Imagine walking into a renovation and construction tools store and asking the salesperson which is best: hammer, screwdriver or pliers. The question doesn't make much sense before explaining what you intend to fix.
Something similar happens in succession planning. Asking whether it is better to create a holding company, a will, a donation, take out insurance or use social security before defining the problem can lead to the right tool for the wrong problem.
But there is an even earlier question: is what you intend to leave what your heirs would like to receive?
Many parents plan succession thinking only about the wealth they want to build. They spend decades buying properties, for example, imagining that they are providing a source of income for their children. But perhaps the children live in other cities, are not interested in managing properties or simply prefer financial investments.
Time also matters. The estate that makes sense for a person at age 50 may not be the one that their children will want to manage when they are 60. Planning a succession means thinking not only about who will receive the estate, but how it will likely be used once it reaches the heirs.
This is where some families may commit an inversion. The parents accumulate several properties and, concerned about succession, create a holding company to organize them. The framework can facilitate ownership and administration rules.
However, if the children do not want to remain together as partners or do not wish to maintain the properties, the family may have efficiently organized precisely what the heirs would prefer to undo. The holding does not eliminate family differences and still has creation and maintenance costs.
Before deciding how to transfer an asset, therefore, you may need to ask whether it should reach your heirs in the form in which it is. In some cases, it may make sense to evaluate the sale of certain assets while still alive and reorganize the assets, considering taxes, costs, income generated and the parents' own objectives.
Only after this reflection does the choice of tools begin.
Imagine a couple with R$5 million and two children. If the concern is to define who will receive certain assets or allocate the available portion of the inheritance differently, a will may be sufficient.
If parents want to anticipate the transfer of assets, a donation during their lifetime, with or without usufruct reservation, may be an alternative. But anticipating succession also requires asking how much control and assets the parents want to maintain while they are alive.
In another family, the problem may be liquidity. Heirs will need money for taxes and expenses soon after death. Life insurance can create additional resources at this time, while private pensions can facilitate the allocation and access to resources accumulated throughout life.
When there are assets abroad, other alternatives arise. In the United States, joint accounts with right of survivorship and mechanisms such as TOD can be part of the planning. In more complex international assets, an offshore company can also be included in the analysis. These are solutions to different problems, which we will discuss throughout this week. When heritage crosses borders, planning also needs to cross them.
And perhaps no sophisticated framework is needed. A person with R$20 million in financial investments, two adult children and simple goals may need less complex planning than someone with R$3 million, a company, real estate, a minor child and little liquidity.
The size of the estate does not alone determine the complexity of the succession. Family, assets, liquidity, where the assets are and, most importantly, what you intend to do with them are also important.
Therefore, before asking whether you need a holding company, will, donation, insurance, pension or an international structure, there are two better questions: what will make sense for those who will receive this heritage and, only then, what problem does the tool need to solve? In succession, as in the toolbox, the best choice does not start with the tool. It starts by understanding what needs to be resolved.
