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How to endow a factory, an airplane, and a boat: combo of inheritance mechanisms

Having built a business or launched a charity project, many entrepreneurs wonder how to pass their legacy to their successors. UFG WM experts advise on the legal tools that may be used to ensure all wishes are fulfilled.

Who is the owner of the assets? What can be bequeathed?

A will is a traditional and most affordable tool for transferring assets to heirs. A will can be used to distribute various assets as well as to impose specific duties on heirs.

The important things to remember include the following:

1. The testator can only dispose of the property he owes.

Under Russian law, all assets acquired during a marriage are considered joint property of the spouses. The exception is personal belongings and property received as gifts, by inheritance, or under other gratuitous transactions. This is the general rule. It applies regardless of in whose name the property is registered.

A marriage agreement or agreement on the division of joint property of the spouses can help avoid such problems with the execution of the will. These tools can provide legal certainty as to which spouse owns a particular asset. The existence of such agreements can also reduce the likelihood of disgruntled heirs and others contesting the will.

2. One cannot bequeath indirectly owned assets.

Let's explain with an example. Alexander owned a factory, winery, and other assets before the marriage. He holds the assets through foreign companies in Cyprus, which, in turn, are owned by a foreign holding company. Alexander is surprised to learn that he cannot directly distribute specific assets, i.e., the factory and the winery, among his heirs. He can only make a will in respect of the shares of the foreign holding company.

3. There are situations where business assets are shared with a partner.

In this case, it is essential to correctly describe these assets so that the will can be executed and there would be no need to rewrite it many times later, since the ownership share may change.

4. The testator can appoint an executor of the will.

The executor of the will acts as a trustee of the estate. The testator can, for example, instruct the executor to vote in a certain way at a general meeting of shareholders of the company whose shares form part of the estate. Such management will ensure the continued operation of the business while the probate process is underway at the notary. The executor of the will can be a business partner or a close friend who is not a legal heir and will not be interested in the assets. Some choose one of the heirs for this role, but such a choice often leads to a conflict of interest.

Bequeathing, but with a disclaimer and testamentary delegation

If the testator does not want an asset to be passed to one of the heirs directly, he can use the mechanism of a bequest. A bequest requires the heir to fulfill a certain obligation at the expense of the inheritance received: to transfer a thing or property to another person for ownership or use, to make regular payments for someone else's benefit.

There can be no bequest without a will. The heirs first enter into inheritance rights and only then execute a bequest at the expense of the assets received.

Here is an example of a bequest. Roman personally owns shares in a Russian company. Given the complexity and peculiarities of the business, he leaves the shares to one heir, his son Alexei. In the same will, Roman can impose on his son the obligation to pay a portion of the market value of such shares to his daughter Catherine (Alexei's sister). In such a case, to enforce the will, Alexei must either sell the inherited shares or pay part of their market value using his funds. Catherine can enforce the bequest through the court as prescribed by law.

Another mechanism obliges an heir to transfer the property he received to a third party, which is a testamentary delegation. The testamentary delegation is aimed at achieving a "good cause." For example, a testamentary delegation can oblige an heir to donate money to charitable organizations.

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