Backup Plan B for your Family Office: Ultimate Assets Protection

No expert could have predicted the events we are witnessing today. These are not only economic and financial crises but also devastating hurricanes, wars, natural disasters with high damage costs, racial and intercountry conflicts, and much more.

And this primarily affects the interests of wealthy individuals and foreign investors who have established their family offices and have not even thought about the fact that a second citizenship can save their assets from collapse and blocking. The reason for the imbalance between reality and expectations is the incorrect business planning at the onset of the family office formation and the lack of competent consultants who could advise on these issues.

Family Office: Characteristics and Benefits

The family office is a holding structure with corporate governance. The main goal of such a business is to minimize the risks of unscrupulous claimants and bring asset management to a new level.

Family offices are typically established in a jurisdiction with favorable taxation and good overall conditions. They combine trust, fund, and beneficial ownership arrangements and meet certain needs of the owner and beneficiaries.

Classic family offices combine a number of functions:

• Investment management
• Corporate governance
• Personal services
• Charity

But even if your family office is organized in the most competent way, you cannot predict and exclude all the risks associated with foreign economic, political and natural events. If you are interested in minimization of losses, you should think of a backup plan B that will allow you obtain a second citizenship and change the jurisdiction without obstacles in the shortest possible time.

Why you Need a Backup Plan B for your Family Office

The backup plan B for a family office organized abroad is actually a second citizenship and a reserve harbor for relocation, including moving assets to bank accounts. 

Unfortunately, not all Family Office consultants are aware of the role played by residence and citizenship in the lives of well-to-do citizens. In fact, they are of great importance, and the availability of a backup plan B for accelerated relocation will allow you to preserve and even increase the family wealth.

The modern era boasts an incredibly high speed of changes: events happen so quickly that we have to be prepared for them in advance. This is the result of a large number of factors, including geopolitical unrest, instability of the economic environment, natural disasters, information development, disruption of financial communication channels, etc.

With such rapid changes taking place in many areas, families can no longer afford to live in luxury and expect stability to be always there to enjoy. Safety is becoming our primary concern, and we need to anticipate all the risks ahead of time.

The slow reaction to foreign, domestic economic and natural events may lead to the collapse of the well-arranged business and the destruction of established habits. As a result, the scenario that we see today is repeated:

• blocking of accounts owned by persons under sanctions
• race conflicts
• restrictions on withdrawal/deposit of money
• closed banking channels
• assets owned by wealthy people are taken away from them
• loss of financial stability
• uncertainty about the future, and so on

But it’s not just politics that leaves its imprint on the family business. The impact of migration flow and increased investor interest in a particular niche should be considered as well. For example, a sharp increase in the population due to a huge number of immigrants and massive purchase of real estate will affect price policy and living standards, and rising taxes will bring about less income.  

Additional adverse factors that should always be kept in mind but cannot be predicted include natural disasters: hurricanes, earthquakes and floods. This will also affect the family office, holding and trust structure, or other forms of business organization.

If you want to avoid losses or at least manage to leave in time to another harbor, a backup plan B is essential. What you really need is a world-class professional consultant or an experienced expert to elaborate the plan for you.

When you Need a Backup Plan B for your Family Office

Unpredictable natural disasters, political unrest, wars, economic downturns, and much more can have an adverse effect on the family office and storage of foreign (private, corporate) capital. Some examples from history include the Los Angeles earthquake, major political events in 2017 in China, Saudi Arabia, Spain, the United Kingdom and Brazil, the situation in Ukraine in 2022, the drought in the Midwest, and Hurricane Harvey, to name just a few.

Insurance covers only a small part of the damage, while most of the costs are borne by taxpayers. We can witness this situation again and again around the world, and only a fraction of wealthy people have a backup plan B to cover costs, avoid large losses, or quickly recover what they have lost. 

Plan B for Family Office in Action – How to Create and Protect Yourself from Risks

Backup plan B for the family office can focus on one main point (citizenship) or take into account all stages of the structure formation. At the same time, do not perceive the backup plan option as a path to an eternal nomad’s life. This is just a way to reduce the tax burden while adhering to the laws of all countries, which should be seen as optimization for wealthy families.

How to build a family business, get a second passport and obtain foreign citizenship under the backup plan B? All in all, you will need to go through five simple steps to reach your coveted goal.

Step 1: Second Citizenship

If you have large capital and obligations to the tax services of other countries, for example, the United States, we advise you to apply for citizenship in low-tax jurisdictions. Remember that the OECD is planning to control its citizens everywhere – just as the US tax system does, which will lead to a considerable tax burden regardless of the place of residence.

At the moment, the tax system in many European countries has compiled a separate list of people with high income who may be obliged to pay taxes on all property and financial values in the future. OECD member countries, starting with the European Union, have adopted a number of special laws allowing for the seizure of their citizens’ bank accounts and introducing the de facto right to refuse to provide passports due to unpaid taxes or as a result of investigative measures being taken.

Here is a good example: Russians, Belarusians and persons on the EU sanctions list are currently having a hard time not only finding a place to get a residence permit/permanent residence but also a secure haven to store assets. As the global conflict connected with Ukraine is gaining ground, the Russian residents see the world divided into friendly and unfriendly countries that will either accept them and provide a second citizenship – or turn them down.

The only way to avoid restrictions and prohibitions (including for capital management and protection within the family office) is to obtain a second passport and thus have a choice. At the moment, the second, third and even fourth passports are better assets than a car or a yacht as they give the right to have a spare place to live and build a business there.

What is the Best Place for Obtaining Economic Citizenship for Wealthy People in 2022?

You can obtain residence by investment and enjoy low taxes in the following countries:

• Some Caribbean countries – Saint Kitts, Grenada, Dominica, Saint Lucia and Antigua
• Vanuatu
• Montenegro
• Malta
• Turkey and Northern Cyprus

If we are talking not only about the family office and low taxes but also about stability and banking security, wealthy families can consider some countries where it will not be difficult to get a residence permit and apply for citizenship:

• Serbia
• Turkey
• Saint Kitts is a good option for citizenship, family office and foundation/trust registration with low taxes
• Northern Cyprus
• Armenia
• Georgia
• Montenegro (offers economic citizenship at a rate of 450,000 euros and the status of a tax resident on favorable terms)
• Grenada, where economic citizenship by investment can be easily obtained
• Vanuatu, a low-tax jurisdiction to implement Plan B and apply for citizenship remotely

You can easily get a second citizenship by addressing the experienced experts of our portal who will help you choose a country depending on your applicant’s status and provide comprehensive assistance in creating a family office and opening accounts. To mitigate risks, we propose affluent families to obtain citizenship in several states.

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Step 2: Tax Residency

A second citizenship rarely gives advantages in tax planning if there is no status of a foreign tax resident. The main task is to become a tax resident of a country that does not tax income generated abroad, where you can live and do business comfortably, including when you use the backup plan B for the family office. 

There are few such countries in 2022. However, if you contact the experts of our portal, you will receive professional assistance and advice that will surely help you make the right choice.

Step 3: Open a Dynasty Trust

A dynasty trust is one of the instruments that can be used to create a financial legacy for several generations. This is a way to protect assets, property and financial values from external encroachment in the event of bankruptcy or conflicts with creditors (including spouses, inheritance and tax claims).

The trust is the essence and basis of the family office since all funds will be kept separate from the beneficiary’s property. Such a structure could be established on the island of Nevis, in Saint Kitts or other offshore jurisdictions. You can also have a European channel for assets protection, such as a parallel trust in an onshore jurisdiction (Madeira, Hungary and other countries).

In any case, it is important to take into account the rules of the Double Taxation Treaties and structure the business correctly – and the experts of our portal can do it for you really effectively.

Step 4: Family Office Operating Company

According to the OECD CRS classification, an operating company is recognized as a legal entity with 50% or more of its funds involved in an active business. The operating company should be located in the place of the ultimate beneficiary’s establishment.

There are many attractive areas for operating companies to work in conjunction with the family office: Ireland, Dubai, FEZs of Shanghai, Panama, and others. 

Step 5: Create A Hedge Fund

If you want to have all the instruments to invest jointly with other family offices and develop a risk hedging strategy, it is better to open a hedge fund. With a good financial base, such a fund can be created on the basis of your own family office by investing in various asset classes: IPO, gold, precious metals, crypto funds, real estate, and even economic areas. However, it makes sense to set up your own hedge fund only if the family wealth exceeds 2 million euros.

Why Family Offices Need Plan B Passports – Conclusion

If you have a flexible backup plan B and an additional passport, you can quickly start relocation even if adverse events occur in your current country or region. A well-thought-out plan B and a second citizenship allow wealthy families to take advantage of opportunities to change their place of permanent residence, receive foreign education, change their lifestyle and direction of investment in a short period of time. And all of this is absolutely legal!

If the strategy and paths to retreat are planned in advance, the family office will manage to increase capital rather than lose it in times of global catastrophes and geopolitical unrest. The main thing is to timely set the right focus: obtain a second citizenship and get a passport, structure the office and investment products, open bank reserve accounts, and quickly transfer your capital to the safest zone.

Contact the experts of our portal right now to find out how to start the ball rolling!