Estate structures often run into trouble for practical reasons. The trust is well drafted and the tax treatment efficient, but nobody has recorded how decisions will be made once the person who made them is gone.
We start with decision rights: who may direct capital, above what amount, and who must be consulted. The family’s lawyers and tax advisers can then choose structures that give effect to those rights.
Three documents
A statement of purpose sets out what the capital is for, in the family’s own words. An investment policy sets the ranges the portfolio must stay within. A governance charter names the meeting, the quorum and how a tie is broken. Together they run to a few pages and settle questions that otherwise cause disputes for years.
Liquidity is the second common gap. An estate with valuable operating assets and little cash can force the next generation to sell a good asset at a bad time. With the family’s accountants, we estimate the tax that will fall due alongside the family’s other obligations, so the shortfall can be held in assets that are easy to sell.
Finally, bring the next generation into meetings years before they are expected to lead them. They learn how decisions are made while the people who set up the structures are still there to explain them.