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Wealth Planning: Why Is It Useful? Where to Start and What Mistakes to Avoid?
When it comes to managing one’s assets, emotions often play a role. The first step to managing it well is awareness, as there is no single ideal protection or planning tool. It is first useful and necessary to “map” individual needs, identify problems, and then, in a second phase, define the
most suitable tools. These tools should not be seen as a “granitic whole” but as a journey.
Often, and with great superficiality, I encounter clients who ask me if a specific solution is suitable for their needs without first understanding that they need to take a step back.
What to Avoid and Therefore Which Path to Take?
For example, starting by asking whether a Trust or an insurance policy is suitable for one’s personal situation can be misleading, also because the regulatory framework is so “volatile” that simplifying things is dangerous. Laws change, court rulings set precedents, and personal needs
can vary. Therefore, a wealth planning project is needed, one that must be monitored and updated as external factors change.
The definition of the project is overseen by various specialist figures who can contribute to identifying critical areas and finding solutions, working in synergy. These figures include notaries, lawyers, and wealth advisors. The wealth advisor plays a pivotal role, providing the initial listening, coordination, and definition of the asset perimeter.
What Are the Main Issues in Wealth Planning?
We must distinguish between two aspects: protection from asset aggression risks and the transmission of assets through inheritance. These are often addressed by resorting to the same legal instruments, which is why they are discussed together.
What Are the Risks of Asset Aggression?
Regarding the risks of asset aggression, managers, doctors, professionals, and entrepreneurs operate in a legislative context that exposes them to increasingly significant dangers.
The premise is the infamous Article 2740 of our Civil Code, which states that each person is liable for their obligations with all present and future assets, thus excluding any “conservative” action, so to speak, on those assets.
It follows that anyone can face claims for damages, with the consequence of jeopardizing their assets.
In reality, our legal system has progressively introduced a series of “exceptions” to this principle, not limiting liability but limiting the scope of application to assets and providing that specific assets can be allocated for particular needs. In practice, the legislator allows for the creation of
a separate or segregated patrimony, unassailable by some personal creditors, provided that the operation is not fraudulently designed to harm them.
The fundamental aspect is that it must be addressed in good time and not when the problem has already arisen. I often find myself contacted in situations that are already compromised or borderline.
Asset liability therefore constitutes an increasingly present risk in our lives: identifying and addressing it before claims arise allows an individual, in the event of asset aggression by third parties, to safeguard at least a portion of their assets.
To apply this form of protection, it is necessary for the assets to have been segregated and thus not be subject to legal action.
For this reason, it is right to think in terms of preventive planning, risk mapping, and what I call a “wealth check-up,” just as occurs in preventive health screening campaigns.
Planning the Transmission of Assets
The second aspect of planning is the transmission of assets, which concerns the entire patrimony: real estate, movable property, and business assets.
It is useful to ask some simple questions: why engage in wealth planning in terms of asset transmission? What are the advantages? The answer is affirmative, let’s see why.
Again, there are no standard solutions; the problem must be addressed from two points of view: fiscal and civil law. From a fiscal point of view, currently in Italy, the taxation system relating to the transfer of assets is particularly favorable: for example, there are significant tax-free
thresholds for direct family members, from spouse to children, down to grandchildren, while for the generational transfer of controlling stakes in companies, solutions can be adopted that allow for both tax optimization and the objective of maintaining unitary control of the same company.
Here, the other aspect comes into play, which is civil law; our legal system provides for a principle known as “forced heirship” (or “necessary succession”), whereby a certain portion of the assets must necessarily be assigned to certain heirs. This leads, in the event of inaction by
the interested party, to a fragmentation of the assets at the time of succession. Conversely, if properly planned, tools are available that allow heirs to participate in the benefits of the assets while maintaining them as a single entity in their components (real estate, businesses, intangible assets). These tools make it possible to keep the assets unified, even if their benefits are divided among those entitled.
This is particularly important, especially for more significant estates.
Wealth Planning as a Tool for Preventing Disputes Among Heirs
Another advantage of planning, even more evident following cases involving well-known personalities, is that of preventing disputes among heirs, which can often lead to long and costly legal battles or, in the case of companies, to the risk of the company’s demise.
In Italy, currently, 53% of entrepreneurs are over 60, 90% of businesses are family-owned, 33% survive the first generational transition, 15% the second, and just 5% the third. It is crucial for the entrepreneur to understand the need to address the transition in good time, defining an adequate plan and strategy. To avoid conflicts, it is important to define family and business governance with rules that regulate relationships among family members in the management of the company, giving importance to founding values or to individual aptitudes and desires.
What Tools Are Available for Wealth Planning, Viewed as Both Protection and Generational Transfer?
Available Instruments:
There are various legal institutions and instruments provided, including:
- Simple partnership
- Trust
- Life insurance policies
- Securitization
- Family inheritance agreements
- Will
- Fiduciary heading
- Family trust
Our legal system provides us with multiple tools that must be used specifically for the individual needs of the assets to be managed and the family unit. They differ in one aspect: most serve to satisfy a very limited purpose.
In some articles, I will specifically address the individual characteristics of each of them.
Among all of them, two instruments, in particular, stand out for being the most flexible, allowing for the resolution of a greater number of planning needs: on one side, we have the simple partnership, and on the other, the trust.
These are two customizable tools that allow addressing multiple issues related to the protection and transfer of assets but present significant legal
complexities.
The simple partnership is characterized by simplified management (e.g., it is not subject to accounting obligations like more structured companies) and allows for very flexible drafting of social agreements. It is also a vehicle with low management costs that can be used to obtain the benefits of corporate ownership. Using a simple partnership allows for separating ownership and management power. By adopting this instrument, assets can be segregated, as assets registered to simple partnerships are not subject to legal action by the creditors of the partners; at the same time, asset transmission can be planned by assigning corporate shares to heirs while maintaining management control of the company itself.
The other instrument of great importance in wealth planning is the trust: compared to other elements of the Italian civil law system, the trust allows for pursuing aims and achieving results that no other instrument permits. The reason for this is that the Trust allows great freedom in
programming the destination of assets, their purpose, and control.
Through this instrument, assets are transferred to an individual who becomes the owner but not for their own interest, but for that of the beneficiaries. The Trustee is an individual who owns the assets but cannot benefit from them. The segregated assets are not assailable by the trustee’s creditors.
What is the reason for this segregation?
It is an asset that is managed by the trustee according to a programmatic design in the interest not of themselves but of the beneficiaries.
In the recent Law n. 112/2016 (Law on “After Us” – “Dopo di noi”), the legislator introduced a series of measures aimed at promoting trusts and deeds of purpose in favor of severely disabled persons, ensuring multiple tax benefits, and thereby expressly recognizing the full legal
legitimacy of asset separation legal instruments such as the trust.
Planning your wealth can therefore not only prevent potential problems or critical issues but also be an opportunity to seize various economic and organizational advantages.
If you wish to carry out a wealth check-up, both in terms of planning your desires and strategic-economic analysis (with the aid of software), please contact me.
Wealth Planning: Why Is It Useful? Where to Start and What Mistakes to Avoid?
When it comes to managing one’s assets, emotions often play a role. The first step to managing it well is awareness, as there is no single ideal protection or planning tool. It is first useful and necessary to “map” individual needs, identify problems, and then, in a second phase, define the
most suitable tools. These tools should not be seen as a “granitic whole” but as a journey.
Often, and with great superficiality, I encounter clients who ask me if a specific solution is suitable for their needs without first understanding that they need to take a step back.
What to Avoid and Therefore Which Path to Take?
For example, starting by asking whether a Trust or an insurance policy is suitable for one’s personal situation can be misleading, also because the regulatory framework is so “volatile” that simplifying things is dangerous. Laws change, court rulings set precedents, and personal needs
can vary. Therefore, a wealth planning project is needed, one that must be monitored and updated as external factors change.
The definition of the project is overseen by various specialist figures who can contribute to identifying critical areas and finding solutions, working in synergy. These figures include notaries, lawyers, and wealth advisors. The wealth advisor plays a pivotal role, providing the initial listening, coordination, and definition of the asset perimeter.
What Are the Main Issues in Wealth Planning?
We must distinguish between two aspects: protection from asset aggression risks and the transmission of assets through inheritance. These are often addressed by resorting to the same legal instruments, which is why they are discussed together.
What Are the Risks of Asset Aggression?
Regarding the risks of asset aggression, managers, doctors, professionals, and entrepreneurs operate in a legislative context that exposes them to increasingly significant dangers.
The premise is the infamous Article 2740 of our Civil Code, which states that each person is liable for their obligations with all present and future assets, thus excluding any “conservative” action, so to speak, on those assets.
It follows that anyone can face claims for damages, with the consequence of jeopardizing their assets.
In reality, our legal system has progressively introduced a series of “exceptions” to this principle, not limiting liability but limiting the scope of application to assets and providing that specific assets can be allocated for particular needs. In practice, the legislator allows for the creation of
a separate or segregated patrimony, unassailable by some personal creditors, provided that the operation is not fraudulently designed to harm them.
The fundamental aspect is that it must be addressed in good time and not when the problem has already arisen. I often find myself contacted in situations that are already compromised or borderline.
Asset liability therefore constitutes an increasingly present risk in our lives: identifying and addressing it before claims arise allows an individual, in the event of asset aggression by third parties, to safeguard at least a portion of their assets.
To apply this form of protection, it is necessary for the assets to have been segregated and thus not be subject to legal action.
For this reason, it is right to think in terms of preventive planning, risk mapping, and what I call a “wealth check-up,” just as occurs in preventive health screening campaigns.
Planning the Transmission of Assets
The second aspect of planning is the transmission of assets, which concerns the entire patrimony: real estate, movable property, and business assets.
It is useful to ask some simple questions: why engage in wealth planning in terms of asset transmission? What are the advantages? The answer is affirmative, let’s see why.
Again, there are no standard solutions; the problem must be addressed from two points of view: fiscal and civil law. From a fiscal point of view, currently in Italy, the taxation system relating to the transfer of assets is particularly favorable: for example, there are significant tax-free
thresholds for direct family members, from spouse to children, down to grandchildren, while for the generational transfer of controlling stakes in companies, solutions can be adopted that allow for both tax optimization and the objective of maintaining unitary control of the same company.
Here, the other aspect comes into play, which is civil law; our legal system provides for a principle known as “forced heirship” (or “necessary succession”), whereby a certain portion of the assets must necessarily be assigned to certain heirs. This leads, in the event of inaction by
the interested party, to a fragmentation of the assets at the time of succession. Conversely, if properly planned, tools are available that allow heirs to participate in the benefits of the assets while maintaining them as a single entity in their components (real estate, businesses, intangible assets). These tools make it possible to keep the assets unified, even if their benefits are divided among those entitled.
This is particularly important, especially for more significant estates.
Wealth Planning as a Tool for Preventing Disputes Among Heirs
Another advantage of planning, even more evident following cases involving well-known personalities, is that of preventing disputes among heirs, which can often lead to long and costly legal battles or, in the case of companies, to the risk of the company’s demise.
In Italy, currently, 53% of entrepreneurs are over 60, 90% of businesses are family-owned, 33% survive the first generational transition, 15% the second, and just 5% the third. It is crucial for the entrepreneur to understand the need to address the transition in good time, defining an adequate plan and strategy. To avoid conflicts, it is important to define family and business governance with rules that regulate relationships among family members in the management of the company, giving importance to founding values or to individual aptitudes and desires.
What Tools Are Available for Wealth Planning, Viewed as Both Protection and Generational Transfer?
Available Instruments:
There are various legal institutions and instruments provided, including:
- Simple partnership
- Trust
- Life insurance policies
- Securitization
- Family inheritance agreements
- Will
- Fiduciary heading
- Family trust
Our legal system provides us with multiple tools that must be used specifically for the individual needs of the assets to be managed and the family unit. They differ in one aspect: most serve to satisfy a very limited purpose.
In some articles, I will specifically address the individual characteristics of each of them.
Among all of them, two instruments, in particular, stand out for being the most flexible, allowing for the resolution of a greater number of planning needs: on one side, we have the simple partnership, and on the other, the trust.
These are two customizable tools that allow addressing multiple issues related to the protection and transfer of assets but present significant legal
complexities.
The simple partnership is characterized by simplified management (e.g., it is not subject to accounting obligations like more structured companies) and allows for very flexible drafting of social agreements. It is also a vehicle with low management costs that can be used to obtain the benefits of corporate ownership. Using a simple partnership allows for separating ownership and management power. By adopting this instrument, assets can be segregated, as assets registered to simple partnerships are not subject to legal action by the creditors of the partners; at the same time, asset transmission can be planned by assigning corporate shares to heirs while maintaining management control of the company itself.
The other instrument of great importance in wealth planning is the trust: compared to other elements of the Italian civil law system, the trust allows for pursuing aims and achieving results that no other instrument permits. The reason for this is that the Trust allows great freedom in
programming the destination of assets, their purpose, and control.
Through this instrument, assets are transferred to an individual who becomes the owner but not for their own interest, but for that of the beneficiaries. The Trustee is an individual who owns the assets but cannot benefit from them. The segregated assets are not assailable by the trustee’s creditors.
What is the reason for this segregation?
It is an asset that is managed by the trustee according to a programmatic design in the interest not of themselves but of the beneficiaries.
In the recent Law n. 112/2016 (Law on “After Us” – “Dopo di noi”), the legislator introduced a series of measures aimed at promoting trusts and deeds of purpose in favor of severely disabled persons, ensuring multiple tax benefits, and thereby expressly recognizing the full legal
legitimacy of asset separation legal instruments such as the trust.
Planning your wealth can therefore not only prevent potential problems or critical issues but also be an opportunity to seize various economic and organizational advantages.
If you wish to carry out a wealth check-up, both in terms of planning your desires and strategic-economic analysis (with the aid of software), please contact me.
