Hawki newsletter - Spring 2014 - Issue 9

Issue 9 Spring 2014

IN THIS ISSUE Page 2 - A welcome to Hawk-i from Maxine Rawlins, CEO Page 3 - Client insight research – Matthew Morel GUEST

Page 4 - The grass really is greener – The growing EU market for expat residency regimes – James Quarmby Page 6 - Philanthropy and philanthropic structures – Jersey, the jurisdiction of choice – Julian Hayden

GUEST

Page 8 - Tailor-made philanthropy – Alison Hope Page 10 - Succession planning in the Middle East is a live issue – James Howe

Issue 9 Spring 2014

This is the first issue of Hawk-i since I joined Hawksford as CEO in January and I am pleased to present it to you. In this issue we have two articles on philanthropy; one looks at the benefits of holding philanthropic structures in Jersey and the other is a guest article, which explores more practical and fulfilling elements of philanthropic giving.

Client service In my first few months here I have been delighted to see how committed the staff at Hawksford are to providing excellent service to our clients. This is something I feel is vital to any business, and we will continuously strive to maintain and enhance the client experience.

Maxine Rawlins CEO T: +44 (0) 1534 740000 E: maxine.rawlins@hawksford.com

In March we completed the third round of our client/adviser insight research with independent research firm, Scorpio Partnership. This helps us to gain a better understanding of what we do well, what we need to do better and what is really important to our clients. As in previous years, we will create action plans based on these results to ensure we continue to improve the service we provide. You can read more about the results on page three.

Expanding into other locations The last few months have been very exciting as we have just acquired a corporate services business in Singapore.

Janus Corporate Solutions was established in 2009 and provides company secretarial, accountancy, business support and immigration services.

Janus has over 40 employees and will continue to be managed by chief operating officer, Jacqueline Low, supported by her team in Singapore and the Hawksford management team.

This acquisition has a significant impact for Hawksford. We are committed to offering our clients the highest quality services in the locations they choose; this client service philosophy underpins our decision to expand into Singapore. We searched long and hard for a high quality business in Asia that would complement our existing service offering, and we are delighted to welcome the Janus team to the Hawksford Group.

New appointment I am delighted to welcome Steve Spybey to Hawksford. Steve is operations director; he helps to ensure the business runs as effectively as possible and heads up the client accounting team.

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Client insight research Over the past 18 months we have continued to invest in our business processes, systems and people and have introduced bespoke administration and CRM systems.

We aim to continually improve the way our business is run and the service we provide. We have recently completed our third round of client insight research, which helps us to achieve this. You can read some of the headlines opposite.

Thank you Thank you to everyone who has taken part in our annual insight research programme.

We really appreciate the time and the feedback you have given, which help us to enhance the service we provide.

of respondents think that offshore changes are IMPACTING THEIR CLIENTS’ REQUIREMENTS.

Almost

Key factors in service provider choice

Why are clients choosing Hawksford?

• responsiveness 31%

• reputation

• quality professionals 25%

• knowledge/expertise

• specialist advice 19%

• products/services

COMMUNICATION

We are always keen to hear your views about Hawksford to help us improve further. If you have any feedback, please contact Matthew Morel, Head of Marketing.

73%

96% 74% 25%

believe Hawksford is effective in communicating its capabilities

of respondents prefer communication via email

82% Matthew Morel Head of Marketing T: +44 (0) 1534 740175 E: matthew.morel@hawksford.com

“We have been very happy with our contacts at Hawksford, they do a fantastic job and are a team that we can genuinely rely on…”

of respondents felt that Hawksford’s full capabilities were not being communicated fully to them

received Hawksford’s newsletter, Hawk-i

considered Hawksford’s service ‘good or ‘very good’.

However 18% considered it ‘average’.

“I consider Hawksford a professional outfit and I know they would not let me down in front of a client.“

“The service and freshness of communications is unique. They are always trying to stay one step ahead of the curve.”

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Issue 9 Spring 2014

The grass really is greener – the growing EU market for expat residency regimes Tax competition is a hot topic at the moment and there has been much huffing and puffing by the OECD and the EU about its allegedly harmful effects. For instance, in February, the European Commission issued a press release in which it calls for solidarity between member states on tax policy and warns that the EU “cannot accept national measures that encourage tax shopping by citizens and businesses, or that are designed purely to steal the tax base of neighbours”.

Now it must be recognised that these communiqués are heavily influenced by the concerns of the ‘big beasts’ of the EU – Germany, France, Italy and so on – those countries with the biggest, most inefficient and most hostile tax regimes.

Not surprisingly, they feel threatened when neighbouring countries wish to roll out the welcome mat for wealthy foreigners.

James Quarmby Partner - Private Wealth Stephenson Harwood LLP

The EU’s smallest member state, Malta, felt the wrath of the European Commission recently over its Individual Investor Programme. The concern was that Malta was giving away its citizenship too easily to non-EU nationals. The government of Malta has been forced to tighten up the rules – including a new requirement that the applicant must be resident in Malta for at least 12 months before he or she can apply for citizenship. There was also a request that Malta put a cap on the number of individuals who will be allowed to apply.

But what Malta is doing is nothing new – a number of EU member states are offering residency and/or passports in return for cash.

In Spain you can obtain residency through the Special Investor Residence Visa, which is also known by the more colourful name of the “Golden Visa” programme. This programme is open to EU and non-EU nationals who invest the required amount of money into the Spanish economy. In return the investor gets residency for one year initially, but this is renewable for another two years subject to the investment being maintained.

So how much do you need to invest? The answer is – not much. You can qualify if you make either one of the following investments: (i) real estate of EUR500,000; or (ii) EUR1m in bank deposits or companies in Spain; or (iii) EUR2m in Spanish government bonds or certain local bonds; or (iv) the creation of local jobs.

T: +44 (0) 207 809 2364 E: James.Quarmby@shlegal.com

“I don’t know about you, but investing EUR2m in the Cypriot economy doesn’t fill me with either hope or joy.”

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The Spanish Golden Visa scheme was heavily influenced by that of its neighbour, Portugal, which introduced its own Golden Visa scheme a year or so earlier. Again a minimum investment is required and the figures are basically the same as those for Spain.

The Portuguese scheme only obliges the applicant to reside in the country for seven days during the first year, with another 14 days over the following two years.

That’s a remarkably short period of time.

Permanent residence will be granted after five years and a passport is available after six years.

This period of time before qualification for a Portuguese passport is about consistent with other EU member states (including the UK). One of the reasons Malta got into trouble is that under what has now been dubbed the “Golden Passport” scheme, it was prepared to dish out passports almost straight away in return for a cash payment of EUR650,000.

But is the Maltese scheme worth looking at? If you are a non-EU national looking for an EU passport then the answer is yes. You will have to invest EUR1.15m in the local economy and pay a fee of EUR650,000 but that’s about it.

Another consideration when weighing up the options is what you will pay in taxation once you become a resident of one of these countries. This is where the Maltese scheme becomes more interesting as although the up-front cost is higher, you will end up paying less in taxation and will qualify for the passport more quickly.

The problem with both Portugal and Spain is that they have world-wide models of taxation – this means that once you become a resident you will be liable to tax on all of your income, regardless of where it arises. This is a big blow if you

have substantial sources of foreign income or gains. Malta, on the other hand, has a remittance basis of taxation and that means you are only taxed on foreign income or gains that are actually brought into Malta. As you can imagine, that makes a huge difference to your potential tax liabilities.

To be fair, Portugal has tried to ameliorate its normally high rates of tax by introducing special low rates of tax for individuals who are working in certain sectors. This can lead to a top rate of tax of 20% on such income, but the fact remains that for most kinds of foreign passive income or gains, the full rates of tax will be payable.

One of the other players in this market is Cyprus, which has for some years offered attractive packages for HNW individuals.

To get residency in Cyprus is pretty easy – you need to acquire property of at least EUR300,000 and be able to show annual income of at least EUR30,000 (plus EUR5,000 per dependent). In addition you must make a deposit of EUR30,000 to a Cypriot bank, which will be blocked for the first three years. Like Malta, Cyprus has a remittance basis of taxation that means that you will normally escape taxation on your non-Cyprus income.

Getting a passport is less easy as it requires a hefty investment in the local economy which, given the collapse of its banking system and much of the local economy with it, doesn’t look attractive.

I don’t know about you, but investing EUR2m in the Cypriot economy doesn’t fill me with either hope or joy.

Another drawback of Cyprus is that, like Malta, it’s an island in the Mediterranean with limited connectivity to Europe (compared to, say, Madrid, and Lisbon).

This is an issue for the internationally mobile individual.

Of course, the most international of all cities in Europe is London and despite all the recent changes in the UK’s legislation it remains an attractive place to live. The UK has its own investor programme and in return for an investment of £1m (which can just be a deposit in a UK bank) you can get a visa to live here. The UK also has a remittance basis of assessment that means for the first seven years as a resident, you can enjoy freedom from taxation on your foreign income or gains, provided they are kept outside of the UK. Thereafter an annual fee is payable (called the ‘remittance basis charge’), which starts at £30,000 per annum.

The final EU contender is Ireland, which recently introduced its own investor programme. You can invest either EUR2m in a government bond or EUR1m in an Irish business and this will get you residency.

Ireland also has the benefit of a remittance basis of taxation, but without the annual fee after seven years.

These schemes are all targeted at nonEEA nationals and they share the same objective – to lure wealthy foreigners to their shores. Of course, if you are already an EEA citizen then you do not need any of these schemes because the EU Treaty gives you complete freedom of movement within the EEA. There is plenty of evidence that EEA citizens are moving to save tax witness the large number of French people who have moved to the UK since Francois Hollande declared war on the rich.

Without competition countries can become sclerotic, inefficient and complacent. The EU Commission may not like it but tax competition is healthy – not harmful – and it’s here to stay. Three cheers to that!

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Issue 9 Spring 2014

Philanthropy and philanthropic structures – Jersey, the jurisdiction of choice This article considers why Jersey is an ideal jurisdiction for the formation and administration of structures. It has the right tools in the form of trusts and foundations and the right skills and experience – the means for providing philanthropic excellence and the opportunity to do so.

It looks at the wider concept of philanthropy, considering the present position and certain currents of change, providing opportunities for Jersey’s future development into a philanthropic hub, rather than considering Jersey’s laws of charity and charitable donation. The main implication of whether or not a structure is “charitable” as a matter of Jersey Law is the question of whether or not tax relief will be available for the donation, but that will only be relevant to a Jersey resident donor. For others, their purposes can be served by a trust or foundation set up for philanthropic purposes, which may or may not fall within Jersey’s concept of “charitable”.

The climate for philanthropy For many people, not just the wealthy, philanthropy is becoming more important, covering a wide range of initiatives, some of which fall within the technical definition of “charitable” whereas others, even though they may be for the common good and benevolent in nature, may not. Here I am primarily looking at philanthropy in the sense of all giving initiatives, whether charitable or not.

Though philanthropic donation is not the sole preserve of the wealthy it is an important financial and legal issue for wealthy individuals and families. Many wealthy families see the creation and maintenance of philanthropic structures as part of a wider process of engaging the next generations in the responsibilities of wealth management.

For many there is a religious or cultural impetus to philanthropic donation.

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There is also a significant increase in social entrepreneurship and in venture philanthropy that is not limited to older generations and the ultra-wealthy. Young entrepreneurs are seeking to make a social impact, and social investment may now itself be seen as a growth area.

We are seeing significant philanthropic growth within the funds sector in which sustainable investments are developing into a separate asset class. Increasingly, philanthropists are looking to the financial services sector in Jersey and elsewhere for greater engagement in the provision of relevant services.

Why Jersey?

It is acknowledged that major charitable benefactors who are resident onshore may not be inclined to set up offshore philanthropic structures if there may be difficulties in securing cross-border tax deductions. However, there can be opportunities for such tax-efficient structuring and in any event there is a huge market where that is not an issue.

Jersey, as well as its expertise in the setting up and administration of trusts and foundations, and its skills base under the rule of a first class system of law, has an immediate opportunity to assist in philanthropy and indeed to develop as a lead jurisdiction, through the wealth already held and administered offshore.

The agglomeration of wealth by substantial families and corporates in tax neutral jurisdictions such as Jersey gives great opportunity to families, individuals and companies to create entities that can serve charitable or philanthropic objectives either directly or as “feeders” to other institutions. They can structure vehicles

for these purposes in a significantly more flexible manner in Jersey than is usually possible in other jurisdictions.

Jersey already has the skills and services to continue to lead the way in providing flexible vehicles for charitable and philanthropic purposes. It is already a preeminent trusts jurisdiction, enjoys modern companies’ legislation, has a wide set of partnership structures and an innovative Foundations Law, the use of which is growing in popularity. All of these make Jersey an ideal jurisdiction in which to establish philanthropic structures that are both flexible and tax efficient. Other benefits include political and economic stability, a highly respected judicial system and a robust regulatory regime, coupled with depth and breadth of experience amongst its professional advisers – the same benefits that assist in capital movements for commercial and family purposes. Perhaps above all, the relevant legislation emphasises the importance of flexibility and so allows structures to be created that meet the needs of an individual client.

Jersey’s trust legislation allows for both charitable and non-charitable purpose trusts, so enabling the setting up of charitable trusts as such or trusts for philanthropic purposes that might not be characterised as strictly charitable. Trusts can even be established for purposes that are partly personal and/or partly charitable and partly philanthropic.

Non-charitable purpose trusts are often used for altruistic good causes and Jersey trusts allow for a range of structures that can be adapted to suit specific philanthropic objectives. The charitable trust is an attractive option, but it is not the only solution.

Since their launch in 2009, Jersey Foundations are increasingly used by philanthropists as an alternative to trusts.

As true orphan structures, they are ideal for these purposes and can be used for structures that are either charitable or non-charitable or that are philanthropic but with the capacity to provide personal benefits.

Approximately one third of foundations set up in Jersey since 2009 are used for philanthropic purposes. Amongst their attractions are the clarity of registration with the Jersey Financial Services Commission and the availability (but only if required) of publicity as to the identity of the economic founder and the nature of the purposes. They are also capable of infinite duration. Through the system of having a council of members and a guardian to ensure the council pursues the foundation’s objects, both flexibility and safeguards are provided, along with the ability for the economic founder to have a continuing role.

Given Jersey’s advantages, it is perhaps surprising that Jersey has not yet become seen as an international hub for charity and philanthropy.

Two potential gaps in Jersey’s profile are perhaps: 1. The absence of a Jersey statute specifically governing charities, equivalent to the Charities Act 2011 in England and Wales, or a regulatory body like the Charity Commission to maintain a register of charities and to supervise their activities; and 2. The possible need to clarify the expression “charitable purposes”.

A new Charities Law Jersey’s government has recently carried out a consultation process on whether a new charities Law for Jersey should be developed to provide a legal and regulatory framework for Jersey charities.

Current proposals would introduce a “charities test” setting out a qualifying definition for charitable status; and “light touch, proportionate regulation” involving the setting up of a Charity Commissioner to regulate Jersey’s charities and to maintain a Charities Register.

It is anticipated that through these means Jersey could develop its existing services in respect of public charities, soliciting donations and maintaining full and proper records, as well as private charities receiving donations only from a particular family and so preserving anonymity. Jersey

will continue to allow for private orphan structures such as through foundations or through special purpose vehicles in commercial transactions which can provide some charitable or philanthropic benefit.

Implementation of the proposals would provide an opportunity to clarify that a Jersey charity must provide, or be intended to provide, public benefit and possibly also an opportunity to recognise certain activities as being charitable.

The new Charities Law would provide an up to date definition of charity and a list of eligible charitable purposes.

It is also proposed that only organisations run by “fit and proper people” would be eligible to be registered as a charity – similar to the test in England and Wales which provides that a charity for tax purposes must be managed by “fit and proper persons” as determined by HMRC. This would be important if, for example, once an organisation is registered on the Charities Register, it would be entitled to accrue tax benefits without any further need to register with the local tax authority. Such arrangements might be analogous to the system in England and Wales.

That principle is reinforced by the judgement of the European Court of Justice in the case of Hein Persche v Finanzamt Lüdenscheid which, in effect, determined that Member States of the EU could not impose a territorial restriction on a charity exemption granted by a Member. This case determined that when a charitable trust or foundation is set up in the EU, or certain other territories, it can nevertheless claim UK tax relief provided it is accepted by HMRC to be charitable for tax purposes, i.e. established for charitable purposes as defined under English Law and meeting conditions as to jurisdiction, registration and management.

The vision behind this initiative is that Jersey should become a jurisdiction of choice for philanthropy, and recognised as a philanthropic hub. This is based on continuing and developing the skills and services already provided for many years and coordinating with government, regulators, advisers and the trust industry.

Perhaps, as part of this process, the negotiation of TIEA and FATCA arrangements will come to include the securing of automatic tax recognition for Jersey’s charitable structures.

In summary Jersey already has abundant skills and experience in the provision of charitable and non-charitable trusts and foundations with an excellent legal background and a highly respected judicial system.

Jersey has the people with the necessary skills and experience to act as trustees or as council members. Jersey’s financial structures are well regulated and the individuals involved and their companies are already highly skilled in fiduciary duties and in the due diligence that is inherent in considering possible philanthropic activities.

When the pros and cons of establishing philanthropic structures “onshore” or “offshore” are weighed, Jersey has several key strategic advantages which can be applied for the benefit of those wishing to set up long term arrangements for charity or for philanthropy in the wider sense.

Those advantages can enable Jersey to become, through the cooperation of expert fiduciaries, the finance industry, government and the legal framework, clearly recognised as a leading global centre for philanthropy and for best philanthropic practice.

Jersey has much to gain and much to offer by emphasising its existing advantages and developing improved solutions, such as through a new Charities Law and a Jersey Charities Commission.

Promoting existing philanthropic skills and services Jersey Finance Limited is itself active in this area, investigating how the Island is perceived by professional advisers when considering where to locate structures with exclusively or primarily philanthropic purposes.

Julian Hayden Director Hawksford T: +44 (0) 1534 740140 E: julian.hayden@hawksford.com

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Issue 9 Spring 2014

Tailor-made philanthropy There’s no question that philanthropic giving has many benefits. However it can be complex and daunting to the unfamiliar. Decisions around how and where money is directed can be powerful life changers for both the giver and recipient. So those decisions need careful consideration. Alison Hope offers advice on how to get real joy out of your giving.

“We recommend developing clear communications, even if you are an individual donor funding things directly. It can be worthwhile publicising your giving strategy and how you do, and do not, want to be approached. ”

When asked what process we go through to support people in their philanthropy the truthful answer is that, even though we have flow charts with the steps we might take a donor through, more often than not we don’t! How people apply their resources to make a difference to the things they care about (their philanthropy, or simply, their giving), is so deeply personal that even the starting point for each person is unique.

For me and the sector specialists at Hope Philanthropic, supporting someone to get real joy and fulfilment out of their giving, is as challenging as designing the holiday of a lifetime. With the potential for much wider ramifications, of course.

Our world is populated by many charities, social enterprises, organisations and individuals with ever increasing financial needs. To ensure that donors get real joy out of their money we invest time in understanding their aspirations and circumstances.

So where do we start? It may be a cliché, but to quote business guru Stephen Covey, we ‘begin with the end in mind’.

Identifying the passions We ask our clients to consider what they want to achieve with their money. What difference would they like to see as a result of their giving?

Then we explore their circumstances. This gives us an insight into their experience of philanthropy to date and who they might like to involve, such as a spouse or children.

We next consider the causes that resonate with them, the ones that fire their passions and generate a real interest. From sectors to locations, this is where the analogy of a holiday is apt. The range could not be greater.

We have worked with donors with a diversity of interests. From a passionate

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classical music lover who believed that people from all backgrounds should have access to musical training to a donor who took inspiration from his childhood hero Scott of the Antarctic. The latter was able to support an international project to save Scott’s hut and its 8,000 expedition artefacts.

Social welfare issues are often the focus for many who feel fortunate. They may help with projects to reduce reoffending in young people, to giving people with disabilities a voice.

Giving that suits you There are so many ways to ‘give well’, so we focus on understanding what best suits the client. We evaluate how involved a donor prefers to be. This could be termed their giving ‘personality’ and there are many options.

The spectrum ranges from very handson philanthropy - including ‘catalytic philanthropy’ where donors are actively engaged in the sectors and causes they support. Over time they develop an expertise and a strategy for giving where they take responsibility for the results. This might even involve campaigning to change the law. At the other end of the spectrum is ‘light touch’ giving, where donors trust their recipients to use funds wisely and simply want to hear from them from time to time.

Many people think that philanthropy advice is all about tax effectiveness and financial structures. But this is a very small part of philanthropic advice. Most wealthy individuals and families have their own advisers to advise and set up the appropriate trust or charity, or they may simply give directly.

A leading UK law firm, which sets up charitable structures, reports that for every charitable vehicle they set up, about 50 percent of clients know exactly what they want to do with this and the rest

have yet to decide. Outside of the USA, where philanthropy advice has long been recognised as a valuable service, there are still many philanthropists who rely on the very charities they plan to support to provide the sector knowledge and project options they might consider.

Communication is key We work with our clients on their communication approach and help them position themselves within the sector. Choosing who receives support is a key strategic decision, and there are choices to be made around taking a reactive or proactive approach. You can select your own projects by research or recommendations from others. Do you go to them or allow them to come to you?

Your strategy would include details of how people will be made aware that you are a funder, your profile, and that you would like to hear about projects in your sphere of interest.

60 percent of US Foundations are closed to unsolicited approaches. That may enhance efficiency but you could miss the experience of meeting inspirational people who live and work in your field of interest.

I recently worked with a family whose charitable foundation invited approaches from projects which benefit their home town of Bristol. We were able to work with them on a pioneering photographic project for children living in divided communities in the inner city. Street crime, fuelled by prejudice and misunderstanding, was rife. By using photography to share experiences, friendships were formed and the stereotypes gradually dissolved. As one child observed: “I learnt that (the areas of) Easton and St Pauls are the same and don’t judge them by their covers.”

The joy of giving is as much about what the donor learns and experiences as the feeling of being able to contribute. It is a truly virtuous circle. Without an ‘open door’ policy with clear parameters, the low key and modest Bristol project would never have seen the light of day and the family would not have enjoyed meeting local pioneers who dealt with a problem in their own community.

The danger of being too available The negatives of an open door policy are that it can lead to inappropriate approaches, which can put people off the challenge of giving well, and sometimes puts them off giving at all.

We recommend developing clear communications, even if you are an individual donor funding things directly. It can be worthwhile publicising your giving strategy and how you do, and do not, want to be approached.

Alison Hope Philanthropy Adviser & Founder Hope Philanthropic T: +44 (0) 117 9244951 E: alison@hopephilanthropic.com W: www.hopephilanthropic.com

Four pointers on your philanthropic journey Ultimately, philanthropists may develop a giving strategy and plan, and the means to support its implementation, but there is much to think about before reaching that point.

These are some of the issues we consider with our clients:

Make it clear whether you will accept unsolicited applications.

1.

You may or may not wish to explain yourself, but if your funds are committed and there is no chance that you will be persuaded to support a cause, even by a friend, then publish this information on the web and in funder directories.

Publish what you really want to fund.

2.

Be absolutely clear about what you will and won’t fund; the size of grant you would be likely to consider, types of organisation and causes, whether you would consider funding core costs or prefer to fund specific activities.

3.

Clarify the information you want to receive.

4.

Let people know what you will do with their approach.

In many cases, a brief summary is enough information to start with.

You can always ask for more detail later.

Will they hear from you if they send you a proposal? If not, is there a time by which they can be sure they have been unsuccessful.

The philanthropic journey, like that epic holiday, needs careful planning and importantly a real interest and understanding of everyone travelling with it. But while the memory of even the best holiday will ultimately fade, philanthropy’s impact has the potential to resonate for decades. And that is the real joy of giving.

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Issue 9 Spring 2014

Succession planning in the Middle East is a live issue James Howe has seen a growing number of Middle Eastern family businesses look for succession planning advice.

Families are becoming more aware of the challenges associated with the preservation of their wealth and are spending a great amount of time, money and effort to find and implement appropriate solutions.

Addressing the problems associated with succession planning in the Middle East is complicated due to issues of culture, family history, hierarchical structures and the importance of Shariah principles.

With approximately 90 per cent of business activities in the Gulf Coast Countries controlled by family businesses, it is no surprise that survey after survey has shown that families are worried about CEO and shareholder succession planning.

When a patriarch takes a step back from his or her day-to-day business to think about the family wealth, there are three things that the patriarch thinks about: the individual; the family, and the community. The three things any patriarch wants can be summarised as PET: • protect wealth • enhance and grow assets • transfer wealth to family and community This can be organised by implementing the following three steps.

Step one: consolidated reporting Work out what assets the patriarch owns now. This requires some homework and planning, as it is an audit of current wealth.

Look at all of the asset classes such as cash, bonds, stocks, options, real estate, investments and insurance and pension policies. Keep it simple, and write down the various asset classes, institutions and countries involved. You might want to segment the family’s liquid and investment assets in one document, with real estate, chattels and fixed assets on another.

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Great care needs to be taken when looking at the family business as it may have been handed down over generations, with built-in assumptions and expectations.

Think about the currency and geopolitical asset split also. US bonds and property in New York will be treated differently to domestic cash and investments in Saudi Arabia. In other words, think about onshore assets in one basket and offshore assets in another.

Finally, think about what assets you expect the patriarch to receive during the rest of his/her life in terms of income, gains, inheritance and commercial profits.

This may take a few months, but the end of step one is when you can produce a consolidated reporting statement. Most importantly, you must keep this up to date.

Look to achieve, at the very least, a quarterly report.

The family protocol is a document that sets down the philosophy of the family and the values and rules in making decisions. It may have a committee for investments and one for executive decision making. When a family protocol is accepted by a family, it tends to be strictly applied and, in most cases, helps to ease tensions that may arise between family members. An investment committee will look at assets in terms of growth and income and the risk versus the return ratio.

The executive decision making committee will review the control mechanisms, the spending and saving and the transfer of assets between family members.

The patriarch will need to look at the education of family members in terms of family protocol and develop a mechanism for power sharing across generations.

Step two: the patriarch

Usually there will be a strong desire to ensure that all Zakat obligations continue to be met and typically, very wealthy families will be active in other charitable and philanthropic activities.

Think about the patriarch and his/her partner. List what assets are personal and will be at the patriarch’s disposal for the rest of his/her life, which may or may not fall into the family structure. These are the patriarch’s assets, under his/her control and which will be covered by a will or pass under Shariah principles.

There may be members of the family who have mental health or physical disabilities and these individuals will be looked after within the family. When looking at a structure for succession planning, there will be many ways to ensure that this support continues and is properly funded to cover future needs.

The patriarch may have a view as to a woman’s rights to property as a daughter’s inheritance is usually half that of her brothers.

The family can use a fiduciary structure for the offshore assets, such as a foundation or a trust, and can create a private trust company to control the assets in accordance with the family protocol, using a wealth partner to administer the structure in a disciplined manner.

Step three: family protocol An audit of both onshore and offshore assets should be carried out for those assets that are seen as part of the family assets.

These may be in different jurisdictions, but the family will be guided by the principles to be written down in a family protocol document. This will usually be done with help from the family’s lawyer.

By following these three steps and having an effective, well-managed structure in place, you can not only enhance wealth during the patriarch’s lifetime, but protect it for future generations.

“Addressing the problems associated with succession planning in the Middle East is complicated due to issues of culture, family history, hierarchical structures and the importance of Shariah principles.�

James Howe Director Hawksford T: +44 (0) 1534 740246 E: james.howe@hawksford.com

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Contact details For further details on any of the content of this issue, or if you would like to contribute to future issues, please contact: Rebecca Stannard Marketing and Communications Manager T: +44 (0) 1534 740182 E: rebecca.stannard@hawksford.com

www.hawksford.com

Hawksford Group (and Hawksford International) are the Registered Business Names of Hawksford Trust Company Jersey Limited which is regulated by the Jersey Financial Services Commission.

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MAGIC CIRCLE AWARDS 2013

MAGIC CIRCLE AWARDS 2013

Trustee of the Year 2013 – Julian Hayden

Trust Company of the Year 2013 – Runner up

WINNER

2012

RUNNER UP

Best offshore trust company – Jersey, Guernsey and the Isle of Man

www.hawksford.com