Family Office - Dynastic Trust Design
How sustainable is their vision?
We modeled after-tax trust sustainability over a range of market paths, exploring which benefit levels could be a threat to the multi-generational vision. While the benefit designs were specific and not readily handled by off the shelf tools, none were complicated, enabling us to quickly develop intuition around the viability of the plan, confirming that the trust was well-funded.
Could the design improve?
The objective of a meaningful support for descendents of varied financial means, without distorting the beneficiary’s circumstances, was better achieved by a grant. But how to design? Census data allowed us to profile young couples of various means across each state, testing benefit designs that were sufficient to improve purchasing power in a material way, while also testing how large a grant would create an undesirable distortion.
What modifications could lower the cost to administer?
The richness of the census data had a technical cost associated with managing it, but served as a rich test ground for simpler benefit designs. We used simpler methods and looked for edge cases to ensure that the simplicity did not create unwanted distortions or perverse incentives. The project left them with more confidence in their vision, better benefit designs and lightweight apps for the trust administer to use in monitoring the plan and for the beneficiaries to use while weighing when and how to take advantage of the support.
The deliverable was confidence and design, but eventually physical web-based models
Throughout the project the intention to test and underwrite the trust design dominated the agenda. As the project matured, we arrived at the potential utility of delivered models, one for the trust administrator and another for the beneficiaries. The latter would help educate descendants on the tradeoffs of how they used the benefits.