Latest news with #wealthyfamilies
Forbes
01-07-2025
- Business
- Forbes
The Hidden Risks In Your Art And Collectibles: Why Specialized Estate Planning Is Essential
Antique watches, magazines, phones, suitcases and other retro products The Million-Dollar Mistake Most Wealthy Families Make Imagine finding a Jackson Pollock worth $50 million in a trailer or a Chinese vase selling for 43 million pounds after being valued at just 1 million pounds. These stories highlight a common oversight among ultra-high-net-worth individuals: underestimating the value of their art and collectibles. Without specialized estate planning, these valuable assets can lead to millions in taxes, family disputes, and forced sales. Understanding the Unique Nature of Art and Collectibles The problem often starts with a misunderstanding. Many wealthy families categorize art as conventional investments, like stocks or bonds. However, art and collectibles are distinct; they do not generate income like other financial assets. Your Monet or Picasso, while visually stunning, remains financially silent, demanding a unique approach to estate planning. When Estate Plans Collide with Artistic Reality Consider a scenario where an estate plan includes a marital deduction trust funded with artwork. The surviving spouse might expect income from these assets, but a $10 million art collection produces none. The trustee faces a dilemma: sell cherished pieces or risk violating the trust's purpose. This turns a tax-efficient strategy into a family tragedy, forcing the sale of artworks meant to be preserved. Sophisticated Strategies and Their Complexities Sophisticated strategies, like Grantor Retained Annuity Trusts (GRATs), add layers of complexity. Funding a GRAT with a single valuable piece might seem advantageous, but it involves costly annual appraisals and IRS valuation challenges. Instead of creating tax benefits, it results in administrative burdens and potential disputes over fractional ownership. The Charitable Donation Disaster Donating art to charities can be fraught with pitfalls. Without proper planning, a generous act could backfire. If the art was self-created or held as inventory, deductions are limited to the cost basis, often negligible, rather than market value. Moreover, if the museum sells the artwork within three years, the IRS might recapture the deduction, leading to penalties. The Possession Paradox Collectors often want to enjoy their art while claiming tax benefits for donations—a legal impossibility. Complete gifts require relinquishing all control, a principle upheld in cases like Parkhill v. United States and Linton v. United States. Retaining possession can result in continued estate tax liability, nullifying the intended benefits. The Valuation Nightmare Art valuation is more art than science. Unlike stocks, artwork lacks daily pricing, making valuations expensive and subjective. Estates can spend significant time and money on appraisals, facing IRS challenges that prolong the process. This, coupled with liquidity issues, can lead to cash flow crises, forcing sales at substantial discounts. Traditional Advisors and Their Limitations Most estate planning professionals excel with traditional assets but lack expertise in art and collectibles. They often miss nuances like fractional interest valuations and IRS requirements for charitable contributions. This knowledge gap can lead to costly posthumous corrections and strained family dynamics. The Solution: Specialized Expertise A specialist in art and collectibles estate planning offers the expertise necessary to navigate these complexities. The approach involves designing trust structures that accommodate non-income-generating assets and creating specific provisions for artwork management. They craft estate plans that respect the unique nature of these assets, establishing separate trusts or art management committees when needed. Optimizing Tax Strategies and Mitigating Risks Effective tax optimization requires understanding the intersection of gift, estate, and income tax rules specific to collectibles. I help clients navigate charitable contribution rules, structuring gifts and sales to minimize tax impact. Proper documentation and planning protect against IRS challenges, ensuring deductions are maximized. Preserving Family Harmony and Legacy Preserving family harmony involves developing succession plans that honor both financial and sentimental value. We create mechanisms for shared ownership and enjoyment, setting clear guidelines for collection management. The aim is to enhance family relationships, ensuring collections are cherished rather than contentious. Your Legacy Deserves Better Your art collection is more than financial value; it represents your taste, passion, and often your family's heritage. Without specialized planning, these assets can become liabilities. The question isn't whether you can afford specialized planning but whether you can afford not to. The potential disasters of treating art like traditional investments far outweigh the cost of proper planning. The Time is Now Don't let masterpieces become burdens. The complexity of art and collectibles planning means procrastination can be costly. As market conditions, tax laws, and family situations change, addressing these issues now ensures flexibility and peace of mind. Your art deserves sophisticated planning, and your family deserves the assurance that your collection will be preserved according to your wishes. Let's ensure your artistic legacy receives the attention it deserves.
South China Morning Post
28-06-2025
- Business
- South China Morning Post
‘Paradise for the rich, hell for the poor': Hong Kong among world's most unequal cities
Hong Kong has long been known as an international financial hub where fortunes are made in office towers that form the city's iconic skyline. Its free-market economy has given rise to some of Asia's wealthiest and most powerful families and firms. Advertisement But beneath the glitz and glamour lies a sobering level of inequality. Some people are unable to pay for basic groceries due to rising inflation, while others live on the streets despite having paid jobs. Poverty alleviation is a major goal cited by the city's government and authorities have targeted the problem with several task forces, including one focused on the issue of subdivided flats. However, many challenges remain.
Forbes
25-06-2025
- Business
- Forbes
How Wealthy Families Build And Preserve Generational Wealth
Building wealth that lasts across generations isn't just about making money—it's about instilling the right principles and systems that ensure prosperity endures long after the wealth creators are gone. While market volatility and economic uncertainty can erode financial assets, the families that successfully transfer wealth across multiple generations share common foundational principles that transcend individual investment strategies. Education as the Ultimate Investment The most enduring family principle among generationally wealthy families is their unwavering commitment to education. This extends far beyond traditional academic achievement to encompass financial literacy, emotional intelligence, and practical life skills. Wealthy families don't just send their children to elite schools; they create comprehensive learning environments that prepare the next generation to be responsible stewards of family resources. Financial education begins early, with children learning about budgeting, investing, and the responsibilities that come with wealth. Many families establish junior investment accounts where children can practice making financial decisions with real consequences on a smaller scale. This hands-on approach demystifies money management and builds confidence in handling larger sums later in life. The Power of Patient Capital Generational wealth builders think in decades, not quarters. They resist the temptation of get-rich-quick schemes and instead focus on sustainable, long-term growth strategies. This patience manifests in multiple ways: holding quality investments through market cycles, building businesses with enduring competitive advantages, and making decisions based on their impact on future generations rather than immediate gratification. This long-term perspective also influences how they structure their investments. Rather than chasing the latest investment fad, they focus on diversified portfolios that can weather economic storms while providing steady growth over time. Real estate, established businesses, and blue-chip stocks often form the backbone of their wealth preservation strategy. Governance and Family Structure Successful multigenerational families establish clear governance structures that prevent wealth from being dissipated through family conflicts or poor decision-making. This includes creating family constitutions that outline shared values, mission statements, and decision-making processes. Regular family meetings ensure open communication and alignment on major financial decisions. Many families establish family offices or work with trusted advisors who understand their long-term objectives. These structures provide professional management while maintaining family oversight and control. Clear succession planning ensures that leadership transitions are smooth and that the family's wealth management philosophy continues across generations. Work Ethic and Purpose Contrary to stereotypes about trust fund children, families that maintain wealth across generations typically instill strong work ethics in their offspring. They understand that purpose and productivity are essential for personal fulfillment and wealth preservation. Many require family members to work outside the family business before joining family enterprises, ensuring they develop skills and perspectives that benefit the entire family unit. This principle extends to teaching children that wealth comes with responsibility—both to the family and to society. Many generationally wealthy families have strong philanthropic traditions that give family members a sense of purpose beyond personal accumulation. Risk Management and Diversification Wealthy families understand that preserving wealth is often more challenging than creating it. They implement sophisticated risk management strategies that protect against various threats: market downturns, inflation, political instability, and family disputes. This includes geographic diversification of assets, multiple income streams, and appropriate insurance coverage. They also diversify across asset classes and industries, avoiding the common mistake of keeping all wealth tied to the business or industry that created it. This diversification helps protect against sector-specific downturns that could otherwise devastate concentrated family wealth. Communication and Transparency Open communication about money matters helps prevent the family dysfunction that often destroys inherited wealth. Regular family meetings, clear financial reporting, and honest discussions about challenges and opportunities keep everyone aligned and engaged. Transparency about family finances helps prepare the next generation for their eventual responsibilities. This communication extends to difficult conversations about money, including discussions about potential conflicts of interest, spending expectations, and the responsibilities that come with inherited wealth. LAS VEGAS, NEVADA - DECEMBER 13: (L-R) Chase Koch, Liz Koch and CEO of Koch Industries Charles Koch ... More attend the Fontainebleau Las Vegas Star-Studded Grand Opening Celebration on December 13, 2023 in Las Vegas, Nevada. (Photo byfor Fontainebleau Las Vegas) Building Systems, Not Just Wealth The most successful families focus on building systems and institutions that outlast individual family members. This includes establishing family foundations, creating educational trusts, and developing investment philosophies that can guide decision-making across multiple generations. These systems help ensure that the family's wealth management approach remains consistent even as leadership changes and new challenges emerge. They provide stability and continuity that helps preserve both financial assets and family unity. Generational wealth isn't built overnight, and it requires more than just financial acumen. It demands a commitment to principles that prioritize long-term thinking, education, communication, and responsible stewardship. Families that embrace these principles create legacies that extend far beyond their bank accounts.
Washington Post
18-06-2025
- Business
- Washington Post
The U.S. is giving up on taxing inheritances
Congressional Republicans are proposing to permanently allow wealthy families to pass on more of their assets tax-free, as the federal government all but abandons taxing large inheritances. Under current law, estates pay tax only on transfers above $13.99 million for single filers and $27.98 million for married couples. Those thresholds, doubled by President Donald Trump's 2017 tax law, are scheduled to fall by roughly half at the end of 2025. But in the tax bill before Congress, both the House and Senate versions would raise the exemption starting next year to $15 million for individuals and $30 million for couples, then set them to adjust for inflation in the future.
Economy ME
17-06-2025
- Business
- Economy ME
UBS Global Family Office Report 2025: Key investment trends and strategic shifts among the world's wealthiest families
UBS has released its Global Family Office Report 2025, offering the most comprehensive analysis to date of the investment strategies, concerns, and evolving priorities of the world's wealthiest families. Drawing insights from 317 single family offices across more than 30 markets, the report covers a broad cross-section of global capital and influence, with participating families averaging a net worth of $2.7 billion and managing an average of $1.1 billion in assets. Conducted between January 22 and April 4, 2025, the report offers timely insights into how this elite group is navigating a period of significant economic and geopolitical uncertainty, while also adapting to long-term structural changes in global markets. European family offices outside Switzerland balance traditional and alternative assets equally, with 51 percent in equities and bonds, and 49 percent in private equity and real estate Read: Middle East families to see $1 trillion transfer of generational wealth by 2030: Report Top concerns for 2025: Geopolitical risk dominate The most urgent concern among family offices globally is the potential for a global trade war, cited by 70 percent of respondents as a primary threat to achieving their financial objectives over the next 12 months. This reflects heightened tensions among major economies and increased uncertainty surrounding international trade flows. Closely following this, 52 percent of family offices identified major geopolitical conflict as a pressing concern. As the planning horizon extends to the next five years, this concern deepens: 61 percent foresee geopolitical conflict as a top risk, and 53 percent are worried about a global recession, likely triggered by serious trade disputes and supply chain disruptions. Concerns over sovereign debt are also widespread, with 50 percent of respondents expressing alarm about a potential global debt crisis, highlighting widespread unease over high government borrowing and fiscal sustainability. Risk appetite and the search for stability Despite the turbulent outlook, 59 percent of family offices plan to maintain their current level of portfolio risk in 2025. However, nearly four in ten (38 percent) admit to facing challenges in identifying effective strategies to offset those risks. 29 percent also note that traditional 'safe haven' assets are no longer predictable, due to shifting correlations and macroeconomic instability. As a response, a significant percentage of family offices are turning toward more dynamic strategies to maintain diversification: 40 percent are increasing reliance on manager selection and active management 31 percent are investing more in hedge funds 27 percent are boosting allocations to illiquid assets 26 percent are favoring high-quality, short-duration fixed income 19 percent are using precious metals, with 21 percent planning to increase their allocation over the next five years Family offices are expected to play an even greater role in shaping the future of capital markets through strategic deployment of assets, stewardship, and innovation Asset allocation shifts: Focus on liquidity and developed markets In light of ongoing volatility and macroeconomic headwinds, family offices are realigning their strategic asset allocations, with a marked shift toward liquid markets and developed economies. Allocations to developed market equities increased to 26 percent in 2024, and among those planning changes, the average expected increase in 2025 is up to 29 percent. Looking ahead five years, 46 percent anticipate significantly or moderately increasing their exposure to developed market equities. Conversely, only 23 percent plan to increase allocations to developed market fixed income. Barriers to investing in emerging markets remain consistent: 56 percent cite geopolitical instability 55 percent highlight political uncertainty and sovereign risk 51 percent are concerned about legal uncertainty and regulatory frameworks 48 percent worry about currency devaluations and inflation Regional preferences: North America and Western Europe lead Geographically, family offices remain concentrated in developed Western markets. North America accounts for 53 percent of total allocations, followed by Western Europe at 26 percent. Together, these regions comprise nearly 80 percent of global portfolio weightings. Succession planning: A work in progress The world is in the midst of the largest intergenerational wealth transfer in history, yet only 53 percent of family offices have formal wealth succession plans in place. The remaining families cite various reasons for inaction: 29 percent believe there is still plenty of time to plan 21 percent have yet to decide how wealth will be divided 18 percent indicate a lack of time to properly address the issue For those with plans in place, the biggest challenge is ensuring tax efficiency (64 percent), followed by preparing the next generation to responsibly manage wealth (43 percent). Notably, only 26 percent involve the next generation in succession planning discussions from the outset. Geographically, family offices remain concentrated in developed Western markets Regional investment strategies: A global snapshot U.S.A. U.S. family offices maintain a heavy tilt toward alternative assets (54 percent), with 27 percent in private equity and 18 percent in real estate. Traditional asset classes make up 46 percent, led by equities (32 percent). Portfolios are predominantly U.S.-centric, with 86 percent of assets in North America. Switzerland Swiss portfolios are weighted toward traditional assets (56 percent), including 34 percent in equities and 13 percent in fixed income. Alternative assets represent 44 percent, with 16 percent in private equity and 12 percent in real estate. Regionally, Western Europe is the preferred destination (53 percent). Europe (Excluding Switzerland) European family offices outside Switzerland balance traditional and alternative assets equally, with 51 percent in equities and bonds, and 49 percent in private equity and real estate. Investment is concentrated in Western Europe (44 percent) and the U.S. (43 percent). Middle East Portfolios are split 50/50 between traditional and alternative asset classes, led by equities (27 percent) and private equity (25 percent). Regional allocation is tilted toward North America (55 percent), followed by Western Europe (21 percent). The latest UBS Global Family Office Report shows that family offices in the Middle East are embracing a diversified, forward-looking investment approach Balancing risk, opportunity, and legacy The 2025 UBS Global Family Office Report reveals a complex landscape for the world's wealthiest investors. While geopolitical and economic uncertainty dominate near-term concerns, family offices remain resilient and adaptive, making calculated shifts in asset allocation to preserve wealth and seize new growth opportunities. At the same time, many are grappling with the practicalities of intergenerational wealth transfer, emphasizing the need for long-term governance and proactive planning. As global conditions continue to evolve, family offices are expected to play an even greater role in shaping the future of capital markets through strategic deployment of assets, stewardship, and innovation. 'At a time of increased volatility, global recession fears and following a near unprecedented market selloff in early April, our latest report serves as a good reminder that family offices around the world are first and foremost pursuing a steady, long-term approach, as they focus on preserving wealth across the next generations,' Benjamin Cavalli, head of strategic clients at UBS Global Wealth Management, says. 'While the global macroeconomic and political environment continues to be marked by rapid changes and a high degree of uncertainty, this survey offers a glimpse of what we can expect over the coming five years. And most importantly, it provides a snapshot into the thinking of family offices around the world, their objectives, preferences and concerns,' Yves-Alain Sommerhalder, head of Global Wealth Management Solutions at UBS Global Wealth Management, explains. 'The latest UBS Global Family Office Report shows that family offices in the Middle East are embracing a diversified, forward-looking investment approach. While maintaining a relatively cautious exposure to global public equities, which is the lowest amongst all regions globally, they have embraced the benefits of alternative investments,' says Niels Zilkens, head Wealth Management Middle East at UBS Global Wealth Management. For more features, click here
