Monthly Archives: September 2016

Is there a Foundation in your Future?


September 26, 2016

Two news stories this week might prompt a review of your estate plan.  The first relates to the announcement by Democratic presidential candidate Hillary Clinton of her proposed tax plan, which clearly showed how her administration intends to raise revenue.  Under the Clinton Plan, the low hanging tax fruit is the wealth that families have saved over their lives.  Instead of increasing taxes on income, Clinton’s proposal involves a massive change in the estate tax, often referred to as the “Death Tax”.

Under current regulations, a husband and wife generally have a combined estate tax allowance of $10.9 million, with any estate valued above this figure being taxed at 40% upon their death.  The Clinton plan would reduce the combined allowance from $10.9 million to $7.0 million.  In addition, the tax rate would rise to at least 45%, and, depending on the size of the estate, could go as high as 65%!

The proposed 65% estate tax rate would be the highest since 1981.  Many political news sources identified this issue as one where the two candidates differ the most.  A common complaint among my clients, both Democrat and Republican, is that it is unfair to penalize a prudent family at the time of death.  Many people with substantial assets own businesses, farm land, timber land and other illiquid assets.  If the Clinton tax proposal becomes reality, I expect that estate planning lawyers and advisors will see a massive spike in business as families reevaluate their situations.

The second story was highlighted by an interesting full page ad taken out in the Wall Street Journal on Thursday.  The Smithsonian Institute used the ad to promote its latest addition in Washington, the National Museum of African American History.  The new museum has been chronicled in many media sources, and is a testament to the history of the African American experience in the US.

The ad was a thank you note to the large number of substantial contributors that helped cover some of the expense of building the museum.  In what is typical of these types of announcements, the donors were segmented by the size of their contribution.  The level of generosity of wealthy individuals, families, and corporations was clear to see.  I always wonder about these types of ads.  Are they meant to acknowledge those that gave, or to raise questions about the names that are not on the list?

What was obvious from the list was the large number of family foundations that contributed to the new museum.  If Hillary Clinton’s Death Tax proposal gets enacted, I suspect more and more families will start to consider establishing their own family foundations rather than have their hard earned assets taken by the IRS.

Carl Gambrell


The Picture Seldom Tells the Whole Story


September 19, 2016

Everything appears idyllic. An affluent mother and father look in good health and are ready to enjoy their well-planned retirement. They have three children, all of whom are successful in their fields of work. There are grandchildren in the family photo at the beach; a photo which captures happiness, prosperity, and accomplishment. So what is wrong with the picture? Nothing at all, except that such an “ideal” family is rare.

As a family office, our core mission is to be advisors to our clients and their families. Most people assume that advising is all about money. It is true that all of our clients look to us for advice and counsel on their investment portfolios. But often, and with increasing frequency, a major share of the time we spend with our clients is on matters other than their investments. Addressing family issues is typically not about making money. In fact resolving problems might be expensive.

Family dynamics can sometimes be hard to observe, for people both inside and outside the family. But nobody involved should look away. Difficult problems, from communication to education to generational transfers, have to be addressed and resolved. Each family functions in its own special way, but many face a situation where someone wants to go left when everyone else is moving right.

A wise client once said to me that money makes life easier, but it does not solve problems. That statement has stuck with me as I have seen wealthy families face problems that are difficult to fix or untangle. For example, many well intended matriarchs and patriarchs of families bequeath their families legal documents in the form of trusts or complex ownership structures. But time is a wicked partner to a neglected plan. Nobody has the crystal ball needed to see how a carefully crafted plan, which makes sense today, will work in ten, twenty or even fifty years time. Families evolve,  and their needs can change dramatically and in unexpected ways.

The less tangible part of what we do as a family office is help clients improve the financial well-being of their families. This part of our practice is not about managing money, nor is it limited to financial planning. It sometimes feels like acting as a consultant to the family “c-suite”. If truth be told, this is the most difficult, and rewarding, part of what we do.

We all know family dynamics can be fascinating and frustrating, not least when brothers and sisters in their fifties still hold opinions of their siblings based on something that happened when they were ten years old. A broker, or an online trading firm, cannot help solve these problems but this area is a core component of expertise within our firm. If, at some point in time, you face a major family problem please remember that your family is one of your most important assets, the management of which deserves the same expertise as your money.

Carl Gambrell