and Next Vantage work with clients to develop these road maps, acting as a centralized framework where financial, legal, and tax information stays consistent and grounded in the family’s long-term goals. The aim is to have the next generation genuinely prepared, both financially and emotionally, by the time full transparency arrives.

Developing a wealth disclosure strategy is a meaningful step in preserving your family’s legacy. Reach out to us at (212) 433-1108 or frice@nextcapitalmgmt.com to discuss how we can help design a road map tailored to your family’s specific situation.

Frequently Asked Questions About Wealth Disclosure Strategy

At what age should I tell my kids we are wealthy?

The age at which to tell children about family wealth depends less on a specific number and more on demonstrated maturity, but most families find a staged approach works better than a single conversation at any age. Early childhood is the right time to introduce concepts like earning, saving, and giving without attaching a dollar amount. The teen years are appropriate for directional information: that significant assets exist, that trusts are structured for specific purposes, and that access comes with expectations. Full financial transparency, including specific figures and trust terms, typically makes sense once a child has established their own professional footing, generally in their mid-to-late 20s.

How do I explain family wealth to my kids without destroying their motivation to work? 

To explain family wealth without affecting a child’s motivation, you should utilize a tiered disclosure strategy that emphasizes values and stewardship over specific dollar amounts. Framing the family capital as a tool for opportunity, such as education or entrepreneurship, helps the next generation view wealth as a responsibility to be managed rather than a replacement for personal effort. This approach allows heirs to develop their own professional identity before they understand the full scale of the family’s financial position.

My child found out about our wealth online. How do I handle that conversation?

If a child discovers family wealth online, the most effective response is a direct conversation that provides the context a search engine cannot. A public estimate shows a number; it does not explain the tax obligations, the legal structures, the guardrails on distributions, or the family’s long-term intentions. Acknowledging what they found, correcting any inaccuracies, and using the moment to begin a more structured disclosure conversation tends to be more productive than either dismissing it or treating it as a crisis. 

When is the right time to show adult children the estate plan and trust documents?

Sharing estate plans and trust documents with adult children is generally appropriate between the ages of 22 and 28, once they have enough professional experience to understand the purpose and complexity of legal structures. The more useful disclosure at this stage is the “how” (e.g., who the trustees are, what standards govern distributions, and how the various structures interact) rather than simply the dollar figures. Introducing these documents gradually, ideally in the context of a family wealth meeting with an advisor present, gives adult children the professional context to understand what they’re reading.

How do I tell my children their inheritance will not be equal?

Telling children that their inheritance will not be equal is best handled as a transparent explanation of the reasoning rather than a unilateral announcement. Distributions that reflect specific factors—active participation in a family business, varying levels of financial need, differing roles in family governance—are easier to accept when the logic is explained directly and grounded in the family’s stated values. Resentment most often follows decisions that arrive without context, not decisions that are genuinely explained. A family mission statement or written distribution framework gives that explanation a foundation that extends beyond any single conversation.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn. 

IMPORTANT DISCLOSURE INFORMATION 

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training. 

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

How Simple Mistakes Kill QSBS Eligibility

By Frazer Rice

The dream of a zero-percent federal tax rate on a business exit is a powerful motivator. However, for many founders, that dream is built on a fragile foundation. While Section 1202, commonly known as Qualified Small Business Stock (QSBS), offers one of the most significant subsidies in the federal tax code, it is not an automatic right. It is a status that must be actively maintained.

With the passage of the OBBBA, the landscape for business owners has shifted significantly. The standard gain exclusion cap has modernized to $15 million, and the introduction of tiered exclusions, 50% after three years and 75% after four, has fundamentally changed the timeline for liquidity. These updates make the tax-free exit more accessible, but they also increase the penalty for administrative oversight.

The reality is that QSBS is a living designation. It requires continuous monitoring across a company’s entire lifecycle, from the first seed round to the final term sheet. When legal, tax, and financial advisors operate in silos, the technical requirements for QSBS often become ticking time bombs that only reveal themselves when it is too late to fix them.

The Original Issue Hurdle

One of the most immediate requirements is the “Original Issue” rule. To qualify for Section 1202, you must generally acquire the stock directly from the issuing corporation in exchange for money, property (other than stock), or as compensation for services.

This means buying shares from another shareholder on a secondary market usually disqualifies those specific shares. Even internal restructurings or certain types of stock swaps can inadvertently break this chain of ownership. If the “original issue” status is lost, the tax benefits typically vanish with it. This is why the method of acquisition is just as important as the timing.

The $75 Million Ceiling

A threshold requirement that often catches founders off guard is that the company must be a domestic C corporation. LLCs and S-Corps can convert, but only shares issued after conversion are eligible. Prior equity does not qualify retroactively.

The most common point of failure is the gross asset test. Under the OBBBA, the limit for a corporation’s aggregate gross assets was increased to $75 million (for stock issued after July 4, 2025). While this provides more breathing room for mid-market platform strategies than the previous $50 million cap, the core principle remains a trap for the unwary.

Founders make the mistake of thinking this limit applies to the company’s valuation. It does not. It applies to the assets’ tax basis on the balance sheet. A major capital raise or the acquisition of a smaller competitor can push a company over this threshold in an afternoon. If new shares are issued (including the exercise of stock options) after that threshold is crossed, those specific shares do not qualify for Section 1202 treatment.

Without a central vantage point to coordinate between the CFO and the tax team, these issues happen routinely, leaving founders and early employees with a tax bill they weren’t expecting at the exit.

The Active Business Requirement

Eligibility also hinges on how the company uses its assets. At least 80% of a corporation’s assets must be used in the “active conduct” of a qualified trade or business. Certain sectors, such as banking, farming, and professional services, in which the principal asset is employees’ reputation, are explicitly excluded. The full exclusion list is broader than most founders realize, covering health, law, engineering, architecture, accounting, consulting, financial services, and hospitality.

The risk here lies in the botched pivot. A technology company that shifts its model toward investment management or begins to hold excessive amounts of idle cash or investment securities can inadvertently fail the active business test. If the company holds more than 10% of its assets in real estate not used in the business, or more than 10% in portfolio securities, it risks disqualifying the stock.

In a siloed advisory environment, the legal team handles the pivot, and the investment team manages the cash, but rarely is anyone looking at the impact on QSBS eligibility requirements until it’s too late.

The Redemption Trap

One of the most technical eligibility killers is the anti-churning rule regarding stock redemptions. If a company repurchases stock from a shareholder (or a related person) within a specific window, typically one year before or after a new issuance, it can disqualify that new issuance for all shareholders.

Founders often use redemptions to clean up a cap table or provide liquidity to a departing executive. If these moves aren’t coordinated with the tax implications of the next funding round, they can effectively negate the QSBS status of the entire next tranche of shares.

One often-overlooked safety valve: a Section 1045 rollover allows founders who sell QSBS before the five-year mark to defer the gain by reinvesting proceeds into new QSBS within 60 days, but only if the move is planned well in advance.

Why Coordination Is the Only Defense

The 5-to-10-year life of a successful company is filled with opportunities to lose QSBS status. Every funding round, every corporate restructuring, and every change in the business model is a potential point of failure.

Most founders have excellent attorneys and capable CPAs. The problem is that these professionals rarely talk to each other in real time. The attorney drafts the redemption agreement; the CPA finds out about it 12 months later during tax prep. By then, the damage is done.

This is why entrepreneurs navigating exceptional financial complexity require more than just advisors; they require orchestration. It is vital to have your legal and accounting teams in place and at your side as you make every major pivot or funding decision. You need a framework that functions like a corporate COO—someone who sits above the silos, understands how a legal decision affects a tax outcome, and monitors technical requirements against the long-term strategy.

The OBBBA has made the tax-free exit more lucrative and accessible than ever. But in a permanent-law environment, the burden of proof is on the taxpayer. Detailed records of issuance dates, gross asset levels, and business activities at the time of issuance are not optional; they are the difference between claiming the exclusion and losing it on audit. Clarity in 2026 comes from knowing that every moving part of your estate is working from the same page.

The dream of a tax-free exit is only as durable as the coordination behind it.

At Next Vantage and Next Capital, we provide the centralized framework needed to help advisors stay aligned on these technical hurdles. We believe clarity comes from a unified outlook, where tax, legal, and financial strategies operate from the same page.

We invite you to reach out if you would like to discuss how this coordinated approach applies to your specific situation.

Frequently Asked Questions About QSBS Eligibility

What are the primary QSBS eligibility requirements under the OBBBA? 

To qualify for QSBS benefits in 2026, the company must be a domestic C corporation with gross assets of $75 million or less at the time of stock issuance. Additionally, the corporation must satisfy the active trade or business test, meaning at least 80% of its assets must be used in a qualified business.

Has the QSBS gain exclusion cap changed recently? 

Yes. Under the OBBBA, the standard federal gain exclusion cap increased from $10 million to $15 million for stock issued after July 4, 2025. For stock issued before that date, the cap generally remains at $10 million or 10 times the adjusted basis.

Can I get a tax exclusion if I sell my stock before the 5-year holding period?

The OBBBA introduced tiered exclusions for stock issued after July 2025. You may now qualify for a 50% capital gains exclusion after a 3-year holding period and a 75% exclusion after 4 years. A 100% exclusion still requires holding the stock for at least 5 years.

Does a company’s market valuation affect the QSBS gross asset test?

No. The $75 million gross asset limit is based on the assets’ tax basis on the company’s balance sheet, not on their fair market value or venture capital valuation. This distinction is critical for high-growth companies that may have high valuations but relatively low asset bases.

Can a stock redemption disqualify my QSBS?

Yes. Anti-churning rules may disqualify stock if the corporation repurchases its own shares within certain time windows (typically one year) of a new issuance. This is a technical area where coordination between legal and tax advisors is necessary to prevent accidental disqualification.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn. 

IMPORTANT DISCLOSURE INFORMATION 

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training. 

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

What the Tax Code Actually Requires From a Family Office

By Frazer Rice 

Once a family has decided that a family office is the right solution, the next question is how to build it. And for most families, the answer to that question has significant tax consequences.

The costs of running a properly staffed family office are real: professional salaries, technology, legal and compliance expenses, and investment management costs. Families naturally want those expenses to be deductible. Whether they are depends almost entirely on how the family office tax structure is designed from the outset.

What Changed in the OBBBA and Why It Matters

For years, many investment-related expenses for wealthy families were deductible as miscellaneous itemized deductions under Section 212 of the tax code. That changed permanently with the “One Big Beautiful Bill Act” (OBBBA) passed in 2025, which eliminated those deductions entirely.

The only path to deductibility now runs through Section 162, which covers ordinary and necessary expenses of a trade or business. To use it, the family office can’t simply manage the family’s own wealth. It has to be operating as a genuine investment-management business. That distinction, which once carried moderate tax significance, now carries substantial weight.

The Defining Question: Is the Family Office a Trade or Business?

The tax code doesn’t define “trade or business” with any precision, so courts have filled the gap over decades of litigation. The framework that emerges from those cases has two central requirements: the activity must be conducted with continuity and regularity, and it must be carried out primarily to generate income or profit through the provision of services and not just through passive investment returns.

That last point is the critical one. The Supreme Court has been clear, in cases like Higgins and Whipple, that managing your own investments, regardless of scale or sophistication, does not constitute a trade or business. Size and complexity don’t change the analysis. What matters is whether the office is providing genuine services to others and being compensated for those services, rather than simply watching over the family’s own portfolio.

The Case That Set the Standard: Lender Management

The most instructive precedent for family offices is Lender Management, in which the Tax Court found that a multigenerational family office was operating a legitimate investment-management business and could deduct its expenses under Section 162.

Several features of that structure drove the outcome. The office served multiple branches of one extended family, each with distinct goals, risk tolerances, and cash-flow needs. It provided individualized investment research, asset allocation, and financial planning—services that looked, in practice, like those of an outside investment adviser managing a roster of clients. It employed multiple full-time professionals. And critically, the management company was compensated through a profits interest tied to performance, not simply through the same passive returns received by investors.

That combination—individualized service, professional infrastructure, and compensation that reflected genuine entrepreneurial risk—led the court to view the office as a real business rather than a sophisticated vehicle for managing the family’s own money. Many family offices now treat this structure as the template for defensible Section 162 treatment.

Lessons from Hellmann

Not every family office structure holds up to scrutiny. A court order in the Hellmann case, though it never produced a final opinion, illustrates how the same general concept can fail.

In that structure, four family members owned both the management company and the underlying investment entities in identical proportions. They lived in the same city, operated as a single economic unit, and made decisions collectively. Because the ownership stakes were perfectly mirrored across manager and investor, the court questioned whether any real services were being provided to separate clients for separate compensation—or whether the structure was simply a formal arrangement among people whose interests were entirely aligned.

The lesson is straightforward: when the management company and the investment entities are owned by the same people in the same ratios, it undermines the argument that the office is running a genuine service business. Economic separation between manager and investor isn’t just a structural preference; it’s a substantive requirement.

Putting the Structure Together Correctly

To support a Section 162 position, the management company and the investment entities it manages should be economically and operationally distinct.

In practice, that means most investors should not hold ownership stakes in the management company. The person or entity running the office should have a clearly separate ownership interest from the underlying investors. And investors should be able to act independently—with individual investment accounts, withdrawal rights, and the ability to make decisions without being treated as a single unified group.

In the Lender Management structure, many family members invested independently, had different objectives, could withdraw capital if dissatisfied, and held no ownership interest in the management company. That autonomy was part of what made the manager appear to be serving clients rather than simply administering its own affairs.

Structuring a Family Office’s Compensation Correctly

Compensation is the other side of the equation. For the family office to look like a real investment-management business, the way it gets paid must reflect that.

Helpful features include a management fee for services rendered, a performance-based profits interest that functions like carried interest, and a clear separation between service income and ordinary investor returns. In the Lender Management structure, the management company held special interests that paid only if investment performance was strong, and those interests were clearly distinguishable from the returns flowing to investors. That structure reinforced the argument that compensation was being earned through services, not simply received as a passive owner.

In the Hellmann-style structure, by contrast, compensation looked indistinguishable from the passive returns all owners received, which weakened the business argument considerably.

What a Real Investment-Management Business “Looks” Like

Taken together, the cases point toward a fairly clear profile for a family office that can withstand Section 162 scrutiny.

The office should provide genuine, front-end investment advisory and financial planning services tailored to the specific needs and risk profiles of individual family members. It should employ full-time professionals with real responsibilities, paid through service-based salaries or guaranteed payments. Ultimate decision-making authority should sit in-house, even where outside experts are engaged. Where the family owns and operates businesses, active management of those entities further strengthens the case.

Documentation matters throughout. The office should be able to demonstrate that profits, interests, and management fees are paid for actual investment-management work and not as a function of family relationships or ownership structure.

The Big Picture

The elimination of Section 212 miscellaneous itemized deductions under the OBBBA has made family office tax structure a more consequential decision than it has ever been. Expenses that were once broadly deductible are now recoverable only if the office qualifies as a genuine trade or business under Section 162—a standard that requires real services, real infrastructure, and compensation structures that reflect genuine entrepreneurial risk.

The families best positioned to meet that standard are those that build their offices to look and function like professional investment managers: serving individuals with distinct needs, employing skilled professionals, and separating the economics of managing from the economics of investing.

Getting the structure right at the outset is significantly easier than trying to retrofit it later.

Next Vantage and Next Capital work with families navigating the full arc of this process—from the initial decision through to tax-efficient structure and ongoing coordination. To start the conversation, contact us at (212) 433-1108 or frice@nextcapitalmgmt.com.

Frequently Asked Questions About Family Office Tax Structure

Why does family office tax structure matter more now than it did before? 

The OBBBA, passed in 2025, permanently eliminated miscellaneous itemized deductions under Section 212, which had previously allowed many investment-related expenses to be deducted. Those expenses are now only deductible if the family office qualifies as a trade or business under Section 162. That shift makes the way a family office is structured (legally, operationally, and economically) a direct determinant of whether its costs are tax-deductible.

What does “trade or business” mean for a family office? 

Courts have established that a trade or business requires continuity, regularity, and a genuine profit-oriented service activity. For a family office, that means providing investment-management services to others for compensation and not simply managing the family’s own wealth. Scale and complexity alone don’t satisfy the standard. What matters is whether the office looks and functions like a professional investment manager serving clients.

What is the significance of the Lender Management case? 

Lender Management is the most important precedent for family offices seeking Section 162 treatment. The Tax Court found that a multigenerational family office operating with professional staff, individualized client services, and performance-based compensation was running a genuine investment-management business. The case is widely used as a structural template by families seeking defensible deductibility of their office’s expenses.

How should a family office structure its ownership to support a tax deduction? 

The management company and the investment entities it manages should be economically distinct. Most investors should not hold ownership stakes in the management company, and investors should be able to act independently—with individual accounts, withdrawal rights, and separate decision-making. Structures where the same people own both the management company and the investment entities in identical proportions are particularly vulnerable to challenge.

What kind of compensation structure supports a Section 162 position? 

Compensation should reflect genuine service income rather than passive investment returns. A management fee for services, combined with a performance-based profits interest that functions like carried interest, is the model most consistent with what courts have accepted. The key is that service-based compensation should be clearly distinguishable from ordinary investor returns both in structure and in documentation.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn. 

IMPORTANT DISCLOSURE INFORMATION 

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training.

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

A Family Office Is a Business Decision, Not a Status Symbol

By Frazer Rice 

A family office is a small private company built to manage one family’s money, legal affairs, and long-term plans. For families navigating significant financial complexity, setting up a family office can bring real structural clarity. But the decision deserves more than enthusiasm; it requires an honest assessment of whether the structure is actually the right fit.

Done well, it’s a powerful solution. Done prematurely or for the wrong reasons, it’s an expensive one.

Complexity, Not Wealth, Is the Real Driver

Most conversations about family offices start with a number… but they probably shouldn’t. Wealth matters (it has to, given the costs involved), but complexity is usually what pushes a family toward a dedicated structure. Families overseeing businesses across multiple jurisdictions, real estate in different markets, global investments, and layered tax structures often reach a point where a loose network of advisors simply can’t hold it together. Add the natural growth of a family across generations and the administrative volume alone—tax returns, legal filings, entity management—can become genuinely unmanageable.

Coordinating between three attorneys, two accountants, and a handful of investment managers with no central point of accountability isn’t a wealth management strategy; it’s a fragmentation problem. Setting up a family office is, at its core, a structural solution to that problem.

The Numbers Have to Work

A properly staffed family office—professionals, technology, operational infrastructure—typically costs in excess of $1 million a year. For families with financial footprints under $200 million, that overhead is rarely justified.

A useful benchmark is whether a well-run office projected to cost roughly $800,000 per year is a figure the family’s wealth can comfortably absorb; if so, a dedicated structure starts to make sense. Below that threshold, a more targeted approach, a strengthened advisory model with a family office-style overlay, usually delivers more value for the cost.

This is a decision worth modeling properly. A straightforward analysis comparing long-term office costs against the current advisor spend can quickly clarify whether the economics support moving forward.

Purpose Before Structure

Before any entity gets formed, the family needs to agree on what the office is actually for. That conversation shapes everything that follows.

A family office can carry a wide mandate (investment management, tax and legal coordination, bill payment, financial reporting, next-generation education, philanthropy) or a narrower one. Neither is inherently better. What is costly is building something without a clear purpose, only to discover months later that the structure is solving the wrong problems.

The most durable family offices are built around a mission that reflects the family’s actual values: privacy, multigenerational stewardship, entrepreneurial legacy, and charitable purpose. Those values determine what gets prioritized when decisions get difficult, which, in a multigenerational structure, they will.

Governance Is the Foundation

Even with the right professionals and a sound investment strategy in place, a family office can still struggle if authority is undefined and decision-making is unclear.

Governance is the part that families most often underestimate when setting up a family office. Written governing documents, defined roles, a clear process for selecting leadership, and regular structured meetings aren’t administrative formalities. They are what keep a well-resourced structure functional across generations and through inevitable transitions or conflicts. Families that think through how disagreements between family lines get resolved before one actually surfaces tend to fare significantly better than those who don’t.

The Right People in the Right Place

Good governance still requires someone capable of building and running the office. That typically means a family member or a trusted senior hire with the time, interest, and authority to lead, particularly in the early phase. Creating a family office from scratch demands considerable operational investment.

Beyond leadership, the office needs skilled professionals: a finance director, investment staff, and operations support. Whether those roles are filled internally or through outside partners depends on scale and preference, but the quality of the people running the office matters as much as the structure itself.

Geography matters too. Where the office is based affects the regulatory environment, the available talent pool, and the tax treatment of certain structures. For families with global interests, this decision often turns out to be more consequential than expected.

Three Paths Forward

Not every family needs to build an office from the ground up. There are three realistic models: a fully dedicated single-family office, a shared structure with other families (a multi-family office), or a hybrid that draws on both.

Each involves different trade-offs on cost, privacy, control, and operational complexity. The right fit depends on how much independence the family requires, how distinctive their situation is, and whether the economics support standalone infrastructure.

Before committing to any model, it’s worth comparing long-term costs across each option with what it would cost to simply upgrade the existing advisory arrangement. Some families find that a more coordinated advisory structure delivers most of the benefit at a fraction of the overhead.

A Logical Response to Scale When Setting Up a Family Office

Families that go through the process of setting up a family office tend to arrive at the same point: their financial lives have grown complex enough that the absence of a central structure feels more disorganized and more exposed than the effort of creating one. The office stops being a luxury and starts being a logical response to scale.

Getting to that decision is usually the straightforward part. Getting the structure right is where the real work begins. Next Vantage and Next Capital work with families navigating exactly this transition, bringing together the legal, tax, investment, and estate planning picture into one coordinated framework. To start the conversation, reach out to us at (212) 433-1108 or frice@nextcapitalmgmt.com.

In Part 2, we examine how to structure a family office efficiently from a tax perspective and why getting that structure right has become significantly more important following recent changes to tax law.

Frequently Asked Questions About Setting Up a Family Office

What is the minimum wealth level for setting up a family office? 

There is no universal threshold, but for most families, a dedicated family office becomes cost-effective when wealth exceeds $200 million. Running a properly staffed office typically costs over $1 million per year, so the family’s financial position needs to comfortably support that overhead. Below that level, a strengthened advisory model often delivers similar coordination at a lower cost.

Is wealth the main reason families set up a family office? 

Not exactly. Complexity is usually the more important driver. Families managing businesses across multiple jurisdictions, global investments, layered legal structures, and multigenerational estate planning often find that a loose network of separate advisors creates more risk than it resolves. A family office brings those relationships under one coordinated framework.

What services does a family office typically provide? 

The scope varies, but a family office can cover investment management, tax and legal coordination, financial reporting, bill payment, philanthropy, and next-generation financial education. The right mandate depends on what the family actually needs. A clearly defined purpose from the start tends to produce a more functional structure.

What are the main options when setting up a family office? 

Families generally choose between three models: a single-family office built and staffed exclusively for one family, a multi-family office shared with other families, or a hybrid arrangement. Each involves different trade-offs on cost, privacy, control, and operational complexity. A straightforward cost comparison between models and against the existing advisory setup is a sensible first step before committing to any one path.

Why does governance matter so much in a family office? 

A family office can have excellent professionals and a well-designed investment strategy and still underperform if decision-making is unclear. Governance (i.e., written rules, defined roles, a process for resolving disagreements between family branches) is what keeps the structure functional across generations and through inevitable moments of transition or conflict. It’s most valuable when it’s designed before it’s needed.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn. 

IMPORTANT DISCLOSURE INFORMATION 

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training. 

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

Planning for Your Post-Exit Identity: Why Your Next Act Needs a Blueprint

By Frazer Rice

The deal closes, your ownership turns into cash, and within six months, you find yourself reorganizing the garage for the third time in a week. It is a common story for founders, but it points to a real challenge: you have removed the professional routine that once organized your entire life.

For decades, your career was the daily structure that held everything together. It managed your calendar, your social life, and your sense of being good at what you do. When you take that structure away without a new plan, the resulting void creates stress for everyone in your life, especially your family.

The Misdiagnosis

Most people will tell you that you need to “find your purpose,” but they are likely wrong. You do not lack purpose; you already know how to get big things done and build complex systems.

What you actually need is a practical plan to use those skills in new ways. Without one, it is easy to slip into having nothing to do or causing accidental stress at home. When you suddenly spend all your time in a house that was used to you being away at the office, the balance of the home changes. Your partner likely spent years building a daily routine that worked because you were working 70-hour weeks. Coming back into that environment without a clear plan often leads to tension rather than the connection you expected.

Thinking of Time as an Asset

Golf and expensive trips will not solve this. Those are just ways to spend money, and they do not satisfy the part of your brain that likes to solve problems.

Instead, think of your exit as getting a big payout in time rather than just money. You have suddenly gained about 2,500 extra hours every year. Without a strategy for how to use them, this new asset simply wastes away on random activities instead of helping you reach your next goals.

A Practical Plan for the First Year

You need a new operating system for your week. This is not because you lack discipline, but because without a design, your old habits will lead to poor choices. Your first-year plan should focus on three main areas:

• Staying Professionally Involved: Board seats or advisory roles help you use your experience without the stress of a daily job. Usually, one board seat is enough; taking on two can accidentally turn back into a full-time career.
• Fitting Back into the Home: Set up specific times for work and family that respect your spouse’s existing routine. Your goal is to help the family, not create more scheduling problems.
• Teaching the Next Generation: Focus on sharing what you know, not just your money. Teaching your heirs how to look at an investment or a charity project turns your expertise into a system the whole family can use.

Your Post-Career Blueprint

To help you see how this works, we put together an example of what a post-career structure might look like. Year one often requires careful time management to avoid developing bad new habits and structures that have to be unlearned later. It not only helps you acclimate to your new operating environment, but it also helps your whole family to understand this new change in boundaries and proximity.

You’re designing a second‑career life where work is optional, but purpose and family are not. The idea is to build a weekly and monthly rhythm that feels full and meaningful without turning back into a 60‑hour job.

Big Ideas for Your Schedule:

• Protect a few non‑negotiables: morning routine, time with your spouse, and regular blocks for board and charity work.
• Try not to overload any single day; aim for one main headline each day, plus some lighter activities around it. 
• Treat family, travel, and giving back as scheduled priorities, not things you fit in if there’s time.

Download our Post-Exit Blueprint, which includes a default week schedule, monthly rhythms, travel planning, and strategies for staying close to kids and grandkids. 

Organizing Your New Life

At Next Capital & Next Vantage, we believe wealth is a tool to keep a family together over time. Your identity after you sell your business is a valuable asset, and it needs to be organized just as carefully as your investments.

Our Next Vantage Model helps act as your main resource during this change. We help bring your legal, tax, and investment experts together into one coordinated playbook. This helps your financial plan support your new life goals rather than complicating them. The goal of your first year is not necessarily to find your next billion-dollar idea. It is to build a lifestyle that lets you move forward with a clear head and your family by your side.

If you are beginning to think through what your first post-exit year should look like, I am always happy to talk through these ideas with you before your new routine becomes permanent. You can reach me for an initial discussion or a referral introduction at (212) 433-1108 or frice@nextcapitalmgmt.com.

Frequently Asked Questions About Post-Exit Planning

How do I maintain professional engagement without rebuilding another company? 

Board advisory roles, angel investing with mentorship components, or family office governance structures let you apply strategic thinking without operational responsibility.

What if my spouse and I have different visions for post-exit life? 

Structured planning conversations (ideally facilitated by a neutral third party) should occur 12-18 months before your exit. Competing assumptions about lifestyle, geography, or time allocation surface best when they’re still hypothetical.

How do I know if I’m ready to step back from active business operations? 

When you can delegate critical decisions without the urge to reverse them, and when you’re building succession infrastructure rather than just contingency plans.

What’s the difference between a family office and wealth orchestration? 

A family office replaces your existing advisors. Wealth orchestration coordinates them, preserving relationships you’ve built while adding the integration layer that keeps them working in concert rather than in isolation.

How should I think about involving the next generation in wealth decisions? 

Start with governance participation before capital control. Let them observe board meetings, review investment theses, or manage a sub-allocation of the portfolio. Competency builds through structured exposure, not sudden inheritance.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn. 

IMPORTANT DISCLOSURE INFORMATION 

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training. 

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

The Architecture of Family Wealth Meetings

By Frazer Rice 

A liquidity event or the steady growth of a family enterprise often shifts a family’s financial structure from simple management to complex coordination. While the technical framework of wealth (the trusts, tax structures, and legal entities) is foundational, the human element remains the most significant variable in long-term success. Without a forum for communication, even the most sophisticated structures risk becoming a source of confusion rather than a tool for opportunity.

Establishing a regular cadence for family wealth meetings creates a centralized framework for decision-making. These gatherings function like a board of directors meeting for the family’s capital: a structured environment where strategy, values, and education intersect.

The Foundation: The Family Mission Statement

Successful meetings often begin with a focus on intent. A family mission statement functions as the architectural blueprint for every financial decision—a written declaration that outlines the purpose of the family’s resources and the values that guide their use.

Building a family mission statement requires moving beyond asset allocation. It involves asking harder questions: 

• What is the primary purpose of this capital? 
• Is it intended as a safety net for future generations, a catalyst for entrepreneurship, or a vehicle for philanthropy? 

Documenting those answers creates a money philosophy that transcends individual personalities and persists through generational transition.

Consider a family that values self-reliance but also wants to support higher education. Their mission statement might specify that family capital is available for any level of degree, but is not intended to subsidize a lifestyle that exceeds a child’s earned income. Having this in writing manages future friction when a distribution request arrives. The conversation shifts from a personal yes or no to a question of whether the request aligns with the family’s stated mission.

Designing a Productive Agenda

Structure serves as a stabilizer for the emotional volatility that can accompany discussions about money. Distributing the agenda at least a week in advance is a small but meaningful step. Participants arrive with a stewardship mindset rather than a personal-interest focus.

A well-constructed agenda has three components, each doing distinct work.

The legacy segment typically opens the meeting. The legacy segment typically opens the meeting. This might mean walking through a single decision a prior generation made (for example, the choice to reinvest profits rather than distribute them) and what that discipline produced over decades. The specificity matters and reminds everyone in the room that what they’re managing didn’t materialize. It was built through particular choices at particular moments. That context reframes everything that follows.

Advisory updates come next. Having a lead advisor walk through the current estate and tax position in plain language gives the next generation a view of the full picture rather than just the piece they personally inhabit. Many adult children understand their own financial position reasonably well but have little sense of how it fits within a broader coordinated strategy. This portion of the meeting closes that gap.

The education segment caps the formal agenda. This might mean reviewing the family’s Investment Policy Statement, walking through how a specific trust functions, or discussing a financial concept tied to a decision the family is currently facing. Over time, this segment builds the financial literacy that transforms passive beneficiaries into capable stewards.

Case Study: The Multigenerational Real Estate Family

Consider a hypothetical family that recently sold a multigenerational real estate portfolio. The patriarch and matriarch were concerned that their three adult children—each with different professional backgrounds—would approach the new liquidity with conflicting priorities.

By initiating formal family wealth meetings, they moved the conversation away from “who gets what” and toward “what do we stand for.” During these sessions, they discovered a shared interest in sustainable development. Their family mission statement was drafted to prioritize investments offering both financial returns and environmental impact. That unified goal turned potential conflict into a collaborative investment strategy, giving the adult children a clear role as committee members rather than passive beneficiaries.

The Family Wealth Charter

To help your family begin this process, we’ve developed The Family Wealth Charter: A Workbook for Intentional Stewardship. It’s a practical guide designed to facilitate your first few family wealth meetings, with exercises to identify shared values, define the purpose of your capital, and draft a mission statement that reflects your family’s unique history. The Charter provides a neutral framework for sensitive conversations and gives you something concrete to build on after the meeting ends.

DOWNLOAD THE FAMILY WEALTH CHARTER WORKBOOK HERE

The Role of Facilitation and Coordination

While the family patriarchs set the vision, the presence of a neutral third party often improves the meeting’s effectiveness. Next Vantage was built specifically to facilitate this level of orchestration. We work with individuals across all generations to bridge the gap between technical estate plans and real-world family dynamics, helping move families from a reactive posture to a proactive governance model.

Most families already have the right advisors. What they often lack is a structure that connects them. Contact us at (212) 433-1108 or frice@nextcapitalmgmt.com to discuss how we can help facilitate your next family wealth meeting and develop a lasting mission statement. 

Part 2: The Disclosure Roadmap
Once the structure of the meeting is established, the next challenge is determining what information to share and when. In Part 2 of this series, we provide a strategic roadmap for wealth disclosure, detailing how to move from general concepts to full transparency as the next generation matures.

Frequently Asked Questions About Family Wealth Meetings

What is the purpose of a family wealth meeting?

A family wealth meeting is a structured forum for coordinating financial strategy, values, and education across generations. Unlike informal conversations about money, a formal meeting operates with a set agenda, professional input, and a consistent cadence—functioning, in effect, like a board of directors meeting for the family’s capital. The goal is to move decision-making from reactive to intentional, giving every family member a clear understanding of the family’s financial position, its governing values, and their role within it.

What should be included in a family mission statement for wealth?

A family mission statement for wealth should document three things: the purpose of the family’s capital, the values that guide how it is used, and the obligations that come with access to it. The most useful mission statements are specific enough to answer a real question such as whether a distribution request aligns with the family’s priorities rather than general enough to apply to any situation. Drafting a family mission statement requires the family to move past asset allocation and engage with harder questions about legacy, work ethic, and what the next generation is actually being prepared for. At Next Vantage, we work with families to develop these statements as part of a broader governance framework, so they function as a working document rather than a framed aspiration.

How often should a family hold wealth meetings?

Most families benefit from at least one formal wealth meeting per year, with the option to add shorter check-ins around significant events such as a liquidity event, a major distribution decision, or a change in the estate plan. Annual meetings allow enough time for meaningful updates while maintaining the consistency that builds financial literacy across generations. The agenda, distributed at least a week in advance, should be substantive enough that participants arrive prepared rather than arriving to be informed.

Who should attend a family wealth meeting?

The right attendees for a family wealth meeting depend on the family’s structure and what is being discussed. Core meetings typically include the patriarch generation and any adult children who have reached an appropriate level of financial maturity. Lead advisors such as legal, tax, or investment are often included for specific agenda items. Younger family members may attend a designated portion of the meeting as part of their financial education before participating fully. Aligning all adults on what is being shared, and with whom, before the meeting begins prevents the kind of mixed messaging that undermines the process.

What is the difference between a family wealth meeting and an estate planning review?

An estate planning review is a technical conversation between a family and its legal or tax advisors, focused on the mechanics of structures already in place. A family wealth meeting is broader in scope covering strategy, values, education, and governance alongside any technical updates. The two serve different purposes and should not be conflated. Estate planning reviews tell a family what the documents say; family wealth meetings determine what the family stands for and how its members are being prepared to steward what those documents safeguard.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City. With more than two decades of experience advising ultra-high-net-worth families, Frazer helps clients bring structure, clarity, and coordination to complex wealth. He specializes in intergenerational planning, fiduciary strategy, and family governance, helping clients manage both the financial and human sides of wealth. Known for his sharp, strategic thinking, Frazer provides a board of directors-level perspective, helping families identify risks, organize priorities, and align advisors around long-term goals.

Before joining Next Capital, he served as Regional Director at Pendleton Square Trust and spent 16 years at Wilmington Trust, where he rose to Managing Director in the New York office. He is the author of Wealth, Actually: Intelligent Decision-Making for the 1% and host of the Wealth Actually podcast, exploring the modern wealth ecosystem.

Frazer earned his BA in Political Science and History from Duke University and his JD from Emory University School of Law. He serves as President of the New York City Estate Planning Council and is a frequent speaker on wealth management and family dynamics. A Manhattan resident, his interests include golf, yoga, media production, politics, horror movies, and 1980s pop culture. To learn more about Frazer, connect with him on LinkedIn. 

IMPORTANT DISCLOSURE INFORMATION 

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training. 

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

How Private Placement Life Insurance (PPLI) Changes the Tax Math

By Frazer Rice

There is a problem that comes up often in conversations with families managing sizable, income-generating portfolios. The investments are performing well and their advisors are competent. Yet every year, a substantial portion of what has been earned goes directly to the IRS and, depending on the state, to the state tax authority as well. For families in California or New York holding private credit, hedge funds, or other income-heavy alternatives, the combined tax drag can approach or exceed 50% on certain income types. 

Private placement life insurance, or PPLI, is one of the few tools designed to address it at the structural level.

What PPLI Actually Is

PPLI is a variable universal life insurance policy, but that description undersells what the structure actually does. The insurance component is real; there is a death benefit, and the policy must meet specific regulatory requirements under IRC Section 7702 to qualify—but the primary purpose for most families is the investment wrapper the policy creates. Premiums fund a cash-value account that can be invested across a wide range of assets, including alternatives like private credit, private equity, and real estate. Those investments grow without triggering income or capital gains tax along the way.

The death benefit passes to heirs generally income tax-free, and when the policy is held inside an irrevocable life insurance trust (ILIT), it may also avoid estate and potentially generation-skipping transfer (GST) taxes entirely.

PPLI is not a product for everyone. It is structured exclusively for accredited investors and qualified purchasers, and the economics work best when funded with a meaningful initial premium, typically $3 to $5 million at a minimum and often considerably more. The families who benefit most generally have a net worth of $20 million or higher, with liquid assets of $10 million or greater.

The Tax Advantage in Plain Terms

A standard taxable portfolio generates two layers of tax friction: income tax on dividends, interest, and distributions, and capital gains tax when positions are sold or rebalanced. Inside a PPLI policy, neither of those frictions applies. Investments compound without annual tax liability. Repositioning within the policy does not trigger a taxable event. And when structured correctly, distributions can be taken as policy loans or withdrawals without creating a taxable event during the insured’s lifetime.

The compounding effect over a decade or more is significant, and we will illustrate it with an example after covering the estate planning dimension below.

Investment Flexibility As a Feature, Not an Afterthought

One of the aspects of PPLI that often surprises people is the breadth of permissible investments. Traditional life insurance policies are constrained to a limited menu of sub-accounts. PPLI policies can hold hedge funds, private equity vehicles, real estate structures, and other alternative assets—precisely the investments that tend to generate the most taxable income in a standard portfolio. That alignment is intentional. The tax-deferred structure of PPLI is most valuable when it is sheltering income that would otherwise face the highest tax rates.

Allocating higher-income-generating assets into the policy while holding lower-turnover, tax-efficient assets outside it is a straightforward way to maximize the structural benefit across the full portfolio. For families who have worked through a post-liquidity transition and are rebuilding their investment structure, this kind of deliberate asset allocation across wrappers is often one of the highest-value decisions available.

Where Estate Planning Fits

When a PPLI policy is owned by an ILIT rather than by the insured directly, the death benefit sits outside the taxable estate. For families with meaningful estate tax exposure, that structural exclusion can represent a substantial transfer of wealth free of income, estate, and potentially GST tax, provided the structure is set up correctly from the outset.

This makes PPLI a natural complement to a broader intergenerational wealth plan where the goal is transferring assets to the next generation in the most tax-efficient form possible, without giving up investment flexibility or liquidity during the insured’s lifetime.

The Full Picture: A Hypothetical Illustration

To see how these pieces work together, consider the following hypothetical scenario: a California resident with a $50 million net worth holds a substantial portfolio of alternative investments, including private credit and private equity, generating significant taxable income each year. She funds a PPLI policy with $10 million in liquid assets, held inside an ILIT to exclude the death benefit from her taxable estate. The policy’s underlying investments are allocated across a diversified mix of traditional and alternative assets.

Assuming an 8% annual return, the $10 million inside the policy could grow to approximately $21.6 million over 10 years. The same $10 million invested in a taxable account, subject to an effective 50% combined federal and state tax rate on gains and income, would grow to roughly $14.8 million over the same period. That $6.8 million difference does not come from a better investment strategy. It comes from removing the tax drag entirely. And upon her passing, the death benefit flows to the ILIT and distributes to her heirs free of income, estate, and potentially GST tax.

For families who have spent years watching alternatives generate strong gross returns that look considerably less impressive after taxes, that full picture tends to reframe the conversation.

Getting the Execution Right

It is worth noting that the One Big Beautiful Bill Act, passed in 2025, did not restrict PPLI; proposed curbs on its favorable tax treatment were excluded from the final legislation, leaving the structure intact for families who use it correctly.

PPLI is not a product you purchase and set aside. The structure requires that the policy comply with the IRS investor control rules and the diversification rules under IRC Section 817(h) to maintain its tax treatment. The investment strategy must be managed within those parameters. And the relationship between the policy, the trust structure, and the broader estate plan needs to be coordinated deliberately.

This coordination is where things either hold together or fall apart. In my experience, the families who get the most out of PPLI are those whose insurance counsel, investment management, and estate planning are operating from the same framework, not working in separate lanes and hoping the pieces connect. At Next Capital and Next Vantage, the coordination of those relationships is central to how we work, whether we are advising a family directly or serving as a resource for a professional partner navigating a client’s complex needs.

For families interested in a related structure that offers tax deferral without the insurance component, Private Placement Variable Annuities (PPVA) represent a complementary option worth understanding. We will cover that in a separate article coming shortly.

To start a conversation about whether PPLI fits your planning picture, contact us at (212) 433-1108 or frice@nextcapitalmgmt.com.

Frequently Asked Questions About Private Placement Life Insurance

What is private placement life insurance, and how does it differ from a standard life insurance policy? 

Private placement life insurance is a variable universal life policy designed specifically for accredited investors and qualified purchasers. Unlike standard retail policies, which offer a limited menu of investment sub-accounts and carry significant insurance costs, PPLI minimizes the insurance component to maximize investment growth. The cash value can be invested across a broad range of assets, including alternatives like private credit and private equity, and all growth within the policy is deferred from income and capital gains tax.

Who qualifies for a PPLI policy? 

PPLI is available to accredited investors and qualified purchasers. The economics of the structure work best for families with a net worth of $20 million or more and liquid assets of at least $10 million. Initial premium commitments typically start at $3 to $5 million, and the tax benefit grows over time as assets compound without annual tax friction. The structure is most advantageous for families in high combined federal and state income tax brackets, particularly those holding income-generating alternative investments.

How does PPLI help with estate planning? 

When a PPLI policy is held inside an irrevocable life insurance trust (ILIT), the death benefit passes to heirs generally income tax-free and outside the taxable estate. Both the accumulated investment growth and the death benefit can transfer to the next generation without triggering income, estate, or GST tax, provided the structure is set up correctly from the outset. The specifics depend on individual circumstances and current estate tax law and should be reviewed with qualified legal and tax counsel.

Can I access the cash value inside a PPLI policy during my lifetime? 

Yes. Policy loans and structured withdrawals can provide access to the cash value without triggering a taxable event in most circumstances. There are no mandatory distribution requirements, and liquidity can generally be arranged in a tax-efficient manner. The mechanics depend on how the policy is designed and managed, which is one reason working with an advisor experienced in PPLI structuring matters considerably.

What types of investments can be held inside a PPLI policy? 

PPLI policies can hold a significantly broader range of investments than standard insurance products, including hedge funds, private equity, private credit, real estate vehicles, and other alternative assets. The portfolio must comply with IRS investor control rules and the diversification rules under IRC Section 817(h) to maintain the policy’s tax treatment, but within those parameters, the investment strategy can be tailored to the family’s goals and risk profile. The tax-deferred structure makes PPLI particularly well-suited for higher-yielding assets that would otherwise generate the most taxable income in a standard account.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City, where he has spent more than two decades advising families navigating exceptional financial complexity.

IMPORTANT DISCLOSURE INFORMATION 

The example used is hypothetical and for illustrative purposes only. Actual results will vary based on individual circumstances, tax rates, investment performance, and policy terms.

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York. 

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by the Company with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of the Company’s current written disclosure Brochure and Form CRS discussing the Company’s business operations, services, and fees is available on this website and/or from the Company upon written request. The Company does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to the Company’s website or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 

Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by the Company), will be profitable or equal any historical performance level(s). Neither the Company’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if the Company is engaged, or continues to be engaged, to provide investment advisory services. The Company’s registration status does not imply a specific level of skill or training. 

Certain portions of the Company’s website (i.e., newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, the Company’s (and those of other investment and non-investment professionals) positions and/or recommendations as of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice. 

Please Note: Limitations. Neither rankings nor recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that the client will experience a certain level of results if the investment professional or the investment professional’s firm is engaged, or continues to be engaged, to provide investment advisory services. 

To the extent that any client or prospective client utilizes any economic calculator or similar interactive device contained within or linked to the Company’s website, the client and/or prospective client acknowledges and understands that the information resulting from the use of any such calculator/device, is not, and should not be construed, in any manner whatsoever, as the receipt of, or a substitute for, personalized individual advice from the Company, or from any other investment professional. 

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.

Private Placement Variable Annuities: Tax Deferral Without the Insurance Layer

By Frazer Rice

In my previous article on private placement life insurance (PPLI), I described how families with significant taxable investment income can restructure the problem entirely, moving assets into an insurance wrapper that allows them to compound free of annual tax friction. The follow-on question I hear most often is a natural one: is there a version of this that does not require a life insurance policy?

There is and it’s called a private placement variable annuity, or PPVA. The structure shares much of the same logic as PPLI, and for certain families and planning situations, it is the more appropriate tool. For anyone seriously evaluating these options, we recommend taking the time to understand where the two converge and where they diverge.

What a PPVA Actually Is

A private placement variable annuity is an annuity contract issued by an insurance carrier to an accredited investor or qualified purchaser. The investor funds the contract with a premium contribution, selects an investment manager, and the underlying assets grow on a tax-deferred basis inside the annuity under IRC Section 72. Unlike PPLI, there is no life insurance death benefit; the structure focuses entirely on tax-deferred accumulation.

PPVA is not a traditional retirement product, even though the annuity mechanics are similar. The investor is not limited to a constrained menu of sub-accounts. The annuity can hold hedge funds, private equity, private credit, and other alternatives that would otherwise generate significant taxable income year after year in a standard portfolio. The investments are held in a separate account, insulated from the insurance carrier’s general creditors.

Minimum investment thresholds are generally lower than PPLI. Many carriers will accept initial contributions starting around $1 million, though the tax-deferral benefit grows considerably as the capital base increases. The setup is typically faster and less structurally complex than PPLI, in part because there is no insurance underwriting involved.

How the Tax Deferral Works

Inside a PPVA, investment income and capital gains are not subject to current taxation. The portfolio can be actively managed, rebalanced, or reallocated without triggering a taxable event along the way. Taxes are deferred until the investor takes a distribution, at which point gains are taxed as ordinary income.

Unlike PPLI, where policy loans and structured withdrawals can often be arranged without triggering income tax, PPVA distributions are taxable. PPVA offers deferral, not elimination. For investors who expect to remain in a high combined federal and state bracket throughout their lifetime, that distinction matters considerably. For investors who plan to retire to a lower-tax jurisdiction (Florida, Texas, and Nevada come up often in these conversations) or who anticipate a meaningful step down in income in later years, the calculus looks quite different.

The One Big Beautiful Bill Act, signed into law in 2025, preserved the favorable tax treatment of both PPLI and PPVA. Earlier legislative proposals that would have curtailed the tax advantages of private placement structures were excluded from the final legislation, leaving both tools intact for families who use them properly.

A Hypothetical Illustration

Consider the following hypothetical scenario: a New York-based business owner sold his company in 2023 and now holds approximately $15 million in liquid assets, most of it invested in a taxable account generating income through a mix of private credit and hedge fund strategies. His combined federal and state tax rate on ordinary income runs approximately 52%—a realistic figure for New York, where the top federal, state, and city rates stack to just under that level.

He funds a PPVA with $5 million of that capital. The underlying allocation mirrors what he was already doing in his taxable account. Over 10 years, assuming an 8% gross annual return, the $5 million inside the PPVA could grow to approximately $10.8 million with no tax paid along the way. The same $5 million in his taxable account, with a 52% effective rate applied to annual gains and income, would grow to roughly $7.3 million over the same period—assuming gains are recognized annually, as tends to be the case with income-generating alternatives. That difference of approximately $3.5 million represents deferred tax: capital that has had the opportunity to compound rather than being remitted to the IRS year after year.

When he eventually retires to Florida, his distributions will be taxed only at the federal rate, reducing the effective burden considerably compared to what he is paying today on every dollar earned in New York.

PPLI or PPVA: How to Decide

Both structures address the same core problem: they shelter tax-inefficient investments from annual taxation. The right choice depends on several variables, and the answer is rarely obvious without looking at the full picture.

PPVA tends to be the better fit when:

• The investor’s net worth or liquidity profile falls below the typical PPLI entry point (generally $20 million net worth, $10 million in liquid assets)
• The primary objective is tax deferral, not tax elimination
• Estate planning integration is not a priority, or has already been addressed through other structures
• The investor expects to relocate to a lower-tax jurisdiction at retirement
• A faster, lower-cost setup is preferable

PPLI tends to be the better fit when:

• The family carries significant estate tax exposure and wants the death benefit to pass outside the taxable estate through an irrevocable life insurance trust (ILIT)
• The goal is both tax deferral during life and an income-tax-free transfer at death
• The investor has sufficient scale to justify the insurance costs and structural complexity
• Long-horizon compounding is the central objective, and the insurance wrapper maximizes the outcome over decades

Some families use both. A PPVA may make sense for a portion of the portfolio where lower minimums and simpler access are priorities, while PPLI is deployed for longer-horizon capital where the estate planning benefit adds a meaningful second layer of value. My article on PPLI covers that side of the comparison in depth.

Neither structure is appropriate for every situation, and neither replaces the need for qualified legal and tax counsel when evaluating implementation.

Getting the Structure Right

PPVA is more streamlined than PPLI, but it still requires deliberate execution. The investment manager must be selected before funding, the portfolio must be managed within the annuity’s separate account structure, and the investor directs, rather than directly owns, the underlying assets. The IRS investor control rules apply here as well as to PPLI. An arrangement that effectively gives the investor direct ownership will not be treated as a qualifying annuity contract.

The families who get the most out of these structures are the ones whose advisors are coordinating across disciplines from the beginning. The decision between PPVA and PPLI, the selection of the carrier, the investment strategy inside the wrapper, and the broader estate planning context all interact. Getting one piece right while leaving the others unconsidered is how a structure ends up underperforming what was possible.

At Next Capital and Next Vantage, that coordination is central to how we work with families navigating exceptional financial complexity—whether we are advising directly or serving as a resource for a professional partner working through a client’s options. To start a conversation about whether PPVA fits your planning picture, contact us at (212) 433-1108 or frice@nextcapitalmgmt.com.

Frequently Asked Questions About Private Placement Variable Annuities (PPVA)

What is a private placement variable annuity, and how does it differ from a traditional annuity?

A private placement variable annuity is an annuity contract issued by an insurance carrier exclusively to accredited investors and qualified purchasers. Unlike traditional retail annuities, which offer a limited range of conservative sub-accounts and often carry significant fees, a PPVA gives the contract holder access to a broad range of institutional-quality investments, including alternatives like hedge funds, private equity, and private credit. The primary purpose is tax-deferred accumulation under IRC Section 72 (the portfolio grows without current income or capital gains taxation) rather than guaranteed income or principal protection. There is no life insurance death benefit, which keeps the structure focused and the costs lower than PPLI.

Who qualifies for a private placement variable annuity?

A PPVA is available to accredited investors and qualified purchasers, as defined by the SEC. In practice, the structure is most commonly used by families with investable assets in the range of $5 million or more, though some carriers will accept initial contributions starting around $1 million. The tax-deferral advantage compounds over time, so the benefit scales with both the size of the contribution and the length of the holding period. Families generating significant annual taxable income from alternatives and those planning to retire to a lower-tax state or jurisdiction tend to benefit most from the structure.

How are distributions from a PPVA taxed?

Distributions from a PPVA are taxed as ordinary income under IRC Section 72. Unlike PPLI, where policy loans and structured withdrawals can often be taken without triggering a taxable event, PPVA offers deferral rather than elimination. The practical implication is that the timing and location of distributions matter considerably. Investors who take distributions during lower-income years, or after relocating to a state without income tax, can reduce the effective rate significantly relative to what they would have paid each year had the assets remained in a taxable account.

What types of investments can be held inside a PPVA?

A PPVA can hold a significantly broader range of assets than a standard annuity product, including hedge funds, private equity, private credit, real estate vehicles, and other alternatives. The investment manager is selected by the contract holder, but the assets are managed within the annuity’s separate account structure. The portfolio must comply with IRS investor control rules under IRC Section 817, which require that the contract holder direct rather than directly own the underlying investments. Within those parameters, the investment strategy can be tailored to the investor’s goals and risk profile. The tax-deferred structure is particularly well-suited for higher-yielding assets that would otherwise generate the most taxable income in a standard account.

How does PPVA compare to PPLI, and how do I know which is right for my situation?

Both PPVA and PPLI shelter tax-inefficient investments from annual taxation, but they differ in two meaningful ways: the tax outcome at distribution and the estate planning dimension. PPVA defers taxes until distribution, at which point gains are taxed as ordinary income. PPLI, when structured correctly, can allow assets to compound and transfer at death without triggering income or estate tax. For families with significant estate tax exposure and sufficient scale to justify the insurance structure (typically a net worth above $20 million and liquid assets above $10 million), PPLI often offers a more comprehensive outcome. For families below those thresholds, those prioritizing simplicity, or those planning to shift to a lower-tax jurisdiction at retirement, PPVA is often the more practical starting point. The right answer depends on the full picture, and working through that comparison with advisors who coordinate across legal, tax, and investment disciplines is where the real value sits.

About Frazer

Frazer Rice is Director of Family Office Services and a Partner at Next Vantage, the Family Office Services group of Next Capital Management in New York City, where he has spent more than two decades advising families navigating exceptional financial complexity.

IMPORTANT DISCLOSURE INFORMATION

The example used is hypothetical and for illustrative purposes only. Actual results will vary based on individual circumstances, tax rates, investment performance, and policy terms.

Next Capital Management, LLC (“Company”) is an SEC registered investment adviser located in New York, New York.

The Company may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. The Company’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Company’s website on the Internet should not be construed by any consumer and/or prospective client as the Company’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from the Company, or from any other investment professional. The Company is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting, or tax advice.

Each client and prospective client agrees as a condition precedent to his/her/its access to the Company’s website, to release and hold harmless the Company, its officers, directors, owners, employees and agents from any and all adverse consequences resulting from any of his/her/its actions and/or omissions which are independent of his/her/its receipt of personalized individual advice from the Company.