gaining a global view of ownership structures - presentation by barbara r hauser llc - elite summit

Gaining Gaining a Global View of a Global View of Ownership Structures Ownership Structures

(to (to Channel Ultimate Tax Efficiency andChannel Ultimate Tax Efficiency andAsset Asset Protection)Protection)

by Barbara R Hauser LLC

For

Marcus Evans Elite Summit

Montreux 31 May 2012

ChallengesChallenges of Global Assetsof Global Assets

Marcus Evans Elite Summit Barbara R Hauser LLC 2

To OpportunitiesTo Opportunities

chaos Strategychaos Strategy


Goal: Safeguard from RisksGoal: Safeguard from Risks

� Country Instability

� Foreign Taxes

� Claims against the client� Claims against the client

� Failure to leave to the chosen heirs

� Poor Management

� Family DisputesMarcus Evans Elite Summit Barbara R Hauser LLC 4

ExampleExample

� Swiss accounts

� Paris apartment

� New York apartment� New York apartment

� Equity in private firms

� Stock in US public/listed companies

� Jersey trustMarcus Evans Elite Summit Barbara R Hauser LLC 5

Likely ChaosLikely Chaos� Taxes could apply: UK, France, USA etc◦ Wealth tax

◦ Capital gains tax

◦ Inheritance tax◦ Inheritance tax

◦ Will a treaty help?

� Disclosure reports for USA? (FBAR & FATCA)

� Local inheritance rules apply?

� Trust recognized?


Client ConcernsClient Concerns

� Minimize all taxes

� Ensure that wealth passes on as the client � Ensure that wealth passes on as the client wishes

� Avoid exposure to risks and claims


Global FourGlobal Four--Step SolutionStep Solution1. Conduct an Ownership Audit

2. Choose/change the Jurisdiction/sChoose/change the Jurisdiction/s

3. Consider a Trust

4. Create strong GovernanceMarcus Evans Elite Summit Barbara R Hauser LLC 8

The 4The 4--Step ProcessStep Process

Trust

Governance

Ownership audit

Jurisdiction/s


#1#1--Ownership AuditOwnership Audit1. 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.Marcus Evans Elite Summit Barbara R Hauser LLC 10

Ownership Audit Ownership Audit ---- ElementsElements

• The legal type of asset mattersWhat

• The legal owner mattersWho

• The “location” mattersWhere


ExampleExample� 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 locatedsubject 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


WhatWhat do they own?do they own?

Listed

Stock

Private Equity

Homes

Client

Private Equity

CollectionsInsurance

Homes


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


Why does the Why does the ownerowner matter?matter?

Right to transfer/sell/gift

Exposure to taxes & claims

Inheritance impact


ExampleExample� Individual owner – free rights to transfer

� Married owner – must consider spousal rights

Partnership – terms of agreement?� Partnership – terms of agreement?

� Corporate owner– who owns the company?

� Trust – will the Trust be valid?Marcus Evans Elite Summit Barbara R Hauser LLC 16

Why does the Why does the locationlocation matter?matter?

Right to transfer/sell/gift

Exposure to taxes & claims

Inheritance impact


ExampleExample

� USA – freedom to dispose (with taxes)

� UK – dependents’ claims

� France – forced heirship

� Switzerland – may follow citizenship

� Gulf Region – Shariah law may applyMarcus Evans Elite Summit Barbara R Hauser LLC 18

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


Why the Jurisdiction MattersWhy the Jurisdiction MattersImportant General Attributes:

� Stable law (including trust law)

� Good Professionals

� Convenience Marcus Evans Elite Summit Barbara R Hauser LLC 20

What the Jurisdiction ControlsWhat the Jurisdiction Controls

� Taxes

� Inheritance

� Claims

◦ Commercial creditors

◦ Family disputes


Jurisdiction in ParticularJurisdiction in Particular

Consider client’s particular risks:

� Where are the client’s assets� Where are the client’s assets

and

� Who might make a claim (and what kind? and where?)


# 3 Use a Trust (or two)?# 3 Use a Trust (or two)?

Client BeneficiariesClientTrustee

Beneficiaries


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

Disadvantages:� Complexity, cost & administration


Choice of TrusteeChoice of Trustee� Extremely important� Many choices:◦ “big bank”◦ Professional private trust company◦ 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 FamilyThe notoriously private owners of Hyatt –The Pritzkerfamily – have decided to part ways, leaving billions in assets up for grabs.family – have decided to part ways, leaving billions in assets up for grabs.

� GCC - The Saad-Algosaibi disasterLack of transparency in Saudi firms’ feud leaves billions in losses hidden

� Family Feuds Grip Ho Casino Empire & Yung Kee Restaurant brothers


# 4# 4--Create Strong Create Strong GovernanceGovernance

Create a strong family governance structure to keep the family in alignment (and to avoid those claims)(and to avoid those claims)


What is Family Governance?What is Family Governance?

Answer:

“How the family makes decisions together”“How the family makes decisions together”


Range of Governance OptionsRange of Governance Options

� Dictator (some Patriarchs/Matriarchs)

� Benevolent Ruler (some Patriarchs/Matriarchs)

� Appointed Leader

� Elected Leader

� Participatory SystemMarcus Evans Elite Summit Barbara R Hauser LLC 29

Best Practices GloballyBest Practices Globally

� Family Constitution

� Family Council� Family Council

� Family Assembly


Process to Follow

Constitution

Council

Assembly


The Family ConstitutionThe Family Constitution

• Preamble: Why are we doing this?

• Who will make what rules on what • 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 CouncilThe Family Council

Who is on it?

What can it do?What can it do?

What can it not do?


Participatory Process: The KeyParticipatory Process: The Key� All contribute to the Process

� All views are considered

� Compromises and Consensus Result

� Flexibility & Amendability are CrucialMarcus Evans Elite Summit Barbara R Hauser LLC 34

Strong Governance ResultsStrong Governance Results

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


Conclusion: Four Steps to SuccessConclusion: Four Steps to Success

#1—Conduct Ownership Audit

#2—Choose good Jurisdictions

#3—Consider Trusts

#4—Create strong family GovernanceMarcus Evans Elite Summit Barbara R Hauser LLC 36

References--Books◦ International Family Governance (Amazon)

� International Estate Planning: A Reference Guide (JurisPub)


Mommy, Are We Rich?

Additional References

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

� LinkedIn Group: “International Family Governance”


Selected BooksSelected 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 (JohnWard)� Creating Effective Boards for Private Enterprises (JohnWard)

� The Rule of Law: On History, Politics,Theory (BrianTamanaha)

� Theory of Justice (John Rawls)

� Flow: The Psychology of Optimal Experience (MihalyCsikszentmihalyi) (core meaning of “a good life”)


Questions?Questions?

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

Barbara Hauser ([email protected])


gaining a global view of ownership structures - presentation by barbara r hauser llc - elite summit

Economy & Finance