C NTENTS Trusts and Trustees Introduction
6-7
TACT
8-9
Clyde & Co LLP
10-11 Baker & McKenzie
Developments in the Wealth Management Industry
12-13 Taylor Wessing
Joined-up Thinking: Protecting Private Wealth from Europe to the Far East and Beyond
14
Caplin & Drysdale
15
Tilleke & Gibbins
A leading law firm from Thailand
16
3 Pump Court Inheritance Mediation Service
Focus on the international tax issues of wealthy individuals.
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Trusts and Trustees Introduction Dating back to the Middle Ages, trusts are a fundamental concept of English property law. They can be constituted formally by way of a trust deed or informally by action of law as a constructive trust. Most people go through life as a beneficiary of a number of trusts without ever realising it. The trust has shown an amazing ability to evolve and within the business context, trusts are used for succession planning (family and will trusts), employee remuneration (pensions, share ownership plans and employee benefit trusts) and raising finance (loan capital trusts and joint venture arrangements). Depending on the nature of the trust and the duties and responsibilities involved, trustees may include family members, employees, professional advisers or professional trust companies. The Association of Corporate Trustees (TACT) is the membership organisation of the UK corporate trustee sector. Its members include trust companies owned by banks and major financial institutions as well as those set up by firms of accountants, lawyers and pensions advisors. Those trust companies are responsible for the management of over ÂŁ1trillion worth of assets, including sovereign and company debt of over ÂŁ900million and occupational pension funds with in excess of 1.25 million members, representing over 10% of that sector. For many, trusts are associated with the offshore financial centres. The tax advantages afforded by offshore structures have been under concerted legislative attack from onshore jurisdictions, neutralising their effectiveness. The choice of trustee now tends to be dictated by the applicable law, the local regulatory regime and the perceived professionalism of the individual or company approached. For the owners of small and medium sized enterprises, trusts are an essential part of succession planning, protecting family wealth and ensuring that as far as possible, it remains within family ownership. Their usefulness in enabling an orderly transition of ownership to take place has attracted the attention of families outside the Anglo Saxon world. English law trusts, which are regarded as tax neutral vehicles, have proved particularly attractive to Italian families and even the Germans, a jurisdiction notably hostile to trusts, have begun to consider their use in wealth and succession planning.
Whilst family members and trusted advisers comprise the majority of trustees, there is much to be said for employing the services of a trust company to provide continuity, independence and professional standards. The provision of trustee services is not a regulated financial services activity in the UK as it is in the offshore jurisdictions, other than for the purposes of anti money laundering legislation, although most corporate trustees are themselves owned by regulated businesses. Many of the offshore jurisdictions did not have their own trust law until relatively recently, indeed Switzerland, which has a huge trust industry, still does not. Trusts had to be constituted under the law of a jurisdiction such as England and foreign resident trustees appointed. The choice of law and residence will depend on a number of factors. These may include: 1. How easy is it to communicate with the trustees; 2. How is the trust taxed; 3. How experienced are the trustees; 4. What regulation is in place to protect the beneficiaries; 5. Does the jurisdiction recognise trusts as a legal concept and if so, does it have a trust law that reflects the current needs of trustees and beneficiaries; 6. How experienced are the courts at dealing with legal disputes.
Rewarding employees Recent tax legislation dealing with disguised remuneration has killed off a lot of the more aggressive tax planning involving employee benefit trusts. Share incentive and ownership plans however remain an attractive method of encouraging employee participation and are structured via trusts. The trustees are invariably corporate and unless the rules require that they should be UK resident, most of this work is carried out by trustees resident offshore in either the Channel Islands or the Isle of Man. There are still capital gains tax advantages, and that is where the experience and skill base lie. Trustees of pension funds operate in a highly specialised and heavily regulated arena. Their work entails investing large sums often into complex financial products designed to match pension fund liabilities. They engage actuaries to produce complex valuations to determine the amounts likely to be needed to provide
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Giles Orton Bridge Trustees Limited President, TACT 0845 497 1094 gilesorton@bridgetrustees.com www.bridgetrustees.com
pensions far into the future. These depend on numerous assumptions such as future investment returns and estimates of how long scheme members will live. Whilst the actuary can advise, the trustee is responsible for the various assumptions. If the conclusion is that more funds are needed, the trustee has to negotiate with the sponsoring employer a recovery plan setting out how quickly any deficit can be made good. This can require considerable diplomatic and negotiation skills.
In some cases, a trustee may be necessary, e.g. because of a listing requirement or because of the need to hold security on behalf of the investors. Generally, the decision is based upon whether the advantages of having a trustee are sufficiently attractive. There are advantages both for the investors and for the issuer. Cost is not normally a significant factor, as the fees charged by trustees are usually minimal within the context of the overall expense of an issue.
Pension fund trustees also have to keep accurate data relating to scheme members, of whom there may be many thousands, perform complex calculations to determine with precision the amounts to be paid to members, and then deliver these payments on time. These tasks are usually delegated to specialist administrators, but the trustee remains responsible for ensuring everything happens as it should. The trustee is also responsible for communications with scheme members – not an easy task when pensions regulations are made ever more complex by Parliament and HMRC. The trustee is required to keep on top of all the regulation, as well as the complex deeds and rules that govern pension schemes.
The advantages of having a trustee include:
Strictly there are no minimum qualifications for a pension fund trustee, but this is a highly responsible and technical role and it is essential to check that a potential trustee has a good track record in this specialist field . The Pensions Regulator maintains a register of trustees who have applied to and met its standards. Most are companies with large staffs that can field appropriate specialists in the differing disciplines involved as and when the need arises.
Raising debt capital The City of London has a pre-eminent role in the international bond markets. This is in no small part down to the existence of a legal system that provides for loan capital to be issued via a trust arrangement. The trustee is the representative of the investors, and owes its duties to them (although its fees and expenses are paid by the issuer). The primary trust property is the obligation to repay principal and to pay interest, which the trustee holds on behalf of itself and the bondholders. It is extremely important to note that the Trustee represents the holders as a body or class of persons – and not the interests of each individual investor. In the simplest of terms, its role is to assist in the efficient running of the bond market, not to act in favour of, or against, a particular individual or investor.
1. The trustee is independent of the issuer. 2. The trustee provides one responsible body as a focal point for investors. 3. The trustee has the ability to discuss confidential matters without causing market disturbance. 4. The issuer can deal directly with the trustee rather than the investors in the reporting of compliance with covenants. 5. The trustee has the right to obtain information in order to monitor compliance with covenants, identify breaches and take appropriate action. 6. As the trustee is responsible for enforcement, proceedings are taken in one unified action on behalf of all the investors, and the legal and financial advice which the trustee obtains is for the benefit of all of them. 7. Any monies recovered by the trustee are distributed to all the investors pro rata, thereby avoiding any risk that only some investors may recover in excess of their entitlement. Acting as a trustee of loan capital is a specialist role, carried out almost exclusively by trust companies owned by major financial institutions.
Contacting TACT More information on trusts and the role of trustees can be obtained from TACT whose website is www.trustees. org.uk
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Clyde & Co focuses on providing a complete legal service to clients operating in our core sectors. We combine this approach with an open, dynamic environment capable of quickly evolving and a global outlook whereby we mirror our clients’ operations. We are consistently early movers into key hubs for international commerce and through this expansion we have become expert in assisting businesses to enter, operate and grow in new and emerging markets. Our combination of sector expertise, commercial attitude and in-depth regional understanding provides a unique perspective.
Paul Friedman Clyde & Co LLP Partner, Dispute Resolution Group. www.clydeco.com 44 (0) 20 7876 4303 Paul.friedman@clydeco. com The St Botolph Building 138 Houndsditch, London EC3A 7AR
This year we have continued to expand our international network with the opening of offices in Brisbane, Newport Beach, Johannesburg and Cape Town. The firm has also received a multitude of accolades and awards, including UAE Client Choice Award (International Law Office in Association with Lexology 2014), Insurance & Reinsurance firm of the year 2014 (Who’s Who Legal) and Asian-Mena Counsel ‘Most Responsive International Law Firm’ 2014.
Commercial Litigation and ADR Our Commercial Litigation and ADR group has three key elements: proven disputes expertise, deep sector understanding and global capability. Recognised as ‘pre-eminent’ and ‘elite’ by the directories, we take a practical, commercially-minded approach to resolving disputes across the full range of sectors. Our global network of offices enables us to offer experience across a wide spectrum of jurisdictions, meaning we can assist clients wherever they do business. The group incorporates practices with a specific contentious focus, including trusts and estates disputes, banking and financial services, class actions, energy and natural resources, corporate and M&A, and many more. Our global group is adept at managing cross-border and big-ticket litigation, where the stakes are high and are often business critical. We understand the different ways a dispute can be resolved, and are flexible enough to respond to the idiosyncrasies of each dispute and our client’s needs as they develop. As a result of our close sector alignment, resolving disputes is in our DNA, and we stand out as one of the leading global practices in the market. The team acts both for and against major banks, corporates, financial institutions and individuals in complex business litigation, including significant cross-border matters. Paul Friedman focuses on trust litigation and arbitration, in particular fraud, asset-tracing and asset recovery. He excels in resolving complex international disputes for global companies and financial institutions. He is qualified as a Solicitor Advocate (Civil) in England & Wales and has excellent experience in successfully running large Commercial Court cases in London and international arbitrations and mediations across the globe. Paul works closely with lawyers in other jurisdictions, representing clients which include global investment banks, private equity houses, high net worth individuals and companies based in the UK, Europe, China, India, Japan, the US and elsewhere.
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Claims Validation and Asset Recovery
Banking and Finance Litigation
Clyde & Co understands that the potential financial and reputational implications of fraud-related proceedings for businesses, and acts for claimants and defendants across the breadth of the firms’ sector practices.
Our «flourishing» banking and Finance litigation practice is distinct in the City, being rarely conflicted from acting for or against many of the major global banking institutions.
The global financial crisis has brought an increased focus on the duties and accountabilities of individuals and organisations, particularly in relation to financial responsibilities. Huge fines and penalties; and launches of new regulatory bodies have become common place. Together with increased responsibilities brought about by legislation such as the Bribery Act and similar legislation in other jurisdictions. This has resulted in increased scrutiny of potential fraudulent behaviours no matter where the jurisdiction. The Clyde & Co team has particular experience in financial crime, including fraud, bribery, money laundering, cartel activity and breach of sanctions. The team has represented defendants in some of the largest fraud claims of recent years.
This well established group gained its leading reputation long before the global financial crisis of 2008 and has consistently maintained its reputation since. We offer clients a «standout» level of care which encompasses the need for discretion as well as getting results.
Corporate and Shareholder Disputes Multi-faceted and complex, corporate organisations face potential exposure to a wide variety of disputes. Clyde & Co has been privileged to be at the inception, growth and development of many of today’s biggest global industries, and as a result, has a thorough understanding of the Corporate and M&A landscape. We know that clients need consistently sharp, forward thinking advice to navigate disputes arising at critical moments. Our team deals with the full range of corporate disputes, including those arising from mergers, acquisitions, floatations and investments, among other transactions; and routinely advises parties in large-scale shareholder and Boardroom disputes.
Real Estate Our dedicated contentious real estate team resolves disputes using all forms of dispute resolution. Our strong foundations in real estate work mean we understand the full lifecycles of a real estate project and can advise on settling disputes at any stage. The team offers the focus of a boutique practice while also being able to draw on the full resources of our global litigation group to advise clients on areas related to real estate.
The team represents major banks and financial institutions, corporates and individuals in complex banking disputes, including significant cross-border cases, no matter where our clients are based. The practice has particular experience in derivatives cases, including those involving ISDA documentation. It is also involved in an increasing number of cases concerning LIBOR and other interest rate swap issues. The trend of mis-selling cases in relation to derivatives continued in the UK during 2014. Following high profile news and investigations regarding allegations of LIBOR-fixing by several banks, the English courts decided that allegations founded on LIBOR manipulation had sufficient merit to be dealt with at future trial. Paul has recently advised on derivatives cases for a number of corporates, including those involving ISDA documentation; and the firm has been increasingly involved in cases concerning LIBOR and other interest rate swaps.
Recognition in the directories The disputes practice is consistently recognised in the legal directories – some examples are as follows: “A substantial and experienced bench to advise on a broad spectrum of disputes.” (Chambers and Partners 2014“) “Clyde & Co provides a consistently high level of service, with clients saying: “The standout quality was the level of client care, which was exceptional.” (Chambers and Partners 2013) «They are diligent and conscientious in the way they deal with matters» (Chambers UK 2014) «The team really know how to work a case» (Chambers UK,2015) «Clyde & Co’s practice remains a popular choice for banks» (Chambers and Partners 2013)
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Developments in the Wealth Management Industry Never before have developments in the wealth management industry transpired so rapidly, and on so many levels, as right now. It is ironic that a deluge of regulation driven in part by the need for governments to increase revenues, following a ‘bust’ caused to some extent by complex financial transactions, is turning an industry – that though often opaque, used to be relatively simple in its operation – into something far more complex that relies on ever-more sophisticated approaches to deliver value to clients. These changes also impact how practitioners work within this space. This article will explore the basic trends impacting the industry and practitioners, specifically (1) legacy issues, (2) revenue, (3) regulation, (4) transparency, and, (5) the greater use of insurance products – each of which is outlined below.
Legacy Issues
Marnin Michaels Baker & McKenzie Zurich Principal +41 44 384 1208 marnin.michaels@ bakermckenzie.com www.bakermckenzie.com
‘Legacy issues’ refers to problems that have plagued the industry for the last 50 years. The concept of ‘statutory bank secrecy’ is not even 80 years old, and it was only codified into law as a result of the events in Germany surrounding Kristallnacht. The original purpose of bank secrecy was to help protect those suffering from persecution in Europe. It is now almost 70 years since the end of World War II, and a little more than 20 years since the end of the Cold War. The reason why many people kept money secret was replaced by a practice of not paying taxes – a significant issue because the European Union could throw 40% to 50% of its countrymen in jail. Countries and financial institutions struggle to solve this issue. Whether it is the approach of Switzerland with its new withholding tax agreements with countries like Germany, the United Kingdom and Austria (with others to come), or the Lichtenstein approach, each of these approaches are attempts to resolve the past historical legacy issues associated with undeclared money, and to create a uniform basis for all taxpayers in a given country going forward. While countries such as Switzerland and Liechtenstein have been very good about taking this approach, other countries have not been as interested.
Revenue We are currently entering our fourth year of recession. Gross domestic product is down, tax revenue is down, debt service costs are up, and the need to spend continues to grow as populations age. Countries need revenue and attempt to find it in any way they can. Approaches vary, including finding new and unique tax systems and approaches, such as that the French have taken with respect to trusts. The other approach is just to increase tax rates and impose austerity measures. The United States is at the forefront of attempts to generate revenue by not changing its tax laws but rather by greater and more significant extraterritorial enforcement of its tax laws, particularly in the offshore arena. As the need for revenue increases, and as the sources to generate it from decrease, tax authorities become more creative as to how to generate it. This results in more aggressive enforcement actions, such as those we have seen against individuals in the United States and Germany; and against banks, such as those (also by Germany and the United States) in Switzerland, or by more complicated and sophisticated tax laws such as those established in the United Kingdom and in France. In fact, over the course of the recent Hollande-Sarkozy election, the French even threatened taxation based on citizenship.
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Regulation No country or securities regulatory agency wants to be responsible for another Madoff event. Regulators are scared of their banks failing and of a major fraud being perpetuated under their watch. As such, we have seen an unprecedented global increase in regulatory requirements, both in actual law and in practice, as to how they are to oversee financial services and how clients must behave. It can be argued that this is more about governments being seen to be doing something than about helping customers. In fact, many of these rules arguably do not help customers at all, but in fact make for a harder, more complex system for everyone. When we look legislation such as Dodd-Frank, or the legislation in Switzerland regarding ‘too big to fail’, one has to ask whether these are more about regulators protecting regulators than about protecting the interests of the companies they regulate. Furthermore, the crossborder regulation of financial services continues to increase, and this is resulting in customers unable to bank at all in certain situations.
Transparency Transparency means, among other things, fiscal transparency. However, transparency is not limited to this concept. There is a perception among many that the financial crisis was caused by financial institutions lacking transparency as to their financial operations. We see greater pressure from governments to force transparency on the market place and its financial institutions, which is not necessarily resulting in stronger financial institutions, but in more transparency by numbers. Arguably, it could be said that this is good, however, it can also be perceived as an unnecessary regulatory burden.
The Enhanced Use of Insurance Products Increasingly, individuals are utilising private placement life insurance and private placement variable annuities as part of their comprehensive wealth planning. Many individuals combine insurance products with trust structures to enhance the tax benefits of insurance. In
a world of increasing tax rates, such as those expected because of the US ‘fiscal cliff’ in 2013, the tax benefits of life insurance should be even more pronounced. This article will discuss generally insurance as a wealth-planning tool but will use the US perspective to highlight certain aspects.
How Does this Impact on the Wealth Management Industry? The key message to take away from these trends is an evolution of the wealth management industry from a relatively unsophisticated business to an ultrasophisticated business, which relies on this extreme sophistication for its value proposition. The days of being able to merely collect 100bps per annum are gone. Clients expect more value: The regulators expect more of the institutions that drive compliance costs. It is also no secret that the tax landscape beyond 2012 is subject to considerable uncertainty. While the ‘Bush-era’ income tax rates are set to expire at the end of 2012, the tax situation in most of Europe is completely unclear. Thus, we live in a world of uncertainty that hasn’t been seen in the last 50 years. No longer can one look only at one’s home country’s rules. Instead, practitioners need to approach their clients’ issues from a global perspective, and get input from many different jurisdictions in which the client operates. Practitioners also need to practice defensive law. Our experience is that clients are not looking for the correct advice, but rather for the advice that they can hand out which states that what they are doing is permissible. Often, this comes at the expense of clients not telling their lawyers the entire situation. It means having two lawyers in the room to ensure that what was said can be relied on. It may also mean longer and more documented memoranda, and more sophisticated advice that has an element of defensive lawyering. However, that means that the cost of advice goes up at a time when clients have fewer funds. This is not ideal.
by Marnin J. Michaels
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Taylor Wessing LLP Steven Kempster Tel: 020 7300 4404 s.kempster@taylorwessing.com
Joined-up Thinking: Protecting Private Wealth from Europe to the Far East and Beyond The world is becoming an increasingly smaller and more interconnected space. However, in a period of major global economic uncertainty, there are two certainties – death and taxes (attributed to Benjamin Franklin, 1798). It is equally certain that a large number of families with significant privately held wealth, will at some stage be subject to a seismic event or events that could seriously damage, if not wipe out, that wealth, whether it be the death of the family/business leader, divorce of a family member, or political, or even currency instability. Not surprisingly, there are a wide range of professionals and jurisdictions now promising to offer a safe harbour for private wealth. According to recent estimates, the Asia-Pacific region now has over 3.3 million HNWIs (high net worth individuals) – higher than any other region, with an estimated 18,000 centa-millionaires (those with a net worth of US$100 million+). But this fast-growing and dynamic constituency needs to pause and think about how to protect that wealth for the future. Even once that crucial decision has been made to set up more robust holding structures, using such vehicles as trusts, foundations and perhaps a private trust company, proper implementation and management is key to address the serious risks.
Governance and Control Whilst there are many professional fiduciaries offering their services, there has been a marked increase in demand – in the Asian market in particular – for the use of private trust companies (PTCs) to act as trustee of a particular family trust. Setting up a bespoke company to act as trustee of a specific trust (as opposed to using a bank-owned or established independent trust company which will act as trustee for many trusts) is intended to have the promised benefits of confidentiality and control by the family, rather than by some unfamiliar professional trustee. Family members or their trusted advisers then take up a formal role in the governance of the PTC and therefore the operation of the family trust, without damaging the integrity of the trust (provided that the PTC and trust are properly administered). Jurisdictions are increasingly adapting structures to make it simpler for the family to understand. In the past, it might have been typical in some jurisdictions for the shares in the PTC to be held in a separate trust that had no living beneficiaries, just purposes (socalled Purpose Trusts). However, this had increased cost and complexity for clients. Instead, jurisdictions such as Singapore (and the UK has been adopting
this model for decades) allow PTCs to be established as companies limited by guarantee, with the directors, or some other group of persons, having membership rights rather than shareholder rights. But there needs to be careful planning with regard to the succession of future members once the original members die, or become mentally incapacitated: Otherwise, the other members, a child or children of the settlor for example, may suddenly find themselves with substantial and disproportionate influence over the PTC and the operation of the trust. What remains to be seen is the extent to which PTCs could, inadvertently, introduce a further layer to a family dispute. Family members/beneficiaries (who will generally be disgruntled at the PTCs actions, or unhappy that the trust violates their rights as fixed heirs under a foreign system of law) might well choose to litigate issues in relation to the corporate administration of the PTC, in a bid to gain indirect control over the operation of the trust. Family members on the board of the PTC could find themselves subject to personal claims for causing loss to the trust – claims that would be much harder to bring against a professional trust company and its directors. How can this be mitigated? Proper administration, regular meetings, proper minutes and proper consideration from time to time of the PTCs role as trustee of the family trust. Having proper professionals on the board, with high-level trust and/ or business experience, is also crucial to demonstrating that the holding structure has integrity and cannot be challenged. There are lessons that can be learned by all families and professional advisers from some of the cases that are already hitting the courts, and (worse for many families) hitting the press. Take the Yung-Ching Wang dispute involving the founder of the Formosa Plastics empire. Leaving no written will to determine the devolution of his estate, Mr Wang left his family, and a number of senior executives in the business, fighting over the control of the PTC that had been holding and administering the business interests, involving claims over the alleged dissipation of sums totalling $4 billion. The battle now rages over which jurisdiction – Hong Kong, Taiwan, or New Jersey, USA (where Mr Wang died) – should be the right legal system to determine the family’s rights.
Getting the Implementation Right An increasingly challenging issue, amply demonstrated in the Wang case, is the problem of clashing legal systems, coupled with a lack of familiarity amongst
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business owners, and even some professional advisers, as to how to address conceptually different legal systems. Due respect must be given to the rules that could be imposed by relevant legal systems with regards to property rights and formalities for a transfer into a trust. In a number of jurisdictions, the concepts of fixed and immutable heirship or spousal rights can form an intrinsic part (and fetter) on what can be achieved by way of tax and succession planning. A number of legal regimes, for example Russia, impose strict written notarised consent requirements on the disposition (whether into a trust or some other holding structure) of matrimonial property. If the law applicable to the assets put into trust is not complied with, the transfers could prove to be vulnerable, even years (decades perhaps) after they were purportedly put into trust. Some jurisdictions – the Cayman Islands being one in point (in 1987), Singapore being another (in 2004) – have sought to enact protective so called ‘firewall’ legislation, to ensure that what is done in that jurisdiction by way of creating trusts cannot be challenged. However, not all attacks on a trust structure will be caught in the socalled firewall legislation. Claims arising under certain types of matrimonial property regimes will not be easily deflected by so-called ‘firewall’ rules in the offshore centres because the nature of the claim, a proprietary claim, may not be caught by those rules.
Plotting a Safe Course What are the key pointers for families and advisers? Firstly, it is vital to consider all possible jurisdictions and local law restrictions when advising a family on the creation of the trust. Particular formalities, such as written or notarised consents for example, might be a strict requirement, or at least desirable, in order to effect a valid transfer that cannot be subsequently challenged by a disgruntled heir, spouse, or creditor. Secondly, flexibility is important, and is the very reason why a broadly drafted discretionary form of trust is often ideal. But it is also often the case that patriarchs or matriarchs of the family will have a firm view of how a structure should operate and what rights it should, and should not, give to the beneficiaries, and those who are entrusted with power and responsibility over the assets need firm guidance on that. Giving flexibility to the trustees combined with a clear and considered memorandum of wishes, which should be reviewed and updated regularly, is key to avoiding the risk of future dispute. The courts will generally protect the inherent confidentiality of such memoranda, although
that cannot be guaranteed if a beneficiary raises a complaint in the future. Thirdly, securing the engagement of family members and other parties whose interests are reflected in the structure will greatly enhance its robustness. Seek to achieve a reasonable balance between the interests of relevant stakeholders, namely the family members, those ‘inside’ and ‘outside’ the business, or children from prior marriages. This may or may not be the equivalent of all family members/beneficiaries signing up to the structure in a formal way, but the worst examples of families falling out occur where the power vacuum left by the death of a dominant family member is coupled with an information vacuum. Therefore, there is now an increased demand for family governance protocols, and these can often be integrated into established corporate governance procedures.
Conclusion The demands of the world’s wealthiest families demonstrate that there is considerable need for bespoke high-quality professional advice on structuring their assets. Only those organisations and advisers who can get the joined-up thinking right, and have the strengthin-depth of international knowledge and resource, will be able to help families achieve their objectives. As Singapore increasingly looks to become the jurisdiction of choice amongst the burgeoning wealth creators of the Far East, it is a blend of international private wealth experience coupled with crucial local knowledge that is key to helping families protect and enhance their wealth, and equipping them with the tools to weather whatever storms might one day be headed their way. Taylor Wessing LLP is a full-service law firm with over 900 lawyers practising from 22 offices throughout Europe, the Middle East and Asia. There are over 60 lawyers practising in Singapore within local member firm RHTLaw Taylor Wessing LLP, offering local law capability in Singapore and other South-East Asian jurisdictions such as Indonesia and Malaysia. The Taylor Wessing private client and contentious trust teams in the UK are rated in the top tier in the Legal 500 directory, and won the prestigious Society of Trust and Estate Practitioners Awards for Teams of the Year in 2011 and 2012. By Steven Kempster, Private Client Partner & Head of Contentious Trusts group, international law firm Taylor Wessing LLP, London & Ryan Myint, Private Client Partner, RHTLaw Taylor Wessing LLP, Singapore
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Biography Mr. Pfeifer’s practice focuses on the international tax issues of wealthy individuals, including entertainers and athletes. He counsels clients on planning for pre-immigration and expatriation, as well as on structuring cross-border investments. Moreover, Mr. Pfeifer advises high-net-worth individuals on estate planning matters including the use of domestic and foreign trusts, and tax controversy matters such as voluntary disclosure proceedings.
The Firm
Michael G. Pfeifer Caplin & Drysdale, Chartered Member Phone: 202-862-5085 www.caplindrysdale.com mpfeifer@capdale.com One Thomas Circle, NW Suite 1100, Washington, D.C. 20005
For half a century, Caplin & Drysdale has been a leading provider of a full range of tax, tax controversy, and related legal services to companies, organizations, and individuals throughout the United States and around the world. With offices in New York City and Washington, D.C., the firm also provides counseling on matters relating to bankruptcy, creditors’ rights, political activity, exempt organizations, complex litigation, employee benefits, private client services, corporate law, and white collar defense. Caplin & Drysdale’s Private Client Group counsels U.S. taxpayers and residents in the U.S and abroad on international taxation, estate planning, philanthropic planning, and tax controversies. We provide comprehensive income, gift and estate tax and cross-border charitable planning services for U.S. clients, including those with international assets or businesses, those who are investing or moving abroad, non-U.S. clients with U.S. family members, and those who are investing in or moving to the United States. We also represent U.S. citizens or residents who wish to expatriate, foreign trusts, and other entities with U.S. tax issues. Our internationally-recognized tax controversy lawyers represent clients ranging from multinational corporations to high net worth individuals in a variety of complex tax disputes, including audits, voluntary disclosures, FATCA compliance, and criminal inquiries. Clients rely on our broad knowledge of tax law and our enduring and productive relationships with tax authorities that enable us to confront the complex issues that our clients present with a truly integrated approach. For more information, please contact Michael G. Pfeifer at mpfeifer@capdale. com or 202.862.5085.
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Bruce McNair Tilleke & Gibbins Consultant, Marketing and Business Development Phone: +66 2653 5545 www.tilleke.com; bruce.m@tilleke.com Supalai Grand Tower, 26th Floor, 1011 Rama 3 Road, Chongnonsi, Yannawa, Bangkok, Thailand 10120
Planning for asset distribution after death is one of the most significant actions a person can take, both to provide a better future for one’s heirs and to ensure that one’s intentions are fulfilled. A properly constructed will is a significant step toward fulfilling these important aims. The primary purpose of a will is to clarify how you want your property to be distributed after you die. An equally important reason for having a will, however, is that it increases the likelihood that your assets will be transferred in the most cost-effective and efficient manner. For those people with assets in Thailand, it is essential to have a will in place. Without a legally binding will, the distribution of your assets will be subject to the provisions of Thailand’s Civil and Commercial Code (CCC), which can complicate a straightforward distribution of assets. When drafting a will, there are several important points to keep in mind, which will be discussed below. First, a will is only valid if it adheres to the form prescribed by the CCC. Choosing the correct form of will is important for two reasons. It can ensure the will is enforceable, and it can grant the holder specific legal rights and obligations. While several forms of wills exist, the two most common are standard wills and holographic wills. A will in standard form is one that is made in writing, is dated at the time of making the will, and is signed by the testator in the presence of at least two witnesses who shall then and there sign their names certifying the signature of the testator. A will in holographic form is one in which the testator uses his or her own hand to write the whole text of the document, and which includes the date and their signature. A holographic will has the key advantage of not requiring any witnesses to be valid. It is also crucial that any alteration made to the will is done accurately and correctly. Regardless of whether the alteration is an erasure or an addition, the law requires that it be done in the same form as the will being altered. For example, an alteration to a holographic will would only be valid if it is done in the testator’s own handwriting and with their own signature. When designating a beneficiary, one should also bear in mind that CCC Section 1653 prevents a legatee from
also being a writer or a witness of the will. Failure to adhere to this requirement will not invalidate the entire will, but any clause instructing the delegation of an asset to that person will be considered void. A common question that arises is what legal rights does a beneficiary have to property that is transferred during the life of the testator? According to CCC Section 1696, the answer is “none.” Under the law, a testamentary disposition is revoked if the testator has intentionally made a valid transfer of the property which is subject of the will. The same rule applies if the testator has intentionally destroyed such property. It is advised that you should consider reviewing your will any time you go through a significant life event. In the event that changes need to be made, a testator may revoke his or her will either in whole or in part at any time. The best way to wholly revoke a will is to make another will, but intentional destruction or cancellation by the testator is also permissible. As with all wills, a will that revokes a prior will must be made according to one of the prescribed forms. Should the testator choose to revoke the will through intentional destruction or cancellation, any duplicates that may exist must also be destroyed or cancelled before the revocation will be considered complete. It is also important to remember that making a will is considered one of the strongest declarations of intention that can be made regarding the disposition of your property. An often-overlooked consequence of this is that failure to name an heir as a beneficiary will automatically disinherit that person from the assets listed in the will. This is a powerful aspect of a will and, as such, listing or omitting any name from a will should be done with extreme care and consideration. Finally, it is highly recommended that there be no delay in creating your will. Beyond the obvious fact that no one can predict their death, the law states that a valid will can only be made by a person of sound mind. Section 1654 of the CCC specifies that the capacity of the testator must be considered only at the time when the will is made. As you age, this requirement may become more and more difficult to fulfill. It is said only two things are certain in life: death and taxes. Having a well-drafted will prepared before you die can help ease the burden of both. This article was written by Saran Kleesuwan, an attorneyat-law in the Dispute Resolution Department at Tilleke & Gibbins.
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Giles Harrap Leader of the Pump Court Inheritance Mediation Panel Mediation clerk: Jonathan Cue: 0207 353 0711; jonathanc@3pumpcourt.com Chief clerk: David Barber: 01962 868161; davidb@3pumpcourt.com www.3pumpcourt.com 3 Pump Court, Temple, London EC4Y 7AJ
Inheritance disputes in England and Wales: Why and when to mediate English Inheritance Law In England and Wales, a person is entitled at his death to leave his property in whatever way he pleases, subject only to the provisions of the Inheritance (Provision for Family and Dependants) Act 1975 (the Act of 1975). The Act of 1975 enables surviving spouses, civil partners, cohabitants, children, persons treated as children of the family and other dependants to apply to the court on the ground that the disposition of the deceased’s estate effected by his will (or the intestacy rules) is not such as to make reasonable financial provision for the applicant. The only guidance given to the court as to the meaning of “reasonable financial provision” is that, in the case of spouses and civil partners, it means such financial provision as it would be reasonable for the applicant to receive whether or not required for his or her maintenance; and in the case of all other applicants, it means such financial provision as it would be reasonable for the applicant to receive for his or her maintenance.
The most recent case law Thirty years after the Act of 1975 came into force, it remains the case that, on a given set of facts, two different judges can come to different conclusions as to whether a will makes or does not make reasonable provision and neither decision will be open to challenge on appeal. A recent example of this is the adult child claim of Ilott v Mitson & others [2011] EWCA Civ 346, [2011] WTLR 779. The applicant left home aged 17 to live with a man she later married. There was little contact between mother and daughter and the mother decided to leave her estate to charity. The daughter was in her forties when her mother died and applied for provision from her mother’s estate. The district judge found that reasonable provision had not been made and ordered that she receive £50,000. A High Court judge on appeal held that in the circumstances leaving the daughter nothing was not unreasonable and so there was no power to make the order. The Court of Appeal, while holding that the High Court judge was not entitled to allow the appeal from the district judge, went out of its way to state that her conclusion that the provision was not unreasonable was “meticulously reasoned and well within the ambit of decisions that were open to her” if she had been the trial judge (Black LJ at 801F). An application for permission to appeal to the Supreme Court has been refused; so no further guidance can be expected in the near future.
Why mediate? Claims under the 1975 Act cry out for mediation. This is not just because of the uncertainty and expense of litigation. The Law Commission’s Consultation Paper on Intestacy and Family Provision Claims on Death (2009) began with these words: “Inheritance is a difficult subject. It is difficult not least because it goes along with bereavement ... The process of grieving, and adjustment to change, can be made far worse by uncertainty and anxiety about money or belongings.” Where disputes arise on death, the need to end the uncertainty and anxiety is all the greater. There is a need for a process that addresses the particular difficulties that arise following bereavement. Litigation, by its nature, tends to aggravate those difficulties. Experience shows that mediation by trained mediators with a good understanding of inheritance disputes can be a particularly well-suited process for resolving such disputes. Generally, it is quicker, cheaper, more flexible, less stressful and less likely to result in fractured family relationships.
When to mediate? All parties to inheritance disputes are required by the Practice Direction – Pre-action Conduct (2009) to consider whether some form of alternative dispute resolution (ADR) might enable them to settle the matter without starting proceedings. It is no longer a sign of weakness to raise the question of ADR. It is a duty placed on the parties and their advisers, and a duty that arises pre-action. Ideally, mediation should quickly follow a letter of claim, in which the proposed applicant sets out the matters he relies on, and the response of the defendants, in which they set out the necessary particulars of the estate and the matters they rely on. Reasonable exchange of information and, in particular, realistic valuation of the subject matter of the claim will generally be necessary, but subject to that, the sooner mediation is tried the better. A key factor in many mediations is the avoidance of litigation costs; so it is far easier to mediate at a time when there will be substantial savings by avoiding litigation or at least bringing litigation to an early end.
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