Inside Marc Andreessen & Ben Horowitz's Multi-Family Office (Part II)

**Michel Del Buono** (0:00)
With all the things happening between SpaceX IPO, a lot of secondary transactions, tender offers and things like that, people are really focused on what to do with how you structure yourself from a trust and estate perspective. So if you're a founder of a company, your basis, the price which your IRS uses to assess your stock is zero. That means 100% of your gain is subject to at least long-term capital gain tax, which depending on the state you're in, can be upwards of 35%. There's really only three places your money can go. It's your family, it's charity, and it's the IRS. I don't know anyone who prefers the IRS. QSBS is an incredible benefit for small businesses, and so for founders who start early in the life of the company, they get up to 15 million proceeds from their stock sale would be not taxed. So it's a huge benefit. A lot of these strategies of having multiple trusts are to try to multiply these QSBS benefits across the different trusts.

**Molly O'Shea** (0:51)
What are the biggest mistakes that people commonly make?

**Michel Del Buono** (0:53)
The biggest one is...

**Molly O'Shea** (1:05)
Michel Del Buono, welcome back to Sourcery.

**Michel Del Buono** (1:08)
So soon.

**Molly O'Shea** (1:09)
I know, this was a long-awaited, highly anticipated, I had multiple people, if not like, on every channel that we put it out, a lot of really positive reception to it, and requests for more knowledge from you.

**Michel Del Buono** (1:25)
Okay.

**Molly O'Shea** (1:25)
So I guess there are a lot of people that need pre-liquidity advice.

**Michel Del Buono** (1:29)
Sure, with all the things happening between SpaceX IPO, a lot of secondary transactions, tender offers, and things like that, people are really focused on what to do, and a lot of that, of course, has to do with how you structure yourself from a trust and estate perspective. But it also has to do, or you can optimize your situation also with different investment strategies that can be complementary to that, and then finally philanthropy. So there's kind of three elements to preparing yourself for a liquidity event, right? Structuring your trust and estate, thinking about how to sort of make key investments that help offset taxes to some degree, and then donating into a donor-advised fund or some other charity. Those three are kind of the nexus of how to optimize yourself prior to a liquidity event.

**Molly O'Shea** (2:15)
I feel like philanthropy can be an entirely another episode. That's a big one.

**Michel Del Buono** (2:20)
It can be. The beauty of the donor-advised fund is that you can sort of detach your decision when to give with your decision of when to sort of tax-optimize, right? So you can donate things into a DAF and immediately get a tax benefit. But if you're young and still working, people aren't necessarily ready to dedicate their lives to how to spend that money and donate it.
But you can defer that decision for a while in a DAF if you're not feeling ready. So it helps you detach a bit the difficulty of tackling the problem. How do I give versus should I give for optimization of my balance sheet right now?

**Molly O'Shea** (2:57)
So to bring it back to center, so you are the CIO of a16z Perennial. I like to call this Marc and Ben's Multifamily Office, is the Wealth Management Fund of a16z. So in terms of all of the events coming up, I guess the number one topic that I was asked was on tax optimization.
Can you break down? I know this is a loaded topic too because there's so many different things. But okay, let's say you have a liquidity event, 90% of your net worth is in one position. What do you do? What is step one?

**Michel Del Buono** (3:32)
So again, if you remember, I talked about three sort of components, but step one is absolutely your trust and estate optimization construction. So there's a lot of nuance and complexity around there, but if you sort of step back, it's all about creating trust. And there is, as you probably know, like a whole bunch of different trusts. You can create charitable remainder trusts, spousal, access trusts, revocable or irrevocable trusts, grantor, non-grantor trusts. There are all these different things you can do. I'm not an attorney, so I don't know all the details about them, but I know enough to tell you that it's a very complicated situation. In parallel, you can also take some of your proceeds and put them in a different strategy to generate losses, so-called tax loss harvesting. And there's several flavors of that too that you can do.