Complex families, founders and executives need one economic map

Learning goals

• Diagnose the case using the stated constraints and quantitative evidence.
• Defend a conditional decision and identify what further evidence could reverse it.

Draft · approximately 95 minutes, excluding further revision.

Decision case · fictional facts

A founder’s economic assets are company equity 12 m, listed employer-linked shares 2 m and diversified assets 6 m; liabilities are 3 m. The family is considering relocation and a business sale. An executive spouse has unvested share awards, and children from a prior marriage have distinct estate interests.

Separate citizenship, residence and tax nexus

Citizenship, immigration residence, domicile and tax residence can be different concepts. Multiple jurisdictions may assert taxing or reporting rights; treaties, entity ownership, asset situs and timing can matter. Relocation decisions require coordinated qualified advice before action, not an assumption that a new address eliminates prior obligations.

Entrepreneur wealth mixes enterprise and household risk

Business ownership can combine illiquid equity, personal guarantees, employment income and control needs. Before a sale, review liquidity, contingent consideration, escrow, tax, currency and reinvestment. A sale does not always convert enterprise value into immediately spendable personal cash. Separate business operating reserves from household assets and define succession or control preferences.

Executive awards and family rights need specialized review

Executives face vesting, exercise windows, trading restrictions, concentration and job-market risk. Award valuations must reflect actual terms and tax treatment; unvested grants are not cash. Complex families require clarity on ownership, beneficiaries, marital rights, support obligations and decision authority. Coordinate specialists while protecting consent and confidentiality across family members.

Stress the founder balance sheet before a sale

Extend the founder case with a single adverse scenario: business equity 12 m falls 40%, employer-linked listed shares 2 m fall 30%, diversified assets 6 m fall 10%, and liabilities remain 3 m. Unvested share awards pay nothing in this scenario and are excluded from current liquidity. Ignore taxes and selling costs solely for this arithmetic.

Compute stressed net wealth and its percentage decline from 17 m. Explain why an expected sale price is not the same as cash available now and why relocation should be planned before signing irreversible arrangements, with actual tax and legal rules checked for the relevant residence and assets.

Model reasoning, sensitivity and self-check

Business equity becomes 7.2 m, linked listed shares 1.4 m and diversified assets 5.4 m. Total gross assets are 14 m; after 3 m liabilities, net wealth is 11 m. Net loss is 6 m, or 6/17 = 35.2941%, larger than the 30% gross-asset decline because unchanged debt magnifies the percentage net loss.

Related gross assets remain 8.6/14 = 61.4286% after stress. The concentration percentage has declined from 70%, yet the family is poorer; a lower weight is not proof that a deliberate diversification program succeeded. Sale proceeds may be delayed, subject to earn-outs, escrow, debt repayment or tax. Reserve financing must use accessible amounts and dates, not the hoped-for headline consideration.

Self-check: reconcile gross and net wealth, separate vested from unvested claims and document guarantee exposures outside the stated debt. A complete plan should coordinate family governance, business succession, liquidity and estate arrangements without assuming that all family members have identical rights or objectives.

Formula and assumptions

Economic net wealth=assets−liabilities−relevant contingent adjustments;concentration=related gross assets/total gross assets

Errors to catch

• Assuming a passport or address determines every tax consequence.

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Original knowledge check

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Sources and coverage status

These original lessons are drafts. Public outlines are used to check scope; the official learning-outcome text and proprietary question banks are not reproduced here. Follow the source for exam-year requirements and updates.

• Reference · www.investor.gov
• Reference · www.irs.gov
• Reference · www.cfainstitute.org