It pays to start planning early
Elsa and Hans’ assets amount to around 10 million Swiss francs, including 5 million Swiss francs in securities at UBS. Their home is worth 2 million Swiss francs, and they own an additional 3 million Swiss francs in company shares. Hans has two children from his first marriage, Madeleine (50) and Robert (45). Elsa has no children. That was a problem, as Elsa sometimes had a rather strained relationship with her stepchildren. She secretly feared that the one-sided inheritance for Madeleine and Robert was to her disadvantage. The fact that her stepson worked in the finance industry and was well-informed about finances didn't make it easier for her. But their father fully trusted his children. At the same time, Hans wanted to make sure his wife’s future was also secure. Elsa clearly recalled how her husband and his son went to the bank after an earlier medical concern to seek advice. They all knew then that it was imperative to manage the estate and to prepare for a potential loss of decision-making capacity through advance care directives.
“Losing your decision-making capacity can happen slowly or suddenly. So, it's especially important for wealthy clients to plan succession and create advance care directives, and they should do so as early as possible,” says UBS succession specialist Peter Brändli. It’s important to know that couples can appoint different people as their care representatives, and they don’t need to be relatives. Advance care directives are also tailored to clients’ needs. That's why Elsa and Hans’ directives were drafted in separate meetings at the bank. To protect Elsa, the couple also drafted an inheritance contract granting her most-favored status. This contract remained valid after Hans lost his decision-making capacity. The inheritance contract is beneficial in case of Hans’ death, and the advance care directive assists in the current situation where he's lost his decision-making capacity. “Those who don't plan in advance are painfully limited in their legal capacity within the family,” says UBS succession specialist Peter Brändli.
Free of financial worries
Even if routine business can be managed without an advance care directive, it’s worth it for spouses to select care representatives early on. That way, the preferred decision makers can be defined and the couple can determine their portfolio’s strategy themselves. Couples should also check whether a main care representative makes more sense than having several, as a way to avoid potential disagreements.
Despite familial challenges, the Gabathulers and their UBS client adviser planned well for the future. It worked out well that Hans introduced Robert to the UBS client adviser after that initial medical concern. Hans was able to communicate his investment philosophy at the time to his son. The care representative was already familiar with the family’s asset situation and so, after Hans lost his decision-making capacity, he was able to ensure continuity.
Elsa was also satisfied. She was able to enjoy the rest of her life without financial worries, with her financial circumstances managed. Her stepson managed the capital as his father intended and due to her most-favored status in the inheritance contract, she had financial security in case of Hans’ premature death. Additionally, because enough assets were set aside, Elsa was able to pay for her husband to be cared for in their own home.
Who should take over in the event decision-making capacity is lost?
- You need to feel a great deal of trust in persons who ultimately will be acting on your legal behalf. This is why it is so important that topics be talked over with your immediate family as well as the various difficult aspects that will need to be settled.
- An advance care directive allows you to stipulate who can make decisions, such as how assets should be managed or when entering into or terminating contracts, in case you lose your decision-making capacity.
- The goal is authorize individuals who are able and willing to carry out your orders.
- Ideally, individuals will be authorized as replacements to step in if one of the intended representatives cannot or will not take on the assignment.
- Additionally, possible expectations that have been disappointed in the wake of the discussions will need to be managed.
UBS Family Banking
UBS Family Banking believes two central features are key to the sensitive topic of “Inheritance and Bequeathing".
Fair distribution of family assets
- Developing a common understanding of personal wishes and needs while thinking of the next generation.
- Setting up a financial plan and getting an overview of assets.
- Developing and regularly reviewing the succession solution.
Preserve family value across generations
- Developing your own approach to investing.
- Discussing and selecting a suitable investment strategy.
- Including the next generation in the investment process.
This article was written by NZZ Content Solutions on behalf of UBS.