Significant rise in clients in Latin America requesting succession planning, reports ZEDRA

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Wealth management firm Zedra has reported a significant rise in the number of requests from clients based in Latin America, asking for a review of both their succession planning and structuring strategies. 

While not linked directly to the Covid-19 outbreak, Zedra believes the publicity surrounding the pandemic has acted as a catalyst, prompting clients to review how their estates will be managed.

Mario Cohn, managing director, Zedra Switzerland, explains: “Succession planning in Latin America is very complex, with many countries still having forced heirship rules, which can complicate estate planning considerably. Examples include countries such as Chile, Argentina, and Brazil. Under forced heirship, unless succession plans are implemented, at least part of an estate has to be divided between the surviving family. Some countries like Mexico have broken away from the practice, allowing for more opportunities to plan wealth distribution, but many have not.”

Global shocks to the economy and the very real threat these present to both wealth and welfare have underlined the importance of succession planning. “Families and individuals with no current succession plans have seen this as the perfect time to focus on getting these implemented,” says Cohn. “Likewise, individuals who have structures in place are also contacting us and asking to review the relevance and reliability of these.” 

International taxation is often a fast-moving environment, and Zedra believes that once the pandemic has passed and the enormous state spending budget has to be accounted for, there will be a strong upward pressure on worldwide taxation. Clients therefore need to regularly review plans and objectives.

Family businesses can add a series of subtle considerations around succession planning, especially where long standing employees have become, in the eyes of the founder, as close in some regards as the family itself. In such cases, Zedra reports, it is not unusual for plans to be drawn which specifically look to protect the roles and livelihood of key employees who may not be direct family members. 

Founders are therefore seeing succession planning both as a tool with which to support a successful generational transition, but also as a means to protect a business and key employees in the long-term.

During periods of intense global turmoil, family leaders in particular may feel a strong urge to re-establish a sense of normality, stability and security. Cohn continues: “Latin American families can be large and typically there are a number of different factors at play. Beneficiaries might be residents in different countries, different generations might work in the business, the business itself may be experiencing a period of flux. The range of business and non-business factors which need to be addressed can be considerable. Clients, though, will demand that the family advisors move as quickly and effectively as they themselves do in periods of uncertainty.”

2019 saw extensive tax reforms across Latin America, and Zedra says these need to be considered carefully in the context of implementing structures. Tax, transparency and a family’s objectives for succession and estate planning must, however, always be considered, regardless of the presence or not of forced heirship rules.