Tax planning for high net worth households can feel like a seemingly endless shuffle of paper and meetings with accountants and tax experts. Others can hit the slopes or the beach knowing that their family office, with its breadth of competencies and holistic knowledge of the family’s finances, is being proactive all year round creating tax efficiencies and ensuring compliance.
If your financial and legal advisors are fragmented and not in constant communication with one another, you are missing opportunities to create tax advantages. Continually shifting rules on tax breaks, loopholes, and shelters add to the complexity. Placing your tax management in the coordinated hands of tax experts, accountants, investment managers, and lawyers in a competent family office streamlines and simplifies wealth management.
Having all financial advisors working together under one roof is also the best offense against tax errors and financial exploitation. The family office team is always watching out for your best interests.
The Complexities of Tax Season
As tax laws become ever more complex, the support of a qualified financial advisory team is indispensable in tax planning for high net worth households. But for many, eliminating tax headaches starts with basic housekeeping. Taxpayers need to have all their receipts and reports in order before the last day to file taxes, which is April 17th, 2019. (You have two extra days to file this year!) And if you run businesses, you need to ensure all your employees have their wage and earnings statements (1099s, W2s) completed.
You may also grapple with these common tax challenges:
- Maximizing charitable deductions: While charitable giving structures are ever-changing, they have valuable tax benefits built in. Ask your family office how tax-advantaged structures – such as the charitable remainder trust or charitable lead trust – can save you estate and gift taxes, while bequeathing lump sum or annuity payments to your favorite causes.
- Optimizing taxes for multiple businesses: Gone are the days when wealthy families focused their efforts on one business venture. Today, diversification of businesses, real estate, and other assets is a key risk-management strategy. Operating each entity as a limited liability company (LLC) protects each business from the losses and legal issues of the others. But it also creates more complex paperwork, more tax requirements to meet, and more potential loopholes to exploit. A family office team can help you take advantage of incentives under an LLC and lower your tax bracket.
- Managing offshore bank accounts and income: The Foreign Account Tax Compliance Act created a complicated paper trail for overseas assets and income. The tax man, meanwhile, is cracking down on offshore tax havens. Your family office will make sure that everything is in order, avoiding fines and complications down the road.
Year-round Attention From a Family Office
A highly effective family office team can take the stress out of tax season by paying constant attention to your account and being prepared well in advance. Many wealthy individuals send their tax and accounting team into a tailspin during tax season to get their tax house in order. Even with electronic record keeping and filing, many nights may be spent rolling up sleeves looking for tax optimization strategies to lower the tax bill. In the worst case scenario, your tax filing is suspicious and you’ll trigger an audit. And if the team of auditors shows up, many more late nights are assured.
Here are a few ways a family office can help you.
Looking at the Whole Financial Picture
A family office team makes tax planning for high net worth households part of the daily operations of running investments, businesses, and other facets of your personal and business financial life. With your tax burden in mind at all times, your family office team is constantly strategizing to optimize your financial structures so that tax advantages are built in from the bottom up.
Organized Receipts and Records
A family office provides record keeping and electronic storage of your expense receipts and other financial records. This makes it easy to file an accurate return using the e-file system and receive refunds by direct deposit. Eighty percent of taxpayers file electronically today, so why store your receipts in a shoe box? The Where’s My Refund tool enables you to track when your refunds, Earned Income Tax Credit, and the Additional Child Tax Credit will be in your account.
All financial receipts and data, and prior-year tax returns are stored for at least three years, as required by the IRS.
Coordinated Team of Experts
With a coordinated team all sitting down at the table together, bankers cannot sweet talk you into moving your assets into an offshore haven through their bank and then charge you high fees to manage the account. Your lawyer and international tax expert are overseeing every financial move being made on your behalf and will flag any suspicious tax maneuver.
Tax season is stressful enough. The planning and management of tax strategies should be handled by experts who have intimate knowledge of your family’s multifaceted personal and business finances. Each family member’s tax implications must be considered. Through a coordinated approach, business and asset cross-holdings can be optimized.
Only with this 360-degree view of your and your family’s wealth management needs can your tax strategy be fully optimized to realize maximum efficiencies. New tax efficient investment securities, for example, may be too high risk in an individual investment portfolio but could be included in a larger, more diversified family fund.
Why Use a Family Office for Wealth Management Instead of a Wealth Advisor?
There is safety in numbers. Several recent, high-profile stars like Nicholas Cage, Johnny Depp, and Cristiano Ronaldo were involved in financial disasters created by wayward managers who failed to do their job or lawyers who gave them bad advice. They let maverick advisors handle their financial affairs, and have lived to regret it. You want trustworthy, impartial people running your team who are always acting in your best interests.
In a family office structure, your team of tax professionals, estate planners, CPAs, lawyers, and investment advisors are all at the table together, and each advisor is accountable to your family and the rest of the team. The family office unit will ensure you receive impartial and valuable advice this tax season and all year-round. If banks try to sell you their proprietary products or real estate advisors divert your funds into their investment pools, your family office team will intervene on your behalf. The family office acts as a fiduciary and, as such, must always consider the best risk/return tradeoff for you and your family.
The wealth advisory model is all too often a creation of smoke and mirrors. From your first meeting, the wealth manager promotes their investment, banking, insurance, and real estate services as a one-stop shop for your financial needs. And like the manager to the stars, they alone control your portfolio to make decisions, and are free to place orders for products and services without cross-check.
A family office is a multi-disciplinary team consisting of experts across many fields, including:
- Legal
- Estate
- Investment
- Insurance
- Business
- Taxation
They are experts in their respective fields whose sole purpose is to save you money and grow your wealth so that current and future generations may prosper.
A Stress-free Tax Season Starts with Sound Planning
There are no mavericks on the successful wealth management team at FBO Services. FBO’s president and founder, Joe Roskos, developed his expertise as part of the earliest family office structures in U.S. history. The Pew Family Business Office became Joseph W. Roskos & Co., which was later sold to the Bryn Mawr Bank Corporation. Having spent decades assembling wealth management advisory teams in a family office environment, Joe formed FBO Services to provide a complete wealth management solution to high net worth families in the Greater Philadelphia Area.
Joe credits his stellar reputation in the wealth management world to his experience working as part of a multidisciplinary family office team. Our advisors hail from top investment banks, law firms, and accountant firms. We specialize in taxation, accounting, estate planning, business administration, personnel management, and other areas of wealth management.
Why spend another tax season with accountants trying to find last minute tax breaks when you can benefit from our tax optimization strategies all year? Your family has worked hard to develop and preserve your legacy. Do not let inefficient tax management cost you.
FBO Services’ multi-disciplinary approach to wealth management provides tailored solutions to preserving and growing your wealth. As your financial advocate, we are here to solve your problems and create sustainable wealth management strategies. So even if you do show up during tax season frazzled with your expense receipts in shoe boxes, you will leave part of a team that has put your family’s entire financial house in order.
FBO Services understands the needs of high net worth households like yours. After all, that’s why the company was founded. The right team of wealth management professionals can elevate your investment strategy to serve your family’s goals in more ways that you can imagine. Talk to FBO Services about how we can assist you in leveraging your wealth to achieve even more.