Structuring the Family Office in Today’s Climate

By Bo Kearney

At the recent 2019 Private Wealth & Family Office Summit, EisnerAmper partner Stephanie Hines moderated a session on structuring family offices in our post-tax-reform environment. Panelists were Steven Huttler, Partner at Sadis & Goldberg LLP; Simcha David, tax partner at EisnerAmper; Richard Dauman, Senior Tax manager at Ingleside Investors; and Steve Palomino, a senior manager at EisnerAmper. Mr. Palomino is a member of the Process, Risk & Technology Solutions practice at the firm and has expertise in organizational development and innovation management for middle-market businesses as well as large and multinational organizations.

“Nothing is Irrelevant” when considering how to structure a family office. What a family needs and wants dictates what types of services are necessary to fulfill the family’s goals. Panelists mentioned that the ever-changing socio-economic environment within and outside of the family requires flexibility of the family office structure and adaptability to new demands.

Some of the challenges faced by family offices are achieving tax efficiency, even in light of increased tax complexity.  Mr. David mentioned the Lenders Case, which had a taxpayer-favorable outcome, and gives a recipe of how to structure the family office so that office expenses can be treated as a “trade or business” instead of investment, and non-deductible expenses. Unfortunately, mimicking facts and circumstances of the Lenders case may be difficult for some family offices. Alternative structures were discussed that need to be tailored to the specific circumstances of the family office.

Technology was another topic that is very important for family offices. Technology increases cost efficiency and will impact headcount. Mr. Dauman stressed that the process of choosing a new technology requires evaluating outside available technologies, internal evaluation of what the family office needs and, finally, customization. Training, implementation and monitoring are the key to a successful technology upgrade.

At the end of the discussion panelists stressed that the environment for family offices is increasingly challenging, especially due to complexities in finance and tax areas.