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Family wealth
Choosing the right vehicle for your succession journey
By Darren Anton, KPMG
Choosing the right vehicle when transferring wealth from one generation to another is critical to ensure a smooth and successful journey for all those involved.
When it comes to succession planning, families often jump straight to the execution stage: selecting a trust or foundation and instructing advisors to set up the necessary structures in a tax efficient manner. While this arrangement may offer some tax and legal benefits to the transferor and to the individual that inherits, it may not allow for both of their visions of success to be realized. Sometimes those visions may not even be the same, something only recognised far too late.
Treating the process as a journey allows individuals and families to spend time clearly
defining and understanding their goals from the outset. Where wealth is passed to more than one of the next generation and the wealth continues to be held and managed together, it can be critical to the future cohesiveness of the family that there is a shared purpose between the family members. This may mean involving as many generations and family stakeholders as possible in conversations on the future of the family’s wealth.
Succession plan
Whether wealth continues to be managed collectively, or assets divided to ensure each family member has the resources to follow their own aspirations, once the goals are clearly defined, the family can chart a course towards an overall succession plan. This may have many different facets and involve different structures as well as simple tools such as outright gifts if this helps the family
achieve their vision and if it provides sufficient tax efficiency.
When making their selection, families will need to compare the specific benefits each vehicle provides against the family’s wider requirements. The most common benefits include: l Asset protection: Protecting the family’s assets against divorce, tax regime change, errant family members and even in some cases overly-risk averse family members. l Flexibility: The ability to respond to the pace of change in the modern world and seize new opportunities with ease. This is particularly relevant where family members are internationally mobile as a vehicle may be treated differently for tax and legal purposes in different jurisdictions. l Tax efficiency: Achieving a family’s ambitions in the most tax efficient manner. Trusts, foundations and companies (limited by shares or
guarantee) all offer these attributes to varying degrees, depending on how important tax efficiency is to the overall plan.
As with any true voyage of discovery, the ‘end’ of the journey is never truly reached. Families - and the world in which they operate - evolve, requiring ongoing monitoring and adjustments to ensure that the succession plan continues to meet the family’s objectives and is aligned with the various legal frameworks and tax rules impacting the family members.
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