When to Use a Holding, Trust, or Offshore: Lawful Estate Planning through Different Legal Structures

Estate, corporate, and succession planning may involve the use of holdings, trusts, and offshore companies, each with distinct objectives, legal foundations, and applications.

This article aims to analyze when and in which legal contexts each model is recommended, in compliance with Brazilian law and international regulations, to protect assets, ensure business continuity, and prevent disputes or sanctions.

The analysis is neutral, allowing readers to understand the available alternatives without favoring any particular profile — whether entrepreneur, partner, heir, or investor.

The increasing complexity of assets and the growing legal risks faced by companies and families have driven the adoption of these structures. However, their use requires caution, as each serves a different purpose, has specific tax implications, and may be misinterpreted if improperly applied.

2. When to Use a Holding Company

2.1. Primary Objective

A holding company is recommended when the goal is to organize, protect, and perpetuate assets under a business structure within Brazilian jurisdiction.

2.2. Recommended Situations

·         Families with multiple properties and heirs;

·         Entrepreneurs seeking to professionalize succession;

·         Asset protection against personal or business liabilities;

·         Corporate restructuring for centralized control and governance;

·         Lawful tax planning (retained earnings, dividend distribution, permissible tax avoidance).

2.3. Advantages

·         Governed by Brazilian law (Civil Code and Corporations Act);

·         Compatible with protective clauses such as inalienability, non-attachment, non-communicability, and lifetime usufruct;

·         Facilitates succession planning through transfer of ownership quotas.

2.4. Practical Examples

·         Formation of a family rural holding company to consolidate farms and prevent fragmentation of property among heirs;

·         Use of a real estate holding company for rental management and professional administration of properties.

3. When to Use a Trust

3.1. Primary Objective

A trust is more suitable when the owner seeks international fiduciary management of assets for succession or protection purposes in common law jurisdictions.

3.2. Recommended Situations

·         Heirs residing abroad;

·         Individuals holding dual citizenship or assets in the United Kingdom, United States, Canada, Switzerland, etc.;

·         Estate planning for inheritance, philanthropic foundations, or staged donations;

·         Asset protection through the legal separation of ownership and control.

3.3. Legal Considerations

·         Trusts are not recognized under Brazilian law, but may have limited international legal effects;

·         Must comply with Brazilian tax legislation (foreign asset reporting, Law No. 14,754/2023, and OECD conventions).

3.4. Practical Example

A Brazilian entrepreneur with children living in Europe creates an irrevocable trust with fiduciary management to preserve overseas assets and distribute them according to pre-defined clauses after death.

4. When to Use an Offshore Company

4.1. Primary Objective

An offshore company is recommended for legitimate international business operations, access to foreign markets, global asset management, and — within legal limits — tax optimization.

4.2. Recommended Situations

·         Companies operating abroad that require a legal presence in another jurisdiction;

·         Investors wishing to hold assets in strong currencies, outside Brazil’s exchange rate instability;

·         Corporate internationalization within global holding platforms (e.g., Luxembourg, Delaware, Isle of Man).

4.3. Legality and Compliance

Owning an offshore company is not illegal, provided that:

·         It is declared in the Individual Income Tax Return (DIRPF);

·         It is reported to the Central Bank of Brazil (CBE) when applicable;

·         Profits and dividends are taxed under Law No. 14,754/2023, which establishes taxation on retained profits starting in 2024.

4.4. Practical Example

A Brazilian corporate group establishes an offshore company in Delaware (USA) to centralize contracts with international clients and facilitate the attraction of foreign investment under a secure legal framework.

5. Ethical Considerations and Risks of Misuse

The structures described above are not synonymous with illegality. However, if used with the intent to defraud creditors, evade taxes, or conceal assets, they may result in:

·         Disregard of legal personality;

·         Tax and criminal penalties;

·         Joint liability for abuse of form.

Specialized legal and accounting advisory is essential to tailor each structure to the client’s lawful purpose, ensuring transparency and compliance with the legal requirements of each jurisdiction.

6. Conclusion

Each of these structures — holding, trust, and offshore — has its own purpose, function, and legal foundation.The question is not which one is more sophisticated, but which is most appropriate to the specific case.

Their distinctions can be summarized as follows:

·         Holding: a domestic, effective, and stable solution;

·         Trust: a foreign law instrument for fiduciary management and protection;

·         Offshore: an international structure for operational or investment purposes, provided it is fully compliant.

The combined use of these mechanisms, when properly structured and for legitimate purposes, can offer secure, sustainable, and tailored legal solutions that align with the asset management and business continuity needs of each client — whether an entrepreneur, heir, investor, or family group.