Family Foundation

Family Foundations | What is a Family Foundation

Don Wilkinson is a veteran in the wealth management industry and has contributed his perspective on the popularity of a family foundation. More affluent Americans are finding that setting up a family foundation for themselves and their families is an ideal way to give funds to charitable causes while making those funds exempt from federal income tax. Moreover, family members can work toward common goals, and instill the value of charitable giving in future generations.

The giving vehicle of a family foundation, which provides full family control, allows for extensive benefits to families who give over $25,000 a year to charity.

The family foundation, with the same characteristics as a private foundation, is a foundation whose board consists of family members of the person who originally funded the foundation. The board of a foundation has ultimate control over its actions. It can choose an investment manager, grant recipients, hire and fire staff, etc. Many families set up a foundation specifically to involve their family in their grant making. Being involved in the foundation can be an excellent way to educate younger family members about asset management, taxes, responsibility, and family values. However, a family foundation can also be set up with only a single board member.

Unlike public charities, which generally derive their funding or support primarily from the general public, and receive grants from individuals, government, and private foundations, the family foundation does not solicit funds from the public. Funding of charitable cause is derived from family resources usually under law of dispensing a minimum of 5% of the foundation’s assets annually.

Tax Benefits

Since a family foundation is a charitable organization, it is exempt from federal income tax on its income, although it must pay a 1-to-2 percent excise tax on its net investment income. The gifts made to establish a new foundation or grow an existing foundation can offer the family certain tax advantages: income, gift and estate tax deductions are available under the law.

When making a gift of cash to a family foundation, a foundation principal can take an income tax deduction in the year of the gift. The amount of the deduction claimed can be as much as 30% of the foundation’s principal adjusted gross income (donations in excess of this limit can be carried forward for five years).

If the principal donates appreciated stock that is owned for at least one year, the income tax deduction will be equal to the fair market value of the stock. The amount of the deduction claimed for a gift of stock can be as much as 20% of the principal’s adjusted gross income (with the same provision to carry forward excess deductions for five years).

In addition to the income tax deduction for a gift of stock, the principal also avoids paying capital gains tax on any appreciation. Donations of assets other than publicly traded stock (such as real estate) are only tax deductible at cost basis, not the fair market value. However, the foundation’s principal does avoid paying capital gains tax on any type of asset contributed to a foundation.

Setting Up The Foundation

Until recently, private foundations were expensive and time consuming. Today, a number of private foundation “administrators” are utilizing Internet technology to drastically reduce the time and expense of setting up a foundation. A foundation can now be set up for less than $50,000 in a matter of days. These administrators handle all of the operations of the foundation including check writing, compliance, record keeping, tax filing and administration.

The fees for these services depend on the size of the foundation, but generally come to less than 1% of foundation assets when the foundation is larger than $1 million. Foundations with lower asset levels generally find that their expenses run from 1-2% of assets. All foundation related fees are paid by the foundation, not by the donor.

An alternative to engaging a specialized administrator is for a member of the family foundation to handle the record keeping and pay an accountant to file the foundation’s tax return. Because tax returns to the IRS differ from traditional charitable donations, it’s best to have a tax attorney or CPA on the foundation team if hiring a specialized administrator is not desirable. The foundation can pay family members salaries to manage the foundation. This is one of the few ways available for family members to take money out of the foundation.

Private Foundations At A Glance

The guest author of this article is Don Wilkinson of Wealth Management Exchange

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What the Ultra Rich Invest in now

Below is a short article on what family offices and some ultra high net worth investors are investing in right now:

Simon Mellon, who’ll be heading up Bonner & Partners Family Office, our soon-to-be-launched money management and tax optimization service, is keeping in close contact with Notes HQ.

Simon is a global finance insider with a decade’s worth of experience working in capital markets. And right now he’s advising investors to remain cautious until a clearer picture emerges about the market’s direction.

When I was a child I could never sit still on a long road journey. I was always asking, “Are we there yet? Are we there yet? ARE WE THERE YET???” My father would always reply “Nearly, son… Nearly,” even though we were still miles from our destination.

This is exactly how the financial markets seem to me right now. It’s been more than two years since the credit crisis kicked off, and I’m getting itchy in my seat: I want to be back out there playing with the other financial (whizz) kids. But it feels like the end of this current rocky road is still on the distant horizon.

Wall Street wants you to believe things improving… that we are on the road to recovery… and that “green shoots” are starting to appear in the economy. Call me a cynic, but I’m just not convinced. Read more…

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Tags: Ultra Rich Investing, investments, family office, family offices, wealth management, financial planning, financial, finance, business, investments, stock market, stocks

Bonner & Partners Family Office

Below please find the Family Offices Profile for Bonner & Partners Family Office. If you need contact details for this family office please refer to FamilyOfficesDatabase.com

Resource #1 (7.8.09) Raife Neuman, of Bonner & Partners Family office, continues his campaign on the injustices of the American education system.

As we all know, often the better you do the more the government wants to penalize your success. Families and college students often pay exorbitant costs for education. And, as I wrote last week, students who go on to get a professional degree are often saddled with loads of debt – creating a new class of indentured servants. You’d think the IRS could cut them a bit of a break. But you’d be wrong.The tax code says “all or part” of a scholarship or fellowship “may be tax free.” The emphasis should be on “may” because you have to meet these strict conditions to avoid taxes Read more…

Resource #2: Simon Mellon, who’ll be heading up Bonner & Partners Family Office, our soon-to-be-launched money management and tax optimization service, is keeping in close contact with Notes HQ.

Simon is a global finance insider with a decade’s worth of experience working in capital markets. And right now he’s advising investors to remain cautious until a clearer picture emerges about the market’s direction. Read more…

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Tags: Bonner and Partners, Bonner and Partners Family Office, Family Office, Family Offices, Wealth management, wealth

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

Below please find the Family Offices Profile for Majid Al Futtaim. If you need contact details for this family office please refer to FamilyOfficesDatabase.com

Resource #1: (6.8.09) Hedge fund manager, Majid Al Futtaim Asset Management, is launching its first Middle East and North Africa (MENA) equity fund, the Luxembourg domiciled ‘Elite MENA Equity Fund’.

Investors can invest alongside the family office of Majid Al Futtaim and gain access to the services of the portfolio management team responsible for the MENA equity investments. The Majid Al Futtaim family office has seeded the fund with Dh550 million ($150 million), making it one of the largest MENA equity funds available to investors. source

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Tags: Majid Al Futtaim, Majid Al Futtaim family Office, Middle east family offices, family office, family office wealth management, wealth management, hedge fund, capital

Many wealth advisors have lost assets and clients through this recent recession. The one bright spot in the industry has been with multi-family offices which have been in many cases gaining new clients as individuals realize they may need more high touch services and holistic products. Paying an extra 1% seems like a small charge after someone has lost 20-30% of their portfolio within a single year. Here is a recent article excerpt on this topic:

“We’re seeing lots of interest in MFOs, and I think you’ll see more as the market improves and clients are less afraid to make a move,” said Tim White, a partner with Kaye/Bassman International Corp., an executive search firm based in Plano, Texas.

“Look, the rich are different: They want a higher level of service. They can get that at a multifamily office,” Mr. White said.

Danny Sarch, president of Leitner Sarch Consultants Ltd., a re-cruiting firm based in White Plains, N.Y., agrees.

“Advisers of high-net-worth clients are looking for alternative solutions right now, and multifamily offices are seen as places that can provide clients with trust and estate and concierge services, and are less bureaucratic and more entrepreneurial,” he said.

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Tags: Multi-Family Offices, family office, family office employment, work for a multi-family office wealth management firms, wealth managers, wealth management, financial planner employment

Below is an excerpt from an article discussing another recent survey pointing to the growing trend for HNW individuals and families to have their assets managed by a family office instead of a traditional financial planner or wealth management firm:

High-net-worth investors are moving their money to multifamily offices, according to a new study that will be released Monday by New York-based accounting and financial services firm Rothstein Kass.

Fully 40% of wealthy investors who moved money this year said they had chosen a family office as their new provider, according to the study, “The Multifamily Office Solution.”

High-net-worth families are “gravitating to the family office model because of the holistic approach to wealth management and personalized attention that they can provide,”

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