The Single Family Office: Converting Wealth into an Enterprise
Tax Tips / Family Office (L4)
The Single Family Office: Converting Wealth into an Enterprise
💡 Executive Summary
- Problem: Managing 10+ trusts (SLAT, GRAT, Dynasty) and disparate assets creates chaos and compliance risk.
- Solution: Establish a Single Family Office (SFO) to centralize investment, tax, and legal functions.
- Result: Institutional-grade efficiency, privacy, and the ability to deduct investment expenses (IRC § 162).
⚠️ THE “SECTION 162” DEDUCTION
Since TCJA 2017, individuals cannot deduct investment management fees. However, a properly structured Family Office (Trade or Business) CAN deduct salaries, tech, and data costs. This alone often pays for the office.
Since TCJA 2017, individuals cannot deduct investment management fees. However, a properly structured Family Office (Trade or Business) CAN deduct salaries, tech, and data costs. This alone often pays for the office.
At the $100M+ level (Tier L4), you are no longer just an “investor”; you are an “institution.” The Family Office is the super-structure that governs the FLPs, GRATs, and Dynasty Trusts we have built, ensuring they work in concert, not conflict.
🧐 Core Definition: SFO vs. MFO
Single (SFO): Serves ONE family. Total control, high privacy, high cost.
Multi (MFO): Serves many families. Shared cost, less customization. SFOs often outsource specific tasks (e.g., tax prep) to MFOs.
Single (SFO): Serves ONE family. Total control, high privacy, high cost.
Multi (MFO): Serves many families. Shared cost, less customization. SFOs often outsource specific tasks (e.g., tax prep) to MFOs.
Performance Simulation
Cost Efficiency ($100M Portfolio)
Traditional Wealth Mgmt (1% Fee)
$1.0M / Year (Non-Deductible)
High Drag
SFO Structure (Direct Costs)
~$600k (Tax Deductible*)
Optimization
The “C-Suite” of Your Family
| Role | Responsibility | Strategic Value |
|---|---|---|
| CIO | Chief Investment Officer | Asset Allocation & Manager Selection |
| General Counsel | Legal & Compliance | Trust Governance (The “Ref”) |
| CFO / Controller | Tax & Accounting | Cash Flow & “Bill Pay” |
“A Family Office is not a luxury; it is a necessity for complexity management. It turns a loose collection of bank accounts into a disciplined, perpetual enterprise.”
🔗 Related BMT Playbooks (Internal)
🛡️ The Engine: Dynasty Trust (Main Client of the FO) ⚖️ The Vehicle: FLP (How the FO holds assets) ✅ The Protection: SLAT (Spousal Access)🏛️ Institutional Resources (External)
📜 SEC Rule: Family Office Exclusion (Inv. Advisers Act) ⚖️ Tax Code: IRC § 162 (Trade or Business Expenses) 🏛️ Case Law: Lentell v. Commissioner (FO Deduction Rules)
BMT designs for tax reality, not theory.