family offices and private trust companies – an overview
TRANSCRIPT
For update informa�on call 1-800-232-3444Website: ceb.com
CONTINUING EDUCATION OF THE BAR CALIFORNIAOakland, California
Reference MaterialsApril 2021
Family Offices and Private Trust Companies –
An Overview
Bobbi J. BierhalsKim Kamin
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For update informa�on call 1-800-232-3444Website: ceb.com
CONTINUING EDUCATION OF THE BAR CALIFORNIAOakland, California
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The 43rd Annual UCLA/CEB Estate Planning Institute via Live Stream Webinar
SCHEDULE
Thursday, April 22nd 2021 8:30 am - 9:00 am Attendees log in - Opening remarks - Introductions 9:00 am – 10:15 am California Developments
S. Andrew Pharies, DLA Piper LLP (US), San Diego 10:15 am – 10:45 am Break 10:45 am – 12:00 pm Family Offices and Private Trust Companies – An Overview Bobbi J. Bierhals, McDermott Will & Emery, LLP, Chicago Kim Kamin, Gresham Partners, LLC, Chicago 12:00 pm – 1:00pm Lunch Break 1:00 pm – 2:00 pm Practicing Law After Covid-19: What did we Learn? Randy J. Curato, Alas, Los Angeles Bruce Stone, Goldman Felcoski & Stone, P.A., Florida Ryan J. Szczepanik, Hartog, Baer, & Hand, APC, Orinda 2:00 pm - 2:30 pm Break 2:30 pm – 3:30 pm Love Makes A Family: Distinguishing Statutory Natural Parentage and
Biological Parentage Jonna M. Thomas, Wells Fargo Private Bank, Walnut Creek Naznin B. Challa, Wells Fargo Bank, N.A., San Francisco 3:30 pm - 4:00 pm Break 4:00 pm - 5:00 pm Planning in a Low Interest Rate Environment Carlyn S. McCaffrey, McDermott Will & Emery, New York Nicole M. Pearl, McDermott Will & Emery, Los Angeles
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The 43rd Annual UCLA/CEB Estate Planning Institute via Live Stream Webinar
SCHEDULE
Friday, April 23rd 2021
8:30 am - 9:00 am Attendees log in - Opening remarks - Introductions 9:00 am – 10:30 am Federal Tax Developments Charles D. (Skip) Fox IV, McGuireWoods LLP, Charlottesville, Virginia 10:30 am – 11:00 am Break 11:00 am – 12:30 pm Property Tax 12:30 pm – 1:30 pm Lunch Break 1:30 pm – 2:30 pm Employment Issues with Caregivers, Nannies, Personal Assistants David A. Wimmer, Swerdlow Florence Sanchez Swerdlow & Wimmer, Los Angeles Emily Camastra, Swerdlow Florence Sanchez Swerdlow & Wimmer, Los Angeles 2:30 pm - 3:00 pm Break 3:00 pm – 4:00 pm The SECURE Act and Special Needs Trusts Stuart D. Zimring, The Law Offices of Stuart D. Zimring, Encino
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The 43rd Annual UCLA/CEB Estate Planning Institute April 2021
Live Stream Webinar
About the Speakers
S. ANDREW PHARIES, DLA Piper LLP, San Diego, is a partner with DLA Piper LLP (US), San Diego, practicing in domestic and international estate planning, postdeath trust and estate administration, charitable planning, exempt organizations, family business planning, and related tax controversies. He received his B.S. from the University of California, Riverside, and his J.D. from the University of Oregon School of Law, where he served as Editor-in-Chief of the Oregon Law Review.
He is a Fellow of the American College of Trusts and Estates Counsel and is certified as a Specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization. Mr. Pharies is a frequent speaker and author on topics relating to trusts and estates law.
BOBBI J. BIERHALS, McDermott Will & Emery, LLP, Chicago, has built her practice by developing creative and customized solutions for her clients. Her experience centers on tax and business planning for high-net-worth individuals and families. Her clients range from executives and first-generation entrepreneurs to multi-generational families, with net worth from $15 million to many
billions of dollars, and include a number of individuals listed in the Forbes 400.
Leading publications such as The Wall Street Journal, Forbes, Business Week, MSN Money, Private Wealth magazine and Financial Advisor magazine have quoted Bobbi frequently on various family office and estate planning topics. A member of the American College of Trust and Estate Counsel (ACTEC), Bobbi has also taught legal research and writing at Harvard Law School. She received her J.D., from Harvard Law School.
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KIM KAMIN, Gresham Partners, LLC, Chicago. Kim joined Gresham after spending many years as a practicing attorney who counseled families regarding the preservation and transfer of their wealth over multiple generations. In her role at Gresham, Kim leads the development and implementation of estate, wealth transfer, philanthropic, education and fiduciary planning activities, advising clients and speaking and writing on topics related to managing multi-generational wealth.
During her legal career, Kim advised clients on a wide array of entity restructuring, succession planning, trust and estate administration, asset protection and philanthropic issues. She also represented wealth owners, beneficiaries, fiduciaries and custodians in contested matters and served as counsel for the formation and operation of not-for-profit entities. Kim is a frequent speaker at national conferences and a contributor to publications that focus on preserving, growing, managing and transferring wealth. Kim received her J.D., from the University of Chicago Law School
RANDY J. CURATO, Alas, Los Angeles. Randy counsels and educates lawyers on ethics, professional responsibility, and avoiding malpractice in his role as Vice President—Senior Loss Prevention Counsel for Alas. He also speaks regularly at outside conferences and programs on ethics and professional responsibility.
Prior to joining ALAS, Randy was a partner at Bell, Boyd & Lloyd LLP in Chicago for 18 years. While at Bell Boyd, he handled litigation, arbitration,
and trials of commercial, real estate, environmental, probate, product liability, professional malpractice, and contract cases. Randy started his practice with Wildman, Harrold, Allen & Dixon LLP in Chicago, where he handled litigation matters. Randy is a member of the American and Chicago Bar Associations, and serves on the advisory board of the Working Group on Legal Opinions. Randy received his JD, from the University of Notre Dame Law School.
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BRUCE STONE, Goldman Felcoski & Stone P.A., Florida, is a shareholder of the firm. His practice consists primarily of estate planning for both domestic and foreign clients. A significant portion of his practice involves disputed or complex problem situations in which he is retained to find creative planning solutions or to serve as expert witness, mediator or arbitrator. Bruce is admitted to practice in Florida.
Bruce is a Fellow and Past President of the American College of Trust and Estate Counsel. He is a past chair of the Real Property, Probate and Trust Law Section of The Florida Bar. Bruce is chair of the Joint Editorial Board for Uniform Trust and Estate Acts, which monitors and recommends updates to the Uniform Probate Code, the Uniform Trust Code, and all other trust and estate related uniform laws on a nationwide basis. He is a member of the Advisory Committee of the Heckerling Institute on Estate Planning. He is an Academician in the International Academy of Estate and Trust Law. In addition to his practice, Bruce is an adjunct professor at the University of Miami School of Law, where he teaches in the graduate masters program in estate planning. He is a frequent lecturer for various organizations.
RYAN J. SZCZEPANIK, HARTOG, BAER & HAND, Orinda. Mr. Szczepanik is a Certified Specialist in Estate Planning, Trust and Probate Law, his practice is devoted exclusively to trust and estate litigation. He has tried numerous matters in both California and federal courts. He became a Principal of Hartog, Baer & Hand in 2016. Mr. Szczepanik has presented on trust and estate topics at organizations throughout California and has authored numerous published articles on
trust and estate topics. Mr. Szczepanik is a Member of the Executive Committee of the Trusts and Estates Section of the California Lawyers Association (TEXCOM). He is the Vice President of the East Bay Trusts & Estates Lawyers (EBTEL). He is a delegate to the Conference of California Bar Associations (CCBA). He serves as a Court Appointed Special Master and Referee for the Alameda County Probate Court. Mr. Szczepanik received his J.D., from Emory Law School.
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JONNA THOMAS is a vice president and senior fiduciary advisory specialist located in the Walnut Creek Wells Fargo Private Bank office. She is a State Bar Certified Specialist in Estate Planning, Trust and Probate Law. Ms. Thomas works with clients to integrate fiduciary and investment knowledge into each client’s custom wealth plan. She coordinates with investment strategists to align investments with the
client’s goals and values. Based on the particular situation, Ms. Thomas can coordinate a variety of Specialized Wealth Services in order to help grow and protect assets, while working toward the client’s overall wealth management goals. Prior to joining Wells Fargo, Ms. Thomas served for eight years as a senior associate attorney with Hartog, Baer and Hand APC, assisting clients to resolve conservatorship, trust and estate related disputes.
She earned her Juris Doctorate with distinction from Pacific McGeorge School of Law and was admitted to the State Bar of California in 2005, although currently not practicing. She received her Master of Laws (LL.M.) in taxation with honors from Golden Gate University in 2014.
NAZNIN BOMI CHALLA, Wells Fargo Bank, N.A., is senior counsel with Wells Fargo Bank, N.A., practicing in the Trust and Investment section. Prior to working at Wells Fargo, she was with the law firm of Evans, Latham and Campisi, practicing in probate/trust administration and trust litigation. Naznin received her J.D. and her L.L.M. in Taxation from Golden Gate University.
Naznin has co-authored various articles relating to trusts and estates law, including, “Heirs in the Freezer: Bronze Age Biology Confronts Biotechnology,” 36 ACTEC J. 179 (Summer 2010), California Trusts and Estate Quarterly, Vol. 23, Issue 2, 2017, “Reports of Their Death are Greatly Exaggerated: The Viability of No Contest Clauses Against Direct Contests Brought Without Probably Cause, and was co-editor of various updates to CEB’s “California Trust and Probate Litigation” practice guide.
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CARLYN S. MCCAFFREY, McDermott Will & Emery, New York, focuses her practice on tax and estate planning for high net worth individuals. A partner in the firm, she is co-leader of the private client practice in the firm's New York office. Ms. McCaffrey is a fellow and a past president of the American College of Trust and Estate Counsel (ACTEC); a fellow of the American College of Tax Counsel; and a member of the International Academy of Trust and Estate Counsel, the
New York State Bar Association's Tax Section, and the Joint Editorial Board for Uniform Trust and Estate Act of the National Conference of Commissioners on Uniform Laws. In addition, she is a past member of the council of the Real Property, Trust, and Estate Law Section of the American Bar Association and the former chairperson of the section's Generation-Skipping Transfer Tax Committee. An adjunct professor of law at New York University School of Law and the Miami Law School, she serves on the advisory committee of the University of Miami's Philip E. Heckerling Institute on Estate Planning and the board of directors of the ACTEC Foundation. Since 2006, Ms. McCaffrey has been listed in "Chambers USA" as a "Star" lawyer for business and wealth management and in each of the past 17 years in "The Best Lawyers in America" for trusts and estates. She lectures frequently and writes extensively on subjects relating to tax law, trusts and estates, foreign trusts, and matrimonial law. Ms. McCaffrey is the coauthor of "Structuring the Tax Consequences of Marriage and Divorce."
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NICOLE M. PEARL, McDermott Will & Emery, Los Angeles, advises clients on estate planning, wealth transfer planning, marital property agreements, business succession planning and post-death administration. Her clients include
family offices, entrepreneurs and business owners, real property investors, private equity fund managers, and entertainment industry figures.
Nicole helps high-net-worth individuals pass wealth to the next generation, while minimizing their tax burden. To that end, she creates estate plans and charitable giving programs designed to meet her clients’ family succession and wealth management objectives. She also advises families in the creation and ongoing administration of their family offices, and works with business owners to maintain control of their companies through buy-sell agreements or to relinquish control via responsibly conducted transition of ownership to family members or employees.
Nicole primarily works with clients throughout Southern California, but also maintains a statewide practice that includes a strong Northern California client base.
CHARLES D. (“SKIP”) FOX IV, McGuire Woods, Charlottesville, VA, is a partner in the Charlottesville, Virginia office of the law firm of McGuire Woods LLP and head of its Private Wealth Services Industry Group. Prior to joining McGuire Woods in 2005, Skip practiced for 25 years with Schiff Hardin LLP in Chicago. Skip concentrates his practice in estate planning, estate administration, trust law, charitable organizations, and family business succession. He is a frequent lecturer across the country at seminars on trust and estate topics. Skip received his A.B. from Princeton, his M.A. from Yale, and his J.D. from the
University of Virginia.
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EMILY CAMASTRA, Swerdlow Florence Sanchez Swerdlow & Wimmer, Los Angeles, represents employers on a wide range of labor and employment law issues. She defends employers in single-plaintiff, multi-plaintiff, and class-action lawsuits in federal courts, state courts, and private arbitrations regarding claims of wrongful termination, harassment, discrimination, retaliation, and wage-and-hour matters. She also represents employers in administrative proceedings before the California Division of Labor Standards Enforcement, the California Department of Fair Employment and Housing, and the United States Equal Employment Opportunity Commission. Additionally, Ms. Camastra advises employers on a wide range of labor and employment matters, including, but not
limited to, leaves of absence, reasonable accommodations, and terminations. She conducts workplace investigations as well as trainings in preventing harassment and discrimination in the workplace. Ms. Camastra drafts handbooks and other human resource policies to comply with federal, state, and local laws. Ms. Camastra is a partner with Swerdlow, Florence, Sanchez, Swerdlow & Wimmer and is fluent in Spanish.
DAVID WIMMER, Swerdlow Florence Sanchez Swerdlow & Wimmer, Los Angeles, has extensive experience advising management on a wide range of labor and employment issues, including establishing effective human resource policies, maintaining a union-free workplace, and complying with federal, state, and local laws. Mr. Wimmer represents companies throughout
the United States in labor-relations matters, such as union-avoidance strategies, election campaigns, collective bargaining, supervisory training, arbitrations, state and federal court litigation, and proceedings before the National Labor Relations Board.
Mr. Wimmer defends employers in single-plaintiff through class-action wrongful termination, harassment, discrimination, and wage-and-hour matters, and in criminal investigations and prosecutions. He represents companies involved in state and federal court litigation, arbitration, and mediation matters, as well as administrative proceedings before the California Division of Labor Standards Enforcement, California Department of Fair Employment and Housing, California Division of Occupational Safety and Health, California Occupational Safety and Health Appeals Board, Federal Occupational Safety and Health Administration, Federal Mine Safety and Health Administration, and United States Equal Employment Opportunity Commission.
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STUART D. ZIMRING, The Law Offices of Stuart D. Zimring, Encino, was admitted to the Bar in 1972, and is admitted to practice in California and U.S. District Court, Central and Northern Districts of California and the U.S. Supreme Court. He received his B.A. degree in 1968 from UCLA and his J.D. degree in 1971 from the UCLA School of Law and is “AV” rated in Martindale-Hubbell. He is a member of the Los Angeles Superior Court Probate Volunteer Panel. Mr. Zimring is a Fellow
of and Past President of the National Academy of Elder Law Attorneys (NAELA), and a Charter Member of NAELA’s Council of Advanced Practitioners (CAP). He is a Fellow of the American College of Trusts and Estate Counsel (ACTEC), is certified as a Specialist in Estate Planning, Probate and Trust Law by the Board of Legal Specialization of the State Bar of California and is one of the 7 California members of the Special Needs Alliance. He is a frequent speaker and writer on Elder Law, Special Needs Trusts and related issues throughout the country. He is co-author of “Tax, Estate and Financial Planning for the Elderly – California Guide” and “Fundamentals of Special Needs Trusts,” both published by Matthew Bender/Lexis-Nexis, as well as a member of Matthew Bender’s Elder Law Editorial Committee.
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The 43rd Annual UCLA/CEB Estate Planning Institute via Live Stream Webinar
April 2021
Chaired by Monica Dell’Osso, Wendel Rosen Black & Dean LLP, Oakland Paul Gordon Hoffman, Hoffman, Sabban & Watenmaker, APC, Los Angeles The Advisory Board John A. Hartog, Hartog, Baer & Hand, Orinda Nancy E. Howard, Sheppard Mullin Richter & Hampton LLP, Los Angeles Nicole M. Pearl, McDermott Will & Emery, Los Angeles S. Andrew Pharies, DLA Piper LLP, San Diego Linda J. Retz, Law Offices of Linda J. Retz, Torrance Kim T. Schoknecht, Pillsbury Winthrop Shaw Pittman LLP, Palo Alto Warren A. Sinsheimer, McCormick Barstow LLP, San Luis Obispo Michael V. Vollmer, Murtaugh Treglia Stern & Deily LLP, Irvine Connie Madera Voos, Continuing Education of the Bar, Oakland Thomas B. Worth, Friedman McCubbin Law Group LLP, San Francisco
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Family Offices & Private Trust Companies – An Overview
Bobbi J. BierhalsKim Kamin
April 2021
Family Offices & Private Trust Companies – An Overview
Bobbi J. Bierhals, PartnerMcDermott Will & Emery LLP444 W. Lake St., Suite 4000Chicago, IL [email protected]
Kim Kamin, PrincipalGresham Partners, LLC333 W. Wacker Dr., Suite 700Chicago, IL [email protected]
Thursday, April 22, 202110:45 am – 12:00 pm PDT
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Bobbi J. Bierhals is a partner of McDermott, Will & Emery LLP. She has built her Private Client practice by developing creative and customized solutions for her clients. Her experience centers on tax and business planning for high-net-worth individuals and families. Her clients range from executives and first-generation entrepreneurs to multi-generational families, with net worth from $15 million to many billions of dollars, and include a number of individuals listed in the Forbes 400.
Bobbi’s breadth of experience across a wide range of client profiles enables her to help them identify and structure tax-advantageous structures for transferring wealth and business interests to younger generations. While many other estate planners focus almost exclusively on tax issues, Bobbi takes a holistic approach that balances tax and family considerations to fit each individual client’s goals. With a geographically diverse client base spanning the United States, Bobbi adeptly navigates the nuances of local law while addressing broader federal tax considerations.
Because of her extensive work with multi-generational, business-owning families, Bobbi has experience in assisting owners of closely held businesses and their family offices with their unique planning needs. She advises her clients on private trust companies, corporate governance, succession planning, wealth transfer planning and family office structuring. She also coordinates other legal needs of family offices, from corporate transactions and real estate, to direct investing, employment law and aircraft acquisition, bringing in lawyers from McDermott or identifying external counsel as appropriate to provide the highest level of quality and service to her clients. Bobbi also has a particular interest in family law issues and has significant experience negotiating pre-marital agreements and partnering with family law attorneys to obtain desirable results in high-net-worth divorces.
Leading publications such as The Wall Street Journal, Forbes, Business Week, MSN Money, Private Wealth magazine and Financial Advisor magazine have quoted Bobbi frequently on various family office and estate planning topics.
Bobbi is a member of the American College of Trust and Estate Counsel (ACTEC) and is listed in the Chambers High Net Worth guide, along with The Best Lawyers in America. Bobbi earned her law degree at Harvard Law School, where she graduated cum laude, and her undergraduate degree from the University of Pennsylvania, summa cum laude and Phi Beta Kappa.
Bobbi J. Bierhals
Kim Kamin is a Principal at Gresham Partners, LLC, an independent multi-family office that currentlyserves about 100 ultra-high net worth families nationally. At Gresham, Kim serves as Chief WealthStrategist, leading Gresham’s development and implementation of estate, wealth transfer, philanthropic,educational and fiduciary planning activities. Previously she was a partner in the Private Clients, Trustsand Estates Group at Schiff Hardin LLP where for many years her legal practice involved all aspects oftrust and estate planning, administration, and dispute resolution.
Kim is an adjunct professor at the Northwestern University Pritzker School of Law where she was awardedthe William M. Trumbull Lectureship. She is also on faculty for the Certified Private Wealth Advisor®(CPWA®) program through the University of Chicago Booth School of Business Executive Education.
Kim is on the Editorial Advisory Board of Trusts & Estates Magazine and has authored numerous pieceshttp://wealthmanagement.com/author/kim-kamin. She has published on a wide variety of topics and is alsoa frequent lecturer in a variety of venues across the country (such as the Family Office Exchange, ACTEC,Heckerling Institute on Estate Planning, ALI-CLE, Purposeful Planning Institute, Chicago Estate PlanningCouncil, Illinois Institute for Continuing Legal Education, Notre Dame Tax & Estate Planning Institute, andthe Tulane Tax Institute). She was co-executive editor and co-author for the past two editions of theLeimberg Library Tools & Techniques book, Estate Planning for Modern Families (3rd Edition 2019).
Kim is a Regent for the American College of Trust and Estate Counsel (ACTEC), where she has chaired the New Fellows Steering Committee, co-chaired the Legal Education Committee, and served as founding chair of the Wealth Strategist and Fiduciary Counsel Subcommittee. Kim is President of the Chicago Estate Planning Council. She also serves on the Leaders Council for the UHNW Institute.
Additionally, Kim serves on the Chicago Community Trust Professional Advisory Council, the Art Institute of Chicago Gift Planning Advisory Committee, the Northwestern Memorial Foundation Professional Council for Philanthropy, the Goodman Theatre Spotlight Advisory Council, the Chicago Foundation for Women Professional Advisory Council, and the Executive Committee for the Lurie Children’s Legacy Partners. She also serves on the Chicago Stanford Association’s Board of Leaders. She is a member of The Economic Club of Chicago, where she has served on several committees.
Kim received her B.A., with distinction and departmental honors, from Stanford University and her J.D.from the University of Chicago Law School. She is an AEP® and a 21/64 Certified Advisor.
Kim Kamin
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INTRODUCTION ANDDISCUSSION OVERVIEW
Introduction and Discussion Overview• Starting Point
• What do the clients want and need?
• Clients have different options as they think about their wealth management needs
• Definitions• These days the phrase "family office" is pervasive in financial institutions, law
firms, investment firms, and other companies working with high-net-worth clients.
• What is a family office?
• What is a private trust company?
• Family Office Types and Structures• What are the common types of family offices and the differences between their
structures?
• What services do family offices tend to provide?
• Private Trust Company Structures• The PTC could be housed in the same entity as the family office.
• The PTC could be a separate, complimentary entity to the family office.
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OVERVIEW OF THE FAMILY OFFICE
Administrative Services
Fiduciary Services
Investment Management Services
There is no “typical” family office. Each structure is unique and designed to meet the specific needs of the family it serves.
• Administrative: The most common functions are to centralize administrative,recordkeeping, and tax compliance services for family members, trusts, andentities.
• Investment Management: In addition to these services, many family officesoversee the management of family investments assets.
• Fiduciary: In some cases, the family office (acting as a private trust company)provides fiduciary services and acts as the trustee of family trusts.
What is a Family Office?
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Detailed Family Office ServicesServices are customized to address a wide spectrum of long-term financial needs.
Wealth Transfer Planning
• Develop objectives• Diagram current plan with assets
and amounts listed• Legal and tax strategies• Action plan to implement changes• Trust and estate administration
Liability Management
• Property & casualty insurance assessment
• Specialty lines of insurance• Cyber, property, and personal security• Collectibles inventory, appraisal &
storage
Family Philanthropy
• Multi-generational objectives• Personal giving programs• Private foundation management• Strategy analysis and implementation• Foundation/grant administration
Family Continuity/Education
• Family governance• Family education plan• Family counseling• Family meeting coordination• Coaching and mentoring• Coordination of outside advisors
Integrated Financial Services
• Balance sheet reporting• Cash flow planning• Retirement planning• Bank financing analysis & negotiation• Life insurance analysis
Tax Review & Compliance
• Review of individual & entity tax returns• Estimated tax payments• Year-end tax planning• Tax legislation updates• Tax compliance
Lifestyle Enhancements
• Personal bill paying• Domestic help and payroll• Property management• Concierge services• Private aviation and travel management• Healthcare advisory services
Client Information Mgmt
• Consolidated reporting• Quarterly performance reports• Online access to custom reports• Document management and retention• Record keeping for personal property• Cash flow forecasting
Investments
• Investment policy development• Portfolio construction• Manager selection• Comprehensive performance reporting
Services Provided by Family Offices
58%
39%
51%
64%
43%
30%
52%
47%
17%
22%
30%
52%
32%
18%
27%
31%
15%
10%
18%
7%
8%
6%
6%
8%
13%
21%
10%
8%
4%
1%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Family Office Management
Intergrated Planning
Accounting, Reporting & Compliance
Lifestyle Management
Trusteeship
Investment Planning/Ananlysis
Philanthropic Activities
Family Continuity & Client Education
Special Projects
Business Management
Internal
Both
External
Source: Family Office Exchange, LLC (2006)
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TYPES OF FAMILY OFFICES
Types of Family Offices
• Serves the needs of more than one family (so client families neednot be related by blood or law)
• Combines resources for efficiency
• Creates a single point of contact for planning and implementation
• Shares family office functions
• Generally either an RIA or trust company (or possibly law firm)
Multi-FamilyOffice
• Created, managed and owned by an individual family (i.e., bloodline)
• May be “investment only” or “concierge” services only
• May have minimal or extensive staff
• Qualifies for the SEC Family Office Exemption and does not need toregister as an RIA
Single FamilyOffice
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Multi-Family Office
Multi-Family Office
• Serves the needs of more thanone family to facilitate acommon interest in assetprotection, cost control, financialeducation, family philanthropyand a host of other needs
• Serves the needs of individualswho may not otherwise have theeconomy of scale or the familymember dedication to form andmanage a family office
Benefits of an MFO
• Combines resources forefficiency
• Creates a single point of contactfor planning and implementation
• Diversity of experience andquality of talent
• Checks and balances
• Better technology access
• Outsourcing personnelmanagement responsibilities
Establish�a�Single-Family�Office�(SFO)
Establish�a�NewMulti-Family�Office�(MFO)
Engage�an�Established�MFO
Engage�a�Bank�or�Broker�Dealer
Pros Flexibility in selecting investments, services and staff
Control of the design and delivery of services
Opportunity to employ family members who don’t otherwise work
Alignment of interests between the family, the SFOand its staff
Flexibility in selecting agreed upon investments, services and staff
Control of the design and delivery of services
Cost-sharing of overhead
Potential alignment of interests between each family, the MFO and its staff
Alignment of interests between each family, the MFO and its staff
Access to select investment managers
Personalized attention due to low advisor-to-client ratios
Continuity following the death or disability of a founder
Each family bears its own costs, which generally will be less than if establishing own SFO/MFO
May have more name recognition and resourcesthan an MFO
Banking and financing services can be attached to liquid accounts held at the institution
Each family bears its own costs, which generally will be less than if establishing own SFO/MFO
Cons Must fit within SEC’s “family office exception” to avoid RIA registration
Requires a significant commitment of capital, time and ongoing oversight
Involves all the risks that accompany operating a small, personal services business
Risk that survivors of the founder won’t have the requisite capital, time, interest or ability to keep the SFO operating effectively
Must be structured as an RIA or Public Trust Company to invest for more than one family
Requires the families to provide significant capital, time and ongoing oversight
Involves all the risks that accompany operating a small personal services business
Risk of conflict among owners, particularly following the death or disability of a founding owner
Less control of investment options, services, and staffing than with establishing own SFO/MFO
Risk if MFO is sold or brings in outside investors and new owners change investment options, services and staffing in ways that reduce alignment of interests
Compensation model typically involves selling products to clients
Total fees and expenses paidtypically difficult to determine
Investment manager accesstypically limited to firms managing large amounts in funds
Less personalized client service as client advisors will have more clients and be much more limited in tailoring services to individual families
Wealth Management Options
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Sample Onboarding Timeline
Investment
Strategy
Income Tax &Wealth
TransferPlanningStrategy
Engagement
& Education
Strategy
Lifestyle
Strategy
Strategy Meeting Deliverables or Action
› Investment PolicyMeeting
› Investment PlatformDiscussion
› Open custodial accounts
› Identify and determine transition plan for assets that will continue to be held
› Prepare and execute account openings and partnership subscription documents
› Investment Policy Statement
› Investment recommendations
› Investment plan implementation
› Cash Flow andPortfolio RebalancingDiscussion
› Cash flow and pro forma Forecast byEntity
› Investment Strategy Private AssetCommitments (2021/2022 Series)
› Goals and Objectives Meeting
› Income Tax Planning Meeting with TaxAdvisor
› Finalize gathering and formal review offamily estate plan documents.
› Gathering and review of recent income and gift tax returns.
› Wealth TransferPlanning Meeting
› Illustrations of existing estate plan
› Numerical illustration of estate
› Estate plan recommendations (continued from current discussions)
› Estate plan implementation (Re-titling ofassets, as needed)
› Execute FinancialAdvisory Agreement
› Advisor to receive electronic downloads or brokerage statements where custody is notbeing moved to custodial account
› Advisor to coordinate request of duplicate statements for private assets
› Reporting Structure& Design Meeting
› Customized balance sheet reports
› Customized performance reports
› Review LOC and margin lending options › Family OfficeServices (FOS)Requirements meeting (if desired)
› Customized FOS implementation plan (if desired) e.g., bill pay and expensemanagement
Months 3-6Months 1-2
Meeting Deliverables or Action
Sample Onboarding Timeline (cont.)
Investment
Strategy
Income Tax &Wealth
TransferPlanningStrategy
Engagement
& Education
Strategy
Lifestyle
Strategy
Strategy Meeting Deliverables or Action
›�Cash�Flow andPortfolio RebalancingDiscussions
›�QuarterlyPerformanceReviews
›�Quarterly�cash�flow�and pro forma�forecast�by entity
›�Quarterly�asset�and performancereport
›�Quarterly Cash�FlowFlowand PortfolioRebalancingDiscussions
›�QuarterlyPerformanceReviews
›�Investment platform�platform�and strategystrategy presentationspresentations
›�Quarterly�cash�flow�and pro�forma�forecast�by entity
›�Quarterly�asset�and�performancereport
›PhilanthropicStrategy Review
›�Charitable�strategy recommendations& implementation
›�Intra-family�loan monitoring
›�Year-end�income�taxplanningrecommendations
›�Creation�of�family�Wealth�Planning�Policy�Policy�Statement
›�Full�Review�of Estate�Estate�Plan (at least�least�every threeyears)
›�Administration�(if needed)
›�Income�taxplanningrecommendations
›�Estate�tax planningrecommendations
›�Family EducationProgramDiscussion
›�Family�education�program implementation,�if�any
›�Family Meetings(as desired)
›�Individual MeetingsMeetings with�G2(as desired)
›�Property& CasualtyReview
›�Property�& casualty recommendations
OngoingMonths 7-12
Meeting Deliverables or Action
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STRUCTURE OF THE SINGLE FAMILY OFFICE
Often “Born” in the Family’s Operating Company• Owned by founder or operating business
• Minimal employees
• Limited services
• Simplicity can come at a cost, especially in the operating business context
Confidentiality
Potential deemed dividend to family members
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Ownership of the Family Office
• Outright ownership provides simplicity
• Benefits of owning the family office in trust
Perpetual ownership
Can be structured to avoid future gift and estate taxes
Can be beneficially owned by the entire family
Often includes a governance structure to ensure all family lines arerepresented in decision-making
• Downsides of owning family office in trust
Difficult to move additional cash into trust to make additional capitalcontributions to fund family office cash needs
Ownership: Governance
• Who should control the family office?
Senior generation only?
Should all family lines be represented?
o If so, per capita or per stirpes voting? Age? Qualifications?
Outside directors? How are they chose?
Advisory committees—audit, investment, compensation, etc.
• No right answer; very family-specific
G1/G2 family has limited options, issues
G4/G5 family has many options and more complex issues
• Flexibility for the future is key
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Governance: Staffing the Family Office
• Who should run the family office?
• Family members or outside professionals
• Retention
• Promotion
• Compensation
Equity options
Identifying comparables
Governance: SEC Family Office Exemption
• Excludes a family office from the definition of “investment adviser” underRule 202
• Ownership limited to “family clients”
Includes broad definition of “family”, including step-children, formerspouses, most trusts and entities, and key employees
• Control limited to “family members”
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Governance: SEC Family Office Exemption
• Most common issues with qualification
Family control of board
Key employees who do not meet the experience or knowledgerequirement
Irrevocable trust that includes a current beneficiary who is not a familyclient (such as a trust for the housekeeper)
Family office serving as a general partner of entities with third-partyinvestors
Descendants of step-children
Private foundations that have received funds from non-family members
• Unclear whether the exception applies when the family office is a division ofthe operating business
• Private trust company may be an alternative
Fee Structures
Different family office services often lend themselves to different fee structures
• Fixed fee (tax preparation, cash flow management)
• Hourly (concierge services)
• Percentage of assets under management (investment management)
• Profits interest or carried interest(investment management)
• Combination of the above
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Fee Structure Option: Assets Under Management• Percentage fee paid to family office based on portfolio value
• Fee paid regardless of performance
• Fee allocated proportionately among all owners of investment partnership
Fee Structure Option: Profits Interest
• The family office conducts a trade or business
May be able to deduct “ordinary and necessary expenses” incurred in“carrying on any trade or business” under Code Section 162
Deductible “above the line” from gross income
“Trade or business” is not clearly defined
Generally, must be a regular and continuous activity with a profit motive
Entity tax classification
• Significant entrepreneurial risk is key
Proposed regulations under Code Section 707(a)(2)(A)
• Arm’s-length nature of relationship
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Fee Structure Option: Profits Interest
• Family office obligated to pay management costs regardless ofperformance; therefore, potential liquidity issues and need for fundingmechanism
• Degree of common ownership (“overlap”)
Higgins U.S. Supreme Court decision
• Ensuring Code Section 2701 does not apply to the structure
• Determining the appropriate profits interest
Relevant Case Law
• Higgins (1941) -- Must have an “active trade or business” case to deductexpenses.
• Lender (2017) – When facts and circumstances support that an active tradeor business is being conducted, expenses can be deducted using a profitsinterest structure.
• Hellman (2018) – When the entity managing the investments and the assetsbeing managed “overlap”, the facts and circumstances likely don’t support aclaim that an active trade or business is being conducted.
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Sample Family Office Structure with a Profits Interest
The Family Office
Ownership Trust
Cash EntityInvestment
Real Estate / PE Entity
Family Limited
Partnership
Family Private
Foundation Family Council
Family Assembly
Family Trusts
Individual Family
Members
Capital Interest Plus Share of Profits
Provision of Services
Provision of ServicesAggregate 99% Non-managing Interest,
Relative Ownership Varying by Entity
G1Cash Gift
Cash Contribution for 100% Ownership
Family Governance
Structure
ElectsBoard ofDirectors
Marketable Securities Entity
Alternatives Entity
DirectInvesting Entity
Various Side Pockets by Sector/Strategy
Vintage Accounts
Various Side Pockets by Investment Strategy Wholly-owned
Subs
Private Trust Company
OVERVIEW OF PRIVATE TRUST COMPANIES
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What is a Private Trust Company?
• An entity owned entirely by members of the same family that serves as atrustee of trusts for the benefit of that family.
• A private trust company is not necessarily a family office, but can include thefunctions of a family office or act as an affiliate of an existing family office.
• Family members may participate in the governance of a private trustcompany, subject to the terms of the trusts and certain limitations necessaryto avoid adverse income, estate, and gift tax consequences.
History of Private Trust Companies
• While private trust companies are not new, they have becoming increasinglycommon over the past decade, especially following IRS guidance issuedseveral years ago and the continuing development of favorable legislation.
• South Dakota was a pioneering jurisdiction that permitted private trustcompanies that were only lightly regulated (as opposed to public trustcompanies subject to standard bank regulations).
• Other states began passing statutes or regulations permitting light—or no—regulation for family-owned private trust companies.
• With many jurisdictional options and advisers having deep knowledge fromother families’ experiences, now is an excellent time to consider whether aprivate trust company makes sense for your family and business.
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Primary Motivations for Using a Private Trust Company• Avoid investment adviser registration
• Potential liability protection (although untested)
• Minimize federal and state income taxes
Additional Reasons for Forming a Private Trust Company• Long-term governance and succession plan (trustees and investment
management)
• Impose a common administrative and decision-making framework for alltrusts
• Permit the family to select the decision-makers
• Manage unique assets, operating businesses, and unusual investmentstrategies
• Significant family privacy compared to commercial service providers
• Focus on what is best for the beneficiaries
• Streamline administration
• Bifurcate decision-makers for different functions (e.g., investmentmanagement vs. distributions)
• Less likely to seek court approval or instructions in certain circumstances
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Choice of Jurisdiction
• Generally, private trust companies are created in jurisdictions that haveenacted specific enabling statutes that reduce formation and regulatoryburdens otherwise applicable to trust companies serving the public.
• Many jurisdictions allow for regulated/licensed private trust companies andunregulated/unlicensed private trust companies.
Regulated and unregulated private trust companies offer similaradvantages.
Nevada and Wyoming are among the more popular jurisdictions,although the following states also allow private trust companies: Florida,New Hampshire, Tennessee and Texas (along with a few less desirablejurisdictions)
Sample Organizational Structure
PRIVATE TRUST COMPANY
Board of Directors
Family Office
Management Services Agreement
Private Trust CompanyOwnership Trust
Capital contribution
100% ownership
Family members
DistributionCommittee
Private Business Committee(s)Investment
Committee(s)
Officers
Control Level
Appoint, remove, and replace members of the Board of Directors
Make any other shareholder decisions for the trust company
Administrative Level
Appoint, remove, and replace members of the Committees
Handle day-to-day business of the trust company
Decision-Making Level
FiduciaryCommittee
A single committee may act for all trusts or separate committees may be appointed for each trust. The number of committee members may vary. Committee members may be the same individuals as the Board of Directors and may include family members (subject to tax limitations).
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Disadvantages of a Private Trust Company
• Initial set-up costs
• Information requests through the formation and compliance processes couldresult in the disclosure of confidential information (although these requirementscan be minimized through the choice of jurisdiction and regulated status)
• Independent parties must be involved in certain decisions (although this samelimitation applies to individuals acting as trustees)
• In the case of mismanagement or other breach of fiduciary duty, family membersmay have little or no practical recourse against a family-owned trust company
• Intra-family privacy concerns could emerge as a result of family involvement inmanagement of the private trust company (either as directors or officers of theprivate trust company or through the administration of trusts for family members)
• Like any business, private trust companies require a plan for succession and thedevelopment of employee policies and procedures
Q&A
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These program materials are intended to provide the seminar participants with general guidance. The materials
do not constitute, and should not be treated as, legal or tax advice regarding the use of any particular estate
planning technique or the tax consequences associated with any such technique. Gresham Partners, LLC does
not provide legal or tax advice and does not assume responsibility for any individual's reliance on the written
information disseminated during the seminar. Each program participant should independently verify all
statements made in the materials before applying them to a particular fact situation, and should independently
determine both the tax and nontax consequences of using any particular estate planning technique before
recommending that technique to a client or implementing it on a client's or his or her own behalf. The author
welcomes your questions or comments about these seminar materials. In addition, kindly inform the author if
you become aware of any errors or omissions within these materials.
Gresham Partners is an independent investment and wealth management firm that serves its clients as a multi-
family office and an outsourced chief investment officer. Gresham has been serving select families, family
offices, foundations and endowments since the firm was established in 1997. Today, we manage or advise on
over $6 billion for about 105 families located nationally. We are committed to providing superior investment
performance by utilizing select, difficult-to-access managers that are located globally in a full range of asset
classes and are not affiliated with Gresham. We make these managers available to our clients in a flexible
format well suited to achieving a broad spectrum of investor goals. As a multi-family office, we integrate this
investment approach with comprehensive wealth planning and management services to address the full range
of each client’s financial needs, often avoiding the need for them to maintain a family office. Gresham is wholly
owned by its senior professionals, client fees are its sole source of compensation, it avoids conflicts of interest
that affect many other firms, and it serves its clients as a fiduciary, dedicated to serving their best interests.
DISCLAIMERS
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