Inheritance planning – Part I

Anticipating the fate of one’s heritage is something that people tend to shy away from until old age. Unfortunately, unexpected situations can arise in which there is no longer time to decide how the succession should take place.

Foresight, by deciding what and under what conditions loved ones should inherit, allows avoiding disputes between them or costly lawsuits for the division of inheritances. It also allows those people with better skills to run the family business. In fact, many times, the succession conflicts that we have all known or experienced closely, generally derive from a lack of orderly and timely planning.

Of course, planning also makes it possible to reduce the tax impact of an inheritance. Although in Andorra, inheritance tax does not exist, our neighbors do tax inheritances and depending on its amount, can total more than any heir, leading to situations that force them to depreciate part of the assets.

In this sense, it must be considered that, even if heirs are located in Andorra, taxes might be assumed for those assets located in neighboring countries.

At AUGÉ LEGAL & FISCAL, we believe that planning an inheritance process is a key to making a transfer of business and assets that avoids disputes and guarantees the financial future of your family circle. PLANNING is essential.

In this sense, the flexibility of Andorran law, which except for the legitimate does not impose any other obligation on the testator, makes it possible to decide on a case-by-case basis what is the best way to ensure that the will of the deceased is fulfilled. This right can even be used by residents of the Principality of foreign nationality.

Of course, succession planning does not just consist of the granting of a will. The legal structure of the assets must also be designed to ensure that the will of the testator is fulfilled as much as possible.

On the other hand, the tax planning of a succession involves many plausible possibilities that go through solutions both obvious and difficult to implement, such as changes in the tax residence of heirs, to the creation of patrimonial structures holding investments that can decrease the value of the total amount of the inheritance, to civil legal entities (such as trusts, life insurances or others), which constitute deferral systems that may come to affect the succession process and, consequently, the taxation that may derive from it.

Of course, the liquidation of assets in high-tax territories and reinvestment in the Principality or other jurisdictions with more interesting succession tax regulations are part of the equations to be assessed when planning an inheritance.

At AUGÉ LEGAL & FISCAL we combine the knowledge of inheritance, corporate and fiscal law that allows us to advise you with the maximum guarantees. In the next releases, we will explain the main principles that succession planning must comply with, and we will do so by focusing on particularities in different jurisdictions such as Spanish and French.