If your family is global, your estate planning should be too. Preserve your assets by setting up international trusts for your loved ones.
In today’s increasingly interconnected world, blended families are on the rise, with children often spread across multiple countries. As a result, managing a family’s estate and ensuring their long-term goals are met can be a challenge.
The situation is further complicated by complex family relationships, international boundaries and the need to comply with the legal and tax rules of multiple jurisdictions. Navigating this intricate landscape requires careful planning, expertise and a deep understanding of the laws and regulations governing estate organisation across countries.
One example of cross-jurisdictional wealth planning that was managed at RBC is a family who had members and professional advisers located in Switzerland, Costa Rica, Canada and the U.S.
“In this example, the family originally built its wealth in Switzerland. The son of the original wealth creator inherited the estate, then significantly grew his inheritance through astute investing while living in Canada, before then moving to Costa Rica,” says Chris Nutter, director, Fiduciary Specialist Team at RBC Wealth Management Europe. “The son had a daughter in the U.S. from his first marriage and had a second marriage in Costa Rica, thereby creating a global blended family.”
“When the son’s health started deteriorating, he wanted to ensure he had succession plans in place to distribute his assets fairly,” says Nutter. “He wanted to discuss settling a trust with assets held by RBC Wealth Management for the benefit of his daughter in New York. His plan was to leave all other assets to his second wife in Costa Rica. RBC worked with the son’s advisers to facilitate a solution, whereby Canadian assets were settled into a Jersey trust for the benefit of his daughter.”
“This involved legal and tax experts in the U.S., Costa Rica and Canada. The key to successful implementation of the solution was to ensure the son and RBC were compliant in each of the three jurisdictions. For this case, RBC engaged a UK-based law firm that had offices across the U.S., Europe and Asia-Pacific and who were therefore well placed to coordinate the requisite advice across all three jurisdictions.”
Families are increasingly global and therefore the need for wealth solutions that help to efficiently manage their wealth across borders, while allowing them the flexibility that they need to be mobile, is essential.
“It’s not uncommon for children of global families to attend college outside of their country of residence, for example in the U.S. or Canada, following which they often establish careers and residency in those countries. In such cases, there may be use for a U.S. domestic trust to manage the passing of wealth into the U.S., or in the case of Canadian resident beneficiaries, the use of offshore trust structuring can be an effective way to pass wealth into Canada,” says Elizabeth Epifanio, director, Fiduciary Specialist Team at RBC Wealth Management Europe.
A trust structure is often preferred to other wealth structuring vehicles for several reasons, particularly for preserving assets or wealth for future generations.
For estate planning purposes, wealth creators are usually keen to make their wealth accessible to family members around the globe, both during their lifetime and beyond. In many instances, as part of their estate planning considerations, they need to take into account that passing wealth directly to their heirs may be overwhelming for their inheritors, and also on that heir’s death there are likely to be estate duties or tax to pay, which reduce the value of the family wealth.
For these reasons, many wealth creators like the idea of a dynastic wealth structure such as a trust to manage the passing of wealth to the next generation. These structures not only reduce the anxiety of inheriting large sums of money, but they also ensure proper stewardship of the wealth and support global tax compliance for the family through the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS).
Working with a professional trust service provider that can help facilitate the creation of trust structures in more than one jurisdiction can be hugely beneficial. Referring to the example above, where children move to the U.S. or Canada for schooling only to remain there to start their careers and families; establishing domestic structures that complement the global structures that manage their family’s estate is hugely advantageous. It ensures that individual needs are catered for without adversely impacting the wider family wealth planning arrangements. It should be noted of course that all countries view the use of trusts in different ways; for this reason, working with advisers to ensure any proposed structure is appropriate and robust is paramount.
Managing the complexities that come with estate planning for global blended families can be a challenge, however working with a professional trustee or wealth manager, in conjunction with wealth planners, tax and legal advisers, can ensure robust management, especially where structuring is recommended as part of the wealth solution.
This article was updated in Dec. 2024.
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