By Richard PirieHead of Trusts and
Foundations, Collas Crill, Jersey
Wealth planning is a long-term exercise to preserve wealth while
meeting the future needs of several generations.
The main reasons why an entrepreneur wishes to put his business
into a structure are succession planning and asset protection
– he wants to decide on the succession of control and
benefit, and he wants to make sure that what he has worked so hard
to build is protected if something goes wrong for him or for a
member of his family, such as divorce. At the same time he wants to
keep control of it. During his lifetime and after his death he
wants his family to enjoy the fruits of his endeavours but he does
not want them to be able to sell the income generator he has
created. The question is how?
A trust may not be suitable because the duties owed to
beneficiaries are not consistent with a trading business as a
significant trust asset. The beneficiaries can collectively
determine a trust and thus sell the business, thereby defeating a
key wealth planning objective.
By contrast the Council of a Jersey Foundation does not owe any
duties to beneficiaries, unless the Regulations expressly provide
them at the request of the Founder. Instead the Council is
accountable to a mandatory Guardian, but there are no restrictions
on who can hold this office so it can be fulfilled by family
A Jersey Foundation has recently been prepared by this firm for
a wealthy GCC-based family with five branches, which owns companies
that operate trading businesses and hold property portfolios and
passive investments. The Foundation will own the shares in all
those companies but only as a passive shareholder, and the family
will continue to control them at board level. In deciding the level
of dividends that the companies declare, the family controls the
flow of money into the Foundation. The Guardian is a committee with
one member from each branch of the family, and the Council cannot
make distributions without Guardian approval, thus the family also
controls the flow of money out of the Foundation.
By using a Foundation, the succession and asset protection
objectives are achieved by transferring ownership of the companies
into it. Meanwhile the family retains control of the businesses and
of all money flows into and out of the Foundation.
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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