The shooting of Brian Thompson, the UnitedHealthcare CEO, on December 4, 2024, has prompted security advisors to rethink security considerations for corporate executives. Estate planning advisors must reconsider the intersection of security with estate and tax planning. For ultra-high-net-worth (UHNW) families, personal security has always been a priority. However, today’s environment demands a more integrated approach that aligns protection with tax efficiency and succession planning.
A recent analysis by Baker McKenzie highlights an often-overlooked opportunity: properly structured corporate security programs can provide tax-advantaged protection that extends beyond the executive to family members. This opens up innovative estate planning strategies that blend security with tax efficiency.
We are witnessing a paradigm shift in estate planning for UHNW families. Security isn’t just a cost center anymore; it’s becoming a central consideration in structuring everything from family offices to succession plans.
Tax Treatment of Security Programs
The IRS provides favorable treatment for “overall security programs” that meet specific requirements. When structured correctly, these programs offer multiple advantages:
- Security costs are tax-deductible for the company;
- Benefits are not treated as taxable income for protected individuals;
- Protection can extend to spouses and children; and
- Even commuting expenses can be covered.
This presents an opportunity to provide comprehensive family protection through corporate structures rather than using after-tax personal funds—a significant consideration in wealth transfer planning across generations.
Integration with Succession Planning
Security concerns are also reshaping how families approach business succession. The timing and structure of leadership transitions need to account for security implications. Some families incorporate security assessments into their regular business valuations, while others build security costs into buy-sell agreements and succession funding mechanisms.
We will see more families integrate security protocols into their family office structures. This allows consistent protection across generations while maintaining tax efficiency.
The Trust Factor
Innovative planners are exploring ways to incorporate security programs into trust structures and family limited partnerships. Some approaches include:
- Creating dedicated security trusts funded with business interests;
- Incorporating security costs into family office operating agreements; and
- Structuring security programs through family limited partnerships.
Digital Security and Identity Theft in Estate Planning
Identity theft and data breaches compromise personal information and expose sensitive details, such as calendars and travel plans, that can put clients at risk. Estate planners must incorporate robust cybersecurity protocols, including encryption of digital records, regular security audits, and secure communication channels for all client interactions. Furthermore, creating a digital asset protection strategy is essential. This includes safeguarding online banking credentials, cryptocurrency wallets, and intellectual property. Identity theft protection services, such as monitoring fraudulent activity and providing insurance against cybercrimes, can be integrated into security measures. Lastly, families should consider the role of digital executors—individuals or entities tasked with managing digital assets—to ensure continuity and protection in an increasingly virtual landscape.
Documentation Becomes Critical
The tax benefits of corporate security programs hinge on proper documentation, particularly independent security studies that justify business necessity. This aligns with estate planning best practices, which emphasize thorough documentation for tax purposes.
Forward-Looking Considerations
As security threats evolve, estate planners must stay ahead of protection needs and tax implications. Regular security assessments, like periodic investment reviews, should be incorporated into the standard estate planning review process.
Conclusion
For UHNW families, security can no longer be treated separately from estate planning. The most effective strategies will integrate protection, tax efficiency, and succession planning into a comprehensive approach that safeguards family and fortune for future generations. As we look to the future, innovation in estate planning will continue to evolve, integrating security measures within financial frameworks. Practitioners should consider how emerging trends, such as tech-enabled security solutions, can enhance family office operations. I encourage UHNW families and their advisors to incorporate these considerations into their estate planning strategies proactively. By doing so, you will protect not only your financial legacy but also your personal and family legacy amidst new challenges and threats.