Family Office & Family Trust Advisory Services

You may be looking at the pros and cons of Family Offices or Family Trust Companies to better manage the increasingly complex needs of your family. We can help.

Family Office Advisory Services

Why set up a Family Office?

While a family office is not for everyone, it can be a comprehensive asset- and family-management tool for the right families. Wondering if a family office is right for your family? If you find yourself answering “yes” to a few of the following questions, it can’t hurt to get in touch with us for an exploratory conversation:

  • Are you wondering how to consolidate and control various family investment positions among various individuals, trusts and other entities?
  • Do you or your family often invest in “hard to share” assets such as direct investment, alternative investments, energy and real estate?
  • Are you concerned about how your family’s wealth will be responsibly passed down through multiple generations?
  • Have your various gifting and estate tax transfer techniques left you with a complex array of trusts and estate entities to manage?
  • Do you find yourself bogged down with family management issues such as travel, security, domestic help personnel and bill paying?
  • Does it sometimes seem your charitable giving program has become a full-time job?
  • Are you concerned about risk management across multiple properties, employees and investment exposures?
  • Would you like to explore new income tax avenues to avoid the IRS characterization of all of these expenses as “personal”?
  • Have you been thinking about the fiduciary duties that apply to your family’s trusts and trustees?

A family office can bring the peace of mind that comes with knowing the above concerns (and many others) have a dedicated solution. Yours should be designed to identify these and any other issues your family faces, and then provide comprehensive and concrete pathways for addressing them. Family governance, along with investment, tax, fiduciary and risk management, can all be addressed in a methodical manner to ensure you and your family are utilizing best practices and the most up-to-date thinking.

Think about it: you’re already dealing with all of the above questions on one level or another. You may even find yourself running from fire to fire, without enjoying the wealth you’ve created. While establishing a family office can be a bit of work initially, in the end it can provide the organization your family needs.

One more benefit: attracting talent and ideas. Your family office can be a magnet to attract the best and brightest individuals you need to advise you and to administer the various tools and entities in your life. (Case in point: would you rather be “Assistant to Mr. & Mrs. Jones,” or “CFO of Jones & Associates, LP”?) In addition, the family office universe is expanding domestically and abroad, and there are a number of organizations catering to family office networking and continuing education.

How should a Family Office be set up?

There is a saying among family office professionals: “If you’ve seen one family office, you’ve seen one family office.” Just as no two families are alike, family offices tend to be varied in structure and function. That being said, most address some or all of the concerns noted above. Therefore, there are certain common areas to address when establishing your family office:

  • Structure — While there are tax and property law considerations to choosing between partnership, corporation, LLC, etc., there also broader investment issues. Some examples:
    • Pooled investment company — a single entity, perhaps with a smaller management entity on top, that pools and manages all family investments:
    • “Silo” approach — multiple entities used to segregate various asset classes to allow family individuals and trusts a menu of managed investment options;
    • Portfolio-style, or “Sidepocket” approach — a single entity with different classes of equity, each allocated to a particular asset class.
  • Governance — Think of the family office as a business: it has shareholders (you, your family and its trusts), a board of directors (you and perhaps other policy makers), executive officers (your team), and implementing employees (in-house or outsourced). Establishing a family office (or getting one back on track) involves spending some time thinking about how to grow the business for the long term, ensuring continuing buy-in from your family shareholders for generations. This includes creating a family mission and some guidelines as to how to stay true to what made you successful in the first place.
  • Management — Your family office’s relationship to the individual and trust investors is usually as a contracted investment manager, meaning the family “hires” the family office to manage all of the concerns we’ve discussed. Addressing the management piece involves setting a lucid investment policy and examining income tax- and estate tax-efficient methods of compensating the family office (if at all).
  • Wealth Transfer — Your family office’s structure can go a long way towards reducing your family’s biggest potential liability – estate tax exposure. There are many ways to structure the entity to streamline your estate tax and gift tax minimization planning.
  • Fiduciary Roles — As you are probably aware, the dance between a trustee’s fiduciary responsibilities and investment management can be tough to keep up with. Your family office will of course be established with an eye towards best practices for trust management, keeping your family and outside trustees in the loop and well-informed.

How can Oakstone help?

Oakstone Law is well-versed in the dos and don’ts of family office structure and strategy. We can help you decide on a structure and set up procedures and policies to put your new family office (or existing family office) on the path to success. We can also introduce you to some wonderful professionals who can help set up or improve your family office’s administrative services, documentation, reporting and internal controls.

Oakstone works with family offices and excellent third-party family office advisors and support service providers. In fact, Oakstone Law’s founder Bob Kleinknecht has extensive experience with family offices, having worked for years inside a Forbes 400 family office with offices in Manhattan and Naples, Florida. Bob has worked with numerous other family office professionals throughout his career.

Family Trust Company Services

A family trust company (FTC) is a relatively new legal structure that can offer advantages in wealth management and estate planning for high net worth families. The FTC is like a mini financial institution that is permitted to serve as a fiduciary. It’s an entity — meaning a corporation or LLC, rather than a person. This entity is owned by a family, and it generally serves only that family. FTCs are prohibited from serving the general public.

FTCs offer a number of benefits to families looking for an alternative to the traditional individual (human) trustee or corporate trustee choices. If your family is struggling to identify potential trustees who are willing to serve and well-suited to your families’ needs, you may want to consider setting up an FTC. Some of the FTC’s benefits include:

  • providing for orderly succession of trustee services —  an FTC won’t become disabled or pass away like individual trustees;
  • accommodating a wider variety of investments — an FTC is not subject to restrictions on certain holdings or overweighted allocations like many traditional corporate trustees;
  • avoiding state income tax — when carefully planned and structured, an FTC may change whether certain trusts are subject to state income tax;
  • handling the family business — an FTC is well suited to families whose primary asset is a closely held business; and
  • avoiding onerous investment advisor regristrations — properly crafted FTCs will be exempt from the SEC registration requirements many family offices are facing.

Oakstone Law’s founder Bob Kleinknecht has been an integral part of building the Florida Family Trust Company legislation which became law in June, 2014. He is a key member of the Florida Bar ‘s Family Trust Company Subcommittee of the Estate and Trust Tax Planning Committee. Working on the Subcommittee with a number of other influential attorneys in the state of Florida, Bob has helped craft legislation that will give families the opportunity to create their own family trust company (FTC) right here in Florida.

Bob has also worked with FTC professionals in New Hampshire, Nevada and South Dakota, learning the ins and outs of the setup, structures and mechanics. Now that the FTC is finally coming to Florida, we expect a number of families will decide that Florida has more to offer than these other jurisdictions and move their existing FTC to Florida or create a new FTC in the state. We are ramping up to be ready for this exciting opportunity.

Click here to learn more about family trust companies, including a continuing education video Bob recorded to help teach other professionals about this exciting new opportunity.

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Oakstone Law
1415 Panther Lane, Suite 439
Naples, Florida 34109
Tel: 239.206.3454