Step by step in building an estate plan – 09/23/2023 – From Grão to Grão

The increase in financial awareness has already awakened in individuals the need and urgency of carrying out estate planning. Currently, there is a vast literature of books and videos on social media on the subject. However, some stand out. Today I interview a renowned author on the subject who stands out for his practical contribution.

The book Constructing Patrimonial and Succession Planning, Analysis of Real Cases, by publisher B18 and David Roberto R. Soares Silva will be launched on October 3rd at the bookstore in Vila do Shopping JK Iguatemi at 6:00 pm. However, I had the privilege of reading his work firsthand and interviewing the author.

The practical aspect of David’s approach is a differentiator in his book.

Most books on estate planning are boring because they read like a dictionary. You have to know what to look for to have a theoretical definition that is distant from the reader. Solving a heritage problem is, in most cases, complex and involves several topics. Therefore, the literature ends up being restricted to legal professionals.

The book of David is different. His form of exhibition is accessible to everyone.

It presents several problems and shows how to analyze and plan the solution. To do this, it divides each real case analyzed into five parts: presentation of the context of the problem, analysis of threats, presentation of the legal basis and legal instruments, implementation of planning and ends with final considerations about the case. Therefore, it is a true step-by-step process in the construction of estate and succession planning.

And anyone who thinks that planning is exclusive to millionaires is mistaken. Proof of this is the analysis of the first case. In this, the dilemma regarding the patrimonial succession of a 67-year-old widow who only owns one property and some financial investments, but who has started a relationship, is analyzed. It seems like an innocent case, but it has implications for your daughter’s right to this asset. I address this topic in one of my interview questions.

As the lawyer and author explains in his previous book that I have already discussed here, estate planning is fundamental for those who have large assets, but it is also important for everyone who has any assets, whether financial or real estate.

This is only the first volume of five, but it already manages to cover a very relevant aspect, which is the dilemmas of property regimes.

I transcribe below the interview I did with David about his book and his teachings.

1. Why launch another book on Estate and Succession Planning? How does this book of yours differ from the previous one?

David: the ‘macro’ theme is the same: estate and succession planning. But the new book takes a different approach. During my research process, I was able to conclude that all books on estate and succession planning address the topic of solving the problem, from the end to the beginning. Examples: “Holding serves to avoid co-ownership of real estate”, or “donation serves to transmit assets during life and avoid probate”.

But what was not available on the market was a book that, based on a real problem, took the reader through the journey of thinking about the solution or solutions for estate and succession planning. In other words, it is a book with an inverted approach: it presents the problem and navigates to the solution.

In addition to the innovative approach, I handpicked real and emblematic cases that imposed many challenges on me and required “outside the box” thinking.

And there is another difference of the book. It addresses real cases and how the entire process of designing and implementing the planning solution(s) took place.

What it has in common with the first book is accessible, direct language, without “legalese”. Each case provides the reader with the basic knowledge to understand the legal concepts involved, the tools that were considered, and how they were adopted.

2. Does your book cover property regimes? What is the influence of the property regime on succession?

This is just the first volume in what I hope to be a collection of books on estate and succession planning cases. In this first book (there are five in total), three cases are somehow related to the property regime of the parties involved, whether in marriage or in a stable union. In one of these cases, I show that what would be the almost certain choice of a certain goods regime would actually be the worst regime. Hence the need for planning even before getting married.

The property regime has a direct influence on succession, especially since the entry into force of the 2002 Civil Code. From then on, even the spouse married under the total separation of property regime (or in a stable union) will have the right to inheritance, as the Civil Code elected him as a necessary heir, just like his son.

In universal communion, the spouse or partner is not an heir, but is ‘co-owner’ of half of the assets (and debts). It’s called sharecropping. And in the regime of partial community of assets, the standard regime, the inheritance issue is mixed, with the spouse being able to inherit a part of the assets and receive another portion as sharecropping.

3. What is your advice for partners who live in a stable, but not formalized, union?

First of all, you have to be sure whether it is a stable relationship or just a long-term relationship. What distinguishes dating from a stable union is the intention to start a family, a subjective concept that is not defined by law.

But this distinction, which may seem small, has a huge impact on the assets of the parties involved. While there are no patrimonial repercussions in dating, in a non-formalized stable union, there may be a need to share assets and inheritance rights in the event of separation or death of one of the parties.

Typically, the problem starts when the relationship ends. As I usually say, during the relationship it’s ‘my good here, my good there’; but, when the relationship ends it’s ‘my good goes here and you go there’…

Each case is different, but if I were to make a recommendation, I would say that the couple should sit down, talk and see what is the best way to formalize the relationship in order to avoid future problems. This is especially important in cases where there are children on one or both sides.

4. Can the total asset separation regime be considered the best option among the asset regimes?

Normally, in estate planning, this is the most recommended and ‘popular’ regime. But there may be situations in which it is not recommended. I explore exactly this situation in one of the cases in the book, but I will not give spoilerr.

Separation of assets protects assets and debts, but there are exceptions. Few comment that, even in the separation of assets, the debts incurred in favor of the ‘domestic economy’ are communicated to the other spouse. The most common of these is the debt incurred for the education of children by one of the parents. If the person who contracted the debt does not pay it, the creditor may charge the other party.

But there are more complicated situations. Would the debt incurred by a spouse when purchasing a larger property to house the growing family be beneficial to the domestic economy? And the one contracted to build a bigger car?

5. At what point in a couple’s life is it necessary to worry about succession?

The succession issue must be part of our lives. I say that it should not be a priority, but rather a value. And I draw a parallel with seat belts, which became mandatory 30 years ago. In the beginning, the priority was to deceive seat belt inspections with the most diverse subterfuge. Today, you get in the car and put on your seat belt. In other words, your traffic safety is no longer a priority and has become a value embedded inside. The difference between the two is that priorities change, but values ​​remain.

The same must be done with succession. If death is certain, the construction of your assets must take into account the succession repercussions.

Concerns about succession change according to our stage of life. I believe that when two people decide to come together or when the assets become relevant to the owner, it is time to start seeing what the vulnerabilities are and how to protect themselves. And, obviously, concern increases as more people depend on you financially.

6. What differentiates Family Holding from Patrimonial Holding?

The holding company is a powerful asset and succession planning tool, which helps in the organization, management and transmission of assets.

There is no legal definition for what a family or patrimonial holding is, but it can be said that the patrimonial holding aims to hold various assets (property, shares in companies, etc.) that will one day be passed on to successors. The so-called family holding is widely used by business families who own several businesses. The holding company is created to hold these shares and establish governance rules for family members in relation to the companies. It may include rules about who can participate in management, how business should be done (or not) between partners and companies, how company assets should be used, how partners should behave in company deliberations, and so on.

7. Does it make sense to think about a Dating Contract?

It makes perfect sense, especially these days with social media and the fluidity of relationships. A stable union – which has patrimonial repercussions – could, in theory, be ‘proven’ through posts on social networks, videos, voice messages, etc. If, in the not too distant past, proof of the existence of a stable union required documents and witnesses, today new technologies provide much of this proof.

The dating contract, if used correctly and without the intention of breaking the law, serves to prove that the couple is not in a stable union and that, therefore, there are no assets to share, no debts to be communicated or inheritance rights.

But what happens if one of the parties does not want to sign the contract? You can find the answer to this question in my new book…

Michael Viriato is an investment advisor and founding partner of Investor’s House.

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