Trusts and succession planning

Building wealth takes time. Deciding how to preserve it and pass it on to future generations is just as important.

A trust makes it possible to plan the transfer of wealth in advance, deciding who will benefit, on what terms and when.

Through a trust it is possible to design a plan for the future of one’s wealth, taking into account the composition of the family, the nature of the assets and the needs of the people one wishes to protect.

Deciding today how wealth will be managed tomorrow

Through a trust it is possible to decide how wealth is to be managed over time and to whom it is to be allocated, setting out in the trust deed the rules the trustee is required to follow.

It can be provided, for example, that certain assets be preserved for a given period, that their income be used for the benefit of the beneficiaries, or that the wealth be transferred to them when they reach a certain age or when predetermined conditions are met.

A trust therefore goes beyond simply identifying who will receive the assets. It also makes it possible to decide when and on what terms they will benefit from them.

Preserving the unity and value of the wealth

One of the most important aims of succession planning can be to keep wealth built up over time together, rather than allowing it to be fragmented among several heirs. Dividing an estate can lead not only to practical difficulties, but also to a loss of overall economic value, especially where assets are worth more when they are held and managed as a whole. This can be the case, for example, with real-estate portfolios, company shareholdings, family businesses, collections or other related assets.

Through a trust it is possible to keep the management of the wealth unified, while at the same time deciding how the related economic benefits are to be allocated among the different beneficiaries. In this way, the heirs can benefit from the wealth without it having to be physically divided. A trust can therefore serve a twofold purpose: protecting the interests of the beneficiaries and preserving the integrity and value of the family wealth over time.

This can be particularly important where fragmenting the assets would risk undermining their profitability, their use or their market value.

Reducing the risk of conflict among heirs

Succession can be a sensitive moment, especially when the estate includes several assets, company shareholdings, real property or a family business.

Without a clear plan, misunderstandings and disputes can arise among the heirs over the division of the assets, their management or the way they are to be used.

A trust makes it possible to define in advance the rules, timing and terms on which wealth is managed and allocated, reducing the uncertainty that often gives rise to family disputes. A clear plan, shared in advance, can therefore help preserve not only the wealth but also family relationships, so that the most sensitive decisions do not have to be taken at the moment of succession.

Protecting the people you care about

Every family has its own story and its own needs.

It may be necessary to secure resources for a spouse over time, to protect children who are still young, to provide for a family member, or to avoid transferring wealth in full to a beneficiary before they have reached an age or a maturity appropriate to managing it.

A trust makes it possible to build a plan adapted to the family’s actual needs, deciding how and when resources are to be used in the interests of the beneficiaries.

The wealth is therefore not simply transferred. It is accompanied from one generation to the next according to a plan defined in advance.

A plan that can follow changes in the family

Sound succession planning has to take into account that a family can change over time.

The people to whom the law grants particular succession rights — the so-called forced heirs (legittimari), who include the spouse, the children and, in certain circumstances, the ascendants — are identified when the succession opens.

Some may already be present when the trust is established, while others may become forced heirs later, for example on the birth of a child or a new marriage.

For this reason a trust should not simply record the situation that exists when it is set up. It can be structured as part of a dynamic plan, able to take account of possible changes in the family and in the wealth.

Respecting the rights of forced heirs

A trust does not make it possible to disregard the rules of succession. The plan must be built with respect for the rights the law grants to forced heirs, after careful consideration of the family and the estate.

It is not, as a general rule, necessary to obtain in advance the consent of every possible future heir in order to establish a trust. What is essential is to ensure that the succession plan is properly structured and takes account of the rights that may be asserted when the succession opens.

Planning in good time therefore makes it possible to reconcile the wishes of the person disposing of their wealth with the protection of family members and with the rules laid down by the law.

The trustee gives the plan continuity

The management of the wealth is entrusted to the trustee, whose role is to administer the assets settled into the trust in accordance with the provisions of the trust deed and in the interests of the beneficiaries.

Choosing a professional trustee means entrusting this role to a qualified party and giving the plan continuity over time, including after the person who established the trust is no longer there.

Where the deed so provides, a protector may also be appointed, with the role of overseeing the trustee and with any further powers set out in the trust deed. In this way, the directions defined at the planning stage can continue to guide the management of the wealth in the future.

Which assets can be included in the plan?

A trust can be used to plan the future of different kinds of assets, including:

• real property and real-estate portfolios;
• cash and financial investments;
• company shareholdings;
• businesses and family wealth;
• works of art and other valuable assets;
• other assets and rights one wishes to preserve and pass on to future generations.

A plan built to measure and made to last

There is no succession solution that fits everyone.

The composition of the family, the age and needs of the beneficiaries, the presence of forced heirs, the nature of the assets and one’s personal objectives all call for a specific assessment.

A trust can be built to measure, defining today the rules that will accompany the wealth in the future and providing, so far as possible, for mechanisms able to adapt as the family and its needs evolve.

Planning one’s succession means not leaving to chance the future of the wealth built up over a lifetime, but deciding in good time how to preserve it, manage it and pass it on to future generations, keeping it together and protecting its value so far as possible, and reducing the risk of conflict among the heirs.