SummaryA well-structured and administrated offshore investment structure will allow a family to diversify risk across geographies and should ensure a family maintains its wealth for many generations.
The management of multi-generation wealth requires a family to look far into the future to determine their financial course and to ensure the course does not get overturned by the challenges of today and tomorrow. It is a complicated challenge to maintain family wealth for long periods of time and a famous quote states that the first generation creates wealth and by the third generation it will be squandered. A family will find that a well-structured and administrated foreign succession structure could be invaluable to overcome complex financial challenges if the decision is made to invest some of the surplus family wealth abroad in order to spread out financial and political risks.
A foreign succession structure can protect a family against many of the risks experienced in their core enterprise and should be drafted and managed as a separate, lawful entity to withstand any unforeseen occurrences encountered by the core enterprise.
There are numerous foreign financial centres where such a structure could be created, of which the Indian Ocean, Caribbean and Channel Islands are only a few examples. A thorough analysis of the advantages and disadvantages of each jurisdiction will enable the family to choose the one best suited to meet their unique needs.
The thorough administration of a foreign structure is just as important as its design. The structure must be supervised throughout to ensure the family’s long-term goals are met.
The investment possibilities from such a structure are almost endless and include safe government bonds of large developed nations, normal shares in the largest and most innovative companies of the world, as well as modern investment products such as ultra-low stock exchange funds. A detailed investment plan will ensure that the factors affecting farming enterprises will not have a negative influence on the wealth of the structure. This will enable a family to intelligently and safely diversify the risks they are exposed to.
Should it be required, the funds allocated to such a structure could easily be used to benefit the farming enterprise or any beneficiary, no matter their location.
In spite of all the benefits of a foreign succession structure, its complexity and related costs require a family to allocate at least a few million rand to the structure for it to be economically feasible.
The taxes, foreign currency and corporate traps of a foreign succession structure could be overwhelming to a person unfamiliar with these fields. It is of critical importance for the family to appoint a skilled and dedicated specialist to assist them with the design, establishment and administration of such a structure.
A well-structured and administrated foreign succession structure could ensure a family maintains its wealth for many generations and that its founder will forever be a legendary figure in the minds of his or her descendants.
Mosaic Family Office is the leading provider of multi-family office services in South Africa.