Gaining Global Tax Efficiency and Asset Protection

Gaining a Global View of
Ownership Structures
(to Channel Ultimate Tax Efficiency and
Asset Protection)

by Barbara R Hauser LLC
For
Marcus Evans Elite Summit
Montreux 31 May 2012

Challenges of Global Assets

Marcus Evans Elite Summit Barbara R Hauser LLC 2

To Opportunities

chaos Strategy

Barbara R Hauser LLC 3

Goal: Safeguard from Risks
Country Instability
Foreign Taxes
Claims against the client
Failure to leave to the chosen heirs
Poor Management
Family Disputes

Example
Swiss accounts
Paris apartment
New York apartment
Equity in private firms
Stock in US public/listed companies
Jersey trust

Likely Chaos
Taxes could apply: UK, France, USA etc
◦ Wealth tax
◦ Capital gains tax
◦ Inheritance tax
◦ Will a treaty help?
Disclosure reports for USA? (FBAR & FATCA)
Local inheritance rules apply?
Trust recognized?

Client Concerns
Minimize all taxes

Ensure that wealth passes on as the client
wishes

Avoid exposure to risks and claims

Global Four-Step Solution
Four-
1. Conduct an Ownership Audit

2. Choose/change the Jurisdiction/s

3. Consider a Trust

4. Create strong Governance

The 4-Step Process
4-
Governance

Trust

Jurisdiction/s

Ownership
audit

#1-Ownership Audit
#1-
1. The first and most critical step is for the
family to have an "ownership audit" of
exactly what they own

2. In whose name, and

3. where it is located.

Ownership Audit -- Elements

• The legal type of asset matters
What
• The legal owner matters
Who
• The “location” matters
Where


Example
Ownership of stock may be an “intangible”—located
where the client “is”
Ownership of a home is likely to be a “fixed” asset—
subject to the laws of where it is located
Investment ownerships (and insurance) may be
controlled by a contract
Marital property may be subject to spouse rights

What do they own?
Listed
Stock

Private
Homes
Equity

Client

Insurance Collections


Who is the legal owner?
Individual client
Married couple (spouse rights)
Undivided Hindu Family
Private company
Off-shore company
Trustee
Holding Company
Other

Why does the owner matter?
Right to
transfer/sell/gift

Inheritance Exposure to
impact taxes & claims


Example
Individual owner – free rights to transfer
Married owner – must consider spousal
rights
Partnership – terms of agreement?
Corporate owner– who owns the
company?
Trust – will the Trust be valid?

Why does the location matter?
Right to
transfer/sell/gift

Inheritance Exposure to
impact taxes & claims


Example
USA – freedom to dispose (with taxes)
UK – dependents’ claims
France – forced heirship
Switzerland – may follow citizenship
Gulf Region – Shariah law may apply

#2- Choose a Jurisdiction (or two)
#2-


Why the Jurisdiction Matters
Important General Attributes:

Stable law (including trust law)

Good Professionals

Convenience

What the Jurisdiction Controls
Taxes
Inheritance
Claims
◦ Commercial creditors
◦ Family disputes

Jurisdiction in Particular
Consider client’s particular risks:

Where are the client’s assets
and
Who might make a claim (and what kind?
and where?)

# 3 Use a Trust (or two)?

Client Beneficiaries
Trustee


Why Consider a Trust ?
Advantages:
Diversification
Central Management
Safety
Control through generations

Disadvantages:
Complexity, cost & administration

Choice of Trustee
Extremely important
Many choices:
◦ “big bank”
◦ Professional private trust company
◦ Family private trust company
Add a Protector?
◦ Ability to remove Trustee
◦ Expand into a family Protector Committee?

Last: The Worst Risk: Family Conflict
L'Oreal Heiress Liliane Bettencourt --Loses Control Of Her
$23 Billion Fortune
Pritzker Lawsuit Divides Family
The notoriously private owners of Hyatt – The Pritzker
family – have decided to part ways, leaving billions in assets
up for grabs.
GCC - The Saad-Algosaibi disaster
Lack of transparency in Saudi firms’ feud leaves billions in
losses hidden
Family Feuds Grip Ho Casino Empire & Yung Kee Restaurant
brothers

# 4-Create Strong Governance
4-
Create a strong family governance
structure to keep the family in alignment
(and to avoid those claims)


What is Family Governance?
Answer:

“How the family makes decisions together”


Range of Governance Options
Dictator (some Patriarchs/Matriarchs)
Benevolent Ruler (some Patriarchs/Matriarchs)
Appointed Leader
Elected Leader
Participatory System

Best Practices Globally
Family Constitution

Family Council

Family Assembly


Process to Follow

Constitution

Council

Assembly


The Family Constitution
• Preamble: Why are we doing this?

• Who will make what rules on what
subjects and how?

• How will we allow changes and ask the
next generation to sign on?


The Family Council
Who is on it?

What can it do?

What can it not do?


Participatory Process: The Key
All contribute to the Process

All views are considered

Compromises and Consensus Result

Flexibility & Amendability are Crucial

Strong Governance Results
Creates a strong family governance
structure to keep the family in alignment
(and to avoid family disputes)


Conclusion: Four Steps to Success
#1—Conduct Ownership Audit

#2—Choose good Jurisdictions

#3—Consider Trusts

#4—Create strong family Governance

References--Books
◦ International Family International Estate
Governance (Amazon) Planning: A Reference
Guide (JurisPub)

Mommy, Are
We Rich?


Additional References
See www.brhauser.com (includes articles
to download) and Appendix in
International Family Governance

LinkedIn Group: “International Family
Governance”

Selected Books
Generation to Generation: Life Cycles of the Family Business
(Gersick, Lansberg, etc.)
Family: The Compact among Generations and Family Wealth:
Keeping it in the Family (Jay Hughes)
Creating Effective Boards for Private Enterprises (John Ward)
The Rule of Law: On History, Politics,Theory (Brian Tamanaha)
Theory of Justice (John Rawls)
Flow: The Psychology of Optimal Experience (Mihaly
Csikszentmihalyi) (core meaning of “a good life”)

Questions?
Thank you, and feel free to email me with
any additional questions.

Barbara Hauser (BRHauser@gmail.com)


Gaining Global Tax Efficiency and Asset Protection

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