Succession and estate planning is getting more expensive and complex during the biggest wealth transfer in history.
Family offices are grappling with increasing legal, tax and emotional costs of such intergenerational transitions during pending U.S. tax changes, with the $13.61 million estate tax exemption set to expire at the end of 2025; high-profile legal battles within prominent families like the Murdoch clan and Singapore’s Kwek dynasty; and the changing expectations and demands of next-gen heirs.
Despite its importance, only 53% of family offices have a succession plan — and only half of those are formal written plans, while the rest are informal or verbal agreements, according to an RBC Wealth Management and Campden Wealth survey conducted last year. The top challenges to succession planning cited by respondents were not having next-generation members sufficiently qualified to assume control of the family office and next-gen members who are too young to plan for their future roles.
The head of a small family office in Texas said he’s the only member involved in the firm. Other family members “have never expressed any interest in the family office or the investment portfolio, so succession has been a big issue for us to think about.” As a result, he’s considering winding down the office and outsourcing most functions, hiring a nonfamily chief executive or joining a multifamily office.
“Things have often gotten more complicated,” said Mark Parthemer, chief wealth strategist and Florida regional director at the wealth management firm Glenmede. “Some of the things that drive complexity are tax planning and family dynamics — especially with blended families” and the increasing international footprint of larger family offices, he said. When a family patriarch or matriarch divorces and remarries or when a family expands its operations across borders to jurisdictions with a variety of tax and regulatory regimens, it can create challenges.
More than three-quarters of family office professionals surveyed by Ocorian, a provider of trust, administration and fiduciary services, have opened more offices in different countries in the past five years. A majority said they expanded due to the diversification and increasing sophistication of their investment portfolios.
Tax concerns have also enhanced migration — for example, the recent election of the Labour Party in the UK and its expected introduction of an inheritance tax that helped drive a net loss of 10,800 millionaires in 2024.
For wealthy families in the U.S., the estate tax exemption doesn’t matter as much as the tax rate, which has varied widely in recent decades, Parthemer said. In response, wealth advisers and their clients have created a growing world of vehicles such as special-purpose trusts, limited-liability corporations and limited partnerships to shield assets.
What makes it even more complex is that “these structures require active maintenance, especially with the pace of change when it comes to laws and regulations,” Parthemer said.
The intricacy of such structures and their maintenance can be daunting to next-gen members of a family, say wealth management experts. And it has led to a growth in building a professional team and often outsourcing some responsibilities that traditionally stayed within the family.
“We’re seeing a greater emphasis on ensuring there is a high-quality team and coordinating professional advisers from a variety of disciplines who understand the client and the client’s family and their dynamics and goals,” Parthemer said.
It can create problems when the current generation becomes incapacitated, creating a leadership and competence gap, said Asin Nurani, managing director of family governance at RBC’s Enterprise Strategic Client Group. That scenario highlights the need to start succession planning as early as possible.
“The best time to chart a course is when sailing on smooth waters and not when sailing through a storm,” Nurani said.
Plan before the storm
To get ahead of the storm — such as the potential expiration of the Trump tax cuts at the end of this year — it’s best to plan now. Preparation and education are necessary for family heirs, said Michael Warszawski, the founder and CEO of the New York-based multifamily office CWM Partners. “That includes the engagement of family members who have not been involved so far, so that they understand what they’ll be inheriting.”
Beyond the financial concerns, such succession and estate planning creates a huge emotional component, Warszawski said. “Human capital is probably the biggest asset on a family’s balance sheet,” he said. “The members of my family — are they thriving? What are their hopes and wishes? And how are their relationships with each other? As a potential leader of the family, what are their talents and strengths? How will I help them to keep thriving after I’m gone?”
Without answering those questions, a succession plan is doomed to fail and is more prone to misunderstandings, disagreements and lawsuits, Warszawski said. One of the only ways to answer those questions is to prepare potential successor candidates by bringing them into the family office for a year or two “and to get a feeling for whether it’s the right fit for them.”
Patty Fitzsimmons, vice president of accounting at Aquilance, helps wealthy families navigate these transitions, which have gotten more complex “as they grow and add multiple houses and have multiple entities. They have many trusts set up and family partnerships, and we work with the individual family members to do distributions and any cash movements that need to be made.”
The first step with new clients, Fitzsimmons said, is to establish a baseline by taking what she calls a “digital shoebox” of their financial statements and rebuilding their balance sheet, which helps the next generation assess the family’s assets and legacy.
In addition, it’s key to consider the financial goals of the family office and the family’s values, said Maryann Bell, a partner at Wingspan Legacy Partners in Chestnut Hill, Massachusetts. Then, when it comes to identifying potential successors, “consider engaging external advisers, such as family office consultants, estate planners or wealth managers, to provide guidance and expertise,” Bell said. “Their impartial perspective can help with navigating complex family and financial dynamics.”