Succession planning and the structuring of wealth protection frameworks are regulated in various norms such as the Political Constitution, the Civil Code, the Commercial Code, Law 1004 of 2005 and Law 1921 of 2018, in addition to other norms that regulate certain specific assets.
They are tools that allow people to plan the future of their assets and their patrimony, guaranteeing their protection and transmission to their heirs in an efficient and conflict-free manner. In Colombia there are several legal tools for succession planning and estate protection, such as:
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Will:
It is the most common instrument for succession planning, by means of which the testator can dispose of his assets and establish the conditions for their distribution among his heirs.
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Trust:
It is another succession planning and asset protection tool that consists of the transfer of assets to an autonomous patrimony administered by a third party called trustee, this transfer is made in order to guarantee the protection of the asset and its distribution according to the conditions established by the person transferring the asset, who is called settlor.
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Holding companies:
They are an option for the structuring of family businesses and the protection of the patrimony since they allow the creation of a business structure for the administration of the assets and the joint decision making among the family members.
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Succession contracts:
They are a legal tool that allows the anticipated planning of the succession, in this contract the conditions for the transmission of the goods and the patrimony to the heirs are established, guaranteeing the protection of the patrimony and avoiding future conflicts.
Estate planning and the structuring of wealth protection frameworks are essential and recommended for several reasons:
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Heritage protection:
They ensure that a person’s property and assets are passed on to his or her heirs in an efficient and conflict-free manner. This prevents third parties from acquiring the estate without the consent of the legal heirs.
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Tax reduction:
They reduce the impact of taxes such as inheritance and gift tax. By planning the succession in advance, strategies can be put in place to reduce the tax cost of transferring the estate.
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Preservation of the family legacy:
They allow for the protection and preservation of the family legacy, i.e., that property and assets are passed on from generation to generation. This is especially important for families who have built up an estate over several generations.
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Avoiding family conflicts:
These mechanisms are important to avoid family conflicts because when a person dies without having planned the succession, disputes can arise among the heirs that can lead to divisions in the family.
Succession planning makes it possible to establish the conditions for the transfer of property and assets, thus reducing the possibility of conflict.
It is important to have the advice of an expert lawyer in order to choose the most appropriate tool according to the needs and personal objectives of the individual in each specific case.
References
- Political Constitution. (n, f.). Senate Secretariat. http://www.secretariasenado.gov.co/constitucion-politica
- Law 84 of 1873 – Civil Code. (1873, May 31). Senate Secretariat. http://www.secretariasenado.gov.co/senado/basedoc/codigo%5Fcivil.html
- Decree 410 of 1971 – Code of Commerce. (197, June 16). Senate Secretariat. http://www.secretariasenado.gov.co/senado/basedoc/codigo%5Fcomercio.html
- Law 1004 of 2005. (2005, December 31). Senate Secretariat. http://www.secretariasenado.gov.co/senado/basedoc/ley%5F1004%5F2005.html
- Organic Law 1921 of 2018. (2018, July 18). Senate Secretariat. http://www.secretariasenado.gov.co/senado/basedoc/ley%5F1921%5F2018.html