Quora Answer: What are the Reasons for Forming a Family Office over a Beneficial Trust or Corporation?

The following is my answer to a Quora question: “What are the reasons for forming a family office over a beneficial trust or closely-held corporation?  Are the differences purely tax related or are there non-tax differences?  How are they organised or registered with government agencies?” 

A family office is merely an entity to manage private wealth.  They serve the needs and interests of ultra-high-net-worth individuals.  It may be a trust, or it may be a company, or it may be a structure which has either or both within it.  They function as the total outsource solution for the management of the assets and finances of an individual, or a group of individuals.  If the family office serves an individual, then it is a single family office.  Anything else is a multi-family office. 

Family offices are more flexible then either a beneficial trust or a company.  A beneficial trust has a limitation in that it must be irrevocable for it to provide protection as a distinct legal entity.  The fiduciary arrangement, however, necessitates the grantor delegating custody and management to another party, the trustee.  They cannot simply take back direct ownership of assets in a trust without going through an arduous process.  A company, by itself, does not protect the director from full legal and debt exposure, only mitigating tax exposure.  A properly structured family office can address all these concerns. 

Family offices offer more than simply mitigating tax exposure.  They function as vehicles for fund management, creditor protection, obfuscate beneficial ownerships, provide extreme confidentiality, arrange charitable donations, manage political and other financial risks, hold the insurance portfolio, and manages disbursement to beneficiaries over an extended period.