As the new year begins, wealthy families are navigating a shifting landscape shaped by a new presidential administration, the onset of tax season and ongoing economic uncertainty. Marcus Baram spoke with wealth strategy experts — who outlined key principles for trust and estate planning, including the expectation that the 2017 tax cuts and estate tax exemptions will be extended through the end of 2025, and the advice to set aside concerns about wealth tax proposals for now.
Although President-elect Trump will not take office until Jan. 20, his anticipated policies are already influencing family offices and wealth professionals, who are preparing for potential changes to taxes, investment portfolios and the broader economy.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: Key strategies for family office trust and estate planning in 2025
By MARCUS BARAM
As the new year begins, wealthy families are navigating a shifting landscape marked by a new presidential administration, the onset of tax season and economic uncertainty. Despite these challenges, wealth strategy experts highlight a few clear principles for trust and estate planning: Start transferring assets sooner rather than later, anticipate an extension of the 2017 tax cuts and estate tax exemptions through the end of 2025, and set aside concerns about wealth tax proposals for now.
“Giving away assets always makes sense — and the sooner you give them away, the better,” said Joshua Rubenstein, leader of the wealth practice at the Chicago-based law firm Katten Muchin Rosenman. He recommends this even though the federal estate tax exemption, which increases to $13,990,000 in 2025, is expected to be extended by President-elect Trump and the Republican-controlled Congress.
“For clients who are in that ultra-high-net-worth space or family office clients who exceed our federal estate tax exemption, it likely makes sense to continue moving forward with planned wealth transfer strategies — even if the exemptions are extended at their current levels, including increases for inflation,” said Liz Summers, director of wealth strategy and family wealth at New York-based Wealthspire Advisors. “They should really consider utilizing their exemptions and moving that appreciation out of their estate sooner rather than later.”
That view is echoed by Mark Parthemer, chief wealth strategist at Glenmede, a New York-based wealth management firm. “What we’re saying to clients is now is not the time to hit the brakes. If you’ve been going through planning in anticipation of the sunset [of the estate tax exemption], stay focused on it.” One of the key reasons to give away that money, Parthemer said, is that the exemption may only be extended for several years due to federal budgetary constraints, and then “clients are going to be in the same position they’re in right now.”
And even if the exemption sunsets at the end of 2025 and goes back to $7 million, Parthemer suggests a few steps.
“You can add a person to the account and then in late December just have that person withdraw it," he said. "You could establish a trust and lend money into the trust; and then if, late in December, you want to convert that into a gift, you forgive the loan. But if you don’t want that to become a gift, you have the trust repay you. That’s creating flexibility so you can be nimble, depending on what happens with Congress.”
Parthemer also recommends at the start of the year using annual exclusion gifts, which will soon rise to $19,000 and are excluded from the estate exemption. No limit exists on the number of recipients to whom a donor can give; thus, it’s a useful planning method for those who have grandchildren and seek to avoid the generation-skipping transfer tax.
In addition, certain tax proposals that would have affected family offices and UHNW investors — such as a wealth tax, higher taxes on trusts, targeting tax planning techniques like granting retained annuity trusts, and taxing unrealized capital gains — seem off the table for now, Parthemer said.
The rise of the DAF
In addition, estate planning experts foresee more people moving money into donor-advised funds (DAFs). Tightening the rules and regulations regarding such funds has been discussed in recent years, but not much change is expected in the current political environment. A big advantage that DAFs have over private foundations is that no minimum distribution is required.
“There’s a little bit less flexibility but more privacy,” Summers said. “They do seem to be becoming more and more popular by the year.”
Plenty of other nontransfer-tax reasons exist to engage in irrevocable-trust planning, she said. “A properly structured irrevocable trust can really provide a vehicle for managing the family wealth for multiple generations. It can provide a layer of protection from creditors, including divorcing spouses, and make sure that the family legacy really continues to benefit multiple generations. And it can also provide structure and guidance for younger family members as they learn how to become responsible stewards of the family wealth.”
If you already have a trust, Summers recommends reviewing the documents to ensure they still reflect the family’s goals, values and the current tax landscape.
Other questions to ask: Have we changed our state of residency? Are we still on good terms with the fiduciary? Have any of our beneficiaries experienced changed circumstances? Do we have state estate tax planning — to make sure, even if we’re no longer taxable at the federal level?
And finally, Summers said it’s key to make sure you have proper powers of appointment, which can enable a trust beneficiary to change the disposition of some portion or all of those trust assets.
“A lot of these trusts, especially for clients in our space, they're designed to last for a very long time," she said. "We know our kids really well. We might know our grandkids really well. But we don't yet know our great-great-grandkids. What if one of the great-grandkids is a social worker and the other is the next Steve Jobs? Their financial needs are very different, and there should be enough flexibility built into a trust to make changes.”
Related Reads:
> Step-up in basis, life insurance and trusts lead estate planning strategies | Crain Currency
> Biden’s tax plan sparks debate amid generational wealth transfer | Crain Currency
How the new administration will impact family offices
By MARCUS BARAM
Though President-elect Trump doesn’t take office until Jan. 20, his impact is already being felt by family offices and professionals, who have been busy preparing for the incoming administration’s likely policies affecting taxes, their portfolio and the greater economy.
Trump has selected several prominent financiers to join his administration. They include Scott Bessent, whose New York-based Key Square investment firm advises family offices and foundations — including the Soros family, with $11 billion in assets — and who was recently tapped as Trump’s nominee for treasury secretary.
Many family offices are already adjusting their investing and estate planning strategies in the wake of the election. Though a majority of investors with at least $1 million of investable assets preferred Kamala Harris to Trump in a survey last fall, they gave Trump a higher grade on the economy.
Investing
Caspar Rock, the chief investment officer of London-based Schroders Wealth Management, said his firm is well-positioned for the new administration, having snapped up U.S. equities and reduced its exposure to fixed income. “Given the move in markets, we remain vigilant but for the time being retain our pro-risk stance,” Rock said. [The] “main losers are those countries and markets that are perceived to be on the receiving end of Trump’s proposed tariffs, with the most obvious being Mexican and Chinese shares.”
In a note to its clients, the WE Family Offices — which serves more than 80 families in the U.S., Latin America and Europe — predicted a boost in economic activity that would benefit infrastructure and commodities. Though Trump has vowed to boost oil and gas production, the firm said, the outlook for energy equities is mixed because “more supply is negative for oil prices, but higher demand is supportive.” The WE Family Offices also expects private equity to “benefit from a regulatory regime that supports increased M&A” and for hedge funds to get a lift out of “higher volatility.”
ESG investors might face some headwinds, said Jason Britton, founder and CIO of Isle of Palms, South Carolina-based Reflection Asset Management, which specializes in thematic investing for high-net-worth (HNW) families and foundations. “Half of my clients were excited about a looser regulatory environment, lower tax rates and a pro-business environment; and the other half were literally besides themselves, worried that we’re going to enter a nuclear conflict with Iran.”
Britton expects the term ESG — as environmental, social and governance principles are commonly known — to wither away “like the Hula-Hoop, Pop Rocks and Beanie Babies, since it’s been so vilified and politicized.” But that doesn’t mean the approach will go away, with continued interest in sustainable investing and voluntary disclosure of ESG metrics by companies.
Britton also expects the Securities and Exchange Commission to slow its enforcement action, Trump’s team to pare down President Biden’s Inflation Reduction Act and its massive incentives in clean-energy startups, and the oil and gas industry to profit with renewed leases and drilling on protected lands.
Taxes
The Trump administration’s tax policies are widely expected to benefit family offices and HNW investors with an almost-certain extension of the 2017 Trump tax cuts — which lowered top income tax rates to 37% from 39.6%; doubled the estate tax exemption, which currently stands at $13 million; and reduced corporate taxes to 21% from 35%.
“While we don’t have a crystal ball, we do believe that the tax environment moving forward will be more favorable for family offices and ultra-high-net worth clients,” said Keith Bloomfield, founder and CEO of Palm Beach, Florida-based FFT Wealth Management. But he cautions against making short-term moves, emphasizing that “it’s also important for family offices and the ultra-wealthy to remember that tax, trade and regulatory policy do not drive the economy. Businesses and consumers adapt to each of these changes, which will ultimately impact growth.”
Even with the extension of the estate tax exemption, wealth advisers recommend using it up by the end of the year. “It’s better to transfer the assets and to do gifting and planning than not if you’re in a position to do so,” said Theresa Balducci, counsel at Herrick, Feinstein’s private clients department. “The exemption is so high right now that if you don’t use it, you’re really leaving a lot on the table.”
“Once that planning takes place, no matter what the tax consequence is, you’re at least getting all that appreciation out of your estate.”
The economy
While Trump’s agenda — including tax cuts, deregulation and a $1.5 trillion infrastructure plan — is expected to spark market rallies and lots of short-term growth in the first 100 days of his presidency, some risks have appeared on the horizon, said Nigel Green, CEO of the deVere Group, a global financial advisory firm. The broader economic environment will be affected by the potential for rising inflation; protectionist tariffs affecting sectors such as technology, retail and automobiles; and heightened market volatility, Green said.
“The combination of rising inflation and the cost of capital could lead to a period of market volatility," he said, "requiring investors to adopt more cautious strategies in the latter half of 2025.”
LOOSE CHANGE
Miami Beach hotel showcases understated luxury, reimagined Spanish cuisine: The National Hotel combines the elegance of the art deco era with modern amenities and an array of experiences tailored to those seeking a refined yet approachable escape.
Ex-Google chief lists penthouse for about 60% more than he paid: Tech billionaire Eric Schmidt has listed his four-bedroom, three-level condo in the NoHo section of Manhattan for $39.5 million, according to a report in Crain’s New York Business.
Michael Jordan's house sold — finally: Nearly 13 years after the NBA legend put his tailor-made mansion in the northern Chicago suburb of Highland Park up for sale, he sold it for $9.5 million. On Feb. 29, 2012 — Leap Day — the basketball icon put the home on the market at $29 million. (Err, Jordan?)
Help us with a story: We’re working on a story about cybersecurity planning for family offices in 2025. If you have any comments on the topic, reach out to [email protected].