The year that decides the inheritance
Succession is rarely lost at the moment of death. It is lost, or secured, in the period that precedes it, while the holder of the wealth still has the standing to make decisions and the time for those decisions to take root. We call this the bridge year, though it is seldom a single year and often three: the interval in which capital is prepared to cross from one generation to the next, after the wealth has been built but before control has passed. Most difficulty we are later asked to resolve traces back to a bridge year that was never used.
The families we advise are almost never confined to one country. A founder resident in Malta may hold a business in northern Italy, a London property, accounts in Luxembourg, and children settled in three different states. Each jurisdiction has its own rules on inheritance, forced heirship, gift tax, exit charges and the recognition of trusts; a plan elegant in one capital can be void, or punitively taxed, in another. The bridge year reconciles these systems while there is still freedom to act, rather than after the conflicts have surfaced.
What follows are the three structures we encounter most often in cross-jurisdictional succession, what each is genuinely good for, and the single arrangement we would advise against regardless of how often it appears in a tax memorandum. None of this is advice on any particular estate; the relevant law differs in every household. The framework, however, is consistent.
The holding company: control without fragmentation
The first and most common structure is the family holding company, typically incorporated where there is a credible participation exemption and a dense treaty network. Operating businesses, real estate and portfolio assets sit beneath a single corporate parent, and shares in that parent, rather than the underlying assets, pass between generations. A founder can transfer twenty per cent to each of two children while retaining sixty per cent and, with it, control.
It answers a specific problem: how to move economic value to the next generation gradually, without splintering the assets or surrendering authority prematurely. Voting and economic rights can be separated, so that a parent retains decision-making while value accrues elsewhere. For a family wishing to keep a business intact across a generation, it is often right.
Its limits are clear. A holding company is poor where the objective is protection from future creditors, or where forced heirship would override the founder's intentions, because shares remain personal property subject to those rules. It also requires genuine substance: a letterbox parent is increasingly disregarded under anti-abuse provisions.
The trust: discretion, protection and the price of relevance
The second structure is the trust, in which the founder, the settlor, transfers assets to trustees who hold them for beneficiaries on terms the settlor has set. It accomplishes what a holding company cannot. Assets cease to be the settlor's property, which can place them beyond the reach of future creditors and, in many cases, beyond forced-heirship claims. Distributions can be discretionary, allowing trustees to respond to a beneficiary's circumstances rather than handing over a fixed share on a fixed date. Malta is among the few civil-law jurisdictions to have legislated comprehensively for trusts and ratified the Hague Convention, giving families a recognised, EU-domiciled, MFSA-regulated home for the instrument.
The counter-argument deserves a fair hearing. Several civil-law countries, France among them, treat trusts with suspicion and may tax them harshly or look through them entirely; a beneficiary who moves to such a country can convert a well-designed trust into a reporting burden with an unfavourable charge attached. Trusts also demand that the settlor genuinely relinquish control; one who continues to direct the trustees as though the assets remained his own invites the structure to be set aside as a sham. The protection is real, but purchased with a loss of control that some founders discover, too late, they were never willing to pay.
The foundation: continuity for the family that thinks in decades
The third structure is the private foundation, an orphan legal person with no shareholders that holds assets for purposes and beneficiaries defined in its statute. To civil-law families uneasy with the common-law trust, it is often more intuitive: an entity, with a council and legal personality, rather than a relationship between settlor, trustee and beneficiary. Maltese law permits private foundations for named beneficiaries, a regulated alternative that sits naturally within continental legal thinking.
A foundation suits the family that thinks in decades and wishes to embed values alongside value: governance rules, criteria for distributions, provisions for philanthropy. Because it owns itself, it offers a continuity that neither a personally held company nor, on some readings, a trust can match, and it is frequently the cleaner choice where beneficiaries reside in jurisdictions that recognise foundations over trusts.
The cost is rigidity and expense. A foundation is more formal and less nimble than a trust, and the administration is not trivial for modest estates. As a rule of thumb, the fixed running cost becomes proportionate only above roughly five million euro of assets. It rewards families with scale and a desire for institutional permanence; it overburdens those who prize flexibility above all.
The structure we decline: the personally held offshore company
The arrangement we advise against, and the one this note was written to name, is the offshore company in a zero-tax jurisdiction, held personally by an individual tax-resident in a high-substance European state. It appears in tax memoranda with remarkable persistence because, on paper, it once worked: profits accumulated free of tax, and the shareholder drew on them at leisure. That world has ended, yet the structure outlives it.
Controlled foreign company rules across the EU now attribute the company's undistributed income to its resident owner, taxing it as though no offshore wrapper existed. Economic-substance legislation in the traditional jurisdictions requires real activity a passive vehicle cannot demonstrate, and Common Reporting Standard exchange makes the account visible to the owner's tax authority within months. The arrangement delivers no benefit while exposing the family to enquiry, penalty and reputational harm. Its persistence is instructive: structures survive in advice long after they have stopped functioning, carried forward by precedent and the comfort of the familiar.
Choosing well: purpose before vehicle
The recurring error is to begin with the vehicle. A family hears that peers have established a foundation, or reads that a trust confers protection, and works backwards to justify it. The sounder method reverses the order. Begin with the recipients: where each is resident, what each will need, which are equipped to steward capital. Then identify the binding legal constraints, forced heirship, exit charges, the recognition or hostility of the destination jurisdiction. Only once those are mapped does the choice of structure become clear.
Combination is frequently the answer: a holding company may sit beneath a trust, or a foundation may hold the shares of an operating group, marrying the control of the corporate form to the protection of the fiduciary one. There is no single correct structure, only the one correct for a particular family in particular jurisdictions. The cost of getting this wrong is rarely the headline tax. It is the litigation between siblings, the asset frozen by a heirship claim in a country no one considered, the structure unwound because the substance was never real, outcomes that are foreseeable and avoidable. That is the argument for using the bridge year rather than leaving the work to those who inherit the consequences.
What this means for clients
First, treat the bridge year as the work, not the will. The document recording your intentions is the easy part; the structuring, conversation and reconciliation that precede it determine whether those intentions survive contact with several legal systems. If a transfer of wealth lies within the next decade, preparation should begin now, while you retain the standing and the time to do it properly.
Second, choose the structure for your family rather than the structure in fashion. The holding company, the trust and the foundation each solve a different problem, and each carries costs, in control surrendered, in flexibility lost, in administration borne. Ask of any proposal not whether it is clever but what problem it solves for your recipients in their jurisdictions.
Third, audit what you already hold. Legacy structures, the personally held offshore company foremost among them, often persist past their usefulness and now create more risk than they relieve. A periodic review against current rules is inexpensive relative to the enquiries it forestalls. Where a structure no longer works, the resolve to dismantle it is itself part of good planning, and the bridge year is the time to find it.
This note is house research and reflects the views of the Family Office desk at the time of writing. It is not investment advice or an offer.
