As families look beyond their borders for opportunities, managing cross-border interests may be complicated. Here are some tips for when your wealth heads overseas.
As families become increasingly globalized and their wealth crosses borders, there are key multi-jurisdictional considerations to be aware of.
“It’s a complex set of obstacles they have to overcome when they want to move their money,” says Iggy Chong, head of Enterprise Private Clients at RBC Wealth Management in Asia.
Global families have assets in multiple locations across the world, and will likely consider transferring wealth to family members who may live abroad.
“Any matters relating to wealth transfer or wealth planning will immediately become a lot more complicated,” says Vivian Kiang, managing director and head of Wealth Planning and Fiduciary Services at RBC Wealth Management in Asia.
According to Kiang, estate planning in multiple jurisdictions typically involves different laws, tax rules and asset ownerships, resulting in more complications than if they had assets in just one jurisdiction.
So what can families with multi-jurisdictional assets do to better navigate cross-border intricacies and ensure effective wealth-transfer planning?
When it comes to intergenerational wealth planning, one of the best ways to teach children best practices is to keep them involved, says Kiang.
A trust may be an effective tool for education. Kiang adds that involving your children in some parts of the decision-making process surrounding the trust may help them plan better for the future and promote confidence related to managing finances.
Shared responsibility can also help minimize potential tension between siblings in cases where there are disagreements regarding assets. Kiang advises constant, open communication as a way of ensuring the right values are transferred to the next generation.
Given that global families have interests that may involve multiple jurisdictions, Chong says it’s important to work with a financial advisor who can ensure that all parties are collaborating across silos and geographies.
“The client benefits hugely from working with a firm that is interconnected; otherwise, they get shuffled from one department to another,” says Chong.
For instance, a Granny Trust established in Asia by a non-resident of Canada benefits only persons who are residents in Canada. Having a team of globally-connected financial advisors and tax professionals can help ensure that the trust structure benefits everyone.
It also helps to have advisors who understand the cultural values of the particular countries in question as this may ease the wealth transfer process, bringing together the capabilities of diverse professionals around the world.
“Choose a financial institution that can link up the two locations,” says Kiang. “For example, someone who can meet with the parents in Asia and [help] distribute their assets in Canada or the U.S.”
Families with a diversified global portfolio need the right framework and structure in place to address intergenerational wealth goals and create an effective estate plan.
“Clients often believe they can carry out their estate planning themselves, but that is not advisable,” says Chong.
He adds, “It’s really important to get local, on-the-ground expertise and work with people who already have done it many times,” referring to implementing a succession plan which spans the globe.
Chong explains it is important to work with an organization that is equipped to introduce clients to a global network of professionals who can support cross-border needs.
Kiang echoes this sentiment, “You want to bank with someone who knows more than you, so that they will be pointing you to things you need to be aware of.”
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