Merrill and Bank of America Private Bank are launching a program that gives their wealthiest clients access to private market funds usually reserved for institutions. The announcement on September 4, 2025, describes an Alts Expanded Access Program for clients with at least $50 million in net worth, available starting in fall 2025. For families at that level, the investment case for private funds is only half the story; the tax mechanics can meaningfully change what they keep.
What changed
The program is built around three features, according to the bank: selective access to funds that are not broadly distributed, often in emerging themes or niche strategies; advisor support that includes fund materials and help understanding the offerings; and client-directed investing, in which clients conduct their own due diligence and invest directly with the managers.
The bank cited its 2024 Private Bank Study of Wealthy Americans, which found that alternatives make up 17% of ultra-high-net-worth portfolios and that 93% of younger ultra-wealthy investors plan to increase their allocations. The new offering builds on the firm's Premium Access Strategies platform, which gathered $60 billion in client assets within three years.
Who is affected
The $50 million threshold limits the program to a narrow group: founders after a liquidity event, multigenerational families, executives with large equity stakes and their family offices and trusts. Many already hold private equity or real estate funds. The client-directed structure means investors deal with managers directly, including on tax reporting.
The after-tax math
Private funds are usually organized as partnerships, and the tax consequences differ from owning public stocks or mutual funds in several ways:
- K-1 reporting. Investors receive a Schedule K-1 each year reporting their share of income, gains, losses and deductions. K-1s frequently arrive late, which can push individual returns onto extension.
- Phantom income. Partners owe tax on allocated income whether or not the fund distributes cash.
- State filings. Funds that own businesses or property in many states can create filing obligations in those states.
- Character of income. Private credit funds tend to produce interest taxed at ordinary rates, while buyout funds lean toward long-term capital gains, which require a holding period of more than one year for preferential rates, per IRS Topic 409.
- Surtax. Investment income, including gains and passive income, is generally subject to the 3.8% net investment income tax above $250,000 of modified AGI for joint filers, according to IRS Topic 559.
- UBTI for tax-exempt holders. Families investing through IRAs, charitable remainder trusts or private foundations can face unrelated business taxable income from leveraged or operating fund investments.
Example: a family commits $5 million to a private credit fund and $5 million to a buyout fund. Assume, for illustration, that each earns a 10% annual pre-tax return. The credit fund's $500,000 of interest is taxed yearly at ordinary rates plus the 3.8% surtax; at an assumed 40.8% combined federal rate, about $204,000 goes to tax, leaving $296,000. The buyout fund's gains may be deferred until exits and then taxed at 23.8%, so the same $500,000 of return, when realized, leaves about $381,000. The difference, roughly $85,000 a year in this illustration, is before state tax and compounding.
Moves to discuss with your advisor
- Asset location. Families often consider which entity holds each fund, since ordinary-income strategies may fit better in tax-deferred or tax-exempt vehicles, subject to UBTI rules.
- Filing calendar. Planning for extensions and estimated payments around late K-1s avoids penalties and surprises.
- After-tax, after-fee returns. Comparing a private fund with a public alternative on a net basis, including carried interest, fees and tax drag, gives a truer picture.
- Estate planning. Illiquid fund interests may be candidates for transfers to trusts, where valuation questions deserve careful review with a qualified adviser.
What to watch
The program's fall rollout will reveal which managers and strategies are offered. More broadly, wirehouses and private banks are racing to widen private-market access, and the tax-reporting burden on individual investors is likely to rise with it.
Sources
After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.
