By Marc Farror Director Vistra (Jersey) Limited
Jersey structures are ideal vehicles for ensuring that assets are protected and for enabling wealthy individuals to determine exactly who inherits which assets going forward.
In Hong Kong, when you mention the high profile names of Dr Stanley Ho and Nina Wang, almost everyone will be able to regale you with stories about how Dr Ho allegedly lost his $3bn casino empire and how Nina Wang's feng shui expert purportedly tried to claim her $4.2bn fortune. In Dr Ho's case, it is suggested that the main cause of the trouble was when he fell ill, his share of SJM Holdings was fought over and divided up amongst his family comprising at least 4 wives and 17 children. It had reportedly been Dr Ho's intention to pass his share of SJM to his second and third wives. For Nina Wang, her feng shui expert allegedly claimed that they had had an affair for years and it was Nina Wang's intention to leave him a substantial share of her wealth rather than have her family inherit it.
Supposedly the problems arose in Nina Wang's case because her will made no provision for the feng shui expert. In Dr Ho's case the ownership of the assets were in personal names rather than through a more established asset protection structure.
The benefits of trusts and companies
The most commonly used asset protection structures for ensuring that assets are protected are trusts and companies.
At a basic level, assets are separated and therefore protected by placing them into different companies. Each company is owned by a trust. This structure works from an asset protection perspective and offers the underlying client many benefits.
Because the assets are separated into different holding companies the risk of losing all assets simultaneously is limited. If an asset is going to be attacked and the company is sued, only the assets held in that particular company are under threat.
With a trust owning all the assets and the underlying client becoming a beneficiary of the trust, legal and beneficial ownership is separated. Therefore it makes it difficult to take legal action against an individual who has settled their assets in this manner.
Jersey trust law does not recognise forced heirship regimes, therefore it is only the named beneficiaries or class of beneficiaries who will ultimately benefit from the trust's assets. It is also possible under Jersey trust law for a settlor to reserve the power to change the beneficial class and therefore rule individuals in and out from receiving trust assets.
The benefits of this type of asset protection are clear. Jersey, a leading international finance centre, is ideally placed to provide sophisticated structures to Asian clients. It is essential that tax and legal advice is taken, in all circumstances, to ensure that personal circumstances are properly reviewed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.