PRACTICE AREA - Family Office


Family Office

Kleinberg Kaplan has significant experience counseling wealthy families with the creation and operation of family offices or converting their existing operations to family offices. Some family office clients have accumulated their wealth over multiple generations while others have earned it more recently. With decades of representing investment managers, many of our family office clients are existing or former asset managers or real estate professionals whose net worth ranges from $100 million to several billion dollars.

We provide a comprehensive suite of legal services for family offices including:

    • organization and structuring
    • estate, gift and income tax planning
    • business succession and continuity planning
    • private equity and venture capital investments
    • asset protection
    • entity formation
    • regulatory and compliance advice and filings
    • real estate transactions and leases
    • employment, confidentiality and non-compete agreements
    • service and supplier agreements negotiation

Organization and Structure

Family offices typically have a single main advisory entity and one or more pooled investment vehicles. The advisory entity employs the employees, leases the office space and provides investment management services to the family office’s clients (i.e., the family members and key employees). The advisory entity restricts its ownership and clients to family members and certain key employees in order to take advantage of the “family office” exemption from registering as an investment adviser or a commodity pool operator. The pooled investment vehicles make investments on behalf of the family office’s clients, who become limited partners or members of those vehicles.

The structure that is best for a particular family office, including the need for separate investment vehicles, depends on a number of factors, among the most important being:

    • the types of investments that the family office plans to make (e.g., will any investments have special tax or liability issues attached, such as real estate);
    • the frequency with which the family office intends to trade; and
    • the types of “clients” the family office will have (e.g., will any of the clients be IRAs, charitable trusts or private foundations; will any be non-U.S. persons).

In the organizational and structuring phase, we assist the family in analyzing the above issues to come up with the most efficient structure from both tax and securities law perspectives. We then form the necessary entities and draft operating and partnership agreements and investment advisory and services agreements memorializing the relationships. We also advise the family as to which employees are permitted to invest in the investment vehicles consistent with the family office exemptions under the securities laws.

Investments

Kleinberg Kaplan advises family offices on a broad range of investment activities, including hedge and private equity fund investments, as well as co-investments and direct investments. We have advised family offices with respect to investments in traditional asset classes, such as real estate and venture capital, to some of the more emerging alternative asset strategies, such as art, professional sports teams and private credit. We have extensive experience in planning for many different types of assets, held in the U.S. and abroad, including:

    • Investment management firms
    • Closely-held businesses
    • Real estate
    • Art collections
    • Life insurance
    • Illiquid investments

Securities Law Compliance

Our family office clients rely on us to help them address the various securities law and compliance issues that arise in running a family office including:

    • complying with the family office exemption under the securities laws;
    • preparing and filing required securities law filings and
    • analyzing securities trading issues such as insider trading and Regulation M compliance and eligibility to purchase 144A bonds.

Trusts & Estates Planning and Administration; Estate, Gift and Income Tax Planning

Our trusts and estates attorneys and tax attorneys work very closely with our family office clients to help them achieve their intergenerational wealth planning goals, minimize income taxes and support their philanthropic endeavors. In addition to the standard estate planning vehicles that utilize family partnerships and trusts, we counsel family office clients using far more sophisticated estate planning techniques. We create preferred partnerships to help families shift wealth and income taxes among multiple family members in different generations. We help foreign families, and U.S. families with foreign connections, invest tax efficiently in the U.S., including in U.S. real estate, through a combination of domestic and foreign trusts and business entities. We help design tax-efficient funding mechanisms for life insurance using either third-party premium financing or intra-family financing through private split dollar arrangements.

We also help family offices minimize income taxes in a variety of ways. For example, by structuring investments through private placement life insurance, our clients can invest in alternative investments and create a stream of income that is free or deferred of income tax. We also have clients restructure trusts and isolate certain trust assets that are designed to eliminate state and local income taxes on the trust income. We can help clients consider how to structure their compensation or other expenses in a manner that is most efficient from an income tax perspective.

We provide a full range of estate and trust planning services to family offices, including probate of wills, filing gift, estate and fiduciary income tax returns, fiduciary accounting services, and coordinating the collection of assets, payment of expenses and the orderly transition of estate and trust terminations.

We also frequently represent family office clients in disputes arising from estate and trust matters, including probate contests, contested accounting proceedings, fiduciary removal proceedings and asset turnover proceedings.

Charitable Planning and Philanthropy

Kleinberg Kaplan assists our family office clients in their charitable planning and philanthropy. We represent a wide range of tax-exempt entities, including national and international public charities, private foundations, arts and cultural organizations, and social clubs. Our practice covers the broad range of legal issues of concern to charities and non-profit organizations, such as:

    Non-Profits: Advising on formation, ongoing administration, grant making (both domestic and international), and dissolution. We work with family offices and their advisors to achieve the most efficient and impactful plan.
    Charitable Planning Vehicles: Advising on the development of planning vehicles, including charitable remainder trusts, charitable lead trusts, public charities, private foundations and donor-advised funds, to maximize a client’s charitable goals. We advise family offices so that they make the most efficient use of their income, gift and estate tax deductions, both currently and in the future.
    Compliance: Advising on the qualification and ongoing compliance of public charities and private foundations.

Real Estate
Kleinberg Kaplan provides comprehensive legal services to family offices that invest in real estate and real estate-related assets. We represent our family office clients in ownership structure formation, development, acquisition, financing, joint ventures and leasing of commercial, office, retail, industrial and mixed-use projects. We also analyze prospective real estate investments (both directly and through various types of participatory interests or stocks) and guide our family office clients through the implementation of a successful exit strategy for their investment positions, including tax structuring.

Additionally, Kleinberg Kaplan assists family offices with their space planning needs, including leases, brokerage agreements, architect agreements and construction contracts.

Succession Planning

Kleinberg Kaplan assists family office founders in increasing and preserving the franchise value of their companies through comprehensive succession and continuity planning. Such planning can provide confidence that the firm will survive the departure of its founder(s) and provide for a greater alignment of interests with the family objectives. A multi-year process that is most successful when developed long before the founder considers leaving the firm, an initial component of succession planning is implementing management and risk committees so that senior employees can participate in the governance of the firm.

We assist family office clients in structuring equity grants to the potential successors, including: developing a succession plan with sufficient flexibility for the firm/founders to adapt to changes in the market and changes in the respective capabilities of employees; providing advice regarding how much equity and control should be granted to the successors and retained by the founders or family; determining if additional restrictive covenants should be imposed upon the successors; developing buy-out terms if a successors departs prior to the retirement of the founders; and establishing mechanisms to protect the return on the founders’ equity after departure.

 

 


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