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As the outcome of the looming presidential election potentially puts at risk the existing lifetime gifting exemption, tax advisors have been hard at work discussing with fund principals different wealth transfer strategies involving the use of carried interest in private investment partnerships, such as private equity (PE), venture capital and hedge funds. The obvious potential impact from a change in administration is a reduction in the current estate and gift tax exemptions and elimination of the step-up in basis at death.
Fortuitously, planners focusing in this area received some encouraging guidance from Treasury and the Internal Revenue Service on July 31, 2020, with the issuance of proposed regulations (proposed regs) under Internal Revenue Code Section 1061 (REG-107213-18) addressing the treatment of carried interests in the context of transfers to grantor trusts, disregarded entities and partnership contributions.1
While an individual’s facts and circumstances need to be addressed along with an evaluation of the broader economic conditions before effectuating any planning strategy, it’s clear the pandemic’s impact on valuation (lower or delayed cash flows, higher volatility, higher discount rates), coupled with these other factors, makes for a favorable time to transfer interests, while the fair market value (FMV) may be depressed and the present law in effect is deemed taxpayer favorable.
In short, this appears to be an opportune time to consider implementing gift and estate tax planning strategies, given:
Potential changes to the estate and gift tax exemptions;
Potential elimination of short-term zeroed-out grantor retained annuity trusts (GRATs), dynasty trusts and sales to grantor trusts and valuation discounts;
Historically low interest rates;
Lower valuations due to the COVID-19 pandemic; and
Clarifications to IRC Section 1061.
Potential Election Impact
With potential changes to the presidency and the Senate majority, a great deal of uncertainty exists with upcoming changes to the tax laws. The current estate and gift tax exemption (currently $11.58 million for an individual) was increased as part of the Tax Cuts and Jobs Act of 2017 (TCJA) and is scheduled to increase based on inflation before sunsetting in 2025 to the pre-2018 level of $5 million for an individual taxpayer. However, planners are well aware that, under a Biden administration, these exemptions could be reduced prior to the scheduled sunset.
In addition, Biden has indicated he’ll propose increasing the corporate income tax rate from 21% to 28%. Without other adjustments, this impact would likely lead to lower valuations for investees, resulting in lower cashflows generated by the general partner (GP).
Finally, there’s continued dialogue about taxing carried interest that would have received preferential tax treatment at a higher rate than the capital gains tax rate that’s currently afforded to it. An increase in the tax rate has been discussed as part of past tax reform plans and continues to be discussed as part of broader tax reform.
If Democrats either win the presidency or take control of the Senate (or both), less favorable tax reforms for gift and estate tax considerations (either via a higher corporate rate, reduced lifetime exemption or other tax impact) are likely. For instance, certain popular estate-planning techniques that are typically implemented with carried interest wealth transfer planning, such as short-term, zeroed-out GRATs, dynasty trusts and sales to grantor trusts (often created as dynasty trusts) and valuation discounts, all of which have been on the “chopping block” in the past, may once again be at risk.2
Fund Interests
Why are fund interests so potent for wealth transfer planning? Estate planners often use a variety of techniques to freeze the value of a client’s estate by locking in the current value of an asset, while at the same time shifting future appreciation to the next generation (ideally in a generation-skipping transfer tax-exempt trust). Techniques such as these are generally effective from a transfer tax perspective when the rate of return on the transferred assets will exceed a so-called “hurdle” rate (for example, the applicable federal rate or IRC Section 7520 rate), depending on the type of technique being employed.
The ability to shift future appreciation in a transfer tax-efficient manner has the potential to make these freeze planning techniques extremely effective when applied to transfers of closely held business interests with a future upside potential. Freeze planning opportunities can arise in connection with structuring family operating businesses, family limited partnerships and pre-liquidity event planning. It may also be effective to implement this type of planning in connection with interests in private investment funds, such as PE and hedge funds, due to the significant appreciation potential associated with such assets.
A GP interest in a hedge or PE fund is often considered a good candidate for freeze planning because of the significant future appreciation potential associated with carried interest in the fund. For instance, in a typical fund in which, say, a 1% capital contribution by the fund GP might be entitled to a 20% profits allocation (the carried interest), there’s enormous potential for growth in the value of the GP interest. If this growth happens inside a trust outside the fund principal’s estate, a shift of future growth will occur for the benefit of the younger generation(s). Taking it a step further, if leverage is applied, this planning could result in an even greater shift of appreciation, particularly in a historically low interest rate environment.
The 30-year U.S. Treasury constant maturity rate hit a historic low in March 2020, during the initial period of the economic fallout from COVID-19, and currently remains near the historically low level. Furthermore, in September, Federal Reserve Chair Jerome Powell indicated an expectation to keep the fed funds rate near 0% through 2022-2023 to help aid in the economic recovery.3 Such a move is expected to also hold the interest rates for longer maturity Treasuries at or close to the recent historically low levels for the next several years.
Transfers to Grantor Trusts
Section 1061 has the effect of recharacterizing certain net long-term capital gains with respect to applicable partnership interests (APIs) as short-term capital gains. In general, Section 1061 imposes a 3-year holding period to qualify for preferential long-term capital gains treatment on carried interest received by GPs of PE funds and other alternative asset management funds (for example, hedge, energy, infrastructure, real estate, credit and fund of funds). This provision recharacterizes certain gains generated from the sale of investments held for one year or more (but less than three years) that would otherwise qualify as long-term capital gains, as short-term capital gains, taxed at higher, ordinary income rates.
The proposed regs provide some welcome news with respect to transfers of APIs in the context of typical wealth transfer transactions. Section 1061(c)(1) defines an API as any interest in a partnership transferred to or held by a taxpayer, directly or indirectly, in connection with the taxpayer (or any related person) performing substantial services in an applicable trade or business (ATB) for the partnership. Section 1061(c)(2), in turn, defines an ATB as any activity conducted on a regular, continuous and substantial basis through one or more entities that consists of, in whole or in part: (1) raising or returning capital; and (2) investing in or disposing of “specified assets,” identifying these assets for investment or disposition, or developing such assets. Section 1061(c)(3) defines “specified asset” as securities, commodities, real estate held for rental or investment, cash or cash equivalents, options or derivatives contracts with respect to any of the foregoing, and an interest in a partnership to the extent of such partnership’s proportionate interest in any of the foregoing.
While some further clarification and examples would be welcome, and comments to the proposed regs have been requested, these provisions appear to be moving in the right direction. Section 1061(d) causes an acceleration of the recognition of capital gains in connection with the direct or indirect transfer of an API to a related party and recharacterizes certain long-term capital gains and short-term capital gains. For these purposes, the proposed regs indicate that a transfer includes contributions, distributions, sales and exchanges and gifts; however, a related person for purposes of Section 1061(d)(2) is defined differently than a related person for purposes of Section 1061(c)(1) and includes only members of the taxpayer’s family within the meaning of IRC
Section 318(a)(1).
In addition, Section 1061(d) provides a rule for transfers of APIs to certain related persons. The special, narrow definition of “related person” provided under Section 1061(d)(2) applies solely to transfers subject to Section 1061(d). Under the so-called “API Operational Rules” with respect to disregarded entities, entities that are disregarded from their owners under any provision of the IRC or Treasury regulations, which specifically include grantor trusts and qualified subchapter S subsidiaries, “are disregarded for purposes of [the] Regulations.” Thus, the summary to the proposed regs provides that “if an API is held by or transferred to a disregarded entity, the API is treated as held by or transferred to the disregarded entity’s owner.” To this end, Prop. Regs.
Section 1.1061-2(a)(1)(v), entitled “Grantor trusts and entities disregarded as separate from their owners,” provides:
. . . a trust wholly described in subpart E, part I, subchapter J, chapter 1 of the Code (that is, a grantor trust), a qualified subchapter S subsidiary described in section 1361(b)(3), and an entity with a single owner that is treated as disregarded as an entity separate from its owner under any provision of the Code or any part of 26 CFR (including §301.7701-3 of this chapter) are disregarded for purposes of §§1.1061-1 through 1.1061-6.
Although various examples are included in Treas. Regs. Section 1.1061-2(a)(2), it doesn’t appear that any examples are provided with respect to transfers to grantor trusts nor to non-grantor trusts.
The proposed regs provide a favorable interpretation of transactions that are often implemented with respect to estate planning with carried interests with grantor trusts. One question that the proposed regs don’t appear to address is what happens on the transfer of an API to a non-grantor trust or on the affirmative “turning off” of grantor trust status after a transfer of an API to a grantor trust. Additionally, are there potential implications of turning off grantor trust status, whether by gift or sale, and should any distinction be made between the types of triggering events that turn off a grantor trust, whether by the death of the grantor or an affirmative turning off of such status during the grantor’s lifetime?
An argument can be made that the language of Section 1061(d) shouldn’t cause an acceleration as a result of a transfer of an API to a non-grantor trust. Section 1061(d) provides a rule for transfers of APIs to certain related persons. However, the narrow definition of related person under Section 1061(d)(2), which applies solely to transfers subject to Section 1061(d) and defines related persons by reference to Section 318(a)(1), makes no reference to Section 318(a)(2) (entitled “Attribution from Partnerships, Estates, Trusts, and Corporations”). Section 1061(d) does make reference to transfers “directly or indirectly” (emphasis added) to a related person that will trigger acceleration of gain on an API. The use of the “or indirectly” language in Section 1061(d), coupled with the reference to Section 318(a)(1), spurs the question whether a transfer to a non-grantor trust that’s for the benefit of one or more members of the transferor’s family within the meaning of Section 318(a)(1) should be considered a transfer that triggers the application of Section 1061(d).
It would seem that this shouldn’t be the result, but the statute isn’t entirely clear, and further clarification in the final regulations would be welcome. Had Congress intended that Section 1061(d) should cause acceleration in the case of transfers to trusts, it could have simply added the language “and Section 318(a)(2)” to the text of Section 1061(d)(2)(A) defining a related person. It doesn’t appear to be an oversight that Congress specifically referred to family members defined in Section 318(a)(1) but omitted any reference to trusts in Section 318(a)(2)(B) when defining a related person. It seems unlikely that the drafters would have chosen to exclude any reference to trusts under Section 318(a)(2)(B) only to then use the “or indirectly” language in Section 1061(d) to reach trusts for the benefit of family members. The proposed regs indicate that a “transfer” includes contributions, distributions, sales and exchanges and gifts; however, a related person for purposes of Section 1061(d) has a different definition than related persons for purposes of Section 1061(c)(1) and includes only members of the taxpayer’s family within the meaning of
Section 318(a)(1).
At this time, while such an argument could be crafted, until further clarification is available, practitioners should be aware of the uncertainty and evaluate the merits of such a position with their clients before affirmatively planning with a non-grantor trust.
Other Section 1061 Points
The proposed regs also provide that a contribution under IRC Section 721(a) to a partnership isn’t treated as a transfer to a Section 1061(d) related person. This is because all unrealized gains attributable to the contributed API must be allocated to the holder of the contributed interest when those gains are recognized by the partnership under IRC Section 704(c) and Treas. Regs. Sections 1.704-1(b)(2)(iv)(f) and 1.704-3(a)(9).
The proposed regs also amend preexisting property holding period regulations to clarify how to bifurcate a partnership interest that consists of capital interest(s), API(s) or profits interests that were issued at different times and require a divided holding period. There’s also guidance that may be relevant for holding periods related to add-on investments in portfolio companies structured as partnerships.
From a charitable perspective, one key item included in the proposed regs affects those who commonly gift highly appreciated property with very low basis. The proposed regs would subject dispositions of property distributed to an API holder to Section 1061 recharacterization. This means that a charitable deduction for the donation of appreciated property distributed from an API would be limited to tax basis unless the donor had held the asset for three years, as it wouldn’t be considered qualifying stock and long-term capital gains property.
There was some favorable language included in these proposed regs as well with respect to family offices. Section 1061(b) allows for the exclusion of income or gain attributable to any asset not held for portfolio investment on behalf of third-party investors. For these purposes, a third-party investor is a person who doesn’t provide substantial services for a partnership or an ATB and who holds an interest in such partnership that doesn’t constitute property held in connection with an applicable ATB. It’s been suggested, in concurrence with agreement by Treasury, that the Section 1061(b) exception is intended to apply to family offices. This is a welcome result for managers who aren’t overseeing third-party capital, although further clarifications would be welcome in the final regulations.
Finally, the proposed regs added a new exception that wasn’t originally included within the confines of Section 1061 that terminates a partnership interest’s status as an API on acquisition by an unrelated party for FMV, provided that the unrelated party doesn’t directly or indirectly provide services to the partnership or any lower tier partnership. This exception provides flexibility for certain financial institutions to acquire interests in GPs of investment funds without triggering adverse consequences pursuant to Section 1061.
Valuation Approaches Overview
The implementation of these gift and estate strategies requires a valuation of the components of the trust. In the valuation of any asset or business, three different approaches may be employed to estimate the FMV of the interest being valued: (1) income approach, (2) market approach, and (3) cost approach. The nature and characteristics of the interest being valued will drive the selected valuation approach(es).
The income approach focuses on the income-producing capability of the subject business being valued. One common methodology used in the income approach is the discounted cash flow (DCF) method, which focuses on the expected cash flows generated. The market approach is typically comprised of the guideline public company method and/or the guideline transaction method. These market approach methods compare the financial performance of the company being valued to those of companies that are publicly traded or have recently been sold in a transaction. Based on a comparison of the financial metrics, multiples are selected to apply to the financial metrics of the subject company to derive a value. The cost approach, typically using the adjusted net assets method, is used to value a company by netting the estimated value of the existing and potential liabilities against the value of the company’s identified fixed, financial and other assets.
In arriving at the value of the subject interest, consider whether a discount for lack of marketability (DLOM) and/or discount for lack of control (DLOC) would be warranted based on the facts and circumstances related to the asset as well as the valuation approach used. A DLOM is applied to reflect the illiquid nature of a private security, while a DLOC is applied to reflect a minority interest position that doesn’t afford the investor control over the decisions related to the management of the business enterprise.
COVID-19 Impact on Valuations
The ongoing impact of COVID-19 has created challenges for fund managers in their valuation of their investee companies and similar illiquid investments. Specifically, the uncertainty of the financial impact and timing of recovery makes estimating and scrutinizing the prospective financial information of their investees a daunting task. As a result, when using a DCF method, a leading practice is to incorporate a scenario analysis to reflect potential levels and timing of a recovery. The market approach also poses challenges in that using the current or latest 12 months of financial data may not reflect the expected performance of the business. Furthermore, many analysts have stopped providing estimates guidance for their research subjects, due to the uncertainty and lack of information available. This disconnect creates a greater risk of applying mismatched market multiples based on differing adjustments and time periods of estimates of guideline companies.
Investees’ expectations for the timing of recovery from COVID-19 could affect GP cashflows, given that expected returns may be depressed and/or delayed and the funds may not realize the same performance within the expected life of the fund. Furthermore, though the volatility in a Monte Carlo simulation is observed over a multi-year period, the recent increased volatility in the markets would only skew such a measurement higher.
Other inputs in the valuation analysis that could be affected by the pandemic include the discount rate and discounts applied. For example, in the discount rate calculation, though the risk-free rate may be lower, the expected risk premium is higher given investors’ lower appetite for risk. Other adjustments, such as a company-specific risk premium, may also warrant a higher rate depending on the aggressiveness of the timing and recovery incorporated into the prospective financial information. The DLOM and DLOC estimates may also be higher in the current environment, given that the higher observed volatility could skew higher the long-term volatility estimate and the discounts observed for closed-end funds, as compared to their net asset values (NAVs). Finally, as it relates to the valuation of limited partnership (LP) interests, additional analysis may be conducted to understand the impact on NAVs of rapid changes in public market values. NAVs are often reported with some delay, and a market adjustment to reported NAVs may be necessary in volatile markets.
Valuation of GP Interest
The most common approach used to value a GP interest is the income approach, specifically the DCF method. This method best captures the timing and the risk of future cash flows received by the GP given the nature of carried interest. This method can be further enhanced by incorporating Monte Carlo simulation techniques to better capture the uncertainties around key assumptions (for example, future performance, timing of distributions or redemptions) by running thousands of scenarios to derive a range of possible outcomes. A valuation of a GP interest using a Monte Carlo simulation is usually more thorough because a typical DCF analysis only considers one set of assumptions in developing an indication of value, whereas the Monte Carlo simulation calculates values with most possible scenarios.
The market approach typically isn’t used, due to a lack of publicly traded guideline companies and the lack of comparability with similar GP interests given the varying stage of fund cycles. Additionally, the cost approach isn’t used because it would reflect the current NAV of the GP, not capture the future performance of the GP and most likely undervalue the interest.
Note that even in the early stages of the life cycle for a GP, the valuation of such an entity will usually have greater than a de minimis value, given the expected future performance of the management fees and, more importantly, the carried interest component. As the Monte Carlo simulation runs thousands of scenarios reflecting theoretical future variables for the eventual monetization of the investments, the valuation analysis captures this optionality. As such, a buyer would be willing to pay for such an option for these future returns even though at an early stage there will be uncertainty with achieving the future performance.
In employing the use of Monte Carlo simulation techniques, random values for uncertain variables (such as performance, timing of distributions or redemptions) are generated repeatedly to simulate the projected cash flows for the GP. The expected fund distributions are first estimated using a base case of the timing and magnitude of returns based on management’s prior experience and expected performance. Alternative scenarios for fund distributions are generated using a representative volatility for the business and a log-normal distribution curve. The cash flows for the carried interest derived from each scenario are calculated based on the contractual waterfall.
The volatility used in the Monte Carlo simulation techniques represents the risk around future performance and is a key input to quantify the scenarios for fund performance. Typically, the volatility is estimated based on observed volatility of returns for similar fund strategies.
Monte Carlo simulation techniques rely on a risk-neutral framework, which means that all calculated future cash flows represent certain outcomes and, therefore, should be discounted at the risk-free rate.
Monte Carlo simulation techniques are common in the valuation of contingent financial instruments such as financial options or complex derivatives. It’s a leading practice to use the values obtained by DCFs using Monte Carlo simulation techniques and reverse-engineer the implied discount rate using future cash flows to the GP that represent the most likely case. That implied discount rate should be comparable to discount rates calculated using the capital asset pricing model for cash flows with similar risks.
A DLOM may also be considered if the shares of a GP aren’t traded on an organized exchange, given that the holder of the shares isn’t able to readily transact other than with a willing buyer in a private sale. The concept of the DLOM is premised on the notion that the ability of security holders to readily convert their securities to cash adds value. Conversely, a lack of marketability for an otherwise identical security would detract from the value. A DLOM could be estimated using empirical research related to restricted stock as well as quantifying a discount using the Black-Scholes option pricing model or a similar option model.
A DLOC may also be considered if the valuation of the GP is for a non-controlling interest in the partnership. This discount is applied given that the interest reflects a minority interest in the partnership and only the controlling investor has control over the investment decision process and other management related decisions. A common way to estimate this discount for GPs is to compare the implied discount of the publicly traded share to the NAV per share of a closed-end fund. Also consider closed-end fund studies and relevant court cases setting precedent for applying such discounts in tax disputes.
Valuation of LP Interest
If an LP interest is in a fund for which the NAV practical expedient4 can be applied, the NAV can be used as a starting point for determining the value of the LP interest. If the NAV practical expedient can’t be applied, the traditional valuation approaches previously discussed would be considered and applied in the valuation of the interest.
As the NAV practical expedient is based on the value derived from the audited financial statements of the fund and represents the fair value for the investment for financial reporting purposes, adjustments need to be considered to estimate the FMV for the interest. Similar methods and considerations that were discussed previously in the GP valuation are applied in quantifying potential DLOMs and DLOCs for the LP interest.
Deemed Gift Tax Pitfalls
Though an interest in a fund isn’t a particularly unique asset from an estate-planning standpoint, for practitioners who undertake gift planning for hedge or PE fund principals using their carried interests, there are additional, unique planning issues and pitfalls to carefully navigate.
Perhaps the thorniest issue when planning for transfers of carried interest is IRC Section 2701, which outlines certain deemed gift provisions generally relating to various “transfers” of subordinate equity interests to or for a junior family member (generally speaking, although the class is a bit broader) when the senior family member (generally speaking, although the class is a bit broader) continues to own a “distribution right,” which is a right to receive distributions with respect to an equity interest in a family-controlled entity, unless interest retained by the senior family member is subordinate, the same class or proportionately the same.
If the transfer of a fund interest (for example, a carried interest) were to fall under Section 2701, the transferor may be deemed to have made a gift for gift tax purposes of not only the actual carried interest that was transferred but also perhaps significantly more of his interests in the fund (for example, GP interest and limited partner interest). Because a fund principal often invests a considerable amount of capital into a fund as a limited partner (either directly or, perhaps, via his interest in the GP of the fund), such a deemed gift could be problematic from a gift tax perspective—if the amount of the principal’s investment as a limited partner is substantial, the amount of the deemed gift could be dramatic, despite the fact that the principal had neither transferred nor intended to transfer his limited partner interest.
To date, the most popular solution implemented by the estate-planning community is to make a so-called “vertical slice” transfer. To make a vertical slice transfer, the fund principal who wants to transfer a portion of his carried interest to his family members must also proportionately transfer all of his other equity interests in the fund.5 If the fund principal owns a significant amount of LP interests in the fund, this approach may have its limitations in terms of how large a percentage vertical slice can be made without triggering a gift tax. Of course, if the current gift tax exemption is reduced earlier than scheduled, in the event of a change of administration, the gifting ability would be limited to an even smaller percentage vertical slice.6
There have been a number of discussions addressing different approaches to structure an estate-planning transaction with carried interest in situations in which the vertical slice doesn’t achieve the client’s objectives. A discussion of those approaches is outside the scope of this article.7
Closing the Books on 2020
As 2020 comes to a close, there are many reasons to pay close attention to the proposals provided by both candidates in the upcoming election, as well as generally what’s driving conversation in Washington, D.C. While the future of the estate and gift tax exemption and the currently available wealth transfer planning opportunities remain in limbo, it’s clear that the significant focus on either eliminating or significantly reducing the use of many techniques is creating concern among the estate-planning community. Whether you’re a seasoned fund manager or launching a new venture, the long-term value of advanced planning with respect to carried interests can drive wealth for future generations. Waiting until December to consider what possibilities are available may not leave sufficient time to properly plan, evaluate and execute before Dec. 31, as many attorneys and trust companies have already seen a dramatic spike in planning similar and perhaps even more dramatically than what the private client industry experienced at the end of 2012.
A holistic approach considering economic factors and individual facts and circumstances, along with the specific points discussed above regarding the importance of valuation and its impact on planning, as well as the benefits afforded through the use of disregarded entities, will all be key to entering 2021 with a clean mindset that one has checked off every box on his agenda with respect to maximizing future tax-efficient wealth transfer. The time to act is now—while you still can.
—The views expressed are those of the authors and are not necessarily those of Ernst & Young LLP or other members of the global EY organization.
Endnotes
1. 26 CFR Part 1, Treasury Regulations Section 107213-18.
2. See Stephen Liss, “Election 2020: Will Estate Planning Ever Be the Same?” New York Law Journal (Sept. 11, 2020).
3. As detailed at the Federal Open Market Committee meeting on Sept. 16, 2020. Refer to Figure 2,www.federalreserve.gov/monetarypolicy/fomcprojtabl20200916.htm, for details of the survey for expected fed funds rates.
4. Financial Accounting Standards Board, ASC 820-10-35-59 through 35-62 and 820-10-15-4.
5. The vertical slice exception to Internal Revenue Code Section 2701 can be found in Treasury Regulations Section 25.2701-1(c)(4), which states that:
Section 2701 does not apply to a transfer by an individual to a member of the individual’s family of equity interests to the extent the transfer by that individual results in a proportionate reduction of each class of equity interest held by the individual and all Applicable Family Members in the aggregate immediately before the transfer.
The logic behind this exception, presumably, is that, by making a vertical slice transfer, the parent has reduced every interest in the entity on a pro rata basis; this, in turn, means that the opportunity to disproportionately shift wealth to the next generation by retaining some artificially inflated equity interests and transferring another artificially depressed interest, doesn’t exist. Rather, the vertical slice enables both the younger generation and the parent to share in the future growth (or decrease in value) proportionally and, thus, doesn’t allow for a shift in value away from the parent down to the younger generation through the non-exercise of discretionary rights.
6. It should be noted that some uncertainty exists as to whether the parents’ interest in the fund management company should also be included when making a transfer of a vertical slice of all the equity interests. The analysis of this question revolves around whether an interest in the management company would be considered to be an “equity interest” in the fund within the meaning of the IRC. Arguably, an interest in the management company isn’t considered to be an “equity interest” in the fund.
7. For a more detailed discussion of the possible application of Section 2701 in the context of estate planning with carried interests, see generally N. Todd Angkatavanich and David A. Stein, “Going Non-Vertical With Fund Interests —Creative Carried Interest Transfer Planning: When The ‘Vertical Slice’ Won’t Cut It,” Trusts & Estates (November 2010).