IF A SUBSTANTIAL SUM IS INVOLVED, HOW CAN MY HEIRS OR THE PERSON(S) I DESIGNATE GET MY MONEY WITHOUT A LOT OF PAPERWORK, PROBATES, AND SUCH UNPLEASANTNESS AS ESTATE, INHERITANCE AND GIFT TAXES?
The Swiss do not require the inheritance tax proceedings nor probate of estates to transfer to the next generation bank accounts of deceased foreigners. Other countries (including Switzerland) will honor a power of attorney giving another person signing power even after the death of the owner of the account. Thus, if you get the signature of your son (for instance) on a power of attorney form and leave this on deposit with your bank, when you die the son has signing power over the account. It is that simple. Just be sure you check with your bank to make sure that your testamentary instructions can be carried out as per your wishes and expectations. Then do the necessary paperwork. If you die with an account in your name and no instructions, your heir(s) will have to find out about the account. If he does, then any claim for it must proceed with the same formalities required in your home country plus similar proceedings in Switzerland. This may mean two probate proceedings! Based upon personal experience, this could eat up 20 per cent of the estate even before taxes, and introduce all sorts of complications and delays.
An arrangement favored by the wealthy (who may wish to put some time and distance between an heir and the money) is to form a Liechtenstein Anstalt or Foundation. A similar trust arrangement is also common on the Isle of Man. Both avoid probate. The trustees (named by the guy with the money) simply deal with the funds in any account as directed in a trust document executed before you die. No probate is necessary and the trustees are unconcerned with inheritance or estate taxes. You can have such a trust in the US or the UK and it can avoid probate but it doesn’t avoid estate or inheritance taxes that could eat up most of the estate.
Let’s assume that your child or heir (like most of our kids) is a complete idiot. He will, if he has the power to do so, shortly after your death transfer your estate funds to his local bank in whatever high-tax country he lives. There, local authorities will no doubt confiscate all of your money for taxes. They will also demand still another sum for penalties, interest, and taxes that were evaded during your lifetime. If your heir had a brain in his head, he would leave your money where it is, take the advice of bankers and an independent lawyer he hires in the country of the bank account. Never, never should he discuss offshore assets with any lawyer or accountant in his home country!
As a general rule, the heir should quietly spend or invest abroad – just as you did! We cannot stress how important it is to have a talk with your potential heirs or beneficiaries on how to handle the funds you intend to leave them. Without such instructions, a multi-million pound or dollar inheritance could be nothing more than a major liability.
In a real case, the widow of the richest man in Sweden in the mid-1980s ended up owing more to the government than two times the value of an inheritance she was stupid enough to honestly declare! She was forced into bankruptcy and narrowly avoided prison! May we humbly suggest that you buy your potential beneficiaries a copy. Put a big red circle around this section! Insist that they read it once a day for a year! If incomprehension is apparent you can be sure that your heir is too stupid to deal with your money in any rational manner That is when you can and should set up a trust or foundation so that he gets only the income, or half the income for X years, and the funds are distributed only to his children. It is your money, and fortunately, you can still protect it against being thrown down the pan, even after you are no longer around personally.
What you do with your money is your affair, but look into how you may be able to protect your children against their own foolishness by means of trust arrangements. To set up a Liechtenstein Foundation, ask for the free brochure of Bank in Liechtenstein’s Treuhand AG. Write: PO Box 6X3, FL-9490 Vaduz Liechtenstein. Any branch of any major bank will also have information and brochures on setting up trusts and foundations. We have found that the Royal Trust Company (any branch) is particularly knowledgeable and helpful in this regard. Bank trust departments are better than lawyers because they will assign an experienced staff lawyer to discuss your needs, offer suggestions and quote prices without charging you anything. They want your account and asset management business. As a result of this motivation, they will sometimes set up trusts and corporations at a discount from what you’d spend doing it on your own, in order to lock you into using their services. This may or may not be good for you. The only way to get good advice is to shop around and perhaps ultimately, hire an independent lawyer or accountant for a second or third opinion of your best options. The only thing to remember is NEVER discuss or set up anything intended to be secret or “offshore,” with the aid of lawyers, accountants or bankers located in your own country of residence or citizenship! Dealing with local professionals who are obligated to keep records and/or report such arrangements to “authorities” defeats the whole purpose of the exercise.