The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

Asset Location Issues

Because that's where the money is.

—Willy Sutton, when asked why he robbed banks

“Asset location,” as its name implies, refers to the question of where to locate each of the investments expected to be employed in the overall portfolio. Unlike most institutional investors, private investors own their assets in many, many different forms. For example, it is not unusual to encounter, in one large family, assets held in the private accounts of different generations, in the private accounts of many different individuals, in the accounts of different collateral family units, in family investment partnerships and family limited partnerships, in charitable foundations, family trusts, IRAs, closely held corporations, LLCs, offshore vehicles, intentionally defective grantor trusts, dynasty trusts, and the alphabet soup of tax and charitable vehicles such as GRATs, GRUTs, CRATs, CLATs, CLUTs, CRUTs, NIMCRUTs, cascading GRATs, and so on. Each of these vehicles is typically created for a specific, largely noninvestment purpose, but each holds assets that must nonetheless be properly invested. The decision about which investments should go into which vehicles is mainly a tax-driven issue, but other issues will also be present and they will sometimes be decisive.

I could write an entire book just on the asset location issue, but in deference to my readers' patience I will only identify the issue as a crucial one and illustrate some of its complexities. Families will, in ...