CREATE A FAMILY OFFICE FOR LEGAL & FINANCIAL AFFAIRS

What is a Family Office? How does it provide for the unique needs of high net-worth families? Who is part of a Family Office team? What is the Family Office Annual Summit? What is the Family Office annual cycle? We follow the Wilson family as they take advantage of a CunninghamLegal Family Office.

By James L. Cunningham, Jr., Esq.

Are you a high-net-worth family whose financial, tax, and estate-planning affairs aren’t fully coordinated? Do you have financial, accounting, and legal advisors who rarely communicate with one another? Do you want to investigate innovative methods for lowering your considerable tax bill? Are you interested in creating truly multi-generational wealth?

The CunninghamLegal Family Office Practice handles these and many other critical needs of high-net-worth families—generally those with assets in excess of $10 million. Think of our Family Office as a one-stop-shop solution to financial and legal issues you may not even know you have.

Lack of Coordination Among Advisors Endangers Wealth

To explain the work of our Family Office, let’s take a look at how we might help a hypothetical family such as the Wilsons.

Frank and Wendy Wilson are in their late forties and have three children, Lucy, 25; Hal, 16; and Tom, 14. Lucy is married and has just given birth to their first grandchild, Adam.

Frank and Wendy have worked hard, made wise investments mostly in real estate, and now have assets around $30 million. The couple works with multiple CPAs and financial advisors whom they hired gradually as their wealth grew. They also have a lawyer who they consult infrequently, generally on business matters. All these people do excellent work in their own separate spheres, but don’t speak to or coordinate with one another.

High net worth brings challenges as well as advantages. The Wilsons are worried that their current advisors aren’t covering all the bases—and rightfully so. Important opportunities are falling between the cracks simply because there are so many cracks to fall between. Frank and Wendy themselves don’t have the legal and financial expertise to do the work themselves—not to mention the time, as they don’t really want to spend all day poring over spreadsheets and reading tax advisories. There’s a lot of follow-through that simply isn’t getting done.

Recently, for example, the Wilsons missed the California Prop 19 deadline to transfer key properties to their children, simply because they hadn’t been advised of the importance of this political shift to their multi-generational strategy. They also missed an RMD on a large inherited IRA, with significant tax consequences. Then there’s the issue of their son-in-law who would like to enter the family business.

One of the best solutions to the Wilsons’ struggle to stay on top of their affairs might well be the creation of a “Family Office” at CunninghamLegal. A Family Office will provide the Wilsons with services customized to oversee and advance their financial, tax, estate, and legacy affairs with a white-glove service organized into a predictable yearly cycle.

What Precisely Does Our Family Office Do?

A Family Office at CunninghamLegal consists of a legal and tax-planning team, including a senior partner, an associate, a paralegal, and an administrative assistant—dedicated to supervising and organizing the Wilsons’ financial and legal interests, needs, and concerns. The team members employ a collaborative approach when working with the family’s other advisors. The team can be thought of as both an in-house counsel and coach.

The Wilsons’ Family Office covers Frank and Wendy’s affairs, as well as those of their minor children, Hal and Tom. Legacy planning continues to involve their adult daughter, Lucy, her husband Trevor, and grandson, Adam. As part of our large, established, and growing law firm, their CunninghamLegal Family Office will provide them with inter-generational continuity and consistency. Everyone is in it for the long haul, and the services provided will not be interrupted by retirements or similar events.

What Services Does Our Family Office Offer?

The Wilsons’ Family Office works for an annual flat fee determined in initial consultations. Under that fee CunninghamLegal offers them the following set of services:

• Tax Planning: A collaborative, integrated approach yields extensive tax savings that would have been unrealized otherwise. The Family Office also coordinates with the Wilsons’ CPA to make sure all taxes are timely and properly filed and tax planning options are explored. This is a focal area that often leads to considerable, immediate benefits. It would not be surprising if in their Family Office’s first year, people with assets like the Wilsons save half a million dollars in taxes or more, simply through proper, insightful, advance planning.
• Financial Planning: The team works directly with all financial and investment advisors to make sure the proverbial left hand knows what the right hand is doing; that they are synchronized rather than working at cross-purposes. While the Family Office does not direct investments, it can and will make recommendations based on changing tax and other regulations, as well as market fluctuations, to maximize overall wealth.
• Legacy Planning: For wills, trusts and other vehicles for generating and maintaining multi-generational wealth, the Family Office oversees and updates old plans, creates new ones, and administers them all on behalf of the Wilsons. Legacy planning also includes insurance planning, audits, and related services. Importantly, their Family Office will make sure that the Wilsons get the best deal possible on their estate tax liability. This may include, for example, making planned gifts during their lifetimes, converting IRAs to Roth IRAs, and creating out-of-state trusts.
• Business Planning: The Wilsons’ Family Office advises on corporate matters, such as business-succession planning and the creation and maintenance of advantageous LLCs, partnerships, and other corporate structures. As the Wilsons are in real estate, this might, for example, include long-range planning for 1031 exchanges to minimize taxes, as well as complex strategies to avoid reassessments when properties pass to the next generation in California.
• Charitable Planning Strategies: Advice on charitable planning strategies to take best advantage of tax laws is provided by the Family Office. A wide variety of options on charitable trusts, up to and including establishing a Family Foundation, will be considered and implemented as appropriate.
• Education and Financial Governance: In addition, the Family Office is committed to educating the Wilson children on financial and asset management and helping them develop a philanthropic, “giving back” attitude. This can involve creating a family governance structure and assisting in the creation of a family Mission or Purpose Statement expressing its mutually agreed-upon values and philosophy. Such exercises can be remarkably effective in helping families avoid conflict and factionalization, as well as perpetuating their value-based legacy. The Wilsons’ legacy involves much more than money, and CunninghamLegal will play a key role in protecting it
• Repository: The CunninghamLegal Family Office provides a centralized, secure digital repository for all pertinent documents, whether they’re financial, tax, or legal. All relevant parties are able to access this documentation on an as-needed basis, and the Office ensures they are up-to-date.

In short, the Family Office involves itself in many key aspects of the Wilsons’ financial and legal life, acting to stabilize and advance all of the family’s interests by comprehensively identifying and maximizing opportunities.

Annual Cycle Focused on Family Office Summit

We have found that a Family Office works best if it follows a predictable, annual cycle of review and action. Therefore, new Family Office clients must sign up no later than February 28 of the year they wish to begin the annual cycle—and for this white-glove service we accept only a limited number of new Family Office clients for each March 1 start date. Current Family Office clients can renew our services every year for the annual flat fee.

Let’s say that the Wilsons sign up in November of the year prior. Although we can provide significant services in advance, the formal annual cycle kicks off March 1. From March 1 to June 2, the Family Office team collects and organizes the Wilsons’ data and documentation from all of the family’s financial and other advisors. We get in touch with all relevant parties to understand what is happening.

In June, along with immediate and necessary actions, we begin to work toward an Annual Family Summit sometime in August, September, or October, depending on the Wilsons’ needs and schedule. The Summit can take place in either the family home or in our offices.

What Is the Family Office Annual Summit?

The Annual Summit is the focal point of the Family Office annual cycle, providing a retrospective analysis of the previous year and formulating a game plan for the coming year. A Summit date at mid-year is crucial. Why? When do basketball coaches find it most important to meet with their players? At half time, of course—so that planning can still occur before the end of the game, or in this case, the tax year.

The Annual Summit enables our team, the Wilsons, and their advisors to direct their full attention to a series of high-level action items meant to preserve and increase the family’s position during ever-changing times and circumstances. It’s a half-time huddle.  What has changed? What’s the current bottom line? What actions have to be taken before year-end to minimize taxes? What’s new or headed down the pike?

Let’s say the Wilsons want to hold the Annual Summit at their house, and the Family Office team travels there for that purpose.

Before the meeting, the team has proactively contacted all of the Wilsons’ financial and other advisors. It compiles summary reports and ensures that all relevant documents are placed in an accessible but secure online repository.

This includes:

• A high-level agenda.
• A booklet, usually running from thirty to forty pages, that expands upon the agenda, detailing all the entities, such as trusts, real estate and business holdings, and much more, in the family’s portfolio.
• A net-worth statement.
• An estate-plan diagram, including a family tree.

Attendees at the Annual Summit will include the principals, Frank and Wendy, and whichever of their children they deem appropriate. All members of the CunninghamLegal Family Office team will attend, as well as whatever other outside advisors are agreed upon.

About two weeks after the summit, an action plan or “Playbook” for the upcoming year is generated, distributed, and discussed. The Wilsons review these plans and, after consultation, ask their extended team, managed through the Family Office, to implement the decisions and actions.

Then it’s our job to follow up, with the full comprehension of the current needs and circumstances only a committed Family Office can bring to the game.

For example, the Wilsons have recently become grandparents for the first time. Their Family Office team, headed by a senior partner, may recommend that they establish a new tax advantaged Trust naming grandson Adam as Beneficiary—and that this should be done before the end of the year for tax purposes. Gifting plans within the calendar year to avoid expected estate taxes in the upcoming year may be implemented. Business agreements with son-in-law Trevor may be formulated for his entry into the family business.

Pro-Active Work Toward Long-Term Goals

Highly personalized assistance continues throughout the year—all formulated against the background of the Wilsons’ evolving long-term goals.

The truth is that without a Family Office, many deadlines can be missed and opportunities passed by—not to mention a lack of multi-generational planning to transfer and preserve the Wilsons’ hard-earned wealth.

Perhaps most importantly, without careful central planning on financial and legal issues, the Wilson family consensus and multi-generational harmony could be threatened.

A Family Office Provides Continuity Over the Years

We know that our hypothetical family, the Wilsons, will be delighted at their first-year results, in particular the tremendous tax savings they will realize through careful planning by our experts. We know that their Annual Summit will become the centerpiece of their fiscal year—year in and year out, over decades. Indeed, as team members cycle out due to retirement, new talent from CunninghamLegal will cycle in, and continuity will be assured.

Legacy planning will always get the same attention as tax and financial planning: through the Family Office, Wilsons’ financial and estate plans will be regularly modified to reflect major life events, such as the arrival of their first granddaughter and their elder son Hal’s marriage a few years later. The result? Family finances as well as financial values are passed on to all their children, who learn that coming from a privileged background entails care and responsibility. When Frank and Wendy pass, the Family Office will administer their Trust, and in the long run, the family’s cross-generational legacy will not only be preserved, but maximized.

This is the long-term vision of the CunninghamLegal Family Office: planning, stability, and opportunity.

About CunninghamLegal

CunninghamLegal is well known for our expert tax and estate work on behalf of California families, particularly those with substantial assets. Always our goal is to guide savvy, caring families in the protection and transfer of multi-generational wealth.

Our Family Office practice is guided by attorneys with deep experience in the field, supported by exceptional staff—with plans for continuity over generations. We have offices throughout California, and we offer in-person, phone, and Zoom appointments.

If you believe your family would qualify for a Family Office and benefit from our service, please call (866) 988-3956 or click here to request a consultation. We also invite you to join or replay our webinar on the Family Office concept.

Our whole team looks forward to meeting and working with you!

Best, Jim

James Cunningham Jr., Esq.
Founder and CEO, CunninghamLegal

We guide savvy, caring families in the protection and transfer of multi-generational wealth.