A “family office” is an organization that very wealthy people and families set up to manage their personal finances and affairs. This includes not just investment management but tax planning, bill paying, estate planning, and even things like arranging for travel and personal errands. One of earliest family offices was set up by the duPont family, but much of the newer wealth, such as the Gates fortune, is also handled by a family office.
In a recent discussion among people involved in family offices we obtained some interesting insights into what the very rich are thinking and doing.
- Lots and lots of very productive people have started to internationalize. That means they have a passport from one country, a residence in a second country, bank accounts in a third country and investments in a fourth country.
- With taxes going up, buying more tax exempt municipal bonds
- We are seeing an increasing number of clients implementing gifts, trusts, and various other planned transactions to take advantage of the 2012 tax rates and regimes. With expiring provisions related to income and capital gains taxes, gift and estate taxes, and the generation skipping transfer tax, many consider these last 52 days to be an historic opportunity.
- Selling mega-mansions and closely held businesses this year.
- “Zero” Cash Flow Commercial Real Estate
- Money will move from the US to more tax friendly nations.
- Moving to Canada, Switzerland, South America or Central America.
Keep in mind that, unlike the middle class, ultra-high-net-worth people are not tied to their jobs, their homes or even to any specific country. If you are worth $100 million, $500 million or several billion dollars you can live anywhere you wish, anywhere in the world. At that level of wealth, money is an accounting issue rather than a lifestyle issue. It’s simply a way of keeping score. The options open to them are virtually endless. In the past the wealthy in other countries often moved to places where taxes were lower. Today we are seeing that becoming the case with America’s wealthy.