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LATAM client numbers requesting a review of estate and tax planning strategies rising, reports ZEDRA

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Contributed by ZEDRA
22 April, 2020

ZEDRA, the global specialist in Active Wealth, corporate and fund solutions is reporting a significant rise in the number of requests from LATAM based clients asking for a review of both their succession planning and structuring strategies. Whilst not linking this directly to the COVID-19 outbreak, ZEDRA believes the publicity surrounding the pandemic has acted as a catalyst, prompting clients to review how their estates will be managed.

Mario Cohn, Managing Director, ZEDRA Switzerland, explains. "Succession planning in Latin America is very complex, with many countries still having forced heirship rules, which can complicate estate planning considerably. Examples include countries such as Chile, Argentina and Brazil. Under forced heirship, unless succession plans are implemented, at least part of an estate has to be divided between the surviving family. Some countries like Mexico have broken away from the practice, allowing for more opportunities to plan wealth distribution, but many have not."

The shock of the new

Global shocks to the economy and the very real threat these present to both wealth and welfare have underlined the importance of succession planning. "Families and individuals with no current succession plans have seen this as the perfect time to focus on getting these implemented," says Cohn, "Likewise, individuals who have structures in place are also contacting us and asking to review the relevance and reliability of these."

International taxation is a dynamic and often fast moving environment and ZEDRA believes that once the pandemic has passed and the enormous state spending budget has to be accounted for, there will be a strong upward pressure on worldwide taxation. Clients therefore need to regularly review plans and objectives.

Family and business in the spotlight

Family businesses can add a series of subtle considerations around succession planning, especially where long standing employees have become, in the eyes of the founder, as close in some regards as the family itself. In such cases, ZEDRA reports, it is not unusual for plans to be drawn which specifically look to protect the roles and livelihood of key employees who may not be direct family members.

It follows, therefore, that founders are seeing succession planning both as a tool with which to support a successful generational transition, but also as a means to protect a business and key employees in the long-term.

Speed is of the essence

During periods of intense global turmoil, such as we are experiencing at present, often speed is everything. When uncertainty is all pervading, family leaders in particular may feel a strong urge to re-establish a sense of normality, stability and security. Cohn continues, "Latin American families can be large and typically there are a number of different factors at play. Beneficiaries might be residents in different countries, different generations might work in the business, the business itself may be experiencing a period of flux. The range of business and non-business factors which need to be addressed can be considerable. Clients, though will demand that the family advisors move as quickly and effectively as they themselves do in periods of uncertainty."

2019 saw extensive tax reforms in the LATAM region, and these need to be considered carefully in the context of implementing structures. Tax, transparency and a family's objectives for succession and estate planning must, however, always be considered, regardless of the presence or not of forced heirship rules.


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