Joe Truelove, Director of Carey Group, and Kerrie Le Tissier, Senior Associate at Bedell Cristin Guernsey Partnership, play out a conversation between a fictional client and his lawyer as the client seeks to understand the various options typically available to ultra-high net-worth individuals for managing their wealth.
The scenario
It is the day of his daughter's wedding and Joe has arranged a quick meeting with his lawyer Kerrie to discuss his family's affairs – the wedding has brought to Joe's mind a number of issues which he wants resolved.
Joe: Kerrie, I need some advice. I've worked hard all my life, I've created a world-leading business, I'm getting old, my third wife is very young, I have many children in a variety of jurisdictions living aroundthe world, I may even be a grandfather soon. I'mworried about the future – how can I provide foreveryone? What will happen to it all when I die?It's all getting too much, I can't sleep at night!What do I do?
Kerrie: You really need to think about preserving yourwealth and succession planning. It sounds asthough what you may need is a trust.You hand over your money to a trustee and theylook after it for you, both during your lifetime andafter your death. In fact, you could put any of yourassets into trust – shares in your companies, yourreal estate, artwork, wine collection...
Joe: What? Are you crazy? I want to keep my assets, notgive them to someone else. Who can I trust?
Kerrie: Find yourself a reputable and experienced trustcompany, in a stable and well-regulated jurisdiction.Trustees in Guernsey are regulated and they'vebeen doing this for more than 50 years.
Joe: But what if I don't like what they do with my money?
Kerrie: They usually have at least some discretion but theycan't just do what they like with the trust assets.They are fiduciaries, which means that they don'tact in their own interests but instead they must actin the interests of the beneficiaries, who would beyour family. There are serious consequences if theyfail to do this – they could face claims for breachof trust and there could be regulatory implications, which they would obviously want to avoid. That said, there are some things, such as providing letters of guidance, appointing a protector and reserving powers, you could do to get even more comfort.
Joe: Okay, a trust could work, I'm still concerned abouthanding over control but I'll think about it. Are thereany alternatives?
Kerrie: To retain even more control, you could form aprivate trust company. This is where you form acompany solely to act as trustee of your trust. Youcould be on the board of the trustee, or own thetrust company and influence its direction.
Joe: But I don't know much about trust law so why would I set one up?
Kerrie: You would appoint people with experience oftrust management as co-directors. It's a popularand tried and tested structure for people in yourposition.However, as another alternative, we havefoundations in Guernsey which tend to appealto people from civil jurisdictions who are notcomfortable with handing over control.
Joe: So I control the foundation?
Kerrie: To an extent. Think of a foundation as a bit like across between a trust and a company: like a trustit is usually used for holding assets for someone'sbenefit (here, your family) and like a company it'sa separate legal entity. There is a council whichmanages the foundation, which is like the board ofdirectors of a company or the Trustee of the trust.You could be a member of the foundation's councilif you wanted to retain some influence over it.
Joe: Okay, so there's a bit less trust involved – I havetrust issues.
Kerrie: I understand that but with either a trust or afoundation, properly set up with your needs andrequirements taken into account, you would havea structure which would assist you with protectingyour assets and planning the succession in thebusiness. Neither would attract additional tax andboth could give you some level of control, whilealso involving experienced professionals in themanagement and administration of your wealth.
Joe: Okay that sounds good, but am I missingsomething? I've been hearing a lot about PCCs –what are they? Why can't I have one of them?
Kerrie: PCC is an abbreviation for a Protected CellCompany. It is a concept which was first createdin Guernsey but has now been adopted by manyjurisdictions where it is sometimes referred to as asegregated portfolio company. Basically a PCC isa single legal entity which incorporates multiplecells each of which is a separate pool of assetsand liabilities.
Joe: So I could put my different businesses in differentcells, give one cell to each of my family membersand limit the liabilities of each cell so that if one ofthem loses money it is ring-fenced from the rest ofthe family wealth?
Kerrie: Yes that's right. You could also put different assetsor asset classes into different cells and/or usedifferent cells to hold assets for different branchesof your family, in each case segregated
Joe: Where can I access all of these different options?What happens if I need a combination of differentstructures?
Kerrie: All of these structures are available in Guernsey.Guernsey's trust, foundation and corporate lawsare robust yet flexible, so I am sure we can find asolution to all your concerns about preserving yourwealth and providing for your family. We have aninfrastructure which is second to none with respectto the provision of trustee, fiduciary, corporateand fund administration services in addition to ourbanking, legal, taxation and accounting expertisewithin the island. You would just need to run anyproposals past your tax advisers first to make surethere are not any adverse tax consequences.
Joe: Thanks Kerrie, this all sounds great. My onlyconcern now is how I manage and administermy various structures – it sounds like it could getcomplicated. I'd really like someone to do all that forme so I can focus on my businesses and spendingtime with my family.
Kerrie: Given the complexity of your requirements and thesize of your wealth, you should consider settingup a family office to manage your assets andcoordinate the administration of your structures.Again, you would want to set this up in a jurisdictionwhere there is expertise in wealth management andreadily available professional support. Guernseywould be a suitable place and having both yourfamily office and structures set up there would makesense. It is able to offer the expertise and supportyou need, you can fly there directly from Londonor Geneva so you can visit your family office asnecessary; it is politically stable and is a tax neutral jurisdiction for non-residents.
An original version of this article was published in Familia, Issue 3, February 2015.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
