A Tolleson Wealth Management client calls his private banker and asks if Tolleson Private Bank can provide financing for a second home he is buying with his son. The son recently moved to Houston to start his medical residency. Initially, the son thought it would be easier to get financing from a friend at a local mortgage company, but the mortgage underwriter does not understand the sophistication of the family’s financial situation. The father wants to avoid capital gains tax and also has gift tax issues. As a result, the client is requesting 100% financing.
The majority of the client’s assets are in a family limited partnership. The rest of the family’s wealth is in the family business.
Due to the mortgage company’s inability to provide financing in a timely manner, the client has had to request a delay in closing and the seller has agreed to a delay of one week. This is a time when the client will be overseas. No further delays are possible and the closing must occur in one week.
The private banker reads the family limited partnership agreement to see if the partnership can pledge its assets to loan requests. After confirming that this is possible, the private banker then suggest that the client pledge his partnership interest in his hedge fund for his equity contribution. Taking the hedge funds as collateral meets the client’s goal of avoiding gift and capital gains tax. The result of the transaction is that the loan closes on time with no problems.
All of this occurs while the client is overseas.