Sam and Angela fulfilled their dream more than three decades ago when they founded a business in the technology sector. While the small, family-run company endured peaks and valleys of growth and industry demand, it finally became a highly successful billion-dollar company. In fact, it was so successful, Sam received multiple offers over the past five years.

During the pandemic in 2020 the couple decided to re-evaluate things – the long hours and stress of running a business, the importance of family, and their health – and decided it was the right time to sell the company. While relieved by their decision to start a new chapter, the sale gave rise to several new questions:

• How should we invest the proceeds from the sale?
• When is the right time to develop a philanthropic plan?
• What changes can we afford to make to our short-term spending?
• How do we leave a legacy for our children and grandchildren? 

The couple’s attorney referred them to his contact at BNY Mellon Wealth Management. Given the ongoing COVID crisis, the BNY Mellon Wealth team was introduced to Sam and Angela via Webex, and spent the next several months listening and gathering information through video conferencing about the couple’s family, lifestyle, their long-term goals for philanthropy, and wealth transfer requirements.

With more than $26 million of investments, and a substantial windfall expected from the sale of the business, the team  introduced Sam and Angela to BNY Mellon’s Active Wealth framework and its five key practices to build and preserve wealth over the long term: Investing to maximize compounding, borrowing strategically, spending dynamically, managing taxes, and protecting legacy.

During one of their virtual meetings, BNY Mellon’s private banker raised a simple, three-word question: What about taxes? And with that, a lightbulb went off for the couple. They had overlooked the significant impact the business sale would have on their tax situation. The banker recommended utilizing an Investment Credit Line¹ to pay the taxes when due.  Although the couple understood the benefits of leverage in a business context, it was a revelation that the same strategy can be applied to preserve and grow personal wealth over time.

The value of advice

Borrowing strategically can add value to an individual’s wealth and increase the probability of achieving  long-term financial goals. Leverage isn't always beneficial, but in Sam and Angela’s case, using a secured line of credit to fund a significant tax obligation – rather than selling portfolio assets – was the best option. Strategically applying leverage when interest rates are low can minimize taxes and leave money invested in the market to potentially generate excess returns above the  cost of borrowing.

Given BNY Mellon’s comprehensive investment and lending capabilities and the team’s timely and thoughtful recommendations, the couple welcomed a single source of wealth and business transition advice from a dedicated group of private banking and wealth management experts.