Everything Everywhere All at Once?
Family Enterprises in 2024

By Patricia M. Angus – Originally published in Trusts & Estates, January 2024

The  2023  Academy Awards ceremony was quite a sweep for the film Everything Everywhere All at Once,¹ which conventions, including genre, casting, plot and the time-space continuum. Looking ahead to 2024, it seems this film is a harbinger of things to come, especially for family enterprises. Just as the family business at the core of the film was caught up in infinitely complex family, business, tax and societal challenges, so too will family enterprises find themselves confronted with seemingly multiple universes in 2024. Here are just a few of the challenges that are likely to be happening, all at once: geopolitical unrest and uncertainty, U.S. elections and public discourse, continued growth and expansion of complex family enterprises and business transformation including the growth of artificial intelligence (AI).

Geopolitical Unrest and Uncertainty
The ongoing war in Ukraine as well as the Middle East war triggered by Hamas’ horrific attack and hostage taking in Israel on Oct. 7, 2023 rocked the world in 2023. Images of lost lives filled the news cycle and shook anyone watching to the core. Humanity at its worst was on view for all to see and experience. These events prompted some high- net-worth individuals and businesses to pull the plug on donations to institutions that didn’t share their views.² At the same time, U.S.–China relations came to the fore with President Xi Jinping’s first visit to the United States in six years, with each side acknowledging the interdependence of the relationship and being cognizant of the economic, trade and security issues inherent in this new “Cold War.” Supply chains, which were disrupted during the pandemic, seemed to be at risk for even more disturbing reasons. Climate change was joined by urgent crises that led to high levels of anxiety among old and young alike; multiple existential challenges were happening simultaneously. As 2024 proceeds, these challenges will be apparent as an unprecedented number of elections take place—over 70 across the world, involving 4.2 billion people, more than half the world’s population.³ The battle between democracy and authoritarianism is on the ballot on a global basis. The results will impact and be influenced by the owners of family businesses, which are the majority of businesses worldwide.

U.S. Elections and Public Discourse
At the time of this writing, it feels as though the 2024 U.S. elections have been in process for years, even though they’ve hardly even begun. Federal, state and local level contests all hinge on one issue —the growing divide within the United States. The prospect of having elected officials and candidates, who boldly question the very concept of democracy is new territory for the United States. It’s not clear in which direction the country will go. Public political divisions are playing out on every level, including within families who own businesses together. Anecdotally, advisors now recognize that the schisms highlighted in the media are alive and present in small and large family business-owning families alike. Families splitting over political, cultural and social differences are becoming more common. In some cases, this strife might affect which family members inherit assets and businesses.⁴ For a family that owns a business, this is a reality that must be faced head on. Before creating trusts that will hold a family—and its business(es)—together for generations, advisors and families must discuss openly whether it’s feasible or advisable to do so. Flexibility, exit valves and ways for family members to opt in and out of ownership will become even more important. On another note, owners of family businesses must decide whether and how they, and their businesses, can or should express their values in public. The risk of failure to do so is high, but the risk of taking a stand may be even higher. These are not easy times, to say the least.

Growth and Expansion
In 2024, families that own one or more businesses are likely to explore expanding those ventures to become “complex family enterprises”⁵— which include one or more operating businesses, investment funds and joint philanthropic efforts. Fewer families will own just a single operating business. Rather, more rapidly than ever before, a business founder or group of family owners will initiate liquidity events and invest the proceeds in real estate, create a formal or informal family office and hire as few as one part-time professional (or family member) or a multitude of employees to coordinate advisors, consultants and others who manage operations across disciplines, geographies and generations. As this trend continues, families will need to focus even more on developing ways to decide whether, how and when they want to own, operate and work together—and when they don’t. More families will have hybrid arrangements, with some family members, but not all, involved together in business. Some will split completely; others will have different choices depending on assets or goals. The potential configurations are endless. A family that co-owns a business might have multiple family offices for individual members or branches. Two siblings might start a business together, while other family members co-invest in other ways. This will require more flexible thinking on the part of advisors as they adapt to the family’s goals and interests. Just as families don’t fit into a single mold, neither will their joint activities. Education and advice must be both broad-based and closely tailored to these new configurations. Younger generations will want to be involved in more meaningful ways and will often be the drivers of the educational and governance initiatives required to get themselves—and the rest of the family—up to speed. Change will be the norm.

Growth of AI
Anyone who’s received a text or participated in calls from a “helpful” assistant with a “normal human” sounding name knows the frustration of trying to reason with AI. “Artificial” seems to be the operational word when navigating the texts, or calls, or other communications driven by AI that can become nonsensical. Closer to home for Trusts & Estates readers, lawyers, especially, need to be careful about whether and how they incorporate AI into their practices, as junior associates have learned the hard way when they try to save time with ChatGPT and the like.⁶ These are two sides of the same coin. And the coin is bigger than bitcoin is (or might be). The key issue in 2024 will be whether and how regulations are promulgated to protect the future of humanity or at least put some guardrails around this new technology. Again, the 2023 Oscar winning movie gives a glimpse into the way things could go—will it be chaos, or are we heading to a happy ending after all?

Despite the frustration, the reality is that we all—and family enterprise owners especially— need to “get over it” and get on with it. AI is here to stay. It’s already transforming all industries and will continue to do so for the foreseeable future.

Family enterprise owners, and their advisors, will need to keep current on the evolving landscape of AI regulation and be educated on ways to integrate it into operations. Administrative tasks may become more efficient, the financial industry will experience further consolidation and distinction among tasks that can be handled through AI vs. humans will become clearer.

What else is on the horizon? Risk. In so many areas. Savings that might be gained from replacing people with technology will likely be diverted into new areas including cyber security, political risk analysis and management and achieving stakeholder- oriented results for businesses and investments. Impact investing will become more sophisticated, and the savviest family owners will be able to quickly identify greenwashing and take their investments elsewhere. Others may find lower returns on their investments explained away with reasons that might be a different form of greenwashing. That is, an excuse for underperforming investments. With higher interest rates becoming the norm, real estate isn’t the only industry that’s heading into more difficult days ahead. The tension between the desire for sustainability and the quest for outperformance will be under the spotlight in the days ahead.

Will all this happen in 2024? No, but these trends have begun and will continue throughout the years ahead. Families and their advisors need to prepare and adjust course more quickly than ever before.

Another Boom Year?
The year 2023 was one of the few in recent memory that didn’t seem to have a background drumbeat of ears repeated over and over about an impending estate tax cliff. Rather, lawyers, accountants and investment advisors worked steadily to set up ever more spousal lifetime access trusts, intentionally defective grantor trusts and comparable structures for clients to enable them to use their gift, estate and generation-skipping transfer (GST) tax exemptions before they might be reduced at the end of 2025, if not sooner. Even though most clients are no longer subject to federal estate, gift and GST tax (with a 2024 exemption of $13.61 million), the prospect of a potential estate tax exemption drop (projected to be about $6 million, if it occurs) at the end of 2025—or sooner with a change in Presidential/Congressional balance—means that there will be plenty of new trusts created and gifts made. Advisors have been relentless in the past and will continue to recommend that their clients rush to get ahead of potential change. There will be significant emphasis on the potential exemption drop, and clients will be encouraged to use the current exemption before it’s lost (all despite hard lobbying to eliminate the estate tax altogether). In this context, it’s hard to see how there won’t be another boom year for lawyers and accountants; gifts to spouses and children will continue to f low (in trust, of course). Hopefully, before making these gifts the donors will assess whether they’ve retained sufficient resources to stay financially secure for the rest of their (increasingly long) lifetimes and will consider the emotional, practical and financial consequences for the family members they name as beneficiaries of these trusts. With family businesses, transferring ownership to trustees (who may or may not be family members) rather than automatically to next generation family members will result in a profound (if little understood) shift of power and control.⁷

Greater Existential Questions
Given all these trends on macro, family and individual levels, it’s easy to see how prescient the 2023 film was. While everything goes on, everywhere and all at the same time, families need to be even more vigilant to focus on their own goals and think about the future they’re helping to create. They must ask—what are my/our guiding principles? What do I/we want to accomplish? Is the proposed course of action going to get me/us there? More and more individuals, especially younger members of families with significant resources, are asking “What’s it all for?” Why are our plans laser- focused on saving taxes? Is that the right objective? Why is government considered the enemy? As a movement begins to grow in the United States and other Western countries among wealthy families who support higher taxes for the rich and as the deficit blossoms while taxes decrease, there are even greater existential questions at hand. As 2024 leads to elections that will have the state of democracy on the ballot in the United States and around the world, it may be a defining moment for Trusts & Estates readers. What will your role be? With these complex challenges everywhere, all at once, how will you find your way through? What universe will you be practicing in?

Endnotes

1. See imdb.com/title/tt6710474/ ; www.nytimes. com/2022/03/24/movies/everything-everywhere-all-at-once- review.html.
2. See, e.g., wealthmanagement.com/philanthropy/ philanthropists-are-pulling-plug-donations-major-universities.
3. economist.com/the-world-ahead/2023/11/06/tom- standages-ten-trends-to-watch-in-2024.
4. See, e.g., wealthmanagement.com/opinions/disinheriting- family-members-different-political-beliefs.
5. Patricia Angus, “Complex Family Enterprise: A New Way to Describe a Growing Trend,” Trusts & Estates (March 2023).
6. washingtonpost.com/technology/2023/11/16/chatgpt- lawyer-fired-ai/
7. For family education purposes, see Patricia M. Angus, The Beneficiary Primer and Patricia M. Angus, The Trustee Primer.