Smarter succession planning for global families
We share some top insights for global families looking to set up their wealth for generations to come.
Ultra-wealthy families are living increasingly global lifestyles, often with generations, businesses and bases across multiple countries. South Africa is no exception, with the country forecast to see net outflows of around 500 high-net-worth individuals in 2023.
Global mobility can, however, bring complexities when it comes to managing family wealth, especially when transferring it between generations.
Take for example, a wealthy couple based in South Africa with three children, each married with their own families who are studying in South Africa, the US and UK. The first of the three is in South Africa running the family business; the second is emigrating to the UK to set up international operations for the business; and the third is in Dubai with no involvement or interest in the business. Their challenge is how to distribute the wealth fairly and equally, and protect it for future generations, while accounting for their children’s own ambitions and jurisdictional differences.
In such cases, careful planning and specialist guidance are needed to navigate any pitfalls and find solutions that best suit a family’s unique circumstances.
Take a global and a local view
Succession laws differ widely by country. Some provide for testamentary freedom (meaning you can leave your assets to whomever you choose); others have a system of forced heirship, whereby there are prescribed rules as to how much of your estate each of your heirs should receive. Generally under international law, the succession law of your country of domicile will apply to all ‘immovable’ assets (including financial investments, company shares and bank accounts).
To put this into context, if you had a home in France, commercial property in the UK, and global investments and bank accounts, you would need to consider French, English and South African succession laws. This often requires wills in multiple jurisdictions, with careful drafting to ensure the overall estate plan fits together seamlessly. There will also be multi-jurisdictional tax implications, and it’s important to consider the availability of double taxation relief under applicable tax treaties, as well as the reporting requirements on the estate.
Establishing a global estate plan usually begins by mapping out where and how your assets are held, and the legal and tax regimes that apply to each. For business owners, understanding the ownership structures, and the different laws under which you operate, is key. This process is likely to require local expertise in the relevant countries, as well as a global perspective to help you identify any potential conflicts or opportunities.
Set out your family’s vision
Many families want to preserve their wealth for generations to come, and create dynastic structures to achieve this. However, there is a range of self-interests inherent in families and family businesses that can lead to conflict.
“Older generations, especially wealth creators, often worry not only about the practicalities of wealth transfer, but also the impact on their children or grandchildren – particularly the challenge of ensuring they remain grounded, have a work ethic, and make their own contribution to the world,” explains Amol Prabhu, Head of Barclays Private Banking: Africa.
“While the core focus of succession planning is financial, the other important goal is about achieving peace of mind for all family members.”
One solution is to work together to understand the ‘shared purpose’ of your wealth and/or business, and to draft a family charter outlining your core vision, including any philanthropic goals. Involving all generations in this process can be a valuable tool in keeping the family wealth, business and the family itself together at the point of transition.
Once agreed, the charter can be integrated into the family business, family trust or, more generally, family office, as a family charter without the appropriate policies to enforce it will serve little useful purpose for generations to come.
Find the right structure for you
To achieve your vision, protecting wealth from risk – whether from family dynamics, third parties, or external factors such as political risks is key. Establishing a wealth structure is one way to do this.
However, as Alexandra Hewazy, Senior Wealth Adviser at Barclays Private Bank highlights,
“It’s important to fully understand the legal implications, and associated costs, before entering into any wealth structure, and having an exit mechanism is essential.”
When setting up an international trust, for example, professional advice is needed to ensure there is a trusted third party who can appoint new trustees, wind-up the trust if appropriate or be consulted on significant distributions.
Other options include foundations or holding companies, which may offer families more control at lower costs than a trust, but with less asset protection and/or fewer succession benefits. “Each family will have different needs and preferences,” explains Alexandra. “Any structures you create should be personal to you, your business and your assets.”
Family set-ups tend to be very fluid, so building in some flexibility can help you manage any life events, such as marriage or divorce, or external changes, to cross-border legislation or geopolitics.
It’s important too to plan for worst-case scenarios, such as the legal owner becoming incapacitated, to ensure continuity and access to assets. Regular reviews are also needed to ensure your plans remain on track.
Succession planning can be emotionally charged and legally complex, but with the right expertise and structures in place, you can create a legacy that supports your unique ambitions, and influence your family’s tomorrow with confidence. DM
Please note: The article is written with a South African audience in mind, and does not constitute advice or any form of recommendation. Barclays Private Bank does not offer tax advice, and professional advice should always be sought.
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