For others, geographical dispersion is rather a matter of tax optimization. The motivations differ, that is to say, but what is certain is the permanent complexity of handling family interests when people and assets are spread over several jurisdictions.
In essence, despite what can be read, cross-border complexity is not necessarily a systematic win-win and the ability to handle the matter properly is essential. Ultimately, the difference will lie in your ability to manage your family’s interests optimally, hence this article aims at demystifying cross-border living and at clarifying how family preservation can be organized in such circumstances.
Living across borders: reasons and complexities.
At first sight, there are many reasons for people tend to organize their lives across various jurisdictions.
One of these reasons is often family enhancement, from political safety to cultural openness and education. Your children might decide (or be encouraged) to attend university in another country. They might consider a gap year abroad at some point, at which stage you might also consider a multi-jurisdictional lifestyle for your own future. Once the young generations go to university, it is indeed frequent to see parents begin a new life centered on their own pleasure and benefits, in which case living across border can may become a form of personal and ambitious retirement dream plan.
Beyond family comfort and lifestyle, numerous business-related reasons lead to cross-border family re-organizations. Family businesses may for instance spread over multiple countries, in which case the likeliness of frequent traveling can push you to select one place of residence over another for convenience reason.
Taxation is another obvious incentive, as wealth management often requires financial engineering, and oftentimes the ability to make the most of tax frameworks and regulations is an efficient way to maximize one’s assets. Having said this, cross-border taxation is never an easy task, and in particular avoiding double taxation is a regular concern. While you would normally be required to pay income tax in the country where you earn your income, your tax liabilities might also be with the state where you live. In some cases, double taxation agreements are also in place. One way or another, the potential for confusion is usually significant and cannot be simply discarded.
Do not stay alone.
In most cases, that is, the economic sustainability of your family would therefore depend largely on your ability to surround yourself with the right advisers. Whatever the dimension – fiscal, financial, insurance, real estate or educational to name but a few – thinking in terms of security and long-term stability is a prerequisite. Whichever route you choose, it is never too early to ensure that your future and your family’s financial future are guaranteed.
For a variety of reasons, family offices are a very relevant possibility in such situations. Because they focus on optimizing the client family’s interests, they can act as a gatekeeper but also as a problem-solver or, depending on the perspective, as a solution provider.
In most circumstances, family offices would mostly manage family interests from a purely financial and asset management perspective, but as we have written before, we also believe that your advisers also have a responsibility from a human perspective. Beyond money, what keeps a family together is indeed the feeling of cohesion and the common values which ought to be shared by every family member and your advisers ought to be able to help with that.
Cross-border plans demand a special mindset.
Of course, it flows from the above that a key element when living across borders is to have a very open and flexible mindset.
First, you probably want to ensure that your family has worked on a set of values that it wants to preserve – for starters – and that there is a long-term plan and vision to be used over time as a form of GPS. Clearly, such values would help preserving the family over time, but they would also provide your advisers with a framework as to what to do and what not to do, so do not underestimate the idea.
Second, the financial strategy of the family also needs to be defined. What is your position towards profits and risks? What type of investment are you interested in making – market finance, cross-border real estate, cross-border funds, gold, the range of option is broad. Should you invest locally or internationally? Should your advisers be chosen for the amount of their fees or because they are close to you geographically?
Third, and as silly as it might seem, you might also want to make sure that your family office is both geographically and humanly present. Your family business – in the broad term – is possibly the most important thing, so make sure that your cross-border plans can be managed by whoever takes responsibility for taking care of your interests.
Bottom line? Beware of hidden complexities and invest in solutions.
The bottom line is, for your cross-border plans to succeed, keep a close eye on the complexity of the process and invest in practical and easy to implement solutions. While organizing your family business around a multi-jurisdictional environment might make sense from a short, medium and long-term tax perspective, many issues could appear along the way and you might want to make sure that you – and your advisers – are prepared for whatever comes next.