Gift early and often.

• Complete annual exclusion gifting early in the year
• Take advantage of increases in estate tax exemption each year
• Utilize lower gift taxes vs estate tax rates

Use compounding to your advantage. It’s the most powerful investment return.

• Use techniques that transfer assets to the lowest generation possible as soon as practical
• Pay attention to the sizing of the transfer

Be Ready When Life Happens.

• Be flexible in planning and trust design because nothing works as planned
• Consider the impact of divorce in all aspects of planning
• Create trusts that are flexible
• Set up advanced life directives for anyone over 21

Anticipate changes in tax rules.

• Take advantage of favorable rules as soon as practical
• Plan for IRS audit risks as well

All techniques have varying levels of risk components.

• Mortality – factor for GRAT
• Investment performance – factor for all freeze techniques
• Audit risks – clearly communicate which techniques are governed by IRC Statute

Guard against creditors and predators.

• Use trusts for asset protection
• Recommend prenuptials
• Select trustees and other management very carefully

Preserve Intent.

• Document intent
• Incorporate into legal documents to the extent possible, such as any charitable entity

Integrate Planning

• Don’t ignore cash flow impact
• Balance techniques to take advantage of low income tax rates

Carefully consider.

• Plan to keep future generations motivated
• Carefully consider use of trust to limit access to large amounts
• Thoughtfully decide the appropriate age at which the next generation should serve either as trustee or co trustee and ages of distribution

Be Mindful of Morals and Ethics.

• Have conversations about values that have guided the family
• Incorporate those values and beliefs into the integrated approach to wealth management and into charitable entities
• Share the plan with the entire family

Run the numbers.

• Document impact today, at death, and for surviving generation for each planning technique
• Do no harm, i.e., don’t benefit one generation at the high expense of another

Implement – The most important process of estate planning.

• Don’t do anything you don’t understand and read everything before you sign
• Inform the family
• Solicit input from other trusted advisors
• Understand that wealth transfer is a marathon, not a sprint
• Prioritize techniques in order of potential impact and risks

Use the best, forget the rest.

• Choose valuation, investment, legal and accounting professionals carefully
• Choose advisors that work well with peers
• Insist on understanding downside risks of each technique

Communicate.

• Ensure that advisors understand your objectives before they start
• Be comfortable asking questions – there is no such thing as a stupid question, but no questions can lead to poor design

Security is a hot topic in the family office world. Security can be thought of in terms of three broad areas:

• Personal Security
• Identity Security
• Data Security

Personal security, or physical security, refers to the prevention of crimes against family members. Some basic measures can go a long way to provide protection.

Some examples are:

• When traveling, do not post your plans or activity on social media.
• When traveling out of the country, research safe areas to stay and consider hiring a driver.
• If the family has minor children, consider the parents flying on separate flights
• At home, make sure alarms are activated and that home cameras are working correctly and adequately monitor the surrounding areas.
• Care should be taken when hiring new family household help.
• Make sure in case of emergency (ICE) information is carried by each family member. Since most cell phones are locked it is often hard for rescue workers to find contact information for family members.
• Use GSP on your cell phone so the location of family members could be tracked.
• Consider getting fingerprints for all family members in addition to dental records.
• Consider using a post office box instead of your home address. These are just a few preventative steps to take. You should consider consulting with a security advisor for a detailed security review.

Identity security relates to protecting items that would make it easier to be a victim of identity theft.

Protect yourself by limiting the amount of personal information you share on social media. Posting too much personally identifiable information can lead to Phishing scams, fake URLs that can trick you into entering your username and password on other sites, and a variety of other scams and hoaxes that can make your identity vulnerable.

Other common safeguards include:

• Ensure social security numbers and cards are stored in a secure location and never give out your social security number via email.
• Have credit card alerts set to monitor unusual activity. Common alerts are total amount of charges in one day, number of transactions within a day, or the current running balance exceeding a set limit.
• Store driver’s license in a secure place in your purse or wallet.
• Use a shredder at home to destroy sensitive documents that contain account numbers.
• Monitor credit scores for unusual changes.  Always destroy old or expired credit cards.
• Keep an eye on debit cards, savings, and checking accounts as well.  Work with the bank to set account alerts for unusual activity.

Data security is increasingly important with the use of mobile devices in all aspects of our lives. Data security is always relevant to electronic data, both professionally and personally, stored on computers, in the cloud, or on backup drives and discs.

Common sense should be applied here as well, including:

• Use a security code or passphrase on your cell phone, computer, and other devices.
• Use complex passwords for financial websites. Passwords should be at least 8 characters long, with a combination of letters, numbers, and special characters (symbols). Never use your date of birth, address, phone number, or other data that is easily known.
• Make sure passwords are not written down or stored in your contacts. Consider buying a password protector application to store all passwords securely, accessible via a single complex password.
• Review data backup procedures for laptops and other devices.
• Do not use public computers to input sensitive password information. Extra care and caution should be used when accessing public WiFi networks.
• Activate a computer firewall and ensure that anti-virus and anti-spyware software is up to date.

Consider cyber security insurance. Data is not covered by standard property insurance policies. A cyber policy can provide comprehensive coverage for data restoration and rectify issues in the event of a loss, no matter how it was caused, up to the full policy limits. In addition, it can provide comprehensive coverage for electronic crimes against you.

If you are a victim of identity theft, such as an IRS breach, an email breach, a lost or stolen credit card, or a breach at a retailer, take the following steps:

• Notify all three credit bureaus: Equifax, Experian, and TransUnion.
• Notify all banks and credit card companies.
• Enroll in a credit monitoring service, such as Lifelock, or monitor your credit and accounts on your own.
• Change all login usernames and passwords immediately. Make sure to use at least 8 characters with a combination of letters, numbers, and special characters.

Among the many duties of a Family Office is the oversight of household help for the families served. In general, there are three common risk management issues faced. These can be summarized as follows:

• Compliance
• Liability
• Security

Compliance refers to the process of ensuring that all workers are classified and reported correctly.

Care must be taken to ensure that all service providers are legally entitled to work in the United States. Obtaining documentation early in the interview process is crucial.

The next consideration is whether the person will be classified as an employee or independent contractor. The IRS has strict guidelines that must be followed in this area. Failure to correctly classify a service provider can subject the family to tax penalties.

The Fair Labor Standards Act requires employees receive one and one-half times the regular hourly rate for all hours over 40 worked in any one week.

If the workers are employees, accurate and timely tax withholding and reporting is required.

Liability refers to the management of risks associated with having employees perform duties in the residence or on family properties.

Effective hiring practices are the best way to ensure liability is mitigated. Best practices include not only checking references and performing criminal background checks, but a credit check as well. These should be updated on a periodic basis.

As a part of hiring any individual to work in the home, consider having new hires sign a confidentiality and nondisclosure agreement.

Be certain to maintain employment files, as in any other business. Emergency contact information should be recorded and updated, as needed, for all household service providers.

Adequate workers’ compensation insurance must be obtained to reduce the risk of work related claims. If workers provide services in multiple locations, ensure the insurance policy covers all locations. If residences are in multiple states, bundling a policy may be cost effective.

In addition, Family Offices should consider having employment practices liability insurance, EPLI. This covers the family against claims by workers that their legal rights as employees have been violated.

Automobile insurance should also be reviewed if workers have access to vehicles owned by the family. A valid driver’s license and proof of personal insurance should be obtained by the Family Office.

Security refers to personal and financial security.

Camera use is recommended to deter theft and monitor the interactions between workers and vulnerable household members such as children and the elderly.

An inventory of personal property, including photographs, should be taken and updated annually. This inventory should include all valuables, including art, jewelry, and other collectibles.

Blank checkbooks, credit cards, and cash should be monitored and stored in a home safe if possible. Credit card usage should be monitored closely. If workers must use the family credit card, obtain a card with a low maximum balance and let the workers know that the card activity will be monitored by the Family Office. Ensure all workers know the card is not for personal use.

The nanny is one of the most critical jobs in the household. Nannies should always be trained in CPR and first aid. Be sure to train them on preferred doctors, hospitals, and contact information in the event of an emergency.

The Family Office should use professional security advisors to assess current security measures. These may include, but are not limited to, monitored home security systems and GPS tracking via phone or other devices.

Cyber security is a hot topic in the industry. Care must be exercised to ensure that passwords to bank accounts and other investment accounts are sufficiently complex and not revealed or kept in view. Monitoring individual credit scores of the family can also be a security measure. There are many companies that now provide these services.

Many household workers stay with the family for a long time. The Family Office plays a vital role in ensuring that best practices are in place to support both the work and family.

1. Protect your family’s assets first.
2. Promote a culture to foster collaboration with family, investment, wealth planning and family office advice.
3. Prioritize wealth, to meet current and future liabilities and aspirations.
4. Perform to meet priorities above inflation, taxes and expenses.
5. Provide a distinctive low turnover model that creates lasting partnerships between family and advisors.