Family Holding Company: How It Works and When It Makes Sense
The family holding company is no longer a tool reserved for large fortunes. When properly structured, it protects the assets a family has built, organizes succession during one's lifetime, and avoids the conflicts and high costs of probate.
What a family holding company is
A family holding company is a company created to consolidate and manage a family's assets — equity interests, real estate, investments, and other property. Instead of the assets being held in the names of individuals, they come to belong to the holding company, and the family members become partners in that company.
What it is used for
- Asset protection: separates the family's assets from operational risks and brings structure to the management of property;
- Succession planning: allows assets to be transferred during one's lifetime, under defined rules, reducing conflicts;
- Efficiency: can reduce the cost and duration of probate and provide tax efficiency, within the law;
- Governance: establishes clear rules on how the family's decisions about its assets are made.
How succession works through the holding company
Rather than leaving the assets to be divided only after death — through probate, which can be lengthy and costly — the holding company allows parents to gift the quotas to their children during their lifetime, usually with a reserved usufruct. This way, the parents retain control and income while they live, and the transfer is already organized.
When it makes sense
A holding company is not right for every case. It usually makes sense when there are significant assets, more than one heir, real estate to manage, or interests in companies. In simple situations, the maintenance cost may not be justified. For that reason, the decision should start from an assessment of the specific case.
What to consider before setting one up
- The type of assets and the family's objective;
- The most suitable corporate form and the terms of the shareholders' agreement;
- The tax impact of contributing the assets to the company;
- The governance and succession rules the family wishes to adopt.
Frequently asked questions
Does a family holding company eliminate probate?
It can significantly reduce the cost and duration by organizing the transfer of assets during one's lifetime. The effect depends on how it is structured and on each specific situation.
Should every family have a holding company?
No. It makes the most sense when there are significant assets, multiple heirs, or property to manage. In simple cases, the cost may not be worthwhile.
Need guidance on this topic?
This article is informational. For guidance on your specific case, talk to our team.