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DC Finance Annual Family Office and Wealth Management Conference 30 March 2011

DC Finance Annual Family Office and Wealth Management Conference 30 March 2011. Justine Markovitz Withers LLP, Geneva Office Partner and Head of Swiss Operations. Overview. Risks to family wealth and generational succession How to protect assets for the next generation

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DC Finance Annual Family Office and Wealth Management Conference 30 March 2011

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  1. DC FinanceAnnual Family Office and Wealth Management Conference 30 March 2011 Justine Markovitz Withers LLP, Geneva Office Partner and Head of Swiss Operations

  2. Overview • Risks to family wealth and generational succession • How to protect assets for the next generation • The importance of succession • Ownership • Management • Ownership models

  3. The family assets Owners Family members Managers Family Business Family Wealth

  4. Risks to Family Wealth and Generational Succession • External Risks • Taxes • Macro-economic and political regime change • Currency risk • Micro-economic change, change in business climate • Compliance liability and reputational risk • Kidnapping, theft, war, disaster and other external "enemies" • Internal Risks • Death, loss of health /mental capacity • Divorce • Lack of ongoing leadership • Loss of communication or common understanding • Loss of sense of family identity • Dissipation of wealth through generations

  5. The succession plan • Understanding the issues • Goals of planning • fairness • promoting family harmony • clarify roles and responsibilities • providing for multi generational stewardship of assets • Who is the team? • ‘soft’ issues vs ‘hard’ issues

  6. Succession (generally) • Key distinction between OWNERS and MANAGERS • Ownership • Allocation of rights and responsibilities (branch, generation) • Asset protection (structures) • Governance (managing the owners and managing the managers) • Compensation (withdrawing value e.g. dividends) • Management • Allocation of rights and responsibilities (‘job title’) • Ensuring development of next generation’s leadership • Asset protection (agreement on skills required and how they will be measured) • Compensation (salary)

  7. Key issues in succession • Single structure vs parallel structures • Ability to exit (restricted vs open) • Who should benefit? • Equality per capita • Equality per stirpes • Involvement in managing the family’s assets/business • Restrictions on benefit (eg age) • Exercise of key powers (eg one branch one vote, all members)

  8. Direct ownership vs ownership through structures • Ownership through structures (trust/ foundation) • Asset protection • Confidentiality • Succession planning / business continuity • Portability / choice of jurisdiction • Tax deferral • Third party intervention • Complexity • Higher cost • Direct ownership • Simplicity • Control • Lower cost • Future fragmentation of holdings • No fiduciary duty to non voting shareholders • Probate can be damaging to business • Limited asset protection • Low confidentiality

  9. Succession planning – trusts and foundations • Family members • Professionals • Independent vs bank trustee • Private trust company Trustee / Foundation Council Protectors / Appointors Trust / Foundation Shareholders’ agreements Share classes Holding Company Holding Company Holding Company Segregation per asset / Segregation per family branch Assets

  10. Succession – role of the family council Family Councilestablishes vision and mission; advises Protector Trustees/Foundation Council, establishes distribution and investment policy, appointor of protector Family Council Cumulative voting system Protector Protector selects and oversees Trustees / Foundation Council with advice of Family Council Trustees / FoundationCouncil select and oversee Holdco Bd of Directors Separate trusts / foundations for benefit of Branch 1 Separate trusts / foundation for benefit of Branch 2 Holdco Bd of Directorsselect and oversee Bds of Directors for family businesses Holdco Holdco Assets

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