The unpredictable nature of managing wealth can keep family offices on their toes. To help families be proactive, we’ve compiled a list of questions and considerations covering everything from estate planning to navigating unforeseen tax audit risks. The start of a new year is the ideal time for family offices to review these considerations, but we recommend continuing to ask these questions throughout the year.

Estate and Succession Planning

What does the looming specter of the annual lifetime exemption amount mean for you and your family office? It's not just a numerical figure; it's a pivotal determinant of how much of your wealth stays within your family and how much will be taxed. Don’t leave the next generation to navigate this and instead consider these often-overlooked questions that could be the linchpin to securing your legacy:

Q1: As the exemption amount might approach its 2025 reduction, could there be added costs in valuing assets if estate planning is delayed?

Q2: Have you engaged in open discussions with the next generation regarding your succession plan, recognizing the potential pitfalls of unaddressed disagreements within the family and ensuring everyone is on board for a seamless transition?

Insurance Oversight

Even the most affluent families can sometimes overlook a critical aspect of retaining wealth: Adequately covering their valuable assets. Regularly review your insurance and know the answers to the following:

Q3: Have you taken the necessary steps to ensure that all valuable assets, including assets such as art collections, jewelry or cars are appropriately included and valued in your current insurance coverage?

Q4: Is an annual insurance review firmly integrated into your financial strategy, considering the potential changes in your asset portfolio over time?

Tax and Audit Risk Concerns

When it comes to potential tax and audit risks, be prepared to have a paper trail that stands up to the scrutiny of the gift tax.

Q5: Beyond the conventional IRS audits, have you thoroughly considered and prepared for potential state tax audits, recognizing the unique challenges they may pose to your financial stability?

Q6: When giving money as a gift, are you documenting every aspect, ensuring that your generosity doesn't inadvertently become a source of audit risk?

Residency and Domicile

It's more than just changing your address; close attention should be paid to understanding areas that could impact your tax obligations. The following questions may help you mitigate risks associated with your choices about relocation. As you contemplate a move, ask the following:

Q7: Are you aware of the distinction between residency and domicile, recognizing the potential implications each carries for your tax status in your current and future states?

Q8: Timing is everything. Have you thought through the risk of continuing to be taxed in your original state, even after moving? What steps are you taking to ensure this transition is documented and defensible?

Sales Tax and Art Acquisition

In art acquisition, the appreciation of aesthetics is too often accompanied by the less creative but equally influential consideration of sales tax. Ask yourself:

Q10: In addition to art, are you conscious of the broader implications of sales tax on various assets you may be adding to your estate, and have you developed strategies to navigate potential tax hurdles successfully?

We understand that for family offices, protecting their most precious asset, the family, is non-negotiable. Asking the right questions now can serve as more than a checklist; it’s a reflection of the commitment you have in securing a legacy that endures.

_{Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.}