Free CFA Level III: Private Wealth Working With the Wealthy Practice Questions

A is correct. In a goals-based framework, aspirational capital is discretionary — loss of this capital does not impair lifestyle or legacy funding — and therefore supports the most risk-on allocation. The Dynasty / philanthropy goal has the longest horizon (50+ years) and is explicitly categorized as aspirational, so it has the greatest capacity and willingness to bear equity, private markets, and other growth risk.

A is correct. In a properly structured intentionally defective grantor trust (IDGT), trust assets are removed from the grantor's taxable estate (achieving the estate-tax-exclusion goal), but the grantor remains the income-tax owner under the grantor-trust rules. The grantor therefore pays income taxes on trust earnings out of personal assets, and those tax payments are not themselves treated as additional gifts to the beneficiaries. Functionally, the trust grows on a pre-tax basis while the grantor's estate is depleted by the tax payments — an IRS-sanctioned transfer-tax leverage technique that compounds across long horizons such as the Dynasty bucket's 40+ year planning window in Exhibit 1.

A is correct. Goals-based investing lets Voss honor the emotional content of Klaus's demand — driven by availability bias around the 2008 liquidity crisis — while keeping the total allocation efficient relative to the family's goal structure. Funding Goal 1 (€45M lifestyle PV) with a dedicated safety bucket produces a cash and high-quality fixed-income allocation of roughly $45/280 \approx 16\%$, which is large enough to be visibly 'safe money' for Klaus yet leaves ~€235M (~84%) for the market and aspirational buckets that fund Goals 2–5. This reframing respects the behavioral driver, preserves goal feasibility, and protects the advisor-client relationship.