Larger “lifestyle” purchases typically come with a myriad decisions beyond determining, “What should I be paying for this?”

Take a home purchase, how should it be purchased – cash or cash and debt? Should it be purchased in trust? If so, what kind of trust? Who’s trust? If not in trust, should the home receive private debt from the trust to finance the purchase? Should the debt be structured as a mid-term note or a long-term mortgage, which would require filing? Have all of the insurance and carrying costs of the purchase been factored into cash flow? This is where things get complex. While a little nuanced, these are just some of the decisions one should consider when preparing to purchase a home.

And beyond questions of ownership lies perhaps the bigger question of integration – how will the ownership and debt payment structure fit into the family’s overall financial plan? Whatever the purpose of the home, be it a vacation property, a gift for a child, or a downsized residence for retirement, the impact of the purchase will be felt across many other areas of the family’s financial life. In the realm of estate planning, whether the home is owned by the parent, a child, a trust or another entity, the purchase will have an immediate impact on cash flow, and a long term impact on the legacy assets to be passed along to their next generation as part of the transfer of wealth. Parents must also consider the long term prospects for the home itself – is it likely that any of the children will want to remain in the house after their parents’ passing, or is it more likely that it will be sold, and the proceeds divided among the heirs? If a future sale is expected, the potential ownership or liquidation contingencies should be clearly addressed in the parents’ wills to avert costly legal disputes. The sale of or transferred ownership of the home may also have tax implications.

Want to fly private? There are a number of choices available, from ride sharing to fractional ownership to chartering to jet cards. All of these options have their strengths and weaknesses based upon where you are going, how often you are going, and who you are going with. Our team has extensive experience working with clients to navigate these decisions, and to make the best choice, it’s really important to understand the context of the acquisition. One of the first questions to be answered is will the potential flights be for personal use, part of a business enterprise or for philanthropic purposes? Plane ownership will never be an investment, but depending on the use, there may be opportunities to realize some tax benefits. Another important consideration is will the expense of the purchase impact your contributions to either your lifestyle or legacy investment portfolios, or can you make adjustments in other areas of your finances to maintain current contribution levels?Other aspects of the purchase, such as whether an individual, entity or trust will be the owner, will have tax and liability implications. Additionally, the ownership structure, along with the plane’s configuration and the number of guests you will be transporting, may trip you into FAA chartering rules.

With any complex acquisition, you must have a full understanding of how the diversion of funds will impact both your current cash flow needs and the growth of your long term assets, as well as how the acquisition will be transferred to your heirs and what the tax implications are. The decision to make a complex purchase is never made in a vacuum, far from it, but with the right team in place, it can be conducted in a way that minimizes the impact on the other areas of your family’s wealth.

Matthew Helfrich, CFP®

Partner and President

Hall of