Welcome to the Forum

Glen Johnson, Peter Moustakerski - FOX

• Who is in the room – 45% new FOX members; 69% Family office executives
• Continued Disruptive Forces – Transitions, Talent, Technology
  • New T – Time – More issues around time crunch with workload and employee shortages
• Evolution of Family Wealth and The Family Office – What are your clients concerned about?
  • Succession Planning
  • Tax Law Changes
  • Family Learning
  • Cybersecurity
• Evolution of Family Wealth and the Family Office – 1980’s – 2000s and Beyond
  • Wealth 1.0 - Rational transactional advice, Preserve and grow the wealth, Multi-gen wealth view Family Office
  • Family Office 1.0 - Recruit FO talent and best-in-class advisors, Peer-based benchmarks and best practices, Focus on tax, investments and reporting
  • Wealth 2.0 - Holistic financial and wealth planning, Focus on “shirtsleeves-to-shirtsleeves,” Enter family dynamics & the “rising gen”
  • Family Office 2.0 - Govern a multi-gen family enterprise, Deliver professional wealth management, Educate owners to be investors and trustee
  • Wealth 3.0 • Psychology integral to advice • Focus on purpose of wealth • Shared values and positivity
  • Family Office 3.0 • Focus on values, purpose, sustainability • Outsource to ecosystem of specialists & firms • Formalize family learning and governance

2022 Trust, Tax, and Estate Planning Update

Jeremy Mertens, BDO

Adam Sherman, McDermott, Will & Emery

Mandy Chardoul, Plante Moran

Scott Winget, FOX, Moderator

• Build Back Better Redux?
  • Democrats get one more bite at the budget reconciliation apple
  • Mid-term election in November
  • Constraints on more spending imposed by inflation, possibility of recession
  • Risk of grabbing low hanging tax fruit—prior proposals/legislation
• Greenbook (aka the “Wishlist”)
  • Income tax rates
  • “Billionaires” income tax
    • Minimum 20% tax on income and unrealized capital gains
    • “Illiquid” taxpayers
    • Required reporting of basis and estimated value of assets
  • Deemed realization of capital gains (death, gifts, trust distributions)
  • Grantor trusts: sales recognized and tax payments = gifts
  • GRATs: minimum term and remainder interest
  • Limited duration of GST exemption
  • No changes to valuation rules, changes in exemption amounts
• Anti-Anti Clawback Regulations
  • Regulations addressing potential for “clawback” resulting from increased exemption amounts added as part of 2017 tax reform included an anti-abuse placeholder
  • If exemption amounts are reduced in the future, these regulations would prevent benefit to taxpayers from having used higher exemption amounts on various “includible gifts”
  • 18-month window (pre-death) to fix
• Opportunities, Trends, and Considerations
  • Interest Rates
  • Valuation
  • Market Volatility
  • IRS Backlog
  • Income Tax Rates
  • Liquidity
  • Cashflow
  • Recent Tax Law Changes (i.e. Secure Act)
  • Wealth Transfer Plan
• Roth IRAs
  • Roth IRAs differ from Traditional IRAs
    • Not everyone can contribute to a Roth (income limitation)
  • However, there is no income threshold to convert an IRA from a traditional IRA to a Roth IRA
  • This inconsistency has created a “back-door” into a Roth IRA, which is still an available planning opportunity, but may not be much longer
  • Contributions and Deductibility
    • Maximum contribution of $6,000 ($7,000 age 50 or older)
    • Contributions are non-deductible
  • Taxability • All qualified distributions are tax free
  • No required minimum distributions
• Roth Conversion Basics
  • A Roth conversion is a “qualified rollover contribution” from an eligible retirement plan
  • The portion of the converted amount included in income is equal to:
    • The amount of the conversion
    • (Less any after-tax contributions that are included in the amount rolled over)
  • Deadline for converting a Roth is December 31^st
  • If the account owner is required to take a minimum distribution (RMD), they must do so for that tax year prior to conversion
  • Planning Note: Taxpayers are permitted to convert a portion of an eligible account to a Roth

• The SECURE ACT “Light”
  • Setting Every Community Up For Retirement Enhancement Act passed in Dec. of 2019
    • Changed RMD age from 70.5 to age 72
    • Except for exceptions listed below*, changed inherited IRA lifetime stretch opportunity for many beneficiaries to much shorter time period)
    • Exceptions are granted for Eligible Designated Beneficiaries or “EDB” (NEW)
      • Surviving Spouse
      • Minor child of decedent (until they reach age 21)
      • Disabled beneficiary
      • Chronically ill beneficiary
      • Individuals who are around the account owners
• Fiduciary Income Tax
  • State Residency Factors
    • Trust created by will of individual who lived in the state at time of death
    • Settlor lived in state at time inter vivos trust created
    • Trust administered in state
    • One or more trustees live in or do business in state
    • One or more beneficiaries live in state Residency Factors
  • Recent Cases
    • N.C. Dep’t of Revenue v. The Kimberly Rice Kaestner 1992 Family Trust (narrow ruling impacting state residency of trust)
    • Steuer v. Franchise Tax Bd (“Paula Trust”) addressing source and non-source income
  • Planning
    • Incomplete Non-grantor Trusts
    • Spousal Lifetime Access Non-Grantor Trusts

Exploring the Family Office Regulatory Landscape

Valerie Dahiya, Perkins Cole

David Allen, Katten Muchin Rosenman

Glen Johnson

• • • Potential family office regulations and the Corporate Transparency Act are impacting family offices.
    • Examining the legislative shift that is placing the burden on family offices
      • What are the implications to existing and future family office structures?
      • Compliance
      • Privacy
      • Reporting
      • What is being done in Washington to bring an industry voice and balanced perspective?
    • Family office exemption notion was not well received
      • Need more education around the family office structure
      • Exemptions on reporting requirements are being applied to entities that are already regulated, not family offices
    • Looking at long term incentive programs
      • Who will participate and are they key employees?
      • Are they qualified clients/purchasers?
      • Need an employee co-investment vehicle
      • The family might want specific investments, so several structures might have to be created
    • Real Estate Impacts
      • Proposed rules around AML in real estate
      • Would capture a substantial amount of RE transactions
      • Pay close attention, as the consequences can be extreme for reporting
      • Looking for non-financed RE transactions
    • SEC Revisiting Accredited Investor
      • Higher standards due to inflation
    • Broker/Dealer Registration Requirements
      • SEC Aggressive on this matter
      • Relying on trader exception
    • Cryptocurrency regulations
      • Younger generations are excited by crypto
      • What to do for valuations?
      • What to do for recordkeeping?
      • The fundamentals that have been relied on are not put in place for crypto
      • Crypto best practices – same rules still apply for fundraising, etc.
      • SEC says the rules in existence are applicable, so no new rules necessary
    • Question: In terms of structure, how does the family office fit into the exemption?
      • Depends on the specifics of the office, but no action position was meant to be broad and cover as many family offices as possible
    • Question: Any insight on whether private trust company will be treated like a bank as far as regulations:
      • Family offices will not be exempt, but…
      • Private trust companies should not be treated like a bank

 Managing Rising P&C Premiums in an Evolving Insurance Landscape

Kimberlee Connell, Marsh McLennan Agency

Robb Lanham, HUB International Personal Insurance

Stephen Poux, AIG Private Client Group

Gaby Griffin, FOX, Moderator

• • • Understanding how to manage the challenging insurance market
      • Steeply rising insurance P&C premiums
      • Canceled policies
      • How to keep premiums down
      • How to work with brokers to ensure best strategies
    • Billion-dollar weather and climate events have increased in recent years
    • Wildfire Mitigation Strategies
      • Hardscaping homes to mitigate risk
        • Ember resistant vents and gutter guards
        • Stucco exteriors when possible
        • Fire resistant landscaping
        • Sprinkler systems
        • Alternate water sources on property
        • Multiple ways to access property
      • Remove dead plants, mulch and other combustibles
        • Remove ornamental grasses
        • Store away furniture cushions and decoration from decks
        • Woodpiles or lumber
        • Vehicles, boats
      • Talk with your agent/broker about additional ways to mitigate loss
    • Severe Weather Preparedness
      • Back-up power source
      • Lightning protection
      • Elevated homes
      • Hail resistant roofing and windows
      • Back-up sump pump