Family assets, how to protect them? | Financially covering your loved ones is undoubtedly one of the biggest concerns that an entrepreneur can have.
It is an issue that particularly concerns families with high purchasing power or who have an Ultra High Net Worth.
We never know what the future holds in terms of health, even if we are experts in predicting the behavior of the markets.
That is why we address this delicate issue here and we bring you some examples of how to prepare to protect family assets.
There are several ways to prepare for this scenario.
But the first and most recommended is still the advice of experts in the field.
Preparing with the help of the best will always be a wise decision.
The transmission of goods to the next generation is and will be a very complex area, without becoming an impossible matter.
Family offices, are the first option to protect family assets
Single-Family Offices are counted as one of the solutions most chosen by families with large capital to protect family assets.
Its application has grown enormously during the last decade thanks to its practicality and efficiency.
They operate as any large company or firm would.
Also, they are managed under the current legislature, taking advantage of the benefits that it grants.
Knowing how to take advantage of them is key for its protagonists.
Composed of the same family members, the Offices of this nature administer all assets and investments.
They are made up of a combination of legal structures ranging from companies and Societies to private funds.
The idea is that, through the correct formation of this, all aspects of the heritage can be managed.
In the same way, its well-organized structure allows the transfer of assets and assets/liabilities to the next family generation.
The most important thing is that the Family Office is formed according to the legal environment that corresponds to the extension of the family’s activities.
The geographical location and competent legislatures for each branch of activity must be considered.
Aspects to consider in a family office
The members of the same and its group of legal and financial advisers are the key pieces for the correct operation.
The legal structure and its composition are the backbones of the Office.
This guarantees not only the generational transmission but the perpetuation of its operation throughout the decades protecting family assets.
That is why the consideration of various aspects is essential to maintain a balance.
The laws of each country where family members reside must be thoroughly understood.
Likewise, the laws that govern the countries where the different businesses and companies of the office operate.
To this is added the understanding of the laws that govern the areas of activities to which it is dedicated.
Also, and no less important, it is necessary to consider aspects of human nature that affect the functioning of the Family Office.
Its negative or positive influence depends on various factors.
The generational step between the first and second generation may go through a few difficulties, due to the closeness of communication and personal experience in the business.
The challenge consists of the passage between the second and third generations.
The latter lacks a reliable appreciation of the socio-economic context in which the first generation developed.
A lack of understanding leads to undervaluing the assets and products of family businesses.
Growing up in opulence, combined with a poor understanding of family machinery can lead to unbridled spending.
Preparation and advice: fundamental keys in the family business
The success of any endeavor lies in the preparation and knowledge of the limitations, advantages, and disadvantages.
The same applies to companies, large and small.
The Family Office functions as such, a multifaceted company in many cases and with specific needs that must be taken care of with great care.
Managing a Family Office, understood as a company per se requires great knowledge and adequate timing.
Taking it lightly amounts to betting on failure.
Dedication and perseverance are undoubtedly key, but correct advice is even more so.
To better understand the extent of its practicality, we want to take a quick tour of the kinds of Offices that exist.
The first, SFO (Single Family Office) revolves around a family. Its extension is basic, representing the Patriarch in the first place and reaching the second generation immediately.
It is the most common in these times.
Then we have the MFO (Multiple Family Office), made up of several families.
Its purpose is to manage wealth through a company or division of a larger one. Among its functions is the management of trusts and patrimonial businesses of the families involved, and therefore their assets.
Finally, we find the VFO (Virtual Family Office) that starts from a more modern concept.
Its hybrid configuration allows it to have low consumption of physical administrative resources while concentrating on remotely managing the family’s investments.
They are closely related to business in the technology area, through digital services and others.
Exploring traditional options
Besides Family Offices, there are other options that have proven to be efficient and protect family assets.
They are traditional and can be applied effectively to secure wealth.
First, there are the Private Interest Foundations, which function as entities with legal personality. Its activities resemble those of a Trust.
Then we have the Irrevocable Trusts, where properties and assets are managed through a Trustee.
Its irrevocable nature, in the case of the traditional ones, provides the security that the assigned beneficiaries maintain control over their statutes.
In the case of revocable, the settlor can modify all aspects of this.
Finally, the VISTA Trust is a Trust that allows shares in companies established in the British Virgin Islands.
A third person allows supervising the administration of the assets, independently of the trustee.
In another article, we will be exploring this important figure, as well as the aspects that make it so attractive in modern times.
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