With the election of Donald Trump it is clear that some major changes in the tax code will occur. The proposed elimination of the estate tax and the possible elimination of the gift tax will translate into a financial bonanza for the very wealthy leading to a rise in dynastic wealth.
The very rich and super-rich often have substantial percentages of their wealth in capital assets that tend to appreciate. Donald Trump who will pass a portfolio of real estate holdings to his children exemplifies this. His inheritors could conceivably never have to sell the assets and pay capital gains. If they needed monies, they could borrow against the value of the real estate resulting in keeping the assets in the family for generations.
An increasing importance of single-family offices will also come about from an increase in dynastic wealth. “We are presently seeing a boom in the number of single-family offices around the world, and it’s because of the growth of substantial personal wealth. Single-family offices are proving to be the preferred way the exceptionally wealthy manage their assets and many aspects of their lives,” says Angelo Robles, founder and CEO of the Family Office Association. “With some of the changes in the tax code being proposed by President-elect Trump, it will be easier for the exceptionally wealthy to keep their fortunes within their families requiring them to take steps to ensure the skillful management of the assets over generations.”
There will also be ever-greater demand for professionals who can contribute to maintaining enhancing dynastic wealth and for ensuring the efficacious operation of single-family offices. “As more families think dynastically, a number of specialists – some employed by single-family offices as senior executives and others engaged in a consulting basis – will be in very high demand. These specialists will be paid handsomely for their expertise,” says Robles. “While already on a tear, the proposed changes in the estate tax and possibly the gift tax will only help super-charge the growth and importance of single-family offices.”
Dynastic wealth in the late twentieth century ushered in the modern single-family offices. Over the last decade, single-family offices have become very significant because of their numbers and the wealth they control. They have always been instrumental in fostering dynastic wealth, and the potential tax changes are only going to make them more important in the management of extreme personal wealth.
