Since there is a billion-dollar lottery in play right now, I thought I'd talk about family offices for billionaires.
In case you bought a lottery ticket, let me tell you about the "family office" you will no doubt want to set up for yourself.
A family office is your own private enterprise, the sole purpose of which is to run the business of managing your money -- (and coordinating family members' interests when a family business is the source of wealth).
You would have a team in charge of tax planning, bill paying, managing investments, charitable gifting, family gifting and handling estate-related issues, among others.
A family office will likely employ CPAs, tax lawyers and money managers, as well as specialists full time or on a consulting basis for certain interests -- for example, if you have extensive real estate holdings or a valuable art collection.
According to the website Family Office Exchange (tinyurl.com/5w73ytht), those who choose to set up a family office typically have at least $100 million in investable assets and decide they want a dedicated team to help provide services and achieve long-term goals.
Ultra-high-net worth families who might have a lower amount of investable assets could consider joining other families in a multi-family office environment instead of a single-family approach.
When we're talking about family offices that are involved in running multigenerational family businesses, family dynamics come into play. Difficulties can arise when family members have diverging interests, according to Josh Baron and Rob Lachenauer (co-founders of BanyanGlobal, a family business adviser in Boston, Massachusetts) in a Harvard Business Review piece published in September ("Is Your Family Office Built for the Future?" -- tinyurl.com/2p9ysrva).
The authors described a situation where two brothers were the leaders of the family office after the death of their father, whose business was the source of the family wealth and the reason for setting up the family office.
Conflict over investing decisions, transparency and decision-making authority eventually caused other family members to avoid the situation and led to the family office being disbanded.
One recommendation is to establish rules on how decisions will be made in their family office. Key questions must be asked, including:
-- What decisions will family owners reserve for themselves?
-- What decisions will they delegate to a board or management?
-- How and when will they involve the next generation in making decisions?
Family dynamics and communication also are key considerations when it comes to the long-term viability of a family office, along with how the family defines success. Also, when and how the family owners should share information with the younger generation is an important discussion.
If you are in the position to consider a family office, be sure to do your research. Read the Harvard Business Review article to see where possible conflicts can occur. Reach out to me (readers@juliejason.com) if you have questions.
So, when you win that billion-dollar lottery, don't forget to check out setting up a family office for yourself. Consider who the decision-makers should be, particularly if you share in the finances with a family member who might have divergent interests. Ideally, I'd start with one person in charge (easy for me to say, since I'm an only child).
On another note: There's still time to apply for the 401(k)Champion Competition, a pro bono initiative for those who "love" their 401(k)s. The deadline is Nov. 17. Go to 401kchampion.com for more details.
DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION