Family Office 101: Estate Plans and the Law

Family Office 101: Estate Plans and the Law

What is a Family Office?

​Family offices are private firms which offer full-service investment management options, primarily to Ultra-High-Net-Worth Individuals (UHNWIs). Family offices vary from some other financial planning and investment management firms in that they typically offer extra financial services that an Ultra-High-Net-Worth family may need, including budgeting, charitable giving, and estate planning. Family offices can either serve a single family, called a Single Family Office, or serve multiple wealthy families at once, called a Multifamily Office. Ultimately, family offices are more comprehensive in the financial services that they have available to offer UHNWIs and their families.

The Problem with Estate Plans

​An important part of the financial planning process for UHNWIs and their families, and one likely to be handled through a family office, is the coordination and implementation of a last will and testament. Although the transfer of an individual’s assets to their intended loved ones and charitable causes is one of the most essential functions of an estate plan, it is one that is not frequently given enough attention. Often, certain groups of an individual’s assets will pass directly to their beneficiaries regardless of the intentions stated in the will. This is particularly common regarding real estate and financial accounts, where legal proceedings can often cloud the intentions of the recently passed individual.

One of the most frequently occurring problems with these estate plans is that the lawyers involved draft complex documents with advanced legal jargon, making the details of the plan virtually incomprehensible to a person without an advanced legal or finance degree. This miscommunication can lead to discrepancies between the client’s view of their financial plan and the actual implementation of the investment management based upon the legal documents. For example, when purchasing life insurance or choosing a retirement account, clients are often asked to choose a beneficiary. On accounts where there is a named beneficiary, an individual’s assets will be distributed to the beneficiary, regardless of what intentions may have been stated in the individual’s last will and testament.

Estate Planning Audits

​A harsh reality of estate planning is that many families aren’t aware of the details of their loved ones’ estate plans until after they’ve passed away. At this point, there is not much that can be done to help the family to rectify any errors or miscommunications. For this reason, it can often be helpful to perform an estate audit, or a meeting with clients to illustrate how their current documents would distribute assets if a member of the family should pass. At M3 Wealth Advisors, estate planning audits are performed in 7 steps:

1. Record all assets and confirm ownership, individual, joint, or trust or other entity.

2. Review all estate documents, wills, revocable trusts, irrevocable trusts, and beneficiary provisions, then provide a summary of how assets flow to and through those documents.

3. Match assets to entities, and provide a current and future value of each entity.

4. Find out if a current trust does not meet your wishes, what power or control you have to make changes, and whether or not the trust can be decanted.

5. Confirm all life insurance policies, death benefit, and duration.

6. Review charitable goals and how current planning supports these goals or what changes can be made.

7. Discussion of your goals and concerns and a strategic review of current arrangements and potential changes that match your priorities. Explore if there is an ability to build in flexibility to make changes in the future, and confirm what is set and can’t change.

A simple way to get ahead of your own estate plan audit by organizing and recording your assets is through M3’s Command Center. Check it out here: