Family Offices Adopt Lender Model to Manage Tax Costs
The strategy helps high-net-worth families maintain tax deductions for investment expenses following recent policy changes.
Updated on Oct. 29, 2026 in Taxes
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Following the permanent suspension of miscellaneous itemized deductions under the One Big Beautiful Bill Act, high-net-worth family offices are increasingly utilizing the Lender model to manage tax liabilities. This strategy allows offices to claim investment expenses by structuring themselves as bona fide businesses.
Why it matters
The One Big Beautiful Bill Act effectively eliminated the investment tax breaks that many family offices previously relied upon. By adopting the Lender model, offices aim to reclassify their operations to maintain tax-advantaged status for their investment expenses.
Qualifying for the Lender model typically requires maintaining $300 million in investable assets, a threshold necessary to justify the infrastructure required for a bona fide asset management business. This comes as the One Big Beautiful Bill Act makes the suspension of miscellaneous itemized deductions permanent.
The players
Keith Lender
Served as the chief investment officer for the family office entity Lender Management.
Lender Management
A family office that received compensation through profits interests in investment LLCs.
The details
To utilize this strategy, a family office must function as a legitimate trade or business rather than a passive vehicle for household assets. This requires maintaining arm's length operations and implementing entrepreneurial risk, such as performance-based compensation for the investment team. By satisfying these requirements, offices can deduct investment expenses that are no longer eligible as miscellaneous itemized deductions for individuals.
Timeline
2017: A Tax Court case involving the Lender family established the pathway for this tax strategy.
October 2026: The One Big Beautiful Bill Act makes the suspension of miscellaneous itemized deductions permanent.
Money Landscape
The adoption of the Lender model signals a shift in how wealth management entities respond to the tightening of individual tax deductions. This transition reflects a broader adaptation to the permanent limitations imposed by the One Big Beautiful Bill Act.
For households with significant assets, the permanent loss of miscellaneous itemized deductions necessitates a review of how investment management fees and expenses are structured. Consult with a qualified tax professional to evaluate whether current family office operations meet the rigorous bona fide business standards required for these deductions.
The takeaway
The Lender model offers a potential pathway for managing investment expenses, provided an office maintains strict entrepreneurial risk and arm's length operations. Review your current tax structure and business expenses with a qualified tax professional to determine if these requirements align with your household financial strategy.
Further reading
For more information on tax changes affecting high-net-worth households, visit our Taxes section.
Source note: This article includes information reported by CNBC.
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