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Transcript of Hong Kong Geneva London Greenwich New York Milan New Haven Can I keep control and still protect my...
Hong Kong
Geneva
London
Greenwich
New York
Milan
New Haven
Can I keep control and still protect my assets?
Justine Markovitz and Jay Rubinstein
Withers LLP
Overview
• Threats to family wealth
• Divorce
• Forced heirship
• Regulatory aspects
• Preserving family wealth • Will
• Joint accounts
• Foundations
• Corporate structures
• Trust structures
Threats to family wealth - Divorce
• Why is this important?
• In many countries, at least 4 in 10 marriages end in divorce
• Divorce can be very expensive
• Often no concept of separate property
• More applications to join trustees
• Assets available for division maximise
Threats to family wealth - Divorce
• Recent case law – the English Court’s new approach
• White v White (2000) – yardstick of equality. ‘Reasonable
requirements’ held to be discriminatory to homemakers (usually
women)
• Cowan v Cowan (2001) – departure from 50% justified on the basis
of husband’s exceptional contribution. Wife received 38%
• Lambert v Lambert (2002) – wife awarded 50%. Marriage of 23
years
• Miller v Miller (2006) – short marriage, no children. Wife awarded
£5m upheld by House of Lords
• Charman v Charman (2008) – family trust established by husband.
Trust treated as resource of husband. Wife awarded £48 million.
Threats to family wealth - Forced Heirship
• Testamentary freedom vs ‘reserved portions’
• Conflict of laws
• Clawback feature
Threats to family wealth - Regulation?
• Licensing requirement
• Required level of third party involvement
• Increasing amounts of disclosure
Keeping wealth in the family
• Will
• Joint accounts
• Foundations
• Corporate structures
• Private trust company (PTC)
• Trust structures
Will
• Advantages
• Full control during lifetime
• Control over who benefits
• Control over who administers
• But
• Forced heirship
• Marital regimes
• Tax
Joint accounts
• Advantages
• Full control during lifetime
• Control over who benefits during life and on death
• Avoid probate
• But
• Forced heirship
• Marital regimes
• Tax
Foundations
• What are they?
• Where are they?
• Civil law jurisdictions
• Evolving in common law jurisdictions
• Founder’s purpose
• Control
• Privacy
• Tax treatment?
Corporate structures
• Advantages
• Control during lifetime
• Control over who benefits during life and on death
• Restrict probate
• But
• Forced heirship
• Marital regimes
• Tax
• Corporate restrictions
Trust structures
• Tax planning
• To protect assets from …
• Creditors
• Disinherited heirs
• Financially unsophisticated heirs
• Ex-spouses
• Minimise impact of forced heirship rules?
Private Trust Company (PTC)
• What is a PTC?
• A company limited by shares created to act as a trustee of a
specific trust or trusts
• Advantages
• Legal personality
• Customisation
• Privacy
• Flexible ownership of shares (e.g. purpose trust)
• Settlor/beneficiaries as directors
Choice of trustee – Private Trust Company – merits / issues
• Tailor structure to family needs
• Combine input of professional trustee, family members and key
advisers
• Control of information
• Continuity
• Location
• Formalities
• Limitation of liability
Private trust company (PTC)
Family Trust
Directors of PTC exercise trustee powers
Protector has power to hire and fire trustees and block key decisions
Private Trust
Company
Purpose Trust
Trustee of purpose trust appoints directors of PTC
Protector has power to hire and fire trustees
AppointorTrustee
(Institution)
DirectorsManage
Trust company (as service provider)
Supports administration
Trustee of
Purpose Trust
Owns
Private Trust Company
Enforcer
Trustee of
Family Trust 1 Family Trust 2 Family Trust 3
Consents to key decisions of trusts• Appointment of trustees• Distributions of and/or income capital
Protector
Exercises overall control• Selects institutional trustee and therefore controls
directors of PTC• Appoints protector of trusts
appoints
Holding Company
AssetsAssets
Holding Company Holding Company
Assets
What about a US State as an APT orPTC jurisdiction?
• Must look to individual state law
• Complexity of regulations of PTCs
• Requirements of local activity
• Costs
• Trust perpetuities period
• Statute of limitations on claims
• “Directed trusts”
Jurisdiction PTC Regime Trust RulesCreditor Protection
Directed Trust Statutes
Delaware PTCs are regulated PTC statutes aimed at commercial rather than private trust companiesMin. capital required is $500,000PTC must employ at least 2 full-time staff who are resident in Delaware, one of whom must have trust expertise
4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer.
Yes, tested and upheld by Delaware courts. Trustees are relieved from liability for any loss resulting from following the direction of adviser except in the case of willful misconduct and from the duty to monitor the adviser and warn beneficiaries of potentially improperly conduct.
South Dakota PTCs are regulatedMin. capital require is $200,000 + a surety bond of $1 millionAt least one of the directors must be a resident of SD and 3/4 of the directors must be US citizens
4 years after the transfer is made or, If later, 1 year after the creditor made or reasonably should have discovered the transfer.
Yes. Although not yet tested by courts, SD statute relieves the directed trustee from liability and at the same time designates the advisor as a “fiduciary” for trust law purposes. SD also codified the concept of investment trust advisor and distribution trust advisor.
Alaska PTCs are regulatedPTC statutes aimed at commercial rather than private trust companiesMin. cap. required $400,000 + paid in surplus equal to 20% of paid-in capitalApplicant must provide a statement of assets and liabilities. AK Banking Department may examine or investigate applicantAnnual certification requiredMinimum contact with AK is required
4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer.
Yes, but not tested by courts yet. The trustee is not relieved from any liability for actions or decisions taken upon the advice of an advisor unless the trust instrument exonerates such liability. The advisor has no fiduciary duty, unless the instrument provides otherwise.
New Hampshire PTCs are regulated, but statute is new and untestedMin. capital requirement - $ 500,000
4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer.
Yes, not yet tested by courts. The trustee is relieved from liability unless the direction is contrary to terms of trust or trustee knows direction is serious breach of fiduciary duty of advisor. The advisor is considered a fiduciary.
Wyoming PTCs are not regulated No license required provided the PTC does not offer its services to the general public and acts as trustee of trusts for a specific familyNo min. capital requirementMinimum contacts with WY is requiredTrustee activities can take place outside of WY
4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer.
Yes, not yet tested by courts. The statute requires the trustee to follow the direction of an advisor but is silent as to whether the directed trustee is relieved of liability. Advisor is considered a fiduciary.
Conclusion
• Too much control is dangerous
• Planning is essential
• Identify the issues involved and understand family dynamics
• Identify the appropriate solution
• Identify the pitfalls and problems
• Establish the structure
• Monitor the structure
Getting in touch
Justine Markovitz
Geneva Office Managing Partner
Withers LLP
63 rue du Rhône
CH-1204 Geneva
Switzerland
Direct telephone: +41 (0)22 593 7711
Fax: +41 (0)22 593 7778
Mobile phone: +41 (0)79 590 8665
Email: [email protected]
Jay Rubinstein
Partner
Withers LLP
63 rue du Rhône
CH-1204 Geneva
Switzerland
Direct telephone: +41 (0)22 593 7704
Fax: +41 (0)22 593 7778
Mobile phone: +41 (0)79 210 3928
Email: [email protected]
16 Old Bailey
London EC4M 7EG
telephone: +44 (0)20 7597 6000
fax: +44 (0)20 7597 6543
Via Cesare Mangili 6
20121 Milan
telephone: +39 02 2906 601
fax: +39 02 29 002 161
63 rue du Rhône
CH-1204 Geneva
telephone: +41 22 593 7777
fax: +41 (0)22 593 7778
430 Park Avenue
10th Floor
New York, New York 10022-3505
Tel: + 1 212 848 9800
Fax: + 1 212 848 9888
157 Church Street
PO Box 426
New Haven, Connecticut 06502-0426
telephone: +1 203 789 1320
fax: +1 203 785 8127
660 Steamboat Road
Greenwich, Connecticut 06830
telephone: +1 203 302 4100
fax: +1 203 869 0558