What is Holistic Wealth Planning?
Unlike traditional asset managers, wealth managers take a comprehensive view of your financial landscape, offering solutions tailored to both your immediate and long-term goals. A key objective of holistic wealth planning is to help preserve and potentially enhance the value of your assets. As part of this, wealth managers help structure plans for the smooth transfer of wealth to heirs, ensuring assets are accessible efficiently and minimizing potential erosion in value.
The Impact of Unstructured Wealth on Asset Value
Without proper estate planning, your assets can be at risk of significant value loss due to a range of issues, including:
Asset Discovery: Without a centralized record of assets, it can take years for executors to identify and access global holdings. This delay can involve third-party professionals, like lawyers, adding considerable costs to the estate.
Probate Costs: If your assets aren't held within a Trust or Foundation structure, probate proceedings will be required in every jurisdiction where the assets are located, and associated requirements may vary depending on jurisdictional regulations. These processes are not only time-consuming but can be expensive, as fees are often based on asset value and may involve legal representation.
Heir Disputes: When heirs differ in their intentions—such as whether to sell or retain assets or at what value to sell—this can lead to lengthy and costly legal proceedings. Additionally, if family members lack urgency or cooperation in completing due diligence or following required steps with investment providers, assets may become frozen. This not only creates administrative and legal costs but also risks value loss if assets cannot be traded in favorable market conditions.
Litigation Risk: Even during your lifetime, personal litigation can threaten asset value if all assets are held in your name, as they may be subject to legal claims.
Getting Started with Wealth Planning
Although the ultimate goal for many high-net-worth families is to establish a Trust or Foundation, this can feel like a significant step for those just starting their estate planning journey. Fortunately, there are smaller, manageable steps to begin structuring your wealth and protecting your assets:
Creating an Asset List
Simple and easy step – no cost
Instructions for how to access each global asset
Share list with a trusted person
Limitation: Does not avoid probate
Limitation: Does not protect against litigation
Limitation: Does not divide assets or protect against heir disputes
Creating a Will
Low cost and allows retention of all assets in your name.
Should list assets and can allocate certain assets to specific heirs, with limitations of any forced heirship rules.
May help provide some protection against heir disputes
Limitation: Does not avoid probate
Limitation: Does not protect against litigation
Limitation: Does not protect capital for the long term
Forming a Holding Company
Centralizes all assets with professional management
May reduce probate-related process, typically limiting probate to company shares.
May help provide some protection against heir disputes.
Assets are not in personal name, so protected from litigation, however, company shares owned still form part of the estate.
Client can retain control similar to personal ownership by serving as a company director.
Limitation: Does not avoid probate
Limitation: Does not provide beneficiary flexibility, as shares are distributed in accordance with inheritance rules or a will.
Limitation: Does not protect capital for the long-term, and legacy can be terminated by shareholders.
In addition to these steps, families may consider developing a family constitution, a document that outlines a unified approach to decision-making and dispute resolution to mitigate potential conflicts among heirs. While not legally binding, a family constitution serves as a valuable guide, setting the stage for other planning measures and helping to address disputes, though it may not provide the same level of effectiveness as formal legal structures.
Summary
While establishing a Trust or Foundation is often the most effective way to meet all estate planning goals for ultra-high-net-worth families, even the smallest steps can streamline wealth transfer, safeguard asset value, and reduce costs associated with an unstructured transfer. Starting the process early is key to preserving wealth for future generations.
