Heritage Reflections

Frédéric Valentin, Head of Wealth Structuring & Planning for Societe Generale Private Banking Luxembourg, Monaco and Switzerland

Pierre-Frédéric Stein, Head of Development and Wealth Planning, Societe Generale Private Banking Luxembourg

A privileged moment

Listening is an essential element in the relationship with clients. It is essential to fully understand their objectives and philosophies. It enables them to implement, with full knowledge of the facts and in a successful manner, the wealth strategy that they have chosen with their advice.

Wealth strategy

A true "bedside book", it represents the fruit of the clients' exchanges with their advisors and usual contacts within the bank, charting the course for the coming years.

Depending on the objectives they expressed, it is articulated around several strategic axes such as, for example, the comfort of life, transmission (possibly transgenerational), capital preservation, support for generations, governance of the family group, geographical location, diversification of assets (including art), philanthropy, matrimonial regimes, international successions..

Each of these areas shall be approached by taking into account the regulations in force.
We propose to address here some typical strategic axes.

Living standards

Let us take the example of a manager, who owns his business, which he sells. After the sale, his income will decrease, he will receive neither salaries nor dividends. In order to maintain a comfortable life, one or more additional income will be necessary.

Several possibilities are open, including the investment of the proceeds in a life insurance package or capitalisation contract. Successive surrenders could make it possible to generate additional income and thus maintain the comfort of life. The collection of property income, such as rental income, or even a trade-off between property income and interest from a life insurance policy may also make it possible to create the additional income sought.

But the sale of the company, in the presence of children, may also be an opportunity to begin the transfer of its assets by transferring the company's shares before they are sold.

Preservation of family cohesion

The preservation of family cohesion is a recurring theme when developing a heritage strategy.
Family governance addresses a number of issues such as the organisation of the assets of future generations, with or without the involvement of the shareholders in the management and development of the company and its group. It is not uncommon for the suggestion of setting up a holding company called a family branch wealth management company to be adopted in order to preserve the legal independence and distribution policy of the group.
This organisation makes it possible to reflect, in a second stage, on the wealth strategies of each branch, which are financially independent of each other.
Specialized family governance consultants assist clients in their reflections.

Considering foreign elements

The possible current international dimension of the client and their family must be taken into account in order to come up with a strategy that is adapted and sustainable, that stands the test of time and life changes.

Does the manager selling their company envisage redeployment in different countries? The geographical location of the country or countries to be chosen, as well as their legislative and regulatory framework, will have to be included in the analysis.

Do family members reside in different countries, or do some of them not rule out changing their country of residence in the long run?
Such a situation will have to be integrated into the criteria for selecting a suitable vehicle for the implementation of effective family governance. For example, the choice of vehicles of Anglo-Saxon (common law) inspiration may prove to be a delicate application in countries with other legal bases.

In another register, the choice of a “Société Civile Immobilière” to conduct real estate investments is a simple solution in a French environment, but may prove unsuitable when certain family members live or plan to settle in a country where this regime is not recognized.

French tax resident clients wishing to begin the transmission of their assets to their non-resident children will have to ask themselves the question of the treatment in their children's state of tax residence of the shared gift under French law that they wish to make. This option of giving and sharing, in the same notarial deed, is a suggestion to be used with caution in the presence of foreign elements.

Similarly for married children who have changed tax residence, the question of the matrimonial property regime will have to be addressed and integrated into the analysis, particularly in the light of the EU Regulation EU 2016/1103.

Asset diversification

The wealth strategy chosen by the client will condition the choice of financial envelopes and asset allocation, a choice to which the bank can contribute through its wealth engineering department with a private banker and/or a manager.