McDermott Will & Schulte, a global law firm

Panelists discussed key governance and practical considerations for family offices adopting AI. The discussion focused on establishing clear policies, accountability, and oversight frameworks while balancing innovation with risk management.

Top takeaways included:

• Leadership, governance, and accountability must be established before AI adoption begins. Organizations should first align their AI philosophy, risk tolerance, and strategic objectives, while clearly defining who is responsible for approving AI tools, overseeing use cases, and managing risks. Strong leadership support and clear ownership create the foundation for responsible AI implementation.
• Protecting confidential information is a core requirement of any AI program. Before deploying AI technologies, organizations should identify and classify sensitive data, implement cybersecurity controls, conduct due diligence on AI vendors, and carefully review contracts for data rights, retention, and confidentiality provisions. These safeguards help reduce legal, security, and privacy risks associated with AI use.
• AI governance is an ongoing process that requires continuous oversight and education. It is critical to train employees on responsible AI use, establish rules for AI-generated transcripts and summaries, and monitor AI activity to detect misuse, unauthorized access, or policy drift. Effective AI governance extends beyond implementation and requires regular review, auditing, and updates as technologies and risks evolve.

This panel explored how to systematically review existing estate plans to identify and avoid potential issues such as IRS challenges, unintended wealth transfers, and unwanted control structures.

Top takeaways included:

• Pressure-test the estate plan by preparing pro forma estate tax filings, modeling distributions, liquidity needs, and downside scenarios, and reviewing them to identify risks early. Estate plans should be “war-gamed” before they are needed, by preparing mock estate tax returns and trust administration documents and having an experienced advisor review them from the perspective of the IRS or a potential challenger to the estate administration. This process can uncover hidden weaknesses and provide an opportunity to strengthen the plan before a triggering event occurs.
• Address issues proactively during life by updating documents, reviewing fiduciary appointments, resolving potential disputes, and planning for liquidity. Many estate planning challenges can be addressed more effectively during a client’s lifetime than after death, when disputes become more expensive and difficult to resolve. Regular maintenance helps ensure the plan continues to reflect current family dynamics, asset structures, and long-term objectives.
• Incorporate strategic protections to reduce IRS scrutiny, and interim distributions and in terrorem clauses, to deter beneficiary challenge. The panel highlighted the value of building defensive features into estate plans to mitigate tax and family-related risks. These measures can help preserve the settlor’s intent by reducing the likelihood of audits, litigation, and beneficiary disputes.

During this session, the panelists discussed emerging trends in family office dealmaking, including how family offices are structuring deals and navigating today’s investment landscape.

Top takeaways included:

• Family offices are emerging as key institutional capital providers, as they shift toward active deployment.
• High-quality assets continue to attract strong investor interest and competitive pricing. Beyond that top tier, investors face a tougher environment influenced by higher interest rates, liquidity constraints, and less-predictable exit strategies. The result is a private market in which pricing discipline matters and opportunities for customized deals are on the rise.
• Family-office transaction trends show increased expansion beyond funds into direct private investments, co-investments, and private-credit and special-situation opportunities. Collaborative capital opportunities are also on the rise, including club deals, manager partnerships, and syndicated transactions.
• Key forward-looking themes include an increased emphasis on control/influence rights, bespoke structures, and sector specialization.
• Enhanced diligence, structural protections, and economic alignment are critical to mitigating inherent private investment risks. Family office deal teams should consider early involvement of legal and financial advisors with a deep-bench and focused experience.

During this session, panelists served up a hearty menu of insights on family office profits-interest structuring and its challenges, walking attendees through tax risks, critical day-to-day management nuances, accounting difficulties, modeling issues, and operational complexities. As a final course, they covered governance planning and challenges of family dynamics in implementing a well-functioning, long-term structure.

Top takeaways included:

• Profits-interest structuring is not “one size fits all,” nor is it necessarily appropriate for every family. In particular, meeting the “bona fide trade or business” requirement must be carefully considered in light of the specific facts.
• Regularly ask the question, “Is the juice worth the squeeze?” The administrative and operational challenges need to be outweighed by the other (material!) benefits of the structure.
• Modeling the profits interest on the front-end is mission critical for the long-term structure’s functionality.
• The structure and governance need to survive, even if material family changes occur (e.g., the death of a principal, the birth of new family members, marriage, or divorce) – meaning that decision-making, ownership, and succession planning are all mission critical.

During this session, panelists explored major tax, regulatory, and planning developments affecting family offices in 2026, including California’s proposed billionaire tax, the IRS’s aggressive posture in Elcan, the growing impact of AI on legal practice and privilege, and the evolving tax risks associated with trust modifications and early terminations.

Top takeaways included:

• California’s proposed 2026 Billionaire Tax Act would impose a one-time excise tax of up to 5% on individuals who were California residents on January 1 with more than $1 billion in net worth, as well as certain applicable trusts. The definition of “net worth” is extremely broad and includes the assets of irrevocable grantor trusts set up by the taxpayer and any property “distributable to” the taxpayer from a trust, whether or not actually distributed. The valuation methods described in the proposed legislation are counterintuitive and impose significant penalties for undervaluation. Many family offices are considering options to minimize the tax, some of which have far-reaching implications that will last well beyond this year, and potentially constitutional challenges.
• The IRS’s position in Elcan signals heightened scrutiny of grantor retained annuity trust (GRAT) administration. The agency is attacking long accepted “lock in” techniques, with a focus on loan mechanics, substitutions, valuation practices, and the grantor’s control. Even though the IRS’s arguments lack clear statutory support, the potential exposure is significant and practitioners should tighten documentation and avoid informal note practices.
• AI is reshaping professional responsibility and privilege risk. Recent cases show courts rejecting privilege claims over AI generated content and criticizing AI “hallucinations” in filings. Family offices and advisers must treat AI tools as non confidential platforms and implement guardrails to avoid inadvertent disclosure or reliance on inaccurate outputs.
• Trust modifications now carry a wider array of tax risks than ever before. Modern decanting and nonjudicial modification statutes make changes easier, but they also increase exposure to gift tax, estate inclusion, goods and services tax (GST) issues, and income tax realization events. The IRS’s recent chief counsel advice (CCA) on adding tax reimbursement clauses underscores the idea that even beneficiary consent can trigger taxable gifts.
• Early trust terminations can be viable but require careful navigation. Recent rulings, including Anenberg and McDougall, show that early qualified terminable interest property (QTIP) and multigenerational trust terminations may avoid adverse transfer tax consequences, but only with precise structuring. Beneficiary gifts, valuation disputes, and potential loss of GST exempt status remain key risks.

This session explored how major philanthropists and family offices are adapting their charitable structures to address evolving priorities around governance, flexibility, privacy, and global impact. The discussion highlighted key considerations in designing, operating, and, when appropriate, winding down philanthropic vehicles, while navigating increasingly complex investment, tax, and regulatory landscapes.

Top takeaways included:

• The entity type, organizational structure, and governing documents and policies of a private foundation are largely informed by a number of factors, including, but not limited to, a clearly articulated mission, the planned involvement of future generations, the intended longevity of the private foundation, and the desire for flexibility in running the private foundation.
• Terminations of private foundations require a number of federal- and state-level considerations and demand careful planning to avoid the application of the termination tax.
• Supporting organizations may allow family offices to pursue more tailored philanthropic investment strategies than are typically available through a donor-advised fund, provided there is careful coordination and a strong, trusted relationship between the family office and the supporting organization.
• Social welfare organizations created under Section 501(c)(4) offer greater flexibility because they are not treated as “disqualified persons” under the private foundation rules (and are not subject to private foundation rules prohibiting self-dealing transactions).
• International grantmaking requires a family office to determine whether a grant is best made to 1) a US 501(c)(3) public charity that operates programs abroad, 2) a US “friends of” organization, 3) foreign organizations using an equivalency determination, or 4) foreign organizations using expenditure responsibility.

During this session, the panelists discussed important considerations for individuals who are approaching the ends of their lives, covering everything from updating beneficiary designations to minimizing estate tax.

Top takeaways included:

• Terminally ill individuals and their advisors should review existing estate planning documents and beneficiary designations to ensure that everything is consistent with the individual’s wishes.
• Deathbed gifts can be an effective estate tax strategy, particularly in states with their own estate taxes, but keep in mind that gifting low-basis assets will mean forfeiting the basis step-up at death.
• Moving out of a state that has an estate tax, and moving to a state without one, is one of the most powerful estate tax strategies available to terminally ill individuals.
• An individual’s deathbed options will depend on his or her facts and circumstances, including in particular how long he or she has to live, but there is much that can be done to optimize an individual’s estate and tax planning while he or she is still living.

Panelists highlighted the key considerations and responsibilities of serving as a fiduciary, from evaluating whether to accept an appointment to effectively managing ongoing duties and risks. The discussion emphasized that a thorough understanding of governing documents, disciplined processes, and active oversight are critical to minimizing liability and fulfilling fiduciary obligations.

Top takeaways included:

• Do not accept a fiduciary role without rigorous upfront diligence; consider family dynamics, history, governing law/instruments, assets (including illiquid or closely held interests), indemnification, waivers, and insurance, among other factors.
• The governing instrument and state law define – and limit – a fiduciary’s duties. Read the governing instruments.
• Fiduciary liability most often arises from process failures. Trustees are expected to follow disciplined, consistent, and well-documented processes.
• Core fiduciary duties owed to the beneficiaries (not the grantor) include loyalty, impartiality, prudence, proper delegation, accurate recordkeeping, and safeguarding trust property.
• Investment and asset oversight require active, ongoing engagement; delegation does not eliminate responsibility.