When AI Joins the Advisory Circle: Privilege Risks for Family Offices

Used properly, AI tools can increase efficiency. Used carelessly, they can create a significant risk: the possible waiver of attorney-client privilege and the disclosure of highly sensitive information.¹

The risk is especially acute for family offices, which depend on a multi-advisor ecosystem involving legal, tax, investment, governance, and personal matters. In family offices, sensitive information may flow simultaneously among principals, in-house family office personnel, outside counsel, accountants, trustees, investment managers, and other trusted advisors. That ecosystem works because it is built on discretion, trust, and controlled information sharing. 

AI tools can disrupt that control. The issue is no longer simply whether someone pastes a privileged legal memo into a public AI tool. A more practical risk is that a sophisticated advisor — someone who is already accustomed to requesting, receiving, and acting on legal advice — may use AI to interpret, summarize, test, or expand upon that advice. 

The Temptation to Use AI as a Legal Thought Partner

Many family office advisors are highly experienced in legal environments. Accountants routinely coordinate with tax counsel. Trustees receive advice about fiduciary duties. Investment and finance professionals participate in deal structuring discussions and help implement financing or liquidity strategies. Consultants assist with governance, succession, or operating company matters.

The risk in this context is not that these professionals are unsophisticated. Rather, precisely because they are sophisticated, they may be tempted to use AI as a legal thought partner. An advisor might ask an AI tool to explain a lawyer’s recommendation, identify alternatives, draft questions for a lawyer, summarize a privileged memo for a busy principal, or generate a “plain English” action plan based on legal advice. Those uses may often seem efficient and even prudent. But they may also create a record showing that privileged advice was requested or disclosed outside the protected attorney-client relationship, which can result in waiver of the attorney-client privilege.

This risk is not limited to situations in which a nonlawyer intentionally seeks legal conclusions. AI prompts alone may reveal the substance of legal advice indirectly. A prompt such as “summarize counsel’s email on our trustee exposure,” “prepare talking points based on my summary of the lawyer’s recommendations in the family business dispute,” or “translate into plain English my notes from a call with tax counsel about the proposed restructuring” may disclose enough to waive the privilege that would otherwise apply to legal advice, even if the prompt does not upload or quote the original legal advice. The same problem can arise if an investment advisor uploads counsel’s comments on a failed co-investment to generate “principal talking points,” if a trustee asks an AI tool to convert the legal advice into a beneficiary communication, or if a family office relationship manager uses an AI tool to turn divorce-related legal advice into an internal briefing for household or security staff.

Consumer AI Is Especially Risky, But Enterprise AI Is Not Risk-Free

Consumer AI tools pose a heightened risk to the attorney-client privilege. They are often used through personal accounts and standard terms without negotiated confidentiality protections, matter-level access controls, or clear limits on retention, review, model training, or use of prompts and outputs. A well-intentioned advisor who asks a public tool to “explain” counsel’s advice may be disclosing privileged information to a system the family office has never approved.

Enterprise AI may be better controlled (and more secure), but it is not a privilege safe harbor. When nonlawyers use it to summarize legal advice or draft principal updates, privileged information may still appear in prompts, outputs, logs, or shared workspaces, which would be unlikely to be protected by the privilege. While security helps, it does not address important privilege considerations such as purpose, confidentiality, access, and attorney involvement.²

Practical Steps to Reduce Risk

Family offices and their advisors need not reject AI tools altogether, but they should treat the potential use of AI tools for tasks involving legal issues with heightened care.

1. Establish a “no legal advice into AI” default. For family offices, consider making it clear that privileged legal advice, attorney-client communications, litigation strategy, tax opinions, and other sensitive information cannot be entered into AI tools unless specifically approved by counsel under defined conditions.

2. Extend AI expectations to outside advisors. AI policies should not stop at the family office door. Consider including provisions in engagement letters, vendor agreements, and advisor onboarding materials that address whether service providers may use AI and in what situations, what tools are permitted, and how prompts and outputs are retained.

3. Use privilege-preserving workflows. When AI can appropriately support a project, use abstraction rather than disclosure. Limit the inclusion of names, legal conclusions, privileged communications, and uniquely identifying facts. Consider framing questions generally without revealing the substance of legal advice. 

The family office advantage is coordinated judgment across trusted advisors. AI tools have the potential to turn that advantage into uncontrolled dissemination of legal advice. Preserving privilege in the AI era requires not only avoiding obvious mistakes but also adhering to a disciplined approach to information governance across the full advisory ecosystem. It is ultimately safer for non-lawyer professionals not to use AI tools to translate or expand upon legal advice.

[1] This is not unlike various lifts that are commonly used in pair figure skating, as explained in the ridiculous comedy starring Will Ferrell and John Heder, Blades of Glory. “All of these [lifts] are weapons in the pair skater’s arsenal and used properly, they can slay your opponent. Used improperly, they can break every bone in your body.”

[2] The attorney-client privilege generally applies to communications between a client and his attorney that are intended to be and are kept confidential for the purpose of obtaining or providing legal advice. The standard varies depending on the jurisdiction.