Opinion – Grain in Grain: Heritage planning is as important as investment planning; expert answers 9 questions

Often treated with prejudice, when thinking about estate planning, many relate it only to real estate and believe that it is only for rich people. However, it is more comprehensive and should be everyone’s concern. To understand about its importance and scope, I interviewed an expert on the subject.

In the interview, we address the three main themes of action in estate planning: family, succession and taxation.

I interviewed lawyer David Roberto R. Soares da Silva from Battella, Lasmar & Silva Advogados. He is one of the authors of the book Wealth, Family, Succession and Tax Planning from publisher B18, which is a reference on the subject.

As David explains, “with proper planning, it is possible to ensure the protection and perpetuation of the heritage, its good management in the present and its smooth transmission to the successors in the future, promoting peace and family harmony in stressful events, such as the owner’s death, and even some tax savings”.

Anyone with an asset or working to achieve it would like the peace of mind provided by planning and explained by David. So let’s go to the interview.

Family:

How should the couple decide which property regime is most advantageous?

David: Talking about premarital property arrangements is often stressful, especially if there is a huge financial gap between future spouses. This discussion can give the (false) impression that one person is more interested in the other’s possessions and money than in the love relationship. But, returning to your question, it is a topic that, yes, should be discussed and taken seriously by the couple. No one thinks about divorce when they’re getting married, but that’s not all that matters when discussing property arrangements. The activities carried out by the bride and groom can have a significant impact on the future patrimony of the family, especially if we consider that the ‘communion’ is not only in the goods, but also in the debts. Take, for example, someone who is a director of a financial institution. If the institution has a serious problem, the Central Bank can block the director’s personal assets. And if he is married under the partial community property regime (the standard, nowadays), that means that the couple’s assets will be blocked. This will not occur if the regime is one of total separation of property. But he’s not just a bank director. See an entrepreneur who owns his business. The risk of him having financial, labor or tax problems in the company is reasonable, and these problems can slip into the individual. In the total separation of goods, the property of the other spouse is protected, which does not occur in the universal community or partial community of goods.

Hence the need to sit down, talk and analyze the situation and the risks of each one, in order to decide on the best regimen.

What is the limit of dating and stable union?

David: the Civil Code defines the stable union as the relationship between two people (straight or homosexual) that is public, continuous, lasting and with the intention of starting a family. The public relationship is that of knowledge of the couple’s social circle; continuous is one that is not sporadic (eg, summer love, or hooking up once in a while); Lasting, in turn, is one that lasts over time, although the law does not set a minimum term. The intention to start a family is the most complicated of the requirements of a stable union, because the law does not say what it is. Courts have understood that the intention of forming a family is to renounce individual life in favor of life as a couple. It’s sharing dreams, joys, sorrows, life plans and providing emotional (and even financial) support for life together. The greater this sharing, the closer we are to the intention to start a family, which, by the way, does not necessarily mean the desire to have children. Dating, in turn, is the relationship between two people (straight or homosexual) that is public, continuous and lasting, but without the intention of starting a family. In the case of dating, the parties maintain a private life of their own, independent of the other person.

It is a very controversial topic, but one that has important patrimonial consequences. While the end of a stable union can result in the sharing of assets, alimony and even inheritance rights, this does not happen with dating. The biggest problem with this distinction occurs when the relationship ends and one of the parties thinks it was dating and the other that it was a stable union. If the relationship is not formalized through a contract or deed, the case may end up in court, which, analyzing the evidence, will decide whether it was a relationship or a stable union. If it is a stable union, then there may be sharing of assets acquired during the relationship. The topic is quite interesting and complex, which could fit into an entire article.

From what volume of patrimony is it important to establish a prenuptial pact?

David: the pact does not depend on the patrimony that already exists. It will be mandatory if the parties do not wish to adopt the standard regime of partial community property. Thus, a young couple at the beginning of their careers, without assets, who want to adopt the regime of total separation of property must make a prenuptial agreement to enforce this regime.

Succession:

At what point in life and from what patrimony should I think about succession?

David: It all depends on one’s life situation. A single person, without children or living parents, should think about succession, as the lack of planning can make their assets go to the state due to the absence of successors. A young divorced businesswoman with small children should also think about how to protect her assets so that, on her death, her ex-husband does not appear wanting to manage her children’s assets. I would say that we should think about succession as we begin to have a family (or children) and/or a heritage that is important to us. It could be R$ 1 million or even R$ 100 thousand. And when we have minor children, the focus should not just be on wealth, but also on ensuring their well-being.

What is the difference between sharecropping and inheritance?

David: share only applies to marriage and stable union. This is half of the assets of a married person (or in a stable union) under the regime of partial community of property or universal community of property. The share means co-ownership by virtue of the property regime. For example, John married Mary in partial communion and purchased a property during their marriage. Even if the property is only in his name, in the event of a divorce or death of João, Maria will be entitled to 50% of the property as a sharecropping (half of the assets acquired during the marriage by either spouse). If João does not have children or living parents, the other half of the property will belong to Maria as an inheritance (João’s private patrimony that belongs to the heirs). Note that in the shareholding, as it is co-ownership, there is no incidence of inheritance tax (ITCMD). Thus, in Maria’s case, she will receive the share (50% of the property) without paying ITCMD, and will pay the tax on the other half that she receives as an inheritance. But, let’s say that John and Mary have a child – Mark. On João’s death, Maria receives half of the property as a share (without ITCMD) and Marcos receives the other half as an inheritance, as he is the only heir of his father in the property purchased during their marriage.

What are the instruments of succession planning? Which is the least expensive?

David: It is not possible to say which instrument is cheaper or more expensive. A gift contract can be simple to make, but if the estate is significant, the ITCMD – gift tax – can be huge. A will, in turn, does not pay ITCMD, but it can be a lot of work to make and cost more to prepare. Even a holding company may have different implementation costs, whether it owns rental properties or only personal properties. This is because, depending on the type of holding company, tax costs can vary significantly. In addition to the donation agreement, the will and the holding company, other assets and succession planning tools include the family asset, dating contract and stable union, sharing in life, partners’ agreement, private pension and life insurance, protocol of family, living will, offshore, trusts, love letterand much more.

Taxes:

What are the relevant taxes in the concern with tax planning?

David: Basically they are: income tax, ITCMD (for donations and inheritances) and ITBI (operations involving real estate).

How to differentiate tax avoidance from tax evasion and simulation?

David: Tax avoidance is the lawful tax planning carried out before the occurrence of the taxable event. Tax evasion is the illegal non-payment of taxes, such as evasion. Simulation is saying an intentional distortion of a given operation. For example, I want to leave a specific asset to a child, but if I make a donation, I will have ITCMD on the market value of the asset, in addition to obeying the rules of (legitimate) succession. Then I can simulate selling the asset to a friend for a small amount, who then ‘resells’ the asset to my son also for a low amount. What I wanted was to donate, but I simulated two sales to achieve that goal. This could be considered simulation.

What is the most common strategy to reduce the tax burden to the customer?

David: It all depends on the type of patrimony involved and what is intended with the patrimony. There is no more common strategy. You may want to save income on the sale of a property, or anticipate a donation to pay less ITCMD if there is a bill to increase it. Note that the tax aspect, within the scope of estate and succession planning, must be aligned with the objectives of the succession itself. You can’t just look at the tax part. Avoiding judicial probate, facilitating the transfer of assets to heirs, or even preventing financial resources from being blocked during probate are just as, or even more important, than an eventual marginal tax reduction. The ideal is to think that estate and succession planning must meet the intended objectives with the maximization of tax savings.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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