Massing of Estates


Summary

Massing of estates is a useful mechanism of transfer of family wealth with many potential benefits for a family office.


Introduction

Planning the transfer of family wealth after the passing of family members is vital for the success of a family office. Estate administration events can be risky for families, with the potential for significant cash outflows due to estate duty and capital gains tax, along with the risk of delays during the lengthy estate administration process. The executor must navigate a maze of government bureaucracy and administrative procedures, which could last for many months. Additionally, there is a potential for a change in control of wealth to a generation that may have a different relationship with the family money and a vision that may not align with that of the wealth creators. All these factors must be considered when planning for the eventual transfer of family wealth.

Logic of a Massed Estate

The massing of estates is a practical solution for delaying the payment of estate duty and capital gains for as long as possible, while also imposing restrictions and responsibilities on the wealth to ensure that it serves the longer-term vision of its creators. The wealth will be bequeathed to family office inheritance structures containing the required guidance for persons taking fiduciary responsibility for it.

Consolidation of Estates

Massing of estates occurs when persons combine their separate estates, using a massing will, into a single estate, indicating in the will how this whole will be administered on the occurrence of certain events. In practice, this event is almost always the demise of the first dying partner.

Requirements

There is a presumption against massing, and therefore it is essential for the will to clearly and unambiguously state that it is the intention of the parties to mass their separate estates into a single, consolidated estate.

Adiation and Repudiation

With the death of the first dying partner, the survivor is required to elect either adiation or repudiation of the massing of the separate estates. If the survivor rejects the massing will, no massing of estates will take place, and the survivor keeps their estate. A massing will should make provision for this possibility.

With adiation, the longest living partner forever loses their ability to recall the massing of estates and accepts that their assets will eventually be distributed to the designated beneficiaries in the mutual will.

Fiduciary Responsibilities

In cases where the mutual will determines that the massed estate will pass to the longest living partner and, on their demise, to another party (such as a trust), a fideicommissum comes into existence that encumbers those assets in the massed estate. The longest living partner takes on fiduciary responsibility and must treat the massed estate in accordance with the terms contained in the joint will. Legally, the eventual beneficiaries have certain rights and can approach the courts if the terms of the mutual will are not adhered to or if those assets are at risk. This gives the first dying partner comfort that the family wealth will be treated in accordance with the estate plan and that the ultimate beneficiaries are sufficiently protected.

Conclusion

The massing of estates can be a useful estate planning mechanism in certain instances, allowing for the transfer of family wealth to family office inheritance structures while providing for the maintenance of the surviving partner. However, specific legal requirements must be met for successful massing of estates to occur.



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