Jersey: Asset Protection - Why Jersey Trusts And Foundations Appeal To Middle Eastern Clients

Robert Dobbyn is a partner specialising in private capital and trusts work in Walkers' Jersey team. He is a Jersey Advocate who has been practising offshore since 2011, and who worked for a leading firm in London before that. Robert specialises in advice and drafting in relation to Jersey trusts and foundations, and advises international clients including trustees, onshore law firms, accountancy practices, settlors and beneficiaries.

In this Q&A, Robert discusses the popularity of Jersey trusts and foundations to clients in the Middle East.

Trusts are enduringly popular with Middle Eastern clients – what are they used for?

Our Middle Eastern clients have traditionally used trust and indeed foundation structures for several reasons and this looks set to continue in future.

As a starting point, the ability to provide for an orderly transfer of wealth to future generations is extremely useful. Sharia law is fairly rigid in terms of inheritance rights and this can impact on what proportion of assets can be left to male and female heirs and spouses. In any event, it often makes sense to think about a gradual transfer of wealth, which may start to take place before the head of the family dies and may continue on past their death, so that younger family members in particular do not receive too much too soon.

For domestic assets, such as real estate or operating companies, local laws often do not allow much structuring flexibility and we are generally not involved with this side of things. But with international assets, such as investment portfolios with Swiss or Singapore banks or real estate in Europe and the US, the senior family members are often more able to transfer these into an offshore structure that is designed to carry out succession planning objectives.

Another, perhaps more topical, reason for using offshore structures is the ability to protect family assets from hostile third parties. This second feature is especially prominent for clients based in jurisdictions that are experiencing political and social upheaval. Families can take comfort from knowing that their assets are located in a safe, well-regulated jurisdiction, and that the assets will continue to be readily accessible even if the family members relocate elsewhere. If that happens, there is no need to open up new bank accounts, transfer title to shares or establish new holding companies.

It is worth noting that such structures are not there to allow people to defraud genuine creditors who have claims at the time the structure is established. However, if a settlor is in good financial health and has no immediate creditor issues, then offshore trusts or foundations can be a robust future-proofing tool.

Other reasons for establishing a trust or foundation include the ability to preserve confidentiality against the public at large (therefore helping to mitigate the risk of extortion, harassment or the invasion of family privacy), and the scope, with appropriate advice of course, to reduce tax where the family members are considering a move to a jurisdiction such as the US or the UK. It is often well worth establishing an offshore structure before a family member becomes resident or domiciled in those jurisdictions.

What about PTCs?

Many of our clients like the sound of a trust or foundation for the reasons I have just mentioned, but they are understandably cautious about placing family assets into the hands of an unknown party. Fortunately, there are a number of ways of dealing with this, and private trust companies, also known as "PTCs", are a really good one.

PTC structuring for Middle Eastern clients has been really popular for a while now. While I could go on for quite a while about PTCs (indeed I have just finished writing a chapter on Jersey PTCs for a forthcoming book), in a nutshell, a PTC is a company that is incorporated solely for the purposes of acting as trustee of a trust or trusts set up for a particular family, and the relevant family members will usually sit on its board. In terms of involving the family, this is a real plus when compared to the traditional model of using a third party corporate services provider as your trustee, where having a family member as a director is generally not possible. Being able to say to wealthy individuals who have built up their business and understand how it works better than anyone, that they will continue to be involved in decisions and have oversight, is a message that really works for them. The jurisdictions that we cover do this very well.

What about the perception and popularity of offshore solutions generally for Middle Eastern clients?

A lot of our work involves acting in conjunction with tax advisers and lawyers, and they often turn to offshore lawyers when advising internationally mobile families. Clients in the GCC and elsewhere will frequently have connections with the US, but also the UK and other jurisdictions, and if they are moving, they will want to plan carefully before they acquire new tax residencies. So we often get involved before they move to the US or the UK in order to help minimise the tax they might have to pay in future years.

The jurisdictions that we advise on offer tax neutrality and a range of broader structuring options including foundations, LLCs, companies limited by shares and by guarantee, and various types of partnerships, which are often used in a funds and investments context. We see a lot of inward investment into the UK and US from our Middle Eastern and other clients and a well-regulated offshore centre can be a key staging post for that capital flow.

The changes in the offshore world over the last decade or so in respect of transparency – and I am thinking particularly about registers of beneficial ownership, FATCA and CRS – have added to the administration requirements, but have not really fundamentally changed the attractiveness of the offshore option for our Middle Eastern clients when it comes to trusts. This is partly because details about trusts and their beneficiaries are not available to the public at large (as opposed to legitimate tax or other governmental authorities), and also because, in any case, the PTC structure in particular is really geared more towards combining orderly succession and asset protection with continuing involvement by the family members.

Prospects for the future – where is demand heading?

I mentioned political and social volatility earlier, and the effect this has on the uptake of PTC and other offshore structures. This looks set to remain relevant.

Also, more and more when we talk to our contacts in the Middle East, the subject turns to private capital, and how best to structure and service family offices generally. Private capital as a source of investment is growing significantly, and new methods are being sought to protect it and to put it to use. That growth has led to the growing trend in the creation of family offices focused on the assets and sometimes the philanthropic activities and administration of a specific family, who are increasingly based across multiple jurisdictions.

These family offices all do very different jobs for very different families, but what they have in common is that they need a structure that allows settlors and other family members to play a more active role in the management of trust assets. PTCs play a useful part in this.

Any final comments on what Walkers can offer in particular?

While my practice is exclusively Jersey based, we have a very good cross-jurisdictional team in our offices around the world that also covers the laws of Bermuda, the BVI, the Cayman Islands, Guernsey and Ireland. We are therefore able to advise on all the premium offshore trusts jurisdictions and have a lot of experience with helping our clients find the structure that works best for them. We are also working increasingly with our colleagues who specialise in funds, private equity and the other ways in which private capital is deployed, which our clients find very useful.

Another point to mention is that we have an excellent Dubai office and many of our Middle Eastern clients find it helpful to deal with them, particularly on their Cayman and BVI corporate matters. We travel out to the region regularly and will often see clients and contacts together with our Dubai-based colleagues.

Finally, we are also very well connected with offshore corporate service providers and onshore legal and tax advisers around the world, and we are always happy to assist with matching up clients with appropriate professionals as required.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Bedell Cristin Cayman Partnership
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Bedell Cristin Cayman Partnership
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions