ITALY Law and Practice Contributed by: Paolo Ludovici and Andrea Mirabella, Gatti, Pavesi, Bianchi, Ludovici
settlor was not an Italian resident at the time of the attribution to the trust (see 1.1 Tax Regimes ). Trustees Trustees are not subject to Italian inheritance and gift tax in relation to assets settled into a trust. 3.4 Tax Consequences of Fiduciary and Beneficiary Roles Italian tax authorities closely scrutinise trusts where a settlor or beneficiary also acts as trustee, protector or holds similar fiduciary powers. Depending on the degree of control retained, the trust may be treated as fiscally interposed, with its assets and income attrib - uted directly to that individual for tax purposes. The choice of estate planning method depends on factors such as the composition of the family’s assets (movable, real estate, and family business), the com - position of the family, the number of generations expected to be involved in the short to medium term and their interest in being involved in the management of the family’s key assets. Generally, the decision-making process concerning which strategy to adopt requires a series of steps which can be summarised as follows: • mapping family wealth; • identifying and focusing on goals; • preserving generational continuity (or selling the family business to enter into new industries); and • evaluation of potentially applicable solution(s). From a mere asset protection perspective, the Italian Civil Code provides some instruments to achieve the interests of the family and the achievement of worthy purposes, such as the following. 4. Family Business Planning 4.1 Asset Protection • Patrimonial fund ( fondo patrimoniale ) – spouses or civil union partners may allocate assets to a sepa - rate fund dedicated to family needs. Such assets cannot be used inconsistently with that purpose
and are generally protected from creditors whose claims are unrelated to family needs. • Destination bond ( vincolo di destinazione ) – reg - istered movable or immovable assets may be segregated for up to 90 years (or the beneficiary’s lifetime) to pursue a legally recognised purpose. The assets are enforceable only in respect of liabili - ties connected with that purpose and are excluded from both the settlor’s estate and the community property regime. Corporate vehicles may also be used for asset protec - tion. In particular, the simple partnership ( società sem- plice ) is widely used to hold financial and real estate assets. Assets owned by the partnership are generally protected from the partners’ personal creditors, who may only attach distributions or, where the debtor’s assets are insufficient, seek liquidation of the partner’s interest. The società semplice is not subject to statu - tory accounting requirements and allows governance rights to be allocated independently from economic interests. 4.2 Succession Planning The key to successful estate planning lies in combin - ing the opportunities offered by civil and tax law with a long-term perspective. Instruments used for succession purposes under civil law include the following. • The family pact (see 2.6 Transfer of Assets: Vehi- cle and Planning Mechanisms ). • Corporate vehicles – setting up a holding company may be a way to remove any conflicts between heirs from the operating companies, shifting them to another layer. The structure of the holding com - pany enables the determination of rules of govern - ance of the family estate, through which it is possi - ble to distinguish between powers of management and enjoyment of economic rights. Moreover, through the gift of bare ownership (see 2.6 Transfer of Assets: Vehicle and Planning Mechanisms ), it is possible for the usufruct holder to retain control of administrative and economic rights by anticipating the transfer of share ownership.
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