Financial Planning

Governance

Advisory

Setting up a Family Office

Why it makes sense

After identifying the three main types of family office and their potential services, a family can start to think about why setting up a family office could be the right decision.

The Impact of Juridiction

Asking the right questions about location

In the end, the most crucial aspect in choosing a family office location may not only be the legal and tax environment, but also the jurisdictions (based on the migration of family members). Finding the location that is most suitable will depend on a thorough analysis of needs and scope.

The legal set-up

It is vital to understand how the jurisdiction can shape the business environment. Internationally active families may need to consider not only the country in which the office will be based, but also the exact location. This is because in certain countries, such as the US and Switzerland, the tax, legal, and judicial structures vary greatly by state (or canton).

As a starting point, it is helpful to establish if the family office will:

• Own the family wealth

• Administer the family wealth by acting on behalf of family members, or

• Only advise family members on their joint investments and possibly other areas

Depending on the framework provided by the jurisdiction, other aspects should be considered to optimize the individual situation within the given legal, tax, and regulatory framework.

Changing global tax laws are already a concern, according to a survey of family offices: 29% of family officers cite them as a key challenge in the coming year.

Structure

The structure refers to the kind of entity that will house the family office and ownership, both in the present and in future generations (assuming the office intends to support more than the first generation). If the family office is linked to a family business, clarity will be needed to determine if it will support the business, which may allow for the deduction of certain expenses against business income.

As different structures are subject to different tax and regulations, it is essential for the family to understand the potential consequences of this decision. In light of the more global orientation of families and investments today, the chosen location and structure need to be flexible yet also maintain the benefits of a traditional, centralized family office.

• It is helpful for the family to gather the following information:

• Location of each family member and presence in multiple jurisdictions

• Future migration and travel plans

• Location of substantial family wealth

• Future investment plans and goals in other jurisdictions

• Locations where family members are subject to various taxes

Criteria

Based on the diverse global interests of the family, the next step would be to investigate and weigh the particular benefits and drawbacks of various structures and jurisdictions. While the analysis will be unique for each family, the following items should be reviewed in each potential jurisdiction:

• Legal structures available

• Tax implications of structure

• Ease of hiring and retaining employees

• Cost of operation versus value received

• Ability to invest and manage the assets of a

• global family

• Risks, reputation, and volatility in light of economic and political climates

• Regulatory and informational filing requirements

• Immigration/visa requirements for family members

• Ability to efficiently coordinate with advisors in other jurisdictions

• Quality of communication and relationships with tax and regulatory authorities

• Streamlined exchange of information

• Flexibility to restructure in the future, including migration

• Opportunities for succession