and are based on 8% annual volatility solution. No Estate Plan Estate Plan Optimized Location Expected nominal estate tax liability $0.0 $0.0 $0.0 Expected nominal ending wealth $305.9 $324.9 $348.8 Expected real ending wealth $196.4 $208.6 $223.9 Asset Allocation Diversified public equity 31.8% 32.1% 28.2% Private equity fund 12.1 10.1 10.5 Taxable 10-year AA bond 0.0 12.3 0.0 Tax-exempt 5-year bond 24.8 11.5 22.4 Taxable money market fund 21.3 24.0 28.9 Hedge fund 10.0 10.0 10.0   100.0% 100.0% 100.0% the assets under his control can be managed free of income and capital gains tax. Asset location shifts more of the more tax inefficient assets into the foundation. Table 31.5 provides ending wealth and asset allocation under the three scenarios. Table 31.6 shows asset allocation and asset location in the optimized location scenario at 8 percent volatility. Mr. Smith is in a very different position from the Jones family because estate taxes do not affect his plans. Consequently, the percentage increases in future wealth derived from the introduction of an estate plan are not nearly as great. Estate planning merely shifts a portion of his wealth from taxable to tax-exempt status. In general, the faster he gives his wealth to the charity, the greater will be the future value of the charity. In our example, we assumed that there would be no further donations until Mr. Smith's death. Asset location strategies allowed for improvement in the expected future value of the foundation. Optimized location produced an expected real future value of $223.9 million, which was 7 percent greater than the uniform asset allocation solution. This was achieved by shifting the tax inefficient hedge fund into the foundation.4 Minimizing the ordinary income generated in the CRT maximized the benefit derived from the CRT. Remember that the tiering of income rules mean that ordinary income or short-term gains in the CRT cause significant increases in Mr. Smith's tax liability on distributions he receives from the CRT. Consequently the CRT is invested in public equity, which has only a low dividend yield, and municipal bonds. As was the case with the Joneses, the best use of the retirement account 4In practice, Mr. Smith's foundation might be viewed as having too aggressive an asset allocation mix. Even though Mr. Smith intends to donate his remaining assets to the foundation, the foundation must be run according to prudent-per son rules. In a real situation, it might be necessary to impose some additional constraints that produce a more balanced asset allocation strategy for the foundation.