Is it as important to have cash as profitable investments?
Family businesses can become a source of conflict between the different members making up the it. However, why are there businesses that have been very successful in generational change and others that have not? Discover with BBVA in Switzerland how a family protocol can contribute to success.
Having cash available can, at certain times, be as important as making secure and profitable investments. As we go through life, particular moments arise where the need for cash can be key to the future of the family’s wealth.
One of the occasions on which the consequences of a lack of cash flow planning can have very bad consequences for the family is when its most economically important member: the wealth generator (such as a business owner or high-earning professional) dies.
Examples of how this lack of cash may seriously affect the future of the rest of the family members and their wealth are:
- The death of the main income generator, when this is a highly-paid professional, can cause a serious lack of liquidity for their family, who often have a high level of expenditure that is very difficult to suddenly stop or reduce. This could involve the quick disposal of assets at whatever price can be obtained for them, rather than through a properly organised sale.
- Similarly, where an inheritance tax is levied, the family may be required to pay it, but not have sufficient cash to do so.
- At times, some of a business owner’s children are heavily involved in managing the family firm while others are not. It is possible that the founders would prefer that their offspring acting as the company’s managers, take over from them as its owners, but they do not have sufficient liquid assets with which to compensate the rest of their children.
To respond to this need, certain kinds of life insurance exist that are based around an initial payment that will generate sufficient cash flow to cover the principal costs at the insured party’s death. The focus of these policies, since they cover risk and not a particular asset class, is some distance away from the volatility of the stock markets. Many international insurance companies offer guaranteed minimum returns with high-levels of cover in the case of death.
The main advantage of international insurance policies is that they have very few exclusions on the payout of benefits and this payment is immediate and independent of the mandatory probate process in the insured party’s country of residence.
To arrange one of these wealth solutions based on international insurance policies, it is vital to get the advice of an independent broker who will search for and suggest the best solution in each particular case. Through your advisor, BBVA Switzerland can put you in contact with a highly-qualified expert who will ensure they find the best solution for you personally.
Have you ever considered moving to another country looking for a better taxation for your assets? Why are there so many cases of athletes or artists who decide to change the country of residence for the benefit of their careers?
Potential family and business risks can be detected with good wealth planning, in order to protect our family against contingencies. However, without planning, structuring and organizing, we will not achieve such protection.