When implementing a succession plan for wealthy families, one
of the easiest parts is putting the structure into place but the
hardest is making it endure through the generations.
It has long held true that wealth rarely survives three
generations and there are many reasons behind this, most of which
are inherent as families increase in size and the influence of the
The key to all enduring wealth planning structures is the
separation of the economic enjoyment of wealth from its control. In
England and other common law jurisdictions this has been achieved
through trusts and their development over many centuries; civil law
jurisdictions are relative newcomers, with the first foundations
appearing in 1925 in Liechtenstein.
As people and wealth have become more mobile, the role of
offshore centres has developed so that today they have a
significant role as neutral platforms for hosting wealth planning
structures. New vehicles have been introduced, such as civil law
style foundations and non-charitable purpose trusts, and trust laws
refined to fit modern requirements with the introduction of settlor
reserved powers, the abolition of rules against perpetuity and the
creation of firewalls.
With the Trusts (Guernsey) 2007 Law and the Foundations Law soon
to come into force, Guernsey is an attractive jurisdiction for the
establishment of wealth planning structures. Likewise Jersey, where
foundations have been possible since 2009 and the soon to come into
effect Trusts (Amendment No. 5) (Jersey) Law, which will provide
additional clarification on, among other things, the enforceability
of foreign court orders against Jersey trusts.
Private trust companies (PTCs) have emerged as a key component
of many wealth planning strategies. The reasons for this have been
well documented elsewhere but, crucially, through PTCs families can
retain much closer control of their underlying wealth. Where
appropriate and subject to any constraints in their home
jurisdiction, family members can serve on the board of the PTC as
well as trusted advisors who have real knowledge of the family and
its financial affairs. PTCs and family offices can also work
closely together, often with the same persons involved in both.
When a PTC is established to act as trustee of family trusts, it
is usually an opportune time to put in place, or revise, an
existing long-term family plan especially as the members of the
board of the PTC will often have other roles within the family.
Every family has a different culture and, within each family, the
individual members are all different so each plan has to be bespoke
but all should address:
Family vision - are there any particular
values, faiths or creeds that the patriarch wants to be
Communication - effective communication and
dissemination of information will prevent many disputes from
arising between family members. Is there to be a family council
type of body and, if so, how is it to be composed?
Disputes - how should family disagreements be
dealt with so that small gripes do not end up as expensive
full-scale litigation between warring branches of the family?
Who is a family member - how much say should
spouses be given and at what ages should children become
Family business succession - what is the
patriarch's view for the future of the family business; who
should succeed the patriarch in the event of his retirement, death
or incapacity; when and how should any sale of the family interests
Family/business interaction - how should the
family be represented within the underlying family business and are
there any criteria family members must satisfy before they can hold
any executive roles (e.g. business experience, qualifications)?
Non-business assets - who can enjoy these and
how should they be managed?
Distributions - how and when should wealth be
Philanthropy - where the family is well
provided for, the patriarch may wish to encourage philanthropy
within the family and set out parameters for this.
The form of the plan, the grounds it covers and the amount of
detail are a matter of personal choice but it is clear that, with a
structure and a plan in place, the family will be better positioned
to overcome the inherent obstacles to keeping its wealth intact as
well as deal with other obstacles that may be thrown in its
The fiduciary team at Collas Crill has much experience of
establishing PTC structures and assisting with the preparation of
family governance plans.
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.
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