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Dealing with succession

Dealing with succession is not a choice but a fact. We all know that life isn’t forever, but it is often something that people tend to put to the back of their minds rather than face the harsh reality. As a result, creating a succession plan often gets pushed way down the list of priorities, as we cling to the hope that we will all live long and full lives.

The problem is that no matter how far down the priority is on our to-do lists, the fact remains that it must get done eventually. Difficult as it may be to face this truth, the tranquillity that is derived from knowing that all your affairs are in order and that your prospective heirs are looked after is worth dedicating time to. After all, the action of writing a will or organising your estate does not mean this will accelerate your fate.

Popular television shows such as Dynasty and Succession showcase some of the complexities that large cross-border estates can present for multi-generational families when there are ineffective, or no succession plans in place. The reality is that it doesn’t take a large dynasty or significant estate for issues to arise after the principal’s death.  Whilst we cannot control our assets from beyond the grave there are effective measures, we can use to ensure that they are distributed and enjoyed according to our wishes.

A simple will remains the most common method of dealing with testamentary assets.  Generally, the law of a person’s jurisdiction of residence will dictate the manner in which the estate is administered.  It is sometimes possible for individuals to choose the law of their country of domicile to govern their wills (if their country of domicile is different to their country of residence).  A will covers most of the assets held by an individual including moveable assets held cross-border.  Immovable assets (mainly real estate) held in other jurisdictions tend to be handled individually under specific wills drawn up under the law of the jurisdiction where the asset is situated.  This is because they will largely be subject to the laws of that jurisdiction even if they are dealt with in a will governed by the country of residence.

Depending on the jurisdiction of residence, an individual’s estate may be subject to forced heirship provisions.  Gibraltar has a common law system and there are no forced heirship provisions in legislation.  It is therefore possible to leave your estate to whomever you please and equally to exclude persons whom you may not wish to benefit. However, where a person dies intestate, letters of administration would need to be sought from the relevant authority and generally the estate would be passed on for the benefit of any surviving spouse or next of kin.

Over the last few years, Gibraltar has seen a rise in the use of testamentary trusts. This is essentially where an individual expresses a wish in his/her will to leave the assets to a trust that is to be created upon their death for the benefit of nominated beneficiaries. The trustees nominated under the will manage the assets taking into account the wishes of the deceased which would have been set out by the deceased in a letter of wishes left together with the will.

Some individuals choose to establish inter-vivos arrangements which will allow for an easy transition to the next generations and other select beneficiaries while the principal is still able to do so. This could include the establishment of various trusts, foundations and asset holding companies, the management and administration of which would be handled via a family office. Often these arrangements will continue intact after the death of the principal without the need for detailed instructions under a will other than in relation to the distribution of shares in the family office or any asset holding company that the deceased may have held directly.

The plan that is put in place will be bespoke to each individual, factoring in the nature of the estate, any cross-border elements, the location of heirs, their ages and the wishes of the individual. This tends to be different and unique to each case. We work closely with our clients to understand their requirements both practical and emotional, to ensure that we create a succession plan that not only fulfils the client’s desires but also ensures minimum negative impact on the prospective heirs.

Written by Emma Lejeune, Partner, ISOLAS LLP

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