Technically, a “family office” is a concept recommended for Ultra High Net Wealth (UHNW) families. One generation amasses so much wealth — often from a business they founded — that they want or need independent full-time experts to help them manage, invest, transfer and/or donate it. Used wisely, a family office also facilitates important financial discussions and education across generations. Because UHNW parents find it as difficult to discuss money with their kids as all others do, the experts help them frame and discuss the issues and their values, as well as facilitate transactions and record-keeping.
Whether or not your net worth puts you in the UHNW category though, if you have benefited financially during this pandemic — when the stock market, private equity and real estate outside of dense urban areas have risen dramatically even as our federal government took on debt that is the equivalent of our annual GDP — you can and will benefit from organizing your financial affairs as though you have a family office.
In other words, whatever your net worth, at this unique inflection point in history and with respect to the US economy, it can be prudent to consult with financial experts. Engaging in thoughtful discussions about money with your family now will enable you to make use of appropriate financial and legal tools and make the best choices for your family before this year ends.
In 2020, our tax laws allow each individual to transfer almost $12 million tax free to their heirs during their lifetime. That law could be changed through legislative action as early as next year. The “lifetime exemption” could be reduced or eliminated. Conventional economic thinking implies that this is likely to happen, too.
Similarly, there is extraordinary need for philanthropic support during this unprecedented time that continues to be punctuated by pandemic, social unrest, environmental disasters, and political uncertainty. If you’ve gotten wealthier as others have struggled, you probably feel inspired and compelled to pay forward your good fortune.
This confluence of law and facts makes it wise for families with substantial assets to consider acting before tax laws change in order to ensure that their assets are used to support the health, education and future of heirs.
This exploration may also facilitate thoughtful discussion of values and goals among family members and help avoid proving the old adage that fortunes are earned and lost over three generations. The help of expert can make this an experience that brings you closer to your loved ones, while setting up a more hopeful future for them too.
To provide context and facilitate connection and discussion, ask yourself and your family the following questions. Their answers may lead to the storytelling and sharing of values that can help bind your family together, keep it strong for the future, and help you chart the wisest course for the future of your loved ones.
- Why does this family capital exist?
- What important family stories and traditions underlie it?
- What opportunities and responsibilities does it provide?
- What are your values and hopes for the future?
- What are your family members’ values and hopes for the future?
- What impact should capital invested in businesses or philanthropy make?
Ideally, a family office includes expertise in real estate, education, health care, investments, trusts, GRATS and other wealth transfer instruments, philanthropy and tax law. Often, it will also include “concierge” services for travel and other lifestyle opportunities as well.
The majority of wealth management firms offer expertise in most the of these categories now. But experts in each category also exist. The best advisors make complicated concepts easy to understand and can provide a structure for your family conversations around important, but potentially emotionally charged, issues as well.
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Susan B. Noyes is the Founder & Chief Visionary Officer of Make It Better Media Group, as well as the Founder of Make It Better Foundation’s Philanthropy Awards. A mother of six, former Sidley Austin labor lawyer and U.S. Congressional Aide, passionate philanthropist, and intuitive connector, she has served on boards for the Poetry Foundation, Harvard University Graduate School of Education Visiting Committee, American Red Cross, Lurie Children’s Hospital, Annenberg Challenge, Chicago Public Education Fund, Lyric Opera of Chicago, Chicago Symphony Orchestra, New Trier High School District 203, and her beloved Kenilworth Union Church. But most of all, she enjoys writing and serving others by creating virtuous circles that amplify social impact.