We invite family office management personnel and advisors that work within the family office to explore best practices in corporate governance and financial management, evaluation skills necessary to oversee and manage the financial and budgetary aspects of their organization, and the tools necessary to make informed and suitable investment decisions. Network with industry experts and peers in an intimate venue cultivating one-on-one interations discussing issues facing family offices. The program, in partnership with Lido Consulting, is taught by leading Pepperdine Graziadio academics and top industry professionals who will share various opportunities, discuss current issues and review best practices.
Bittersweet because while we achieved a doubling of the lifetime tax exemption, from $5.6M to $10.2M per person, but we did not succeed in repealing, or lowering, the rate of tax. Both politics and optics played big roles in the final vote with Senate Republicans sound-biting it all with: “We have taken care of all but 1300 families in America.”
Representative Kevin Brady (R-Texas) Chair of the House Ways & Means Committee, held out for repeal, but the Senate provision ultimately prevailed. Senator John Thune (R-SD), 3rd highest ranking Senator, who we thought was our champion in the Senate, would not consider a rate reduction, even though the revenue impact was not significant. He felt that doubling the exemption took care of his constituents and most of the farmers, and that was good enough.
Doubling the exemption will be good for many families, and I do celebrate that, but it is still a band aid for many families, their employees, and their businesses. But it is not over; we have been told by members of Congress that it is not done; “the tax needs to go away and permanently”. So, while it is unlikely that it will happen in 2018, or that another tax bill will happen soon, death tax repeal can be tied to other legislation, and now repealing it once and for all will cost less in loss tax revenue, which will still be an issue. So, our plan at Policy and Taxation Group is to continue the fight, to keep what we have achieved, and keep trying to ultimately repeal the death tax once and for all. We hope you will support our work; we need you more than ever.
I will continue to develop our strategy, alongside the PATG Board, meet with politicians on the Hill, make presentations to groups and at family meetings when asked, and meet with our Supporters. The fight is not over, and we need our Supporters to stand strong with us.
If you would like to hear more about the 2017 Tax Bill, and how politics played in the final outcome of the bill, I will be presenting at Institute for Private Investors Winter Forum, on February 13 in San Francisco. I will also be facilitating a discussion on various family office topics with others, in the closed-door family office session at Lido Consulting’s 13th Annual Family Office Investment Symposium on February 26 in Santa Monica.
On the personal front, I have formally retired from consulting for GenSpring. It’s been a great eight years working with talented colleagues and clients, whom I know are well served by them. I am continuing to consult independently with families and family businesses, and if I might be permitted a “personal pitch”, I would be most interested in serving on a company, or family-owned business board — having sat in such board room meetings for so many years!
I am also working with Cal State Fullerton’s Center for Family Business and facilitating its monthly Women in Leadership Affinity Group which is comprised of successful women business owners, running their family businesses. I have also started working with Dean Jenny Darroch at Claremont Graduate School, helping to build a Global Family Business Institute. It’s exciting stuff.
And for some bedtime reading. . . enclosed is an article from Trust & Estates magazine which I co-authored with Kathryn McCarthy, also an advisor to families and family offices: “SFO’s Evolve as the Landscape Changes.” The last time Kathryn and I wrote on this topic was twelve years ago, so an update seemed timely!
Please note my new e-mail address is email@example.com. My Policy and Taxation email address continues to be firstname.lastname@example.org. and my cell phone remains the same. (But please delete my “old” Genspring e-mail address!)
Thank you again for your interest and support and all my very best for 2018.
The SFO faces a transformational time as it tries to continue to have the scale to provide additional and more sophisticated services amid a sea of compliance requirements and the rising cost of attracting and maintaining talent. Add to that the age of the SFO executive, who’s nearing retirement, and the question of succession arises.
A dozen years ago, the landscape in which the SFO worked looked less complicated. The top-of-mind concern centered on defraying costs of the growing needs of the multi-generational family office run by an executive in his prime. SFOs dealt with this concern in a few ways. Taking on non-family clients. Many assumed the logical way to address these concerns around cost was to take on outside clients.
These challenges, and the change they demand, make it more crucial than ever that the family office and wealth management industry remain flexible, adaptable, and able to retain talent, so it can achieve the scale necessary to provide sophisticated solutions to increasingly complex issues. This article summarizes the key issues that are demanding industry transformation.
After delays and scrutiny, the Department of Labor (DOL) Fiduciary Rule went into partial effect June 9. Full implementation of this landmark Obama-era investor protection rule is set for January 1, 2018. This sweeping proposed DOL rule elevates all financial professionals who work with retirement plans or provide retirement planning advice to the level of fiduciary to assure that advisors put client interests first.
With the significant changes in Washington DC since my last letter in October 2016, I’d like to dive straight in with an Estate Tax update.
HR 631 – The Death Tax Repeal Act of 2017 was introduced in the House on January 24th by Rep. Kristi Noem (R- S. Dakota) and co-sponsored by Rep. Sanford Bishop (D-Georgia). Sen. John Thune (R-South Dakota) introduced companion bill, S205, in the Senate.
Both bills include repeal of the estate and generation skipping tax, but not the gift tax. This remains a struggle. I have spent considerable time these past weeks meeting with legislators and elected representatives from both sides of the aisle to explain why gift tax must be included in legislation. While it remains important to forge co-sponsors for these bills, our legislation will more likely be included in a larger tax reform bill. This is good news since repeal, or reform of some estate tax aspects, are more likely to be passed as part of a larger tax “package” than as a “stand alone” bill. Pay close attention, tax reform is likely to happen in the Spring!
Earlier this year, Family Enterprise USA, whose mission is to promote the interests of family businesses in the US, and on whose Board I serve, retained the services of respected pollster, Frank Luntz, to conduct a survey of one thousand US voters (GOPs, Dems, Independents) on their attitudes toward tax reform, including gift, estate, and generation skipping taxes. The findings were fascinating, illuminating and encouraging. To synthesize the data:
Here are some other key survey findings:
I am excited to be getting the word out about these survey results. Here is a list of where I will be speaking. If you have, or know of a group that would be interested, please let me know.
You might also be interested to know that GenSpring, in collaboration with Marty Secada, Founder of ivyFON, is hosting two Family Office Workshops: April 4th in Los Angeles and May 9th in Orange County. In Los Angeles, the speaker will be Pat Soldano and in Orange County, Ernie Dawal, GenSpring’s Chief Investment Officer. If you would like more information, please email Marty at email@example.com, or check out ivyFON’s web site www.ivyFON.com.
Finally, enclosed is an article from Trust and Estates Magazine, co-authored with Chris Walters, Managing Director, GenSpring Western Region. “Snapping to Attention” discusses trends in the family office and wealth management business. I hope you find it of interest.
As always, thank you for taking the time to read this letter and I look forward to keeping you apprised of all that is going on in the Estate Tax discussion.
Patricia M. Soldano
Permit me to start this quarterly letter with an important update:
In my last letter I said that the IRS had yet to issue its new proposed regulations for Section 2704 of the tax code concerning valuation discounts for family related entities.
On August 2, the IRS issued their much anticipated proposal. Essentially it calls to limit the use of discounts, when valuing interests in family entities for estate, gift and generation-skipping transfer tax purposes.
If this legislation passes, it will restrict the use of “lack of control” and “lack of marketability” when valuing family business interests, thereby increasing the valuation for estate, gift and generation-skipping transfer tax purposes of any family business interests transferred, or owned at death. While this rule only affects business assets passed on from one family member to another, (it does not affect business assets passed on to non-related parties) the gift and estate tax on affected family businesses could rocket by 30-40%. This as a direct attack on family businesses and partnerships.
We are now in a 90-day opinion period until November 2, 2016. On December 1st the Treasury will hold a public hearing. I will be flying to Washington DC to attend the hearing, along with families who have agreed to address the Treasury during the public comment period.
If you would like to add your voice to the issue, or better still, join us in DC, please go to the Treasury website (below*) to register your comment or sign up to attend.
Proposed Regulations could become permanent 30 days after the hearing. This is a complex issue and I would urge you to contact your estate attorney in regard to your particular situation.
On to less contentious topics! As you likely know, millennials now outnumber baby boomers. They are making their presence felt everywhere, including in the family office and wealth management industry. I’m intrigued by the different way they see the world and recently co-authored an article published in Trusts and Estate Magazine with Lauren Benanti, Director of Family Education for GenSpring – and herself a millennial! Enclosed is a copy of “Millennials and the Family Office” which I hope you might find of interest.
I will also be talking on these millennial-influenced and other trends at several venues over the next few weeks: IvyFON in San Francisco on 11/10, and in Los Angeles on 12/8. I am also presenting on a panel discussing, “Changing Demographic Trends; Hang on Millennials”, on November 4th in Newport Beach at the annual UC/Irvine, Center for Investment and Wealth Management Retreat. For those of you in the Boston area, on Nov. 17th, I will be presenting on post-election “Estate Tax and Politics” at Family Firm Institute at an evening event.
My GenSpring colleagues are also busy presenting in the coming weeks – and again just let us know if you would like to attend any of these events:
For a complete list of events in which GenSpring will be participating please visit our web site at www.genspring.com.
By the time of my next letter we will know who will be our next President. Nevertheless, many of the issues attached to our clients and to our own family office business remain unpredictable. I will continue to keep you informed as best I can — and, as always, I enjoy receiving your comments and questions.
With early good wishes for the start of the Holiday Season.
Patricia M. Soldano