Next gens not prepared to pay for their parents' tax breaks
The offspring of wealthy business owners, or next gens, are facing potentially embarrassing tax demands as they inherit offshore bank accounts from deceased parents, writes Katie Barker.
The problem has risen to the surface in the last few years as governments seek to tighten tax loopholes for wealthy individuals stashing money in offshore centres.
Philip Marcovici, chief executive of LawInContext, said: "One of the big problems with hidden assets is that the wealth holder does not give the same level of attention to these assets as to the rest of their portfolio."
He added: "The money is often neglected and not put in appropriate structures to protect it for future generations. If the wealth holder dies the younger generation might not even know about the undeclared assets. In all instances the inheritors will have to take the difficult decision of what to do with the undeclared assets."
Next gens generally embrace this era of greater tax transparency, seeing it as one of the building blocks towards creating a more responsible society that is geared to the social thinking of the 21st century.
Marcovici said: "We are evolving into a more global world and one of greater ethics. The younger generations want to do the right thing; they understand and agree that avoiding paying tax is not an option."
In contrast, previous generations might have taken a more liberal attitude towards disclosing their tax matters, said Fred Shepperd, founder of Swiss-based family office Shepperd Investors AG.
"It was a wink of an eye and out goes the cash. But today this form of 'black money' is more a curse than a blessing for most European families and family offices who have inherited the money and the problem."
Marcovici agrees: "Often the younger generation is left holding the bag for the older generation's tax affairs."
But the former partner at law firm Barker & McKenzie says next gens can follow some simple advice to avoid the problems associated with inheriting undeclared assets.
He said: "They first need to understand their legal position thoroughly. The law is dependent on the country both the next gens and the asset reside in. Only by gaining a good understanding of the situation will you get the best deal.
"Then, in most instances, voluntary disclosure is the best course of action ? basically coming clean with the authorities. This is always viewed more favourably than if you get caught. If you have inherited the asset and declare it straight away the tax authorities will treat you much better."