Family Office Counsel: Tax Minimization & Efficient Legal Structures

Structuring a family business to minimize taxes on wealth transfer is a key priority for high-net-worth (HNW) and ultra-high-net-worth (UHNW) families seeking to preserve intergenerational wealth. With careful planning and strategic legal structuring, families can significantly reduce exposure to estate, inheritance, and gift taxes—while ensuring business continuity and asset protection.

For example, creating domestic or offshore trusts allows business owners to transfer shares or interests in the business to beneficiaries without immediate tax liability. With proper family office legal advice, this planning can generate deferred or reduced estate and gift taxes, assist in creditor protection, and preserve wealth for multiple generations. A well-designed succession plan can reduce the taxable estate and ensure a smooth transition of family businesses. Tools used by family office attorneys often include: gifting shares over time using annual exemptions, the use of Grantor Retained Annuity Trusts (GRATs) or Family Limited Partnerships (FLPs), and cross-border planning for international family members.

A family holding company can consolidate ownership and enable tax-efficient management of shares and assets. Many countries offer tax incentives for business transfers within families, such as Business Property Relief (UK); Family Business Exemption (EU); and Estate Freeze Techniques (Canada and U.S.) Working with experienced family office legal and tax advisors ensures compliance with local and international tax laws while maximizing available reliefs.

The most common legal structure for a family office depends on the family's objectives, jurisdiction, and complexity of assets. Globally, Special Purpose Vehicles (SPVs) and Private Trust Companies (PTCs) are the most frequently used structures for both single-family and multi-family offices.

SPVs are widely used due to their flexibility, liability protection, and tax efficiency. SPVs are typically formed as Limited Liability Companies (LLCs) in the U.S., UK, Switzerland, UAE, and Singapore, but they can be formed as other types of business entities depending on the jurisdiction of formation and tax considerations. Key benefits include separation of personal and family office liabilities; pass-through taxation or corporate tax structuring; simplified governance and operational control; and the ability to hold diverse asset classes (e.g., real estate, private equity, art, or intellectual property rights).

In contrast, a PTC is a specialized entity formed to act as trustee for one or more family trusts. It is popular among ultra-high-net-worth families seeking greater control over trust management, as it can provide enhanced privacy and confidentiality, consolidated estate and succession planning, and multi-generational asset protection. A PTC can be formed as an LLC, a company limited by shares, or another type of business entity depending on its jurisdiction of formation, and they are often established in favorable trust jurisdictions such as the Cayman Islands, Jersey, or Singapore.

Another structure that is commonly used in civil law jurisdictions (e.g., Liechtenstein, Panama, or Switzerland) is the family foundation. Family foundations offer a robust structure for asset preservation and philanthropic goals. These typically have no shareholders—control is governed by the foundation’s charter, which provides for long-term wealth preservation with strong succession rules. Family foundations are often used in combination with holding companies or investment arms.

Finally, many sophisticated family offices employ a multi-entity structure, combining SPVs, PTCs, and foundations to meet regulatory, operational, and tax planning objectives across multiple jurisdictions.