Member question:

How does a family office handle tax issues?

Expert reply by RSM: 

For a family enterprise, tax is rarely a once-a-year compliance exercise. It is an ongoing discipline affecting individuals, entities, investments, transactions and multiple generations. A well-designed family office tax function combines accurate compliance with forward-looking planning and tax strategy intended to preserve wealth, manage risk and support the family’s broader objectives.

The scope can be extensive. Income tax matters may involve individuals, partnerships, S corporations, C corporations, trusts, and private foundations, each with its own complexities, including distinct filing, allocation, estimated-payment and information-reporting requirements. The family office may also coordinate the collection of tax data, including working with family-owned operating companies, tracking K-1s, managing tax calendars and supporting the timely payment of tax obligations across the family enterprise.

State and local tax considerations can materially affect the family's aggregate tax position. These may include individual residency and domicile, the taxation of trusts, multistate business and investment activity, entity-level taxes and the sourcing of income and gains. Families with international investments, foreign entities or family members in multiple jurisdictions may face additional reporting requirements, including foreign account reporting, foreign entity reporting, foreign trust reporting, withholding, foreign tax credits and cross-border planning considerations.

Trust and estate planning is also central. The family office may coordinate estate, gift and generation-skipping transfer tax planning; monitor existing trust structures; support lifetime gifting and charitable planning; and evaluate how changes in assets, family circumstances or tax law affect the family’s wealth-transfer strategy. These efforts should be coordinated with legal and investment advisors because tax planning often intersects with asset protection, succession, governance, investment strategy and control objectives.

Private foundations introduce their own tax and operational requirements. The family office may support annual filings, qualifying distributions, investment and grant activity, expenditure oversight and compliance with rules governing transactions involving the foundation, family members and related parties, including self-dealing, minimum distribution requirements, excess business holdings, jeopardizing investments, and taxable expenditures. Foundation activity must also be coordinated with the family’s broader charitable, investment, liquidity and estate-planning objectives.

The structure of the family office itself can create an additional layer of tax complexity. Family office operations may structurally incorporate management companies, service entities and agreements, investment partnerships or other ownership and compensation arrangements. The structure selected can affect who employs personnel, contracts with vendors, incurs expenses, determines the deductibility of those expenses, and provides services to family members, trusts, foundations and related entities.

These decisions can introduce requirements involving expense allocation, service agreements, payroll, employee benefits, partnership accounting, tax distributions and reporting. A structure

may be technically supportable yet still create significant administrative complexity if it is not designed to support day-to-day operations.

Whatever structure and operating model are selected, coordination is critical. Tax professionals, accountants, investment teams, estate counsel and other advisors need reliable information, defined responsibilities and a regular planning cadence. The goal is not simply timely filings, but rather a coordinated tax function that supports informed decision-making, protects assets and facilitates the efficient transfer of wealth across generations.

RSM is a Founding Partner of the UNI Family Business Center.

the experts

Libby Hutton

Jim Steele

Max Youngquist

RSM's Family Office Services

Navigating the complexities of family wealth requires more than technical proficiency—it calls for a trusted advisor who can guide you through every stage of your journey, from creating and operating your family office to managing assets and sustaining your legacy.

Learn more about RSM's Family Office Services.