Estate Planning is increasingly necessary

The estate planning in relation to its assets is the solution not only to escape from the grudge collection of the State, but also to prevent endless and costly family struggles. 

In Brazil, it has been more common the people necessity, independently of their economic situation or their professional sector, to adopt the estate planning in relation to its assets, not only to escape from the grudge collection of the State, but also to prevent endless and costly family struggles because of the inventory opening.

There are many positive points which are obtained through the estate planning. One of them is the permission of a better assets control, dispensing the necessity of goods inventory in the future. The other one is the reduction of tax burden.

The main focus of the estate planning is to assist the organization of family economic groups. As it is known, well-structured generations and their transitions guarantee a continuous development of the companies. This is the main preoccupation of the planning, that is, to give support so that the inheritances occur on the best way, giving to the people who are interested tools that can permit them to verify which one is the best way to follow. 

A change required by the Estates which stills pendent of decision by the Federal Senate, however, increases the necessity of attention to the plans. The increase of the ITCMD (Property Tax and Donation of Any Type), that is charged by the States to aliquots in which are from 4% to 7%, obligates the ones who have already been planning to accelerate necessary analyzes and studies.

The maximum aliquot is set by the Senate, which in August 2015 received from the Nation Finance Policy Council (Confaz) a proposal to raise the rate of that aliquot to 20%, which can occur at any moment, being applicable, however, just from 2018. 

The state planning work is developed in several phases, all of them are necessarily analyzed by a multidisciplinary team, consisted by professionals from many areas of the Law. It is fundamental to proceed to the judicial analysis of all individual assets, as well as a detailed study about the accounting analysis and the asset evaluation of the involved companies.

After this first moment, the next step is a diagnosis with the respective indications of the possible restructuring alternatives. Only from that point is possible to begin the execution of the plan implementation.

Because of that is really important to have a multidisciplinary view. In most of the cases, independently of the asset, the estate planning involves professionals from several areas of legal performance, such as corporate, tax and civil; as well as an eventual support team consisted by experts and other ones who are necessary.

Once this is done, the following step it the identification of the necessity or not of a family holding constitution. It is the time to decide the estate management to be adopted and elaborate a contract or social statute that predicts in a clear and objective way the “shielding clauses”, as well as the profit distribution policy, the society management and the estate and tax advantages.

In all its stages, the tax aspect must be carefully analyzed, since because of the complex national tax system, the correct interpretation and application of the tax norm has power to avoid inconvenient financial disadvantages.

It is important to remember that the estate planning isn’t necessarily a tax planning. Most of the times, the lower tax burden is a consequence, because the estate planning allows a more thorough analysis of the involved goods and the hypotheses of tax incidence.

Since 01/01/2017 it has been already in force the increase from 15% to 22,5% of the aliquot of The Individual Income Tax (IRPF) about the capital obtained, as well as, exists, the propose from the Nation Finance Policy Council (Confaz) to raise the maximum aliquot of the ITCMD from 8% to 20%. A  well-done estate planning can soften the tax impact of the IRPF and the ITCMD, which has been drawn the attention to the tax aspects of this type of planning.

This aspect became even more relevant because of the measures taken by several States that, through the respective local laws, raised their ITCMD aliquots, within the limit of 8%, or made them progressives, with a direct consequence on the charge to the taxpayers.

The effect of this situation was that the increase of this tax almost obligated the ones who were already planning their estate process to accelerate the analyzes and studies, in order to have information which allows to make decisions for the implementation of the restructuring, in time to have the asset protected.

With this scenario, the one who doesn’t search for new alternatives to restructure his business, working and managing for the next generations, may in the future, in addition to suffer estate planning consequences, through a judicial inventory, for example, bring to the business conduction and have an asset reduction because of a higher  taxation. It is also possible to say about the competitive loss, if it is compared to the competitor who opted to the estate planning.

This is a topic that continues to deserve, at least, the reflection of the businessmen who are concerned to avoid the tumultuous asset inventory and anticipate the solution of issues that will inevitably arise at some point.

Marcello Maurício dos Santos and Renato de Mello Almada 
Chiarottino e Nicoletti