Setting up a family investment fund: A practical and comprehensive guide

What is a family investment fund?

Definition and operation of a family fund

A family investment fund is a legal and financial structure allowing a family to organize, manage and develop their assets in a manner strategic and sustainable. Unlike institutional funds or investment funds between friends, a family fund aims above all to preservation of heritage And the intergenerational transmission. Create an investment fund family also makes it possible to establish clear rules to avoid conflicts between heirs and guarantee the harmonious management of assets over several generations.

This type of fund can cover several legal forms adapted to the needs of the family and may include different types of assets, such as:

• realty : rental properties, commercial buildings, agricultural land. Real estate investment is often preferred for its stability and its long-term valuation potential.

• Financial investments : shares, bonds, ETFs, derivatives. These instruments allow portfolio diversification and optimization of the fund's performance.

• Private Equity : investments in unlisted businesses, especially family businesses, in order to ensure their development and transfer.

• Alternative assets : cryptocurrencies, works of art, raw materials. These investments offer attractive return potential but require expertise and rigorous management.

The advantages of a family investment fund

A family fund offers numerous asset and fiscal advantages :

• Centralization and optimization of asset management : by grouping assets under the same structure, management becomes more effective and makes it possible to avoid the dispersion of assets.

• Attractive taxation : structuring your assets through a fund allows you to benefit from fiscal optimizations, especially in terms of donations and transfers.

• Asset protection and security : holding assets through a family fund protects assets from the vagaries of life, such as divorces or individual financial difficulties.

• Flexibility and adaptation to family needs : the fund can be tailor-made to meet the goals and values of the family.

• Easy access to credit : a consolidated legal entity benefits from better credibility with banks and allows access to more attractive financing.

Why create a family investment fund?

The wealth objectives of a family fund

Creating a family fund makes it possible to achieve essential goals in terms of asset management :

• Preserve and transmit assets over several generations by ensuring a smooth transition through adapted estate planning.

• Optimizing taxation and reduce inheritance costs by using specific strategies such as donation-sharing, property dismemberment or the Dutreil pact.

• Structuring investments and harmonize long-term asset management, in particular to avoid strategic mistakes that could compromise the financial stability of the family.

Relationship issues and trust between members

The management of a family fund is also based on human and relational factors. It is essential to establish a climate of trust and transparency between members to avoid tensions and ensure consistent decision-making. Poor communication or differing expectations can lead to conflicts that can weaken the family structure and the sustainability of the fund.

Key steps to create a family investment fund

Choosing the right legal status

The choice of legal structure is fundamental to ensure the viability of the family fund. It depends on several criteria, including:

• La nature of assets (real estate, financial investments, businesses).

• The number of investors and their role in fund management.

• Les fiscal and regulatory aspects, which may influence the costs of transmitting and operating the fund.

The main options available are:

• SCI (Real Estate Civil Society): It is a legal structure commonly used for the holding and management of real estate assets. SCI allows several people, often members of the same family, to own real estate together while avoiding the constraints of indivision. It offers great flexibility in the management and transmission of shares, in particular by facilitating the gradual donation of assets while benefiting from tax advantages.
  

• SAS (Simplified Joint Stock Company): SAS is a form of commercial company that offers significant flexibility in terms of governance and distribution of powers between partners. It is often preferred for structuring diversified family investments, particularly in Private Equity, financial portfolio management or real estate. One of its main advantages lies in the statutory freedom it offers, allowing the rules of operation to be adapted according to the goals of the family.

Who can create a family investment fund?

Just like create an investment fund between friends, a family fund can be initiated by Any member of a family wishing to structure its assets in a more efficient way. However, to ensure optimal management, it is recommended to surround yourself with experts such as:

• A tax lawyer to define the legal framework and fiscal implications.

• A notary to organize the transmission and draft the legal documents.

• A wealth management advisor to optimize investments and ensure the consistency of the fund with family goals.

• A chartered accountant to ensure legal and accounting compliance, by guaranteeing rigorous management of the fund's financial flows.

Governance and management of a family fund

Structuring effective family governance

One solid governance is essential to ensure the stability and sustainability of a family fund. It makes it possible to organize asset management and to avoid conflicts between members. The main tools to be put in place are:

• A management committee : This decision-making body, composed of members of the fund and possibly external experts, sets strategic guidelines and ensures the performance of investments.

• A family charter : This document formalizes the values of the fund, the management rules and the principles of transmission. It ensures a common vision and harmonious governance.

• An associates' pact : As part of a SCI Or of a SAS, it regulates the distribution of powers, the transfer of shares and the distribution of profits.

Well-defined governance guarantees structured and sustainable management of the family heritage.

Managing family conflicts within the fund

Disputes between members are frequent in the management of shared assets. To prevent them from undermining the cohesion of the fund, it is essential to put in place prevention and resolution mechanisms :

• Clarifying roles and responsibilities to limit misunderstandings.

• Establishing a mediation process to resolve disputes quickly.

• Define entry and exit rules in order to ensure a balance between the members of the fund.

• Maintain regular communication through meetings and reports that are accessible to all.

Preventive conflict management ensures the harmony and sustainability of the fund over the long term.

Tax aspects of a family fund

Tax regimes applicable to family funds

The fiscal framework of a fund depends on its legal structure and asset objectives. Among the most common diets:

• SCI to the IR : The income is taxed in the hands of the partners according to their tax bracket. This regime is suitable for families who want flexible management.

• SCI at the IS : Profits are taxed at the company level, offering the possibility of reinvesting earnings with reduced taxation.

• SAS at the IS : This structure allows flexible dividend management and fiscal optimization for share transfers.

Each option should be analyzed according to the objectives of the fund and the profile of the members.

Tax optimization of a family fund

To limit the tax burden and maximize profitability, several strategies can be put in place:

• Dutreil pact : Reduction of inheritance tax up to 75%, under conditions of conservation commitment.

• Dismemberment of property : Transferring the bare ownership of assets makes it possible to anticipate succession while minimizing tax costs.

• Staggered donations : Making donations while respecting tax allowances makes it possible to gradually reduce taxation during successions.

A well-planned tax forecast allows to optimize the transmission of the heritage and to ensure its continuity.

Transfer of assets within a family fund

Estate planning with a family fund

The transmission of a family fund must be anticipated to avoid conflicts and optimize fiscal costs. Key steps include:

1. Define a transmission strategy adapted to family goals and fiscal constraints.

2. Setting up shared donations to distribute assets fairly and progressively.

3. Protecting the heirs and the surviving spouse through usufruct clauses or other legal arrangements.

4. Involving the new generation progressively in the management of the fund to ensure the continuity of investment decisions.

A well-prepared transmission guarantees the stability of the fund and the preservation of family assets.

Avoid legal and financial bottlenecks

Poorly anticipated transmissions can lead to disputes and unnecessary costs. To avoid these pitfalls, it is recommended to:

• Integrate pre-emption and approval clauses in the articles of association to control the transfer of shares.

• Structuring an estate governance plan with a committee responsible for supporting the transition.

• Ensure regular legal and fiscal follow-up to adapt the structure of the fund to legal and family developments.

Rigorous supervision of asset transmission makes it possible to secure the future of the fund and avoid conflicts between heirs.

Why choose Overlord to create a family investment fund?

Overlord simplifies your project thanks to its expert legal support And to her investment platform intuitive. Our all-in-one solution allows you to structure, formalize and manage your family fund effectively.

By combining legal expertise, advanced technological solutions And a thorough understanding of the needs of investors, Overlord offers a comprehensive and personalized support.

• Simplicity and accessibility : Overlord makes creating and managing a fund accessible to everyone, even without prior financial expertise. The platform guides each user through all the steps, from initial structuring to ongoing management.

• Legal compliance : With Overlord, you get the assurance that your fund meets all legal and regulatory requirements. Thanks to our in-depth expertise, you avoid any risk of non-compliance with financial institutions.

• Advanced management tools : Overlord offers interactive dashboards to track fund performance, manage member contributions, and plan future investments. These tools guarantee total transparency between participants.

• Flexibility for all types of projects : Whether your family wants to invest in real estate, financial markets, or alternative assets, Overlord offers solutions tailored to your specific needs.

In 2022, Cléry, a family office committed to impact investing, has chosen Overlord to structure its wealth fund. Founded by David Guinard and Robin Ucelli, Cléry is based on a sustainable and long-term investment philosophy.

Thanks to Overlord, Cléry was able to:

• Structuring your family fund in a professional manner and in compliance with regulations.

• Optimize the management of your capital while integrating sustainable investment principles.

• Access advanced management tools guaranteeing transparency and detailed monitoring of investments.

FAQ on creating a family investment fund

Common mistakes to avoid when creating a family fund

• Choosing an unsuitable structure : A poor selection between SCI and SAS may result in fiscal and legal constraints.

• Lack of clear governance : The absence of family charter Or of Shareholders' agreement can lead to conflicts.

• Neglecting tax optimization : A poorly prepared transfer can generate high taxation. Anticipate through Donations and the Dutreil Pact is essential.

Additional resources for creating a family fund

• Books : Private Equity (Lextenso editions), by Gaspard de Monclin

• Tools : Online tax simulators to estimate the impacts of a donation.

Start your family fund with Overlord

Find out how the investment platform Overlord supports you in every step of creating and managing your family fund.

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