Wealth planning is the art of structuring your wealth while building it, preserving it, and in order to transfer it to the next generation, tax optimised.
Wealth planning is a mixture of tax planning, wealth protection, estate planning, and business succession planning and related to your total worldwide wealth. A good family office will support you with solid wealth planning services.
By putting suitable regulation complaint wealth planning structures in place threats can be be neutralised.
Wealth and structuring go hand in hand. There is hardly any wealthy family that does not use one or more wealth planning structures to safe guard, optimise, or preserve their wealth. The most important task of a family office is make sure the structures used by the families they serve are tax and regulation-compliant in the country where the family lives.
Below are few of the most widely used tax planning structures and information on the functions these structures can fulfil for affluent families, when used in compliance with laws and regulations
A family office can help you establish and manage a foreign holding company. When structuring their assets, a considerable number of wealthy families and their family offices use International Business Companies as their wealth planning structure of choice. The traditional use of International Business companies: the main characteristic is that any income generated outside the jurisdiction in which the company is established, is not taxable within that jurisdiction. This sort of company is used by the family office as the top holding for the international corporate structure of the family in case this also tax beneficial and complaint from the perspective of the country of residence of the ultimate shareholders.
An international holding company may also be set up by a family office for privacy reasons. Growing international pressure on tax heavens to become more transparent and the introduction of automatic exchange of financial information coupled with pressure from international community on jurisdictions which do not levy tax on income is causing new and upcoming shift to jurisdictions like Singapore, Malta, Ireland, New Zealand and Switzerland as these offer beneficial tax regimes.
A corporate trust provider or family office can act as a trustee or take another role in your family trust. All kinds of assets can be held in a trust and they are a great instrument for protecting privacy and wealth and tax complaint planning. For generations trusts are beingused to protect families’ assets from tough economic and political condition.
A trust can be described as a legal arrangement through which the legal ownership of assets is transferred to the trustee in order to keep those assets for the benefit of others, the equitable ownership of the assets is thus deemed to be held by the beneficiaries. When based in the right jurisdiction and structured correctly, kit is an excellent tool to protect the assets of the family because these are transferred into the possession of the trustee. Trusts are not recognised by every civil law jurisdiction and hence it is unclear as to how assets owned by trusts are to be taxed due to lack of clarity and recognition by tax authorities.
Family foundations and private foundations can hold a wide range of assets. A foundation is a good structure for protecting wealth and foundations are often used as an alternative to a will. Foundations are also used for charitable purposes eg. Swiss foundations. Family offices acting for families living in civil law countries regularly use foundations to structure their wealth.
Foundations are used similar to trusts for wealth protection, privacy and wealth planning and originally existed only in civil law countries, but nowadays some common law countries also offer the option of setting up foundations. The founder decides who the potential beneficiaries are and the intentions of the founder are written down in the foundations’ by- law.
Since jurisdictions are not clear about how tax on the assets held by a family foundation and its distributions are levied, family office can assist you by advising on setting up a foundation and also act as a member of the foundation board as an advisor or guardian.
One of the wealth planning structures increasingly used by family offices for their families is a professional investor fund. A PIF is a collective investment scheme only available to a limited number of sophisticated investors.
PIF is an investment fund which cannot be distributed to retail clients. It is only open to certain classes of well-informed sophisticated investors like institutional and professional investors and by wealthy individuals and families. Retail clients are allowed to invest in PIFs and hence regulatory requirements are less stringent that for investment vehicles aimed at retail clients.
Investors can decide for themselves which type of vehicle they will use to establish the PIF