Contributed By Baker McKenzie S.A.S.
The most popular method for asset protection planning is the incorporation of a separate vehicle from the individual's personal estate, providing asset protection from third parties or creditors.
Individuals may place assets held in their own names into a local trust in order to designate them or their proceeds to a specific purpose or persons. The assets placed into a properly structured trust form an estate separate from the assets of the settlor.
In structuring asset transfers, whether or not gratuitously made, attention should be paid to Colombia's creditor protection laws. The Colombian Commercial and Civil Codes include specific rules on the enforcement of a revocation action (acción revocatoria) against the unjustified actions performed by debtors prior to the request of a treaty process, a mandatory liquidation process or a restructure process.
Further asset protection can be obtained through an enforceable investment agreement with the following jurisdictions.
In Colombia, a testator only has an unlimited right of disposal over one half of her or his estate that corresponds to the freely disposable portion. The testator may decide upon the beneficiary of the assets comprising the remaining half of the estate, but must respect the compulsory portion that corresponds to his or her heirs.
Certain corporate arrangements (national or foreign) such as life insurance policies and the use of foreign or national legal entities may be implemented when forced heirship rules do not meet the wishes or needs of the testator or his family. The latter by legally allowing assets to be passed down to intended beneficiaries successfully and circumventing Colombian forced heirship rules.
Partial Interest in an Entity Transferred during Lifetime
If a partial interest is transferred during lifetime, it is presumed that the fair market value of the interest cannot be lower than its intrinsic value increased by 30%.
If the partial interest being transferred is received as consequence of gift, the value of the interest is at cost basis.
Partial Interest in an Entity is Transferred after Death
On the contrary, if a partial interest is transferred at death, any amount received as consequence of an estate, legacy, donation or conjugal portion is considered as a capital gain subject to capital gains tax at a 10% rate. The value of the interest is its cost basis.
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