Almost every industry has experienced stark changes over the last few years as a result of the COVID-19 pandemic. The wealth sector in particular has seen a major shift with the generational wealth transfer timeline significantly shortening compared to pre-pandemic times.
The ongoing pandemic has inadvertently pushed older individuals to re-assess their plans in transferring wealth to younger generations. This is especially crucial for ultra-high-net-worth families here asset protection and wealth preservation is of utmost priority.
Family foundation for wealth preservation and asset protection
Despite the economic turmoil during the pandemic, it has surprisingly boosted the wealth of the super-rich by up to 27.5%, which in turn has put more pressure for ultra-high-net-worth individuals to ensure a smooth and successful transition of wealth.
Based on reports,, it is expected that almost $15 trillion will be transferred to the hands of millennials, Gen Z, and Gen Y in the next decade. For ultra-high-net-worth individuals with net work of more than $100 million, 62% of whom are older than 75, there is urgency in effective asset protection and wealth management.
Before the onset of the pandemic, wealth transfer for the older generation was expected to begin in five years’ time, but due to the COVID-19 pandemic, the older generations have began accelerating wealth transfer into their current timelines.
With the rising number of wealth transferring transactions, ultra-high-net-worth individuals and families need to understand their options and establish the right infrastructure to facilitate smooth and stress-free wealth transition. The use of trusts and foundations will play an integral role in this transition of wealth while mitigating the risk of wealth depletion.
Why Use Foundations for Asset Protection and Wealth Management?
In the current economic landscape of rising inflation and low interest rates, wealth conservation is a top priority of ultra-high-net-worth individuals and their respective family offices. A foundation will be an important asset protection and wealth management tactic, having a wide remit within succession planning. It can protect assets by allowing the effective separation of legal ownership from the utilization of assets, offering families with the flexibility to delineate how they prefer their assets to be held preserved, and allocated in the long term.
A foundation can be customized to address the specific needs of ultra-high-net-worth families and can be established for an unlimited period. It also allows maximum functionality and flexibility to ensure the continuation of wealth across multiple generations. The foundation layout also offers a great level of privacy, while being flexible enough to ensure adherence to with regulations and existing tax laws.
In terms of asset protection, a foundation can hold any type of asset that an individual may own, ranging from cash, public securities, family businesses, as well as alternative assets such as real estate, luxury assets, real estate, art, and many more.
Should You Consider a Foundation for Wealth Preservation and Asset Protection?
While deciding on whether a trust is the best option to facilitate the transfer of wealth, ultra-high-net-worth individuals need to gain a great depth of understanding to understand the primary features of a foundation structure. This is especially significant when cross-border investments are concerned. Individuals across multiple jurisdictions who want to build a foundation need to consider their options carefully before pursuing this financial activity.
Private purpose foundations are typically less widely adopted than trusts. These structures are considered a hybrid between a company and a trust as they are structured as a corporate entity, with a separate legal personality owning the property and transferred by the founder at some point. Additionally, a foundation may transact using its own name, which means there are no separations when it comes to ownership. However, it offers a long list of benefits as well.
Working as a premier financial consulting business, Damalion offers expert assistance in the formation of a private foundation in Luxembourg or another preferred jurisdiction. Utilizing our years of expertise in the business and our extensive global service network, we have the resources and skills to ensure a smooth process of trust and foundation incorporation and bank account opening. To learn more whether a foundation is a suitable structure for your family’s asset protection and wealth preservation needs, contact a Damalion expert today.
This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
