The family office originated from wealthy European and American families in the 19th century. According to the definition of the American Family Office Association, it is designed to provide comprehensive wealth management for super wealthy families, so that their assets can be developed in the long-term, met the expectations of the family, and enable the related wealth to be passed on smoothly and to maintain appreciation. In recent years, Asia has become the fastest growing place for high-net-worth individuals and total wealth, especially in China.
According to Forbes, the growth rate of Chinese billionaires was 166% from 2013 to 2019. There are more and more wealthy people, and the number of family offices in Asia has sprung up. Generally speaking, the most common family office establishment models in Asia can be divided into two types-trust system and corporate system.
The trust system is a relationship in which the trustor transfers the property rights to the trustee and manages the trust property for the benefit of the beneficiaries in accordance with the essence of the trust. The formation of this kind of organizational structure involves the principal, trustee, beneficiary and executor. A family office established by a trust system generally has the following advantages:
The plan can be set up flexibly and autonomously. The relevant trust can flexibly formulate various terms according to actual needs, including the duration of the trust, income and property distribution, etc., or set the conditions for the beneficiary to obtain income, such as age and marriage restrictions.
The trust property is independent of the trustee and the beneficiary’s own property, and will not become the subject of the creditor’s request for debt. Through the trust, the inherited assets are separated from the personal assets, which can prevent the personal assets from being affected when the individual or the enterprise encounters risks in the future.
With a high degree of confidentiality, the trust agreement is a private agreement between the settlor and the trustee. Normally, it does not need to be disclosed to any third party.
As for the family office established by another corporate system, it will be broken down next time. Interested readers please continue to pay attention.