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Putting the Family in Family Office
By Deborah Lust Zaluda, JD
Family wealth – whether accumulated over many years or the rapid result of a liquidity event – is the center of the family office. But often the families themselves find that focus too narrow. They are concerned about more than preserving their wealth and passing it on to future generations; they want their financial planning to reflect their values.
At The Bensman Group, we believe the ultimate goal of the family office is to develop a comprehensive understanding of the family’s financial picture, and in so doing, have the ability to address the non-financial goals of the family, such as philanthropy or alignment of family wealth and family values.
For example, we might ask:
Understanding these values and goals makes it easier to help families plan. Traditional wealth and estate planning can take care of most financial concerns. But passing on values might require other tools, such as ethical wills and letters of wishes. Those values also should be a part of choosing a fiduciary and structuring trusts.
- What are the most impactful memories of your life growing up?
- Who are the family members who most influenced you?
- What life experiences – familial or historical – most influenced who you are today?
- What core values motivate you personally, professionally, philanthropically?
- What are you most passionate about, and have you thought about how you express that passion?
- What are your most valuable assets? Relationships? Hard assets? Financial assets? Personal or professional reputation? Family? A combination of these things?
- What core wisdom do you want your children and grandchildren to remember, and how do you share this wisdom?
- How would you like to be remembered?
- Would you like to make an impact on society? How? And are you working toward this now?
A family office should also address property and casualty insurance for both hard assets -- such as homes, jewelry and fine art – and liabilities. For example:
Life insurance is another tool that the family office can use to meet the needs of ultra-wealthy families. A life insurance death benefit may be viewed as a “non-correlated” asset class that can be used in an estate planning context to provide flexibility and immediate liquidity for surviving family members.
- The insuring of specialty assets such as custom homes, irreplaceable art collections, custom jewelry and other unique assets is complex and requires specialty insurers and advisers.
- Wealthy individuals also may be a target for lawsuits, and liability limits should address not only potential losses, but also the cost of defense.
- Household employees can file lawsuits for many things, so consider background checks on potential employees to see if they have filed such suits against former employers. Also consider whether you need worker’s compensation insurance.
- Liability related to home-based businesses might not be covered by personal homeowners and umbrella policies.
- People who serve on boards might need directors and officers insurance.
- Flood insurance limits – for both primary and vacation homes – might not be sufficient to cover potential losses.
These are only a few of the issues that can arise in the family office space. By limiting focus to the financial issues, the family values and asset protection issues may go unaddressed. We believe that by working with a fully integrated, experienced and knowledgeable team of advisers and utilizing products and carriers that specialize in the ultra-high net worth client, the capabilities of the family office can be limitless and can allow the “family” rather than the “financial” to be the focus.
For more information on planning strategies and team building for ultra-high net worth families, contact firstname.lastname@example.org; 847-572-0838.