Artificial Intelligence in the Family Office: Risks and Rewards

AI has arrived in the family office space and is already changing the legal and administrative procedures used by family offices. Attorneys and family office teams naturally are curious how these new technologies can streamline and improve their practices, but they also would be wise to consider potential risks related to its use as we outline here.

Potential Uses and Rewards

Document Drafting

Generative AI tools may be particularly helpful for document drafting. Large language models (LLMs) can provide a meaningful draft of anything from an engagement letter to a comprehensive will and trust. Professionals using AI drafting capabilities should not treat any AI-produced document as a final draft. LLMs are still a work-in-progress, and any AI-created material should be thoroughly reviewed and edited prior to use.

Estate Summarization

Generative AI may also be useful in reviewing complex estate documents and asset compilations. Based on initial documents and information provided by the client, a family office professional or an attorney may be able to use AI as a quasi-search engine. Questions could be as simple as “What is the net worth of this client?” or as complex as “Would this client benefit from setting up a GRAT or sale to an Intentionally Defective Grantor Trust?” While AI used in this fashion has the potential to save significant time, the user would need to have a high level of confidence in the AI software before relying on it for answers to more complex questions.

Client Communications

Family office service and estate planning is highly complex and personalized. One of the most important skills for a professional to possess is the ability to explain sophisticated concepts in a way that can be understood by the client, who may be unfamiliar with even general estate planning terminology. AI may be particularly useful with the translation of legalese into easily understood terms. A family office professional or an estate planning attorney may tell generative AI software to “Explain the generation-skipping tax exemption to a 10-year-old,” and the software will provide a simplified explanation of exactly that. Clients with little to no background in finance or estate planning may benefit from these AI-generated simplified outputs, whereas a more experienced client may be able to process higher-level concepts.

Potential Risks

Generative AI software is a work-in-progress, and there are a variety of concerns that family office professionals and estate planning attorneys should be aware of before using AI tools. Specifically, confidentiality and security are of utmost importance to clients. For generative AI to work, the software must be able to review existing documents, many of which may contain sensitive and confidential information. Clients may have concerns about where their confidential information is going and how it is being used. Professionals must be able to give accurate, satisfying answers to these questions, and be prepared to postpone or forego AI use if the client feels uncomfortable.

Within the estate planning and family office industries, generative AI tools may be able to simplify time-intensive processes, but the human relationships and personalized conversations in the family office and estate planning contexts of estate planning are crucial to client satisfaction. AI cannot comfort a grieving widow, play referee to a dispute between estranged siblings, or implement a family business succession plan. Only trusted confidants who have earned the confidence and trust of clients can implement a well-crafted — even AI-generated — plan into a long-term, sustainable solution. While clients may not hire estate attorneys specifically for these interpersonal services, such services are necessary for any meaningful client representation.