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Getting VerticalGetting Vertical

Private equity, venture capital and hedge fund estate-planning pitfalls.

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David A. Handler, Anna Salekand 1 more

August 24, 2018

21 Min Read
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Trusts and estates attorneys who work with clients who run private equity (PE), venture capital (VC) and hedge funds regularly rely on the “vertical slice” exception to Internal Revenue Code Section 2701 to transfer interests in those funds to their descendants. It’s widely accepted by practitioners in this space that if a general partner (GP) transfers an equal proportion of each class of his equity in a fund, the draconian valuation methodology of IRC Section 2701 won’t be imposed. Achieving verticality, however, is more easily said than done.

Reason for Enactment

Section 2701 was enacted in 1990 to prevent what was perceived to be an abuse of the gift tax system, specifically preferred stock recapitalizations. Before 1990, a member of a...

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About the Authors

David A. Handler

 

David A. Handler is a partner in the Trusts and Estates Practice Group of Kirkland & Ellis LLP.  David is a fellow of the American College of Trust and Estate Counsel (ACTEC), a member of the NAEPC Estate Planning Hall of Fame as an Accredited Estate Planner (Distinguished), and a member of the professional advisory committees of several non-profit organizations, including the Chicago Community Trust, The Art Institute of Chicago, The Goodman Theatre, WTTW11/98.7WFMT (Chicago public broadcasting stations) and the American Society for Technion - Israel Institute of Technology. He is among a handful of trusts & estates attorneys featured in the top tier in Chambers USA: America's Leading Lawyers for Business in the Wealth Management category, is listed in The Best Lawyers in America and is recognized as an "Illinois Super Lawyer" bySuper Lawyers magazine. The October 2011 edition of Leading Lawyers Magazine lists David as one of the "Top Ten Trust, Will & Estate" lawyers in Illinois as well as a "Top 100 Consumer" lawyer in Illinois. 

He is a member of the Tax Management Estates, Gifts and Trusts Advisory Board, and an Editorial Advisory Board Member of Trusts & Estates Magazine for which he currently writes the monthly "Tax Update" column. David is a co-author of a book on estate planning, Drafting the Estate Plan: Law and Forms. He has authored many articles that have appeared in prominent estate planning and taxation journals, magazines and newsletters, including Lawyer's Weekly, Trusts & Estates Magazine, Estate Planning Magazine, Journal of Taxation, Tax Management Estates, Gifts and Trusts Journal. He is regularly interviewed for trade and news periodicals, including The Wall Street Journal, The New York Times, Lawyer's Weekly, Registered Representative, Financial Advisor, Worth and Bloomberg Wealth Manager magazines. 

David is a frequent lecturer at professional education seminars. David concentrates his practice on trust and estate planning and administration, representing owners of closely-held businesses, principals of private equity/venture capital/LBO funds, executives and families of significant wealth, and establishing and administering private foundations, public charities and other tax-exempt entities. 

David is a graduate of Northwestern University School of Law and received a B.S. Degree in Finance with highest honors from the University of Illinois College of Commerce.

Anna Salek

Partner, Kirkland & Ellis LLP

Anna Salek is a partner at Kirkland & Ellis LLP, based in the New York City office.