Former Italian prime minister Silvio Berlusconi was a household name due to his eccentric qualities and his business interests outside of politics.
The Milanese man built a vast business empire encompassing:
- Property development
- Banking and financial services
- Media
- Sports, previously having owned AC Milan and more recently acquiring AC Monza.
His lavish lifestyle included dating supermodels, travelling on mega-yachts, and hosting over-the-top “bunga bunga” parties. He was a controversial figure in life, so it’s perhaps unsurprising that his passing on 12 June 2023 brought about plenty of questions and intrigue surrounding his estate.
Read on to learn about the dilemma that the outcome of his will possibly posed for his business empire, what eventually happened, and three important estate planning lessons your clients can learn from the conclusion.
A potential ugly and protracted battle for control between siblings
According to Sky, the late Berlusconi’s business holding company, Fininvest, employs more than 20,000 people globally and reported sales of €3.8 billion in 2021. In the immediate aftermath of his passing, the news agency reported that questions surrounding the division of his estate and business empire might take years to resolve.
His eldest children, Marina and Pier, chair and hold directorial positions at Berlusconi’s company. They also each held 7.65% shares in the firm at the time of their father’s passing.
Meanwhile, his three children from his second marriage – Barbara, Eleonora, and Luigi – each owned 7.14%. Barbara and Luigi hold positions on Fininvest’s board of directors, while Eleonora does not.
Silvio Berlusconi retained a 61.3% majority ownership stake in his company. This is where the intrigue surrounding his estate arose.
At the time of his death, his eldest children held the most important positions in his business, yet their younger half-siblings held a larger combined share in the firm.
If Silvio opted to divide his estate among his children equally, it would effectively gift the younger trio a combined majority stake in the business.
This posed the possibility of a battle for control and the potential for a breakup of the Fininvest business empire.
It turned out Berlusconi carefully planned for his estate and eventual succession
For all the fear and intrigue that circulated in the press, none of it came to pass. Berlusconi’s will reading laid out in clear terms the division of his estate and a plan of succession for his business empire.
Deadline reports that Berlusconi’s eldest, Marina and Pier, were given control of Fininvest and a combined majority stake in the business of 53% (made up of their previous holdings and their inheritance).
Berlusconi’s five children will split the vast majority of his estimated $7 billion in assets between them with roughly 60% going to the eldest two and 40% to the youngest three.
According to Forbes, the division of his estate means that each of the five Berlusconi children are now billionaires.
3 important estate planning lessons your clients can learn from Silvio Berlusconi
1. They should ensure they have a valid, detailed will in place
If your clients don’t already have a will in place, they might want to consider setting one up as a top estate planning priority.
Without a detailed will, their assets may not be distributed to the right people, and their estate could fall under the rules of intestacy. This would give control of the division of assets to the courts and state.
Canada Life reports that 50% of adult Brits don’t have a will in place. Among them, 33% of those aged 55 and over don’t have one, while 14% of Brits don’t ever intend to make one.
For all the rumours surrounding Berlusconi’s estate, his clear and detailed will ensured his assets were divided as he intended and that his business empire had a thorough succession plan in place.
Even if your clients do have a will in place, they should consider reviewing it on a regular basis to ensure it accounts for any major changes in their lives.
2. They should consider sitting down with their loved ones and discussing their plans
Clear communication can resolve many potential issues before they arise. Simply taking the time to sit down with their loved ones to discuss their estate plan might help your clients reduce any potential headaches arising from their passing.
According to research from Tower Street Finance, 66% of parents and their children in the UK haven’t discussed their estate plans in detail – most notably any potential inheritance. Additionally, 19% have never had a conversation on the subject.
If your clients opt to discuss their plans with their loved ones, it could help their beneficiaries better understand the reasoning behind their decisions and alleviate any points of potential conflict.
For all the media furore, it is evident that Berlusconi had planned for his succession behind the scenes. He also wrote a handwritten letter to his children outlining his decisions, which was read out to them during his will reading.
3. They might want to consider gifting their wealth while they’re still alive
Berlusconi left vast amounts to his children, brother, and girlfriend. Luckily for them, Inheritance Tax (IHT) in Italy is relatively low.
Berlusconi’s children will likely benefit from Italy’s IHT regulations that cite:
- The deceased’s spouse or children typically don’t pay tax on the first €1,000,000 inherited (each). After that, the rate is usually set at 4%
- If a business or large shareholding in a company is inherited, no tax is payable as long as it is passed to the deceased’s children, and they continue the business for at least five years.
In the UK, IHT is payable at a rate of 40% on the value of your clients’ estate above the nil-rate band, which is £325,000 (2023/24 tax year).
If your client passes their home to their children or grandchildren, they can benefit from the additional “residence nil-rate band” of £175,000, which increases their IHT threshold to £500,000.
Additionally, spouses can pass any unused allowances between them, meaning an individual could leave an estate worth up to £1 million before IHT is due.
The potential for a hefty IHT bill is greater in the UK than in Italy. So, reading about Berlusconi’s estate might be a useful and timely reminder to your clients to review ways to reduce IHT in their own estate plans.
One way to potentially mitigate an IHT bill is for your clients to consider gifting their wealth to loved ones while they’re still alive.
There are many ways to gift, but as long as at least seven years pass between the date of the gift and your clients’ eventual death – it is typically free of IHT. However, if your clients pass sooner than that, their loved ones might face a potential tax bill.
Read more: How to protect your clients’ wealth from a greater Inheritance Tax risk
It is never too early to start estate planning, your clients should reach out for advice
Estate planning can take in many areas, such as a will, Lasting Power of Attorney (LPA), and IHT considerations. It is never too early to start planning, but it is possible to be too late.
Your clients won’t want to leave their estates open to conflict and disputes through not taking steps to clarify their intentions while they’re still alive.
For advice, they should email mail@delaunaywealth.com or call 0345 505 3500.
Please note
This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
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