A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Family offices are the most bullish they’ve been in years, putting their cash to work in stocks and alternatives as the Fed starts to cut interest rates, according to a new survey.

Nearly all family offices, 97%, expect positive returns this year, and nearly half expect double-digit gains, according to Citi Private Bank’s 2024 Global Family Office Survey.

“This is the most optimistic outlook we’ve seen,” said Hannes Hofmann, head of the family office group at Citi Private Bank, which has been conducting the survey for five years. “What we’re clearly seeing is an increase in risk appetite.”

The survey is the latest sign that family offices — the private investment arms of wealthy families — are emerging from two years of hoarding cash and bracing for recession to start making more aggressive bets on market and valuation growth.

They especially like private equity. Nearly half, 47%, of family offices surveyed say they plan to increase their allocation to direct private equity in the next 12 months, the largest share for any investment category. Only 11% plan to reduce their PE holdings. Private equity funds ranked second, with 41% planning to increase their allocation.

With interest rates heading down, family offices are also regaining their appetite for stocks. More than a third, 39%, of family offices plan to increase their allocation to developed-market equities, mainly the U.S., while only 9% plan to trim their equity exposure. That comes after 43% of family offices increased their exposure to public stocks last year.

Public equities remain their largest holding by major asset class, with stocks making up 28% of their typical portfolio — up from 22% last year, according to the survey.

“Family offices are taking money out of cash, and they’ve put money into public equities, private equity, direct investments and also fixed income,” Hofmann said. “But primarily it’s going into risk-on investing. That is a very significant development.”

Fixed income has become another favorite of family offices, as rates start to decline. Half of family offices surveyed added to their fixed-income exposure last year — the largest of any category — and a third plan to add even more to their fixed-income holdings this year.

With the S&P 500 up nearly 20% so far this year, family offices are looking for 2024 to end with strong returns. Nearly half, 43%, expect returns of more than 10% this year. More than 1 in 10 large family offices — those with over $500 million in assets — are banking on returns of more than 15% this year.

There are risks to their optimism, of course. When asked about their near-term worries about the economy and financial markets, more than half cited the path of interest rates. Relations between the U.S. and China ranked as their second-biggest worry, and market overvaluation ranked third. The survey marked the first time since 2021 that inflation wasn’t the top worry for the family offices surveyed, according to Citi.

One of the big differences that sets family offices apart from other individual investors is their appetite for alternatives. Private equity, venture capital, real estate and hedge funds now account for 40% of the portfolios of the family offices surveyed. That number is likely to keep growing, especially as more family offices make direct investments in private companies.

“It’s a significant allocation that shows family offices are asset allocators who are long-term investors, highly sophisticated and taking a long-term view,” Hofmann said.

One of the biggest themes for their private investments is artificial intelligence. The family offices of Jeff Bezos and Bernard Arnault have both made investments in AI startups, and repeated surveys show AI is the No. 1 investment theme for family offices this year. More than half of family offices surveyed by Citi have exposure to AI in their portfolios through public equities, private equity funds or direct private equity. Another 26% of family offices are considering adding to their AI investments.

Hoffman said AI has already proven to be different from previous investment innovations such as crypto, and environmental, social and governance, or ESG. Only 17% of family offices are invested in digital assets, while a vast majority say they’re not interested.

“AI is a theme that people are interested in and they’re putting real money into it,” Hofmann said. “With crypto people were interested in it, but at best, they put some play money into it. With ESG, we’re finding a lot of people are saying they’re interested in it, but a much smaller percentage of family offices are actually really putting money into it.”

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

The tightening presidential race has touched off a wave of tax planning by ultra-wealthy investors, especially given fears of a higher estate tax, according to advisors and tax attorneys.

The scheduled “sunset” of a generous provision in the estate tax next year has taken on new urgency as the odds of a divided government or Democratic president have increased, tax experts say. Under current law, individuals can transfer up to $13.61 million (and couples can send up to $27.22 million) to family members or beneficiaries without owing estate or gift taxes.

The benefit is scheduled to expire at the end of 2025 along with the other individual provisions of the 2017 Tax Cuts and Jobs Act. If it expires, the estate and gift tax exemption will fall by about half. Individuals will only be able to gift about $6 million to $7 million, and that rises to $12 million to $14 million for couples. Any assets transferred above those amounts will be subject to the 40% transfer tax.

Wealth advisors and tax attorneys said expectations of a Republican sweep in the first half of the year led many wealthy Americans to take a wait-and-see approach, since former President Donald Trump wants to extend the 2017 tax cuts for individuals.

Vice President Kamala Harris has advocated higher taxes for those those making more than $400,000.

With Harris and Trump essentially tied in the polls, the odds have increased that the estate tax benefits will expire — either through gridlock or tax hikes.

“There is a little increased urgency now,” said Pam Lucina, chief fiduciary officer for Northern Trust and head of its trust and advisory practice. “Some people have been holding off until now.”

The sunset of the exemption, and the response by the wealthy, has broad ripple effects on inheritances and the trillions of dollars set to pass from older to younger generations in the coming years. More than $84 trillion is expected to be transferred to younger generations in the coming decades, and the estate tax “cliff” is set to accelerate many of those gifts this year and next.

The biggest question facing wealthy families is how much to give, and when, in advance of any estate tax change. If they do nothing, and the estate exemption drops, they risk owing taxes on estates over $14 million if they die. On the other hand, if they give away the maximum now, and the estate tax provisions are extended, they may wind up with “givers’ remorse” — which comes when donors gave away money unnecessarily due to fears of tax changes that never happened.

“With givers’ remorse, we want to make sure clients look at the different scenarios,” Lucina said. “Will they need a lifestyle change? If it’s an irrevocable gift, can they afford it?”

Advisors say clients should make sure their gift decisions are driven as much by family dynamics and personalities as they are by taxes. While giving the maximum of $27.22 million may make sense today from a tax perspective, it may not always make sense from a family perspective.

“The first thing we do is separate out those individuals who were going to make the gift anyway from those who have never done it and are only motivated to do it now because of the sunset,” said Mark Parthemer, chief wealth strategist and regional director of Florida for Glenmede. “While it may be a once-in-a-lifetime opportunity as it relates to the exemption, it’s not the only thing. We want individuals to have peace of mind regardless of how it plays out.”

Parthemer said today’s wealthy parents and grandparents need to make sure they are psychologically comfortable making large gifts.

“They’re asking ‘What if I live so long I outlive my money,'” Parthemer said. “We can do the math and figure out what makes sense. But there is also a psychological component to that. As people age, a lot of us become more concerned about our financial independence, regardless of whether the math tells us we’re independent or not.”

Some families may also fear their kids aren’t ready for such large amounts. Wealthy families who planned to make big gifts years from now are feeling pressure from the tax change to go ahead with it now.

“Especially with families with younger children, a primary concern is having donors’ remorse,” said Ann Bjerke, head of the advanced planning group at UBS.

Advisors say families can structure their gifts to be flexible — gifting to a spouse first, for instance, before it goes to the kids. Or setting up trusts that trickle out the money over time and reduce the changes of “sudden wealth syndrome” for kids.

For families that plan to take advantage of the estate tax window, however, the time is now. It can take months to draft and file transfers. During a similar tax cliff in 2010, so many families rushed to process gifts and set up trusts that attorneys became overwhelmed and many clients were left stranded. Advisors say today’s gifters face the same risk if they wait until after the election.

“We’re already seeing some attorneys start to turn away new clients,” Lucina said.

Another risk with rushing is trouble with the IRS. Parthemer said the IRS recently unwound a strategy used by one couple, where the husband used his exemption to gift his kids money and gave his wife funds to regift using her own exemption.

“Both gifts were attributed to the wealthy spouse, triggering a gift tax,” he said. “You need to have time to measure twice and cut once, as they say.”

While advisors and tax attorneys said their wealthy clients are also calling them about other tax proposals in the campaign — from higher capital gains and corporate taxes to taxing unrealized gains — the estate tax sunset is far and away the most pressing and likely change.

“In the past month, inquiries have accelerated over the [estate exemption],” Bjerke said. “A lot of people were sitting on the sidelines waiting to implement their wealth-planning strategies. Now, more people are executing.”

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

Sales of ultra-luxury homes surged in New York, Miami and Palm Beach, Florida, in the second quarter, even as they fell in much of the rest of the world, according to a new report.

The number of homes that sold for $10 million or more in the second quarter jumped 44% in Palm Beach, 27% in Miami and 16% in New York, according to a report from real estate firm Knight Frank.

New York led the U.S. in $10 million-plus sales, with 72, its highest total in two years, according to the report. Miami came in second with 55, followed by Los Angeles with 42 and Palm Beach with 36. Los Angeles saw a 29% decline in $10 million-plus sales, due largely to the new “mansion tax,” which adds a 5.5% charge on homes sold for over $10 million, the report said.

The biggest sale of the quarter was the $150 million deal in May for Palm Beach’s only private island, reportedly purchased by Australian infrastructure investor Michael Dorrell, according to The Wall Street Journal. In June, a historic 3.2-acre estate in Palm Beach sold for $148 million, while in Manhattan, the penthouse of the Aman New York was sold for $135 million in July.

While demand in many top luxury markets is slowing from the 2021 peak, ultra-wealthy buyers continue to pay record prices for rare trophy properties, boosted in large part by rising financial markets, Knight Frank said.

“Substantial wealth creation has supported the growth in the global super-prime sales market,” said Liam Bailey, global head of research at Knight Frank. “The transformation of markets like Dubai, Palm Beach and Miami has more than offset the slowing experienced by some more mature markets.”

Globally, in the 11 top luxury markets that Knight Frank tracks, sales of $10 million-plus homes fell 4% over last year to $8.5 billion.

Dubai leads the world in ultra-luxury real estate, with 85 sales in the second quarter, the report said. The city has seen a stratospheric rise, as the ultra-rich from Russia, China, Europe and other areas moved to Dubai for its friendly tax and regulatory regimes. In 2019, Dubai had only 23 sales over $10 million. In the past 12 months, it has had 436 sales — although sales in the most recent quarter fell slightly from last year and the first quarter, Knight Frank said.

London saw one of the largest declines in the world, with sales of $10 million-plus homes plunging 47% from last year on fears of higher taxes on the U.K. wealthy, according to Knight Frank.

Although ultra-luxury buyers usually pay cash for their properties, falling interest rates throughout the world are expected to help support sales in the second half, according to the report.

Last week, 29 contracts were signed in Manhattan for properties priced over $4 million, according to the Olshan Luxury Market report — the strongest post-Labor Day week since at least 2006.

“With rates moving lower, total transaction volumes are likely to tick higher into 2025,” Bailey said.