Building and Protecting Generational Wealth
You have successfully generated wealth, whether that through entrepreneurship, successful investments, a successful career, or other means. What do you do now?
Often the greatest challenge for individuals and families is not generating that wealth but managing its transition from one generation to the next. Ensuring that your children and possibly their children do not have financial worries (or less) and moving wealth from one generation to the next is often one of the greatest challenges, and preserving that wealth for future generations often requires a different strategy.
If not planned correctly, investments can become fragmented, and the return does not maximise, decision-making can become unclear, and the administration of family assets can become increasingly complicated. Future generations may not have the same experience or skill sets to manage family assets. If the family assets are large, it can become a daunting task as well as running the risk of family wealth being eroded because of a lack of direction, clarity, and expertise. It is for the reason why many families utilise corporate structures as part of their long-term wealth strategy.
Why Families Choose Corporate Investment Structures
A corporate structure, or a “family investment company” structure, can act as a central vehicle through which family investments are managed, governed and transferred. As an alternative to individual family members holding assets independently, wealth can be arranged and brought together within a structured corporate framework that facilitates planning, oversight and continuity. A corporate structure may involve a private limited company, a trust, a foundation or a combination to achieve the targets outlined when set up. Such structures or corporate vehicles can allow for several numerous practical advantages.
Key Benefits of Corporate Structures for Families
A properly designed family investment structure can provide several practical advantages, including:
- Centralised management of family investments.
- Clear governance and decision-making arrangements.
- Greater continuity across generations.
- Tax-efficient disposals and wealth transitions.
- Enhanced succession planning opportunities.
- Preservation of long-term family objectives and values.
- Defined rules regarding the distribution of wealth among family members.
- Flexibility to address unique family circumstances and future contingencies.
The structure may also give clear guidance as to the distribution of wealth to family members and cater for special situations arising within the family.
The Advantages of Structured Wealth Ownership
The Income Tax Act in Malta allows for differing situations and tax planning flexibility for investments, and it is possible to classify as income or/and capital for tax purposes. The legislation in Malta allows for tax-free disposals, a lower effective tax rate of between 5% and 18% depending on the asset class, structure of corporate vehicle, and whether the company satisfies certain conditions to be deemed a trading company for tax purposes or a holding company with more passive holdings.
Malta as a Jurisdiction for Family Wealth Planning
Due to the often-complex situations of families and wealth, corporate structures can provide clarity, continuity and clearly defined ownership arrangements. Many families may integrate investment companies with broader wealth planning strategies that may include trusts, foundations or family office arrangements, depending on their objectives.
A Long-Term Approach to Family Legacy and Succession
At Papilio Services, we regularly assist high-net-worth families, entrepreneurs, family offices and international investors with creating structures designed to support wealth preservation over the long term.
By combining technical expertise with practical commercial advice, we help families create structures that remain effective not only today but for future generations.
Family Case Study: Bringing Family Wealth Under One Structure
Consider a family where the parents have accumulated €12 million in assets over a 30-year period through a successful business exit, investment properties, listed investments, and private equity holdings. They have three adult children, each with different levels of investment experience and varying financial objectives.
Initially, many of the investments were held directly by individual family members. As the family wealth grew, administration became increasingly fragmented. Investment decisions were often made independently, reporting obligations differed across jurisdictions, and there was no clear framework for how control and economic benefits would transition to the next generation.
Following a strategic review, the family established a family investment company that became the central vehicle for holding and managing the family’s investment assets. The new structure provided several practical benefits:
- Family investments were consolidated under one governance framework.
- Investment performance and reporting became centralised and easier to monitor.
- Clear decision-making procedures inserted to reduce the potential for family disputes.
- Succession planning could be implemented gradually rather than through a single transfer event.
- Future generations gained exposure to investment management while benefiting from the guidance of the founding generation.
- Flexibility to accommodate future family circumstances.
While every family’s circumstances are unique, this example illustrates why many successful families choose structured corporate arrangements to preserve wealth, facilitate intergenerational transfers, and maintain a clear long-term vision for their family legacy.
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.
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