It is never too early to get clarity

Rebekka Schaller (name changed) was sitting in the shuttle bus to Geneva Airport and felt downhearted, even depressed. Everything had happened so fast. The International Committee of the Red Cross (ICRC) delegate was en route to her next deployment in an ambulatory healthcare center near the Afghan capital of Kabul. She, as an experienced surgeon, had been trained on how to manage extreme situations. But she found herself still struggling to organize her thoughts.

What had happened? For the first time during her short visit home, Rebekka had experienced what it felt like to have her mother no longer recognize her. Within a short period, the older woman had succumbed to advanced dementia and become completely dependent on nursing care. Rebekka’s physically impaired father also requires it.

The right time to quickly re-organize the family’s assets, capital and real estate had come and gone. It was too late for that now. Suddenly, what the family had hoped to avoid had come to pass.

“The need to plan for a loss of decision-making capacity often arises from an unexpected event,” says Reto Furter, attorney and UBS succession advisor, who knows from experience. “In Rebekka Schaller’s case, those affected were absolutely overwhelmed.” Accordingly, it will take quite some time to arrange everything.

Company owners have twice the responsibility

Whatever solution individuals choose really depends on the person in question, according to Furter. That especially applies when, in addition to capital and real estate, a company's future is being discussed.

The next example concerns Heinrich Waser (name changed), director, sole shareholder and the only member of the board of directors of a larger family business. He had planned for such a dramatic day in a timely manner and his plan was perfectly balanced with his personal circumstances. Waser, father of three grown children, is divorced and has a new partner. In addition to his own company, he also owns the penthouse where he lives and holds private securities.

“All entrepreneurs should look to Heinrich Waser as an example when making arrangements in anticipation of a possible loss of decision-making capacity,” Furter says. He also strongly advises drawing up a power of attorney to stipulate who will take care of you and your private assets one day. It must also stipulate who is authorized to execute shareholder rights and in which form. Additionally, entrepreneurs should ensure that the company’s internal operations are secured through powers of attorney and signing powers.

“Awaiting decisions from some possible officially imposed custodian on how to deal with private and corporate challenges is not an option. Doing so could ultimately endanger the existence of a company,” warns the UBS Succession Advisor.

Check relationships and make arrangements

A new Child and Adult Protection Act has been in effect in Switzerland since 2013. It allows persons, through a power of attorney, to autonomously determine who will take care of them and their assets should they lose their decision-making capacity.

“The spouse’s legal right of representation is limited and vague," says Furter. "For example, it is not enough if the matter involves a mortgage revaluation or a land purchase.” The following principle generally applies: take precautions. Not only must the owner be willing to actually do this, but everyone else, sooner or later, must sit down together and decide who will take over what and in what type of circumstances.

In Waser’s case, the questions were if and to what extent his three grown children should represent him, whether enough mutual trust already existed between him and his partner for her to do so, and how all parties involved should work together and keep one another informed.

"It was important to the Waser family that they be able to engage a representative who could handle both the private circumstances of the boss as well as safeguard his investor rights," Furter summarizes the solution. "With the partner's explicit consent, this was the two older children."

Power of attorney and an entry in the commercial registry established that a colleague of many years would take over operational management of the company. What was more important in this case was that the various documents were drafted with enough clarity and detail so there was no room for interpretation concerning individual responsibilities.

Safety checklist

Who should take over in the event decision-making capacity is lost?

  • For an entrepreneur, the fact that both private and business questions will need to be settled makes the choosing the authorized person even more challenging.
  • 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, including the various difficult aspects that need to be settled, be talked over with your immediate family.
  • The goal is to authorize individuals who are able and willing to carry out your orders. Individuals who are not family members may need to be authorized to take care of specific topic areas.
  • 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 hopes 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.

Preserving family values 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.