Wealth planning comprises the strategic structuring of wealth based on existing assets, the family's current situation and its future plans. In an initial assessment we analyse the existing composition and structure of financial and real assets, as well as the current family situation and existing or yet to be developed future plans. The aim of the analysis is to develop the optimal future organisation under the consideration of wealth building and wealth protection, taxes and succession planning.
The substantive target structure may involve one or more legal entities in different jurisdictions, including for example corporations, foundations or life insurance policies. In terms of succession planning the structure shall, among other things, reconcile factors such as the needs, wishes and values of the family's current decision centre with intergenerational considerations.
Legal Entities and their most important characteristics
The implementation of the target structure might take several organisational tasks, such as the establishment and administration of various legal entities as well as the implementation of an asset management strategy. To getting these tasks done, we rely on an international network of specialists, including lawyers, tax experts, private banks and asset managers.
In the context of wealth planning, a corporation will be considered primarily as a non-operative holding company. A holding company is often chosen to group different equity holdings under a common (tax) umbrella. Typical corporate forms are the stock corporation and the limited liability company. When choosing a domicile, security and tax considerations will be substantial.
The private foundation – in the legal construction characteristic of Switzerland and Liechtenstein – offers an opportunity to preserve private assets across generations. The initial assets of the foundation are contributed by a founder and subsequently managed by the foundation's governing body (foundation board or foundation council) for the benefit of the beneficiaries and the purpose of the foundation. Beneficiaries and purpose of the foundation are determined by the founder in a foundation deed. While the influence of the founder on the decisions of the foundation can be modelled relatively flexibly by the construction of the foundation, the influence of successors is strictly limited.
A trust under the common law applicable in many English-speaking countries is a legal entity set up by a settlor. The settlor brings in assets and transfers them to a trustee, who is supposed to manage them in the interest of a beneficiary, a group of beneficiaries or for a purpose set out in the trust deed. Trusts have similarities in construction and purpose to the foundation, which is more firmly established in continental European legal systems.
Life insurance policies, especially those based on the Liechtenstein model, from a tax perspective offer an attractive legal shell to manage and grow wealth. However, as this entity is considered long-term, it might not be perfect for assets that are needed to be liquid on a short-term basis. For passing wealth to the next generation, on the other hand, the insurance is perfectly suitable. In addition, the Liechtenstein variant offers extreme flexibility. For example, the owner of the policy is free to appoint an asset manager of his choice within certain limits, and may contribute a wide variety of – not exclusively financial – assets to the policy. If necessary, the owner can make partial surrenders or even a complete surrender during the policy term.
From a tax point of view, special funds of different legal regimes can be as suitable as the Liechtenstein life insurance in order to manage financial instruments. On one hand, a special fund solution is significantly more flexible when it comes to interim distributions or withdrawals; on the other hand, it requires a more complex structure, may therefore involve higher costs, and should only be considered if the initial investment base suffices. Special funds are very well suited for cases where several family members are to participate independently of one another in the performance of the fund.
In many families, the perspective of wealth planning is intergenerational. This is particularly the case when a significant part of the wealth consists of real assets. A typical consideration would be the continuity of family business; for example, who is to run the family business in the future and what grade of influence is to be granted to other family members; Another consideration might concern real estate, how or if its ownership shall be divided in the future, and who should be granted which rights of residence.
Tax considerations may also play a role in this context. If, for example, a daughter has her tax residence in a country with high inheritance taxes, this can be taken into account in the structuring process.
Some of these cross-generational considerations can be implemented in a will by means of appropriate regulations, while others may already be reflected when structuring the wealth and implementing the legal institutions.
It could be a once in a lifetime decision when family members and even entire families consider to relocate the centre of their vital interest. For example, it could be the founder of the family business who, shortly before handing over responsibility to his successors, is thinking about moving to a country where the sun shines more often. In some cases, this may be very simple, in others it may be a complex task because of restrictions on capital movements, residence or tax implications. Together with our network, we accompany and support you in this process.