In this article, we discuss the concept of a family office, its role and benefits in the Indian context, important considerations relevant in setting up a family office, disclosure obligations in case of succession planning structures set up outside India and important precautions to be taken in the context of general anti-avoidance rules, which are slated to come into effect from April 2017.
A family office generally refers to an organisation which provides private wealth management advice, fiduciary services (like acting as trustees) and services related to handling club memberships, family holidays, etc., to High Net-worth Individuals (HNIs) and their families. The modern day concept of family offices started in the 19th century with wealthy businessmen such as J.P. Morgan setting up offices to take care of their family assets.
A family office can be characterised either as a Single Family Office (SFO) if it caters only to the needs of a particular family or as a Multi-Family Office (MFO) if it provides such services to multiple families. SFOs are generally set-up by the family members themselves (though they may seek guidance from external advisors as well) while MFOs generally comprise external advisors. A notable example of a family office which started off as a SFO but later became a MFO is Rockefeller Financial Services. It was set-up by John D. Rockefeller to manage his family's business and philanthropic pursuits, but now advises multiple families, including the illustrious Rothschilds.
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