Estate Planning for Private Equity and Opportunity Zone Funds

Private Equity and Opportunity Zone fund managers typically receive a special equity interest in the fund commonly referred to as a "carried" or "profits interest", as incentive compensation for managing the fund. Successful managers that earn a return exceeding the fund's hurdle rate often receive 20% of the fund's profits creating significant value to the fund manager over the life of the fund. This session will explore estate planning opportunities for the Manager's carried interest comparing different approaches and highlighting income tax and gift tax technical issues including application of IRC Section 2701. In addition, we will discuss valuation of the Manager's carried interest for gift tax purposes including significant factors impacting the current value and potential future value of a successful fund.