A family that will not simplify has to manage. A family that will not manage should simplify.

A family that will not simplify has to manage. A family that will not manage should simplify.

A family office is an investment and/or management company formed to manage a family's assets and to provide centralized services to a specific family.

For a family whose primary objective is to maximize profits, I believe that there is no better way to manage wealth across generations. A well-constructed family office takes on the administrative burden of owning assets. It supports compliance and operational needs for family members. It centralizes the paperwork and the vendors as much as possible.

A family office operating as a trade or business may also deduct its ordinary and necessary business expenses under §162. When the family office does not work - when the team is not competent - the opposite occurs. The office itself becomes a source of conflict.

Does the family want to continue holding these assets collectively after the death of the wealth creator? If the answer is no, forming a family office is probably the wrong solution. Hiring one probably does not solve the problem either.

For families that need to manage complex assets but are unwilling or unable to form a family office, what happens?

Sometimes the trustee becomes the de facto family office. If it is not the trustee, it is another professional drafted at the behest of an anxious family member - often an attorney or a CPA. The person acting as quarterback makes sure the various providers get hired and get paid. In reality, the family has informally ceded control to an ad hoc network of providers who are often making the actual decisions.

An entire industry of multi-family offices has emerged - typically registered investment advisors offering bookkeeping, tax, administrative support, or concierge services on top of traditional investment advisory. Sometimes they are accounting firms that handle administration for clients.

Beyond external support, families rely on their operating agreements and legal documents to govern decisions. But the reality is that without a central structure - without a central decision-making apparatus - the family ends up with ill-informed decisions, substantially more conflict, and much higher costs.

In many of these cases, the family did not avoid the family office. Instead they accidentally built a bad one, one invoice at a time.

I’ll be discussing these ideas at the upcoming Notre Dame Tax & Estate Planning Institute, October 28–30, 2026.

Register for the conference to attend my presentation and the other sessions.
https://lnkd.in/ehEjXur5