Last week our own Neelai Patel spoke at an LB Business Network event organised and hosted by the law firm Howard Kennedy, looking at the question of whether the UK will be a more attractive destination for business post-Brexit. Mr Patel's presentation offered a case study to illustrate the specific benefits of an excluded property trust for asset protection in the case of:
- Potential bankruptcy
- Potential divorce
- A necessity to applying income for minors
Kylie and Jason, a married couple from Australia, have two young children, and hold two classes of assets: a collection of wines and an overseas holiday let.
The couple want to immigrate to the UK and set up an excluded property trust (EPT). Both individuals are non-UK domiciles and their assets are non-UK situs.
When they arrive in the UK, they purchase a portfolio of Buy-to-lets in the UK, and enrol their children at private schools. Their assets have been settled prior to their arrival in the UK.
"The calm before the storm"
10 years later, house prices are rising, forcing the UK government to increase SDLT on purchases of second homes and restrict mortgage interest relief in order to curb rampant rising prices.
The following year, the Bank of England raise interest rates by 2%.
Kylie and Jason suffer financial difficulties as a result of these changes, which subsequently cause them matrimonial problems.
"They were smart"
The EPT provides asset protection from lenders and ensures that neither party to the marriage can stake a claim for the assets, as these are ring-fenced, providing financial security for the children.
The trustees are able to apply income for school fees with any issue.
You can't predict the future but you can manage and mitigate risk.
Two key words to take away from this case study are: "asset protection".
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.