When meeting a new Family Office client, it usually takes just a short conversation for us to understand one of the key items worrying them – their K-1 investments. A K-1 investment is the tax term we use to describe an investment in a partnership, informally known as a “deal”.

Oftentimes, you will get excited about a new deal, be it a new company or a property. Looking over the partnership agreement, you note the promised cash return on the investment and the schedule of distributions. You sign the agreement, wire over the funds and then promptly forget about the whole thing. Every now and then a check arrives in the mail which you deposit in your account. For other investments, a wire is sent directly to your account, which you may or may not notice when it arrives.

A couple of times a year, you decide it’s time to pay attention to these distributions, figure out how much you have received and how much is due to you. What’s your actual cash return on your investment? You add this task to your to-do list, and make the decision to spend the time reviewing your distributions to-date; comparing the numbers with the partnership agreement and the year-end forms or reports sent to you. And that’s exactly where it stays – on your to-do list. It is something you want to do, something you need to do, but something that does not actually get done.

One of the key services we are proud to offer to our Family Office clients is cash distributions oversight. By reconciling accounts each month and generating clear reports which detail which investments sent funds that month, we are providing this information in a clear and concise manner. A net cash balance is tracked for each K-1 investment so that our clients can clearly understand how much they have put into each investment and how much they have received back. We compare the amounts received to-date with those promised in the original agreements, using the cash returns to evaluate ongoing performance of the investments.

Additionally, it is at this time of year, when all the tax returns have been filed, that we will begin comparing the amounts listed on the K-1 tax forms with the actual amounts received in our clients’ bank accounts. Any discrepancies will be pointed out and discussed. This enables our clients to focus on what you do best, while at the same time, having easy access to the information you need to make informed decisions.

To learn more about our Family Office Services department, contact Chana at 212-221-1140 x 150 or email familyoffice@bernathandrosenberg.com.

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