(From the motion picture - Meet Joe Black - Brad Pitt and Anthony Hopkins)
Unavoidable by all living humans, death and taxes are part of life.
Although approaching such themes makes many of us uncomfortable, both are paramount if you care about the next generation. In fact, preparing for your succession is the best gift you can leave for your successors.
If this is true for everyone, it is even more for international estates. When dealing with cross-national successions, planning is essential in order to avoid confusion, delays and extra costs.
In contrast to many European Countries and the US, Brazil has a considerably low taxation on succession. Inter vivos (donation) and Causa Mortis (succession) are regulated by the State, but are limited by Federal Legislation to eight per cent (8%). In most States, including São Paulo and Rio de Janeiro, donation or succession is taxed at four percent (4%).
It is important to inform that Income Tax is not levied upon simple transfer of assets. However, if the transfer includes a positive variation on the value of the asset, then Income Tax is due.
Still in relation to taxation, attention should be given to the type and location of the assets (movable or immovable), jurisdiction of heirs and jurisdiction of the settlor/patriarch-matriarch.
Besides taxation, there are other aspects that may be even more relevant to the family. For example, the existence of a company and the succession of management and control. Very often, not all heirs have management skills, and disputes may endanger the survival of a business.
What are the tools usually available that may be offered and used? The options vary a lot from case to case and the specific needs of each family.
When a business is involved and located in Brazil, we usually recommend a local Holding Company, with different types of shares, along with a strong shareholder agreement and donation of shares to the heirs with retention of usufruct.
When real estate encompasses a good share of the estate, a specific purpose company offers better protection and some tax advantages.
The use of foreign vehicles such as Trusts and Foundations may be recommended if the beneficiaries are not resident in Brazil. However, we have already seen the use of such instruments with locally resident beneficiaries.
For simpler estates, a clear and straightforward last will may suffice.
These are just a couple of examples of family situations where we offer legal suitable solutions. Katz Advogados has experience in preparing and executing estate and succession planning for nationals as well as foreign individuals, including worldwide asset distribution.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.