Luxembourg Limited Partnership (SCS) and Special Luxembourg Limited Partnership (SCSp) : use cases as Trust and estate planning vehicles

SCS and SCSp are companies contracted by one or more General Partners (GP) indefinitely and jointly liable for social commitments, with one or more Limited Partners, who only commit a determined stake in accordance with the provisions of the social contract (the limited partnership agreement).

A Swiss resident but it could be as well a Monaco resident or resident non domiciled in the UK, decides for various succession and estate planning reasons to set up a Société en Commandite Spéciale (Special Limited Partnership), transfer his ownership on landmark buildings he ownes in Europe to his children while retaining the management rights of the properties. Such transfer takes place in exchange of receivables owed by the children towards the father. The latter is the owner and manager of the GP and remaines in control of the assets thus transferred.

The advantage of such vehicle is the entire contractual freedom allowing the parties to taylor it to their needs.

While this entity has no legal personality, it can open bank accounts, which are managed by its GP. The SCS or SCSp are tax transparent for the purposes of Luxembourg income tax and net wealth tax. Furthermore, if the GP is a limited liability company holding less than 5% of the equity interests, the SCSp will not be subject to commercial tax.

In many ways, such structure has similar features to a Trust structure?:

?- Transfer of assets?: The settlor of the trust (typically the father) alienates his ownership rights to third parties (his kids)

?- Trustee/Manager?: The asset management is ensured by the GP of the Luxembourg Limited Partnership. Given the unlimited liability of the GP being the counterpart of its discretionary power over the Luxembourg Limited Partnership’s assets, the GP is very often incorporated under the form of a Luxembourg limited company such as a S.à.r.l.

?- Beneficiaries?: The asset’s transferees can be definitely assimilated to the beneficiaries of a Trust.

- Protector?: As the owner of the GP (under the form of a Luxembourg private limited company), the transferor can retain an oversight on the GP’s management, by appointing and removing its board members.

As a result of the above, the succession rights are no longer applyied, neither in Switzerland nor in the country where the properties are located, as the children are already the direct owners of the same. The transferor has already secured a regular flow of revenues during his lifetime with the receivable repayment plus interest as the case may be.

Our teams at Trustconsult Suisse S.A. and Trustconsult Luxembourg S.A. are gladly at your disposal.?