Barbara R. Hauser of Barbara R Hauser LLC explains the various planning considerations and challenges for families when trying to ensure smooth governance and wealth transfer.
Date: Apr 2012
This means thinking about where the wealth is located and how the children will handle it – in turn leading to them considering a trust more than ever before as a vehicle for protecting the assets, she explained.
Internationalising investments and lifestyles
If a family buys a home in Paris, France, for example, but doesn’t get any particular advice about this transaction, they probably wouldn’t know that French inheritance laws will apply to that property regardless of their will, said Hauser.
Further, if such a property is put into a trust, complications arise because some countries don’t recognise trusts, she added.
As an extension of this, there are various tax-related issues which many people are not aware of.
For example, said Hauser, anyone who is a US citizen needs to know that it is the only country in the world which applies worldwide inheritance tax on all assets owned.
Without proper planning, therefore, Hauser said ownership of assets around the world – and especially property – can create problems.
Family governance structures
According to Hauser, there are various grey areas in terms of the rights of adult children in terms of their own inheritance.
This depends partly on the law of the relevant country, and partly on its culture. For example, she asked, is it still a given that the eldest son will assume the father’s role?
Without clear rules for the second generation about entitlement, there is some anxiety, said Hauser.
Yet structure on its own isn’t enough to deal with the various wealth planning challenges. Regardless of how well-drafted any of the documents and vehicles are, if the family is unhappy, individuals will find a way to litigate, said Hauser.
Families therefore need to create their own governance system as a starting point, she explained, and then look to create the right structures to help it work in practice.