The Importance of a Family Office

For high-net-worth families, there is a lot of organization required for the
management of their assets. This includes insurance planning, tax strategies,
investment planning, estate planning, charitable gifting, etc. A family office is a
private company that handles wealth, investments, and management for families.
The company is dedicated to the complex management of a family’s wealth.
Because of the complex nature of their assets, high-net-worth families must
engage in estate planning to ensure a seamless transition of their wealth to the
next generation. Aside from the distribution of assets, it also involves
comprehensive strategies that ensure the family’s financial well-being.

The following are the importance of a family office:

Training family members on how to use and manage wealth: While this
may seem like a very simple objective, but the preservation of wealth hinges
on the ability of its users to make use of it wisely. For this reason, financial
training is necessary.

Wealth preservation: Family offices provide professional wealth
management services to their clients. These include investments, taxes,
and financial planning. They ensure that the family’s wealth is preserved,
increased, and spread across generations.

Support: Apart from the management of finances, family offices also
provide their clients with comprehensive services such as family
governance (decision-making, conflict resolution, etc), philanthropy,
lifestyle management, etc. Through philanthropy

Tax and legal services: Family offices ensure that the families adhere to
tax regulations and navigate legal complexities in order to minimize legal
risk. For example, family offices advise high-net-worth families to make use of
gifting as a means to share their assets with their children in order to
reduce tax costs. Through family offices, donations can be structured to
utilize tax deductions such as the charitable income tax deduction as
provided by Section 25 of the Company Income Tax Act.

Estate planning and asset protection: Family offices work with legal
professionals to create comprehensive estate plans that minimize tax
liabilities and ensure a smooth transfer of wealth across generations. This
includes creating trusts, wills, appointing powers of attorney, etc. in
accordance with the provisions of the Wills Act, Cap W4, Laws of the
Federation of Nigeria (LFN) 2004.

Creation of a legacy: Family offices help to ensure long-term well-
being of the name and legacy of their clients through philanthropic
advising, lifestyle management, education, etc. The family office helps
families create a specific and clear purpose that will be upheld as a legacy
through generations.

Privacy: A family office helps a family to have all their personal information
in one secure place that is accessible to only a limited number of people.

In this capacity, the family office serves as a guardian of the family’s
Privacy.

Navigating the Legal Landscape: Family offices are skilled in navigating
the complex legal and regulatory environment in Nigeria. They work
closely with legal professionals to ensure families adhere to tax regulations
outlined in the Company Income Tax Act, the Personal Income Tax Act, the
Wills Act, and other relevant statutes.

The Risk of Inadequate Estate Planning
Without a family office, a lot of high-earning families make mistakes that can cost
them their wealth such as failing to create comprehensive plans, procrastination,
overlooking tax implications, disregarding the need for professional guidance,
etc. Such mistakes affect the ability of the family to manage, preserve, and
transfer their wealth. This is the gap that family offices fill and why they are
important for affluent families.
Some of these significant risks include the following:

Estate Tax Burden: Where there has been no estate planning, with
deliberate steps taken to minimize financial burdens, high-net-worth
families tend to lose substantial amounts of their liquid assets to tax
Burdens.

Probate Challenges: Lack of proper planning will lead to probate
challenges when significant members of the family die. Such challenges
will lead to delays in transferring wealth which will also increase the
administrative cost of the process. It also creates room for disputes
amongst the beneficiaries.

Asset Exposure: Insufficient protection of assets exposes high-net-worth
families to various risks, such as potential creditors, lawsuits, and
unforeseen events. To safeguard wealth and provide peace of mind, it is
important to employ comprehensive estate planning techniques.

This involves the utilization of legal structures, trusts, and proper titling of
assets; these are all services that can be provided by a family office.

Conclusion
Establishing a family office is a strategic decision for high-net-worth families in
Nigeria, because it offers a one-stop shop for managing its complex financial
affairs. It acts as a central hub, consolidating the roles of various professionals
like lawyers, accountants, treasurers, and financial advisors. This holistic
approach streamlines the management process, fosters coordinated decision–
making, and ensuring all aspects of the family’s financial well-being are
addressed under one roof. By combining expertise and focusing on the family’s
unique needs, family offices help navigate legal complexities, preserve wealth
across generations, and build a lasting legacy.

Author: Xerona D Philips