USA Law and Practice Contributed by: Diana Zeydel, Marc Selden, Benjamin Babcock and Brian Smith, Greenberg Traurig, LLP
LLCs and LLLPs Limited Liability Companies (LLCs) are a common tool used to protect assets from liability. LLCs are common owners of personal residences to protect personal assets (and maintain some degree of privacy), and can be used to protect business interests from per - sonal liabilities, and individual assets from business liabilities. A limited liability limited partnership (LLLP) is another structure used to limit liability. Restrictions on the transfer of ownership interests in the entity may For owners of privately held businesses, succession planning is designed to ensure that ownership and control transition smoothly while preserving the long- term success of the enterprise. Effective planning requires balancing tax efficiency with governance, creditor protection and the founder’s desire to retain an appropriate level of control during life. Some suc - cession plans do not rely on a single technique but contain a variety of approaches tailored to the family’s objectives. Entities The first step is often to separate economic ownership from voting control. Family businesses are commonly held through LLCs, family limited partnerships (FLPs) or corporations that permit voting and non-voting equity interests. Dividing voting and non-voting inter - ests allows the senior generation to retain voting con - trol while transferring equity to younger generations (or trusts for their benefit). Non-voting equity interests may be eligible for valuation discounts under US gift and estate tax laws, so using such interests to engage in wealth transfer may save significant taxes. Private Trust Company (PTC) further enhance the protection. 4.2 Succession Planning For ultra high net worth families with significant assets with more complex needs and a multitude of trusts, the formation of a PTC might be an attractive option as compared to utilising an individual trustee or a cor - porate trustee. A PTC is a trust company administered by the family that will serve as trustee of several fam- ily trusts, allowing the family to provide for continu - ous fiduciary services while maintaining family control of the wealth. A PTC requires careful navigation of applicable US income and transfer tax laws to avoid
causing the trust assets to be taxable to the family members. Family Office Ultra high net worth US families with asset levels in the nine figures approaching and exceeding USD1 billion may consider utilising a single-family office as part of their wealth preservation and succession planning strategy to provide the most tax-efficient and central - ised management of wealth and family governance. A single-family office can be leanly staffed and focus on investments, or can be fully staffed and handle all aspects of accounting, legal, tax, investment and charitable efforts across generations. The family office structure helps reduce potential conflict among family members (especially differing generations) by provid - ing more transparency around the family assets and entities. Multi-family offices are popular among ultra high net worth families, allowing them to provide fam - ily office services to a small number of families but maximise their in-house service offerings by working with multiple families. The tax and regulatory land - scape in the US makes it an attractive jurisdiction for establishing family offices. 4.3 Transfer of Partial Interest When interests in private assets and interests in pri - vate companies are transferred for gift and estate tax purposes, a qualified appraisal is required to report the value on an applicable gift or estate tax return to the extent values are not established in the public market. When partial interests in these private assets are transferred, the fair market value of the interest for transfer tax purposes includes all applicable dis - counts, such as those for lack of control and lack of marketability.
5. Wealth Disputes 5.1 Trends Driving Disputes
As the US baby boomer generation ages, the greatest wealth transfer in the history of the US is underway. This wealth transfer involves the transfer of wealth through trusts created by baby boomers and prior generations during lifetime, which are transitioning to younger generations, either outright or in further trust, and the devise of assets at death. With greater wealth
686 CHAMBERS.COM
Powered by FlippingBook