Our clients often ask us what is the most flexible and tax-efficient way to transfer their assets to the next generation. This type of transfer requires a customised solution, one that is in line with your wishes and tailored to your individual situation. A commonly used method is to set up a family fund. A family fund is an investment fund set up by (grand)parents for their (grand)children. The (grand)parents will, for example, transfer a securities portfolio or real estate to the family fund in exchange for the issuance of units, which will not be freely transferable. The (grand)parents will then annually gift those units to their (grand)children. Alternatively, they could set up private limited liability companies for their (grand)children, transfer the shares to a trust office managed by the (grand)parents as directors, and then issue depositary receipts for those shares to the (grand)children. It is important to gift the depositary receipts on such terms and conditions that the assets remain within the family.
The advantage of these types of structures is that you will save future inheritance tax by gifting your assets during your life at the 10% rate, whereas a rate of 20% would apply in the event of your death. Also, any future increases in the value of the assets gifted to your (grand)children will not be subject to tax. Moreover, the (grand)parents will retain control of the family assets, with the (grand)children only acquiring beneficial ownership and having no control over the assets.
If you are interested in finding out more about the options available to you and your family, please give us a call or come by our office for a cup of coffee.