For today’s contemporary Asian families, there is no one-size-fits all solution to inheritance planning, Brian Balleine from Butterfield Singapore writes.
By Brian Balleine, Regional Head, Asia, Butterfield Singapore
The wealth landscape in Asia has evolved into a highly sophisticated environment. The generational transfer of wealth and the pervasive march of technology mean it is not enough to merely offer clients traditional asset allocation or individual investment solutions.
It is becoming increasingly important to protect and preserve the wide range of assets that have been accumulated over many years, and wealthy Asian families should consider proper wealth structuring and succession planning as an essential part of their overall wealth management plans.
Becoming a Global Citizen
Modern Asian families are no longer confined to one jurisdiction; they are becoming global citizens, which in itself brings a number of challenges. Many have a growing business and personal interests spread across regional borders, if not beyond continents. Family members educated overseas may have decided to take up longer-term opportunities in the US or Europe, for example.
While these changes in tradition have seen families extending and developing their geographic connections, managing personal wealth has become more complicated, and for some, an increasing concern. Each international move, while challenging and potentially lucrative, can mean that family members are exposed to additional layers of regulations and laws across each new jurisdiction. Many of us struggle to keep up with our own domestic rules and regulations when it comes to managing our finances and being tax compliant.
Rapid Growth of First-Generation Wealth
Once revenue and/or assets start to be accumulated across borders, the demand to keep in control of the developing responsibilities can be overwhelming. Clearly, gone are the days when financial, legal and tax advice was a simple off the shelf solution suitable for everyone or for every purpose. Professional advice and guidance to meet today’s multi-jurisdictional circumstances have become a pre-requisite.
Here in Asia, while there has been a rapid growth of first-generation wealth, the originators of the established wealth are now in the twilight of their lives.
Contrasting the Patriarchs
The stage is set for one of the largest and most concentrated transfers of wealth in history, and successors think very differently about creating and managing wealth than their forebears. Their views may well contrast to the patriarchs who established the family business and this is particularly relevant within family governance responsibilities and succession plans.
A report from «Bloomberg» earlier this year highlighted that a fifth of the five hundred people on the «Bloomberg Billionaires Index» are octogenarians and twenty-one of them are between ninety and ninety-nine years of age. This group includes eight from Asia who could pass on a combined net worth of about $125 billion. Unless robust succession structures are in place, families or spouses can face a multitude of problems, at a time when emotionally they may not be in the best frame of mind to make the soundest decisions.
Recognized Legacy
The traditional thinking for leaving a recognized legacy has been to establish a will, something that for cultural reasons an older generation of Asian families have not always pro-actively sought to establish.
Probate processes can also be long and drawn out, and if multi-jurisdictional assets or business interests exist, securing title to the families financial interests can be a daunting and time-consuming exercise. Unfortunately, the interpretation or even the legitimacy of a will can be questioned, leading to the potential collapse of family relationships or substantial legal fees.
Difficult Situations
There is also a commonly held misconception that having the shares of a company held by a nominee means that probate is not required. This is not correct as the nominee is holding the shares on behalf of the individual, and the shares will therefore still form a part of their estate upon their passing on. If the shares are held by a trust however, this is not the case.
Through no fault of their own spouses, next of kin and partners left behind, who have not been at the forefront of the wealth creation and management, are often left in difficult situations at a time when certainty and access to family assets are important.
Suitable Trust Structure
A typical scenario could see a family member whose partner had recently passed away. Other than the assets in their own personal name, the individual may also have held assets via a number of BVI registered companies.
The beneficiary will have to endure a long, complicated and protracted probate process which involves first obtaining probate in the home jurisdiction and then subsequently in the BVI before claiming title to the assets. Even with the assistance of professional advisers, the family may find the whole experience challenging, time-consuming and disruptive, at a time when they are coping with the loss of a loved one. Many of these issues can be potentially avoided with appropriate planning and advice, together with the formation and administration of a suitable trust structure.
Working With a Trusted Partner
Therefore, families will be well advised to give serious thought to inheritance issues in business and on a personal level at a time when things are running well and smoothly.
Working with a trusted partner as trustee alongside the necessary professional advisers will result in suitable structures being established that not only respect the necessary global tax and estate planning requirements but also ensure that the family wants and needs are addressed and continually reviewed. By implementing proper wealth structuring and succession planning at as early a stage as possible, the family can protect and preserve its assets.
