Category: Private Client

Background

The Delacroix family, a European high-net-worth family, had spent generations building wealth across various industries, including real estate, private equity, and financial markets. As their assets grew more complex and spread across multiple jurisdictions, they needed a robust and tax-efficient structure to manage their wealth efficiently, ensuring strategic oversight of investments, protect their assets from external risks (such as legal claims or political instability), and ensure they established a seamless succession plan to preserve the family wealth for future generations.

With Switzerland’s financial stability, legal certainty, and strong fiduciary expertise, the family decided to establish a Swiss Family Office using a Swiss Private Trust Company (PTC) structure. With careful planning, the Delacroix family implemented a structure that balanced wealth preservation, regulatory compliance, and investment flexibility while retaining control over decision-making.

Structuring the Swiss Private Trust Family Office

Unlike a traditional Trust where an external Trustee manages the assets, the Delacroix family opted for its own Swiss Private Trust Company (PTC) to act as the Trustee of the structure. This bespoke approach ensured that the Delacroix family retained control over their wealth structure whilst benefiting from Swiss fiduciary expertise and compliance oversight.

1. Forming the Swiss PTC

Establishing a Swiss Limited Company allowed the family to:

• Determine the composition of the PTC’s Board of Directors, appointing a mix of family members, trusted advisors, and professionals to guide its governance.
• Recruit and oversee employees responsible for the administration and management of the Trust structure.
• Engage asset managers, tax specialists, and legal advisors to provide expert advice and guidance in investment management, tax structuring, and regulatory compliance.

2. Asset Segregation: Creating Multiple Trusts for Different Asset Classes

The Delacroix family possessed a variety of asset classes that required consideration when setting up the PTC. Their assets included, a substantial investment in a Swiss private bank, a luxury yacht, several high-value collectibles, and a portfolio of commercial and residential properties that needed to be customized accordingly. As a result, they decided to establish three separate Trusts to sit within the PTC, each holding the different types of assets:

1. Real Estate Trust
2. Yacht and Lifestyle Trust
3. Portfolio & Investment Trust:  Overseeing their financial assets.

3. Ensuring a Smooth Succession Plan and Long-Term Governance

One of the most important objectives of the Delacroix family was to also secure the financial well-being of future generations, including minor children, their, grandchildren, and any vulnerable family members. Philanthropy is also important to the family, and as such they wanted to ensure they could continue to support the various charitable initiatives important to them.

With this in mind, the Delacroix family’s succession plan needed to include:

• A governance framework aligned with their family values. The PTC Board defined clear distribution policies to ensure responsible wealth management.
• Predefined conditions for Trust distributions, ensuring that the wealth is transferred to beneficiaries based on age, education, and other milestones as set out by the family.
• Long-term preservation of key assets. Certain assets, such as their family businesses and real estate, were protected from forced sales or external claims.

By structuring the PTC to serve as a multi-generational Trustee, the Delacroix family ensured financial stability, continuity, and governance flexibility over time.

Compliance and Regulatory Considerations

Due to Switzerland’s stringent regulatory framework, it was crucial for the Delacroix family’s PTC to collaborate with a Swiss professional Trustee to ensure full compliance with Swiss anti-money laundering (AML) laws, the Common Reporting Standard (CRS), and FATCA. By controlling the PTC, the family maintained financial privacy, minimising the necessity to disclose sensitive wealth information to external Trustees.

The Outcome

By establishing their family office through a Swiss Private Trust Company, the Delacroix family successfully created a long-term, legally robust and adaptable structure for wealth preservation and intergenerational governance. The structure allowed them to customise the management of their assets, retain full control over all Trustee decisions, facilitate a smooth transition of wealth across generations, subject to their criteria, and ensure full compliance with minimal exposure.

The Delacroix family’s experience highlights why Switzerland remains a premier jurisdiction for high-net-worth families looking for a structured, secure, and tax-efficient family office model. Dixcart Trustees (Switzerland) SA has been providing Swiss Trustee services for over twenty years and has obtained the FINMA license beginning of 2024, demonstrating its adherence to the highest regulatory standards for Trust management and ensuring compliance with Swiss financial regulations to uphold security and integrity. Dixcart Trustees (Switzerland) SA is a member of the Swiss Association of Trust Companies (SATC) and affiliated with the Organisme de Surveillance des Instituts Financiers (OSIF).

If you would like additional information regarding Swiss PTCs, or to discuss if this structure is right for you and your family, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

For high-net-worth individuals and families, managing wealth across generations requires careful planning and a balance between control, flexibility, and asset protection. While traditional Trust structures are very effective, many families wish to retain control over decision-making.

A Private Trust Company gives families the possibility to manage their own estate, through a bespoke estate planning tool, to suit their specific needs.

What Is a Private Trust Company?

A Private Trust Company (PTC) is a legal entity established to act as the Trustee of one or more family Trusts. Unlike traditional Trust companies, which manage Trusts for multiple clients, a PTC serves only a single family or related group, offering a tailored approach to wealth management. They offer a higher level of control to the settlor or their family and can be particularly advantageous for families with complex or significant assets.

Benefits of a Private Trust

1. Retain Control Over Decision-Making: A PTC allows family members to control investments, distribution, and governance decisions. Unlike an institutional Trustee, a PTC enables more direct influence over Trust management, ensuring that family values and long-term goals remain intact.
2. Enhanced Privacy and Confidentiality: A PTC keeps Trust-related matters within the family, reducing the need to share sensitive information with external Trustees. This structure enhances privacy and minimises exposure to public scrutiny, as the family members decide what they wish to share and with who.
3. Efficient and Flexible Administration: With a PTC, Trust-related decisions can be made quickly without the delays associated with external Trust companies. The flexibility of a PTC allows for easier adaptation to changing financial goals and family circumstances.
4. Custom Governance and Succession Planning: A PTC enables families to establish a governance framework that aligns with their values and long-term vision. This structure allows for a smooth transition of wealth across generations, ensuring continuity, stability and flexibility
5. Stronger Asset Protection and Risk Management:By structuring a PTC correctly, families can enhance asset protection while maintaining compliance with legal obligations. A well-managed PTC can mitigate risks associated with external trustee decisions that may not align with the family’s best interests.
6. Tax and Estate Planning Advantages:While a PTC is not inherently a tax planning tool, by establishing one in a tax-efficient jurisdiction such as Switzerland, families can optimise their estate planning strategies when transferring wealth, as well as potentially minimise estate taxes.

Is a Private Trust Company Right for You?

A PTC is best suited for ultra-high-net-worth families with substantial assets, complex financial structures, and long-term intergenerational wealth management needs. If your priority when establishing a structure is to ensure control, privacy, and flexibility while ensuring proper governance, a PTC might be the ideal solution for managing your family’s Trust assets.

How to Set Up a Swiss Private Trust Company

Establishing a PTC involves legal, regulatory, and structural considerations.

A PTC is often set up and administered by an existing licensed professional Trustee, such as Dixcart Trustees (Switzerland) SA, which advises the board members of the PTC, in terms of corporate governance and Trustee matters. In some cases, a representative of the professional Trustee company will sit on the board of the PTC together with family members. This combination of family and professional advisers allows the PTC to react quickly to the needs of an extended family and to meet its best business interests. 

Dixcart Switzerland

Switzerland is often considered the main hub for family offices. Discretion, expertise and security, together with one of the best jurisdictions in the world for asset protection and asset management makes it the best place for a high-net-worth family to conduct its estate management and control of its assets.

Dixcart Trustees (Switzerland) SA has been providing Swiss Trustee services for over twenty years and has obtained the FINMA license beginning of 2024, demonstrating our adherence to the highest regulatory standards for trust management and ensuring compliance with Swiss financial regulations to uphold security and integrity. Dixcart Trustees (Switzerland) SA is a member of the Swiss Association of Trust Companies (SATC) and affiliated with the Organisme de Surveillance des Instituts Financiers (OSIF).

Additional Information

If you would like additional information regarding Swiss PTCs, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

In recent years, Malta has become an attractive jurisdiction for high-net-worth individuals and families looking to establish Single Family Offices (SFOs) due to its robust regulatory environment and favourable tax regime. A SFO is an entity that manages the wealth of a single family, offering services such as investment management, estate planning, philanthropic activities and lifestyle management. The primary objective is to preserve, increase, and seamlessly transfer family wealth across generations.

Family Offices are one of the priority areas indicated in the Strategy for Financial Services launched in March 2023. On the same line, the Malta Financial Services Authority (MFSA), in a recent circular, has identified family offices as a growth opportunity for Malta’s financial services sector. In collaboration with the Malta Financial Services Advisory Council and other representative industry bodies, it has updated its regulatory framework to facilitate the establishment of such structures in the country.

The MFSA circular amends the framework for setting up and operating SFOs in Malta.

Key Frameworks Amended

The circular, published on 27 November 2024, outlines regulatory updates and guidelines, requirements, compliance obligations, and operational expectations for individuals or entities setting up SFOs within Malta’s jurisdiction. The document highlights the framework adjustments aimed at attracting high-net-worth families to manage their wealth from Malta while ensuring compliance with financial regulations and risk mitigation. The MFSA has amended two frameworks, namely the Investment Services Rules for Notified Professional Investor Funds (PIFs) and Related Due Diligence Service Providers; and the Trustees of Family Trusts Rulebook.

Amendments to the Investment Services Rules for Notified PIFs

A Notified PIF, an instrument that was launched at the end of 2023, can now be managed by a Fund Manager in Malta who is exempt from needing an investment services license, provided the PIF only invests in the private wealth of family members and does not raise external capital. This is applicable to family office vehicles. The amendments also clarify what constitutes a “family office vehicle” and specify the types of investors that can use such structures.

In addition, local managers who are exempt from an investment services license will now have reporting obligations. These managers are required to report according to specific parts of Annex 2 to the Rules.

A new Section has been added to provide supplementary rules for Notified Professional Investor Funds (PIFs) managed by exempt managers. It defines specific thresholds for the applicability of exemptions available to Fund Managers, requiring Due Diligence Service Providers and the governing body of the Notified PIF to verify and confirm the eligibility for these exemptions both initially and on an ongoing basis.

Amendments to the Trustees of Family Trusts Rulebook

One of the most significant changes is about the definition of ‘family member/family dependent’, which has been broadened to reflect modern family structures. In certain cases, the definition may now extend to include ‘family clients’ who can benefit from family Trusts.

As a consequence of these amended definitions, registration considerations also needed to be amended to accommodate Trusts involving family clients as beneficiaries.

What Changes for High-Net-Worth Families

The amendments to these frameworks present an opportunity to create wealth management structures that include investment capabilities, while reducing reporting requirements. When combined with Malta’s existing global mobility and immigration programmes, EU membership, use of English as an official language, and a diversified financial services sector, these new elements are designed to enhance Malta’s appeal to high-net-worth families.

Additional Information

The Dixcart Malta office can assist from a structuring, regulatory compliance and operational perspective. For further information on Single Family Offices in Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com 

The popularity of Family Investment Companies (FICs) has increased over recent years, and they are viewed as a corporate alternative to the more common discretionary trust.

What is a Family Investment Company?

FICs are companies limited by shares (an “Ltd” or “Limited”) and often established by parents and/or grandparents (“Founders”), to benefit themselves and their family, as shareholders. An FIC owns assets such as property, which generate income and capital gains, which can be distributed to the family shareholders over time.

Assets generally come from the Founders themselves, either through a loan or a direct transfer into the FIC. Each shareholder owns a different class of shares (often referred to as “alphabet shares”), gifted to them by the Founders.

Generally, the Founders’ shares will have the usual rights to vote and receive dividends but not capital, whereas the gifted shares will only have the rights to receive dividends and capital, but not to vote.

This ensures that the Founders have the sole right to make decisions, regarding the FIC, at both shareholder and board level, including decisions relating to dividend payments.

Benefits of a Family Investment Company

A number of benefits are available through the use of an FIC. It is, however, important to speak with a tax specialist, such as Dixcart, who can help advise on the tax merits of an FIC, taking into account each potential Founder’s circumstances and objectives.

The benefits offered through the use of an FIC, include:

1. FICs can be used to move assets from individuals’ personal estates into a corporate vehicle, which can then be used, to control those assets by those individuals (Founders), being the only shareholders with the power to vote and to decide the composition of the board. This allows them to provide a controlled source of income for both themselves and their family over a period of time.
2. Limited companies offer the advantage of flexibility. This is ideal in situations where family structures, objectives and other considerations, are changing regularly. Examples of such flexibility, include: shares being transferred, new shares being issued with different rights, and changes to the composition of the board of directors.  All of which can be decided by the Founders.
3. There are a number potential tax advantages when using FICs, including Inheritance Tax, but these will vary depending on; the size of the investments/loans, the assets held by the FIC and the personal circumstances of the Founders.
4. If the Founders loan funds to the FIC, the loan can be repaid over time from the FIC’s post tax profits, in addition to any profit paid out by way of dividends. This can provide the Founders with an ongoing source of income.
5. Alternatively, if the capital value of the loan is no longer needed, the Founders could gift the value of the loan to other family members. This would move the value of that loan out of their taxable estate, for Inheritance Tax purposes, subject to them surviving the date of the ‘gift’ by seven years.

Opportunities Provided Through the Use of a Non-UK Resident FIC by International Families

International families making direct investments into UK companies, as individuals, are liable to UK Inheritance Tax on those UK situs assets. It is also advisable to have a UK will to deal with those assets on their death.

Making those investments through a non-UK resident FIC can remove the liability to UK inheritance tax as well as the need to have a UK will.

An Example Using a Guernsey Company

The example below details the potential benefits provided through the use of a Guernsey company.

The company will pay tax at a rate of 0% on any profit that it generates, due to the fact that this is the corporate tax rate in Guernsey (with limited exceptions and subject to any specific provisions in the counties where investments are held).

Provided that the company is correctly managed and controlled from Guernsey and the register of members is kept, as required, ‘offshore’ it is possible to retain ‘excluded property’ status for IHT (apart from in relation to UK residential property and certain other assets).

The shares in the company are not a UK situs asset. If the company is a private Guernsey company, it does not need to file accounts. There is a beneficial ownership register for companies in Guernsey, this is private and not searchable by the public.

Additional Information

To find out how an FIC might be of benefit to you, and for assistance in establishing an IFC appropriate to meet your needs, please contact the Dixcart office in the UK: advice.uk@dixcart.com

The Dixcart office in the UK can also provide advice as to whether a non-UK resident FIC might be applicable in your particular family circumstances.

The Middle East is home to a growing number of high-net-worth families with diverse and often complex wealth management and estate and succession planning needs. As families in the region focus on preserving their legacies and planning for the next generation, innovative structures like the Private Trust Foundation (PTF) offer an ideal solution. Combining the best aspects of Guernsey Trusts and Foundations, a PTF provides a tailored approach to managing and safeguarding wealth in alignment with the region’s unique cultural, financial, and legal considerations.

What is a Private Trust Foundation?

A Private Trust Foundation is a hybrid structure where a Guernsey Foundation acts as the trustee for a Guernsey Trust. This innovative arrangement combines the flexibility, confidentiality, and tax efficiency of a trust with the legal personality, governance, and control offered by a foundation.

For Middle Eastern families, this structure provides a robust mechanism to align with Sharia-compliant principles, address succession challenges, and centralise asset management, whilst maintaining privacy and often most importantly for our clients, control.

In this arrangement:

• The Foundation serves as the trustee, holding legal ownership of the trust assets and managing them according to the Trust Deed. This could include holding shares in the family business.
• The Trust retains its role as a fiduciary vehicle to protect and distribute wealth in line with the settlor’s wishes via the Trust Deed.
• A Guardian is appointed by the Founder of the Foundation to ensure the Foundation Council acts in accordance with the Foundation’s objectives and charter.
• The Settlor transfers the legal ownership of assets to be held by the Trust in accordance with the Trust Deed.
• Beneficiaries are appointed by the Settlor within the Trust Deed detailing whom the structure should benefit. The Settlor may also be a beneficiary.
• The Foundation Council can be made up of family members, working alongside professional fiduciaries to ensure decisions reflect both family values and professional expertise.

• In order to benefit from the Guernsey regulatory regime either the Guardian of the Foundation or one of the Council members must be a licensed Corporate Service Provider in Guernsey

The Appeal of Private Trust Foundations to Middle Eastern Clients

1. Succession Planning Across Generations
   Many Middle Eastern families operate multigenerational businesses or hold significant wealth across jurisdictions. A PTF ensures seamless wealth transfer, providing a clear and controlled framework for succession planning. The foundation’s governance allows for family representation while adhering to the settlor’s vision.
2. Sharia Compliance and Family Harmony
   Islamic principles, such as the equitable distribution of wealth and asset preservation, can be accommodated within the flexible structure of a PTF. The foundation’s role as trustee ensures that the trust is managed according to specific family or religious requirements, reducing potential disputes and fostering unity.
3. Privacy and Confidentiality
   Discretion is paramount for many families in the Middle East. Guernsey offers a high degree of confidentiality, with no public register of trusts and the register of foundations only includes the following information; foundation name, registered office address, registration date and foundation status. . This ensures that details about the Settlor / Founder, beneficiaries, assets, and governance remain private.
4. Centralised Control and Governance
   The foundation’s council acts as a decision-making body, balancing professional expertise with family involvement. This structure aligns with the preference for centralised control often seen in Middle Eastern family enterprises.
5. Protection Against External Risks
   Political or economic instability can pose risks to family wealth. The PTF structure provides a stable, legally robust framework to protect assets from external claims or unforeseen challenges.
6. Adaptability
   Whether for holding shares in a family business, preserving real estate, or facilitating philanthropic endeavours, the PTF adapts to the family’s unique needs.

Real-World Applications for Middle Eastern Clients

1. Business Succession Planning
   Many Middle Eastern families rely on family businesses as their primary source of wealth. A PTF allows for professional management while preserving family control. It can hold business shares and ensure continuity through generations.
2. Asset Protection
   In jurisdictions with uncertain political or legal environments, a PTF offers security and stability. Wealth is managed under Guernsey’s strong legal framework, reducing exposure to local risks.
3. Philanthropy and Religious Giving
   A PTF can be used to structure charitable giving or fulfil zakat obligations through the Trust in a transparent and compliant manner. The foundation’s oversight and control of the Trust ensures that philanthropic objectives are met appropriately.
4. Multi-Jurisdictional Asset Management
   For families with assets across the globe, the PTF provides a centralised structure, simplifying management whilst respecting local regulations.

Why Choose Guernsey?

• Global Reputation: Guernsey is renowned for its stability, expertise, and innovation in fiduciary and wealth structuring. Its legal framework ensures that structures like PTFs meet international standards while offering flexibility.
• Favourable Tax Environment: Guernsey’s tax-neutral regime benefits Middle Eastern families by enhancing tax efficiency without compromising compliance.
• Expertise: Service providers in Guernsey, such as Dixcart, bring decades of experience in tailoring solutions to clients with complex needs, ensuring a seamless and professional experience.

Conclusion

A Private Trust Foundation is a modern, adaptable solution for Middle Eastern high-net-worth families seeking to preserve wealth, plan for succession, and uphold cultural values. Its unique combination of trust and foundation benefits ensures privacy, protection, and a legacy that aligns with your family’s vision.

At Dixcart Guernsey, we specialise in crafting bespoke wealth management solutions tailored to your specific circumstances. Contact Beth Le Cheminant at advice.guernsey@dixcart.com to discuss how a Private Trust Foundation could meet your family’s unique needs.

Guernsey is a renowned jurisdiction for wealth management, offering various structures for individuals and families seeking to manage and protect their assets. One increasingly popular option is the use of a Family Investment Company (FIC). A Guernsey Family Investment Company provides a flexible, tax-efficient vehicle for wealth management, allowing families to retain control over their investments whilst planning for succession across generations. In this article, we explore the key features and benefits of Guernsey FICs and compare them to traditional trust structures.

What is a Family Investment Company (FIC)?

A Family Investment Company (FIC) is a private limited company established to hold and manage family wealth. The shares in the company are typically owned by family members, and the company’s investments are managed in line with the family’s objectives. FICs allow for effective wealth management and tax planning, offering a high degree of control, flexibility, and protection for family assets.

In a FIC, family members can hold different classes of shares, allowing for tailored voting rights and income distributions. This flexibility allows the founder or head of the family to maintain control over major decisions, while gradually transferring ownership to the next generation.

Key Features of a Guernsey Family Investment Company

1. Ownership and Control: A key advantage of a FIC is the ability to separate ownership from control. While the younger generation may hold shares in the company, the Founder or senior family members can retain voting shares, allowing them to make key decisions regarding the company’s investments and strategy. This structure is particularly useful for succession planning, as it allows for a gradual transfer of wealth without relinquishing control.
2. Tax Efficiency: Guernsey’s favourable tax environment offers significant benefits to FICs. Guernsey does not impose capital gains tax, inheritance tax, or wealth tax, and companies benefit from no corporate tax on most income streams as long as the economic substance regulations are observed. However, it is important to seek professional tax advice to ensure compliance with tax regulations in the jurisdictions where family members may reside.
3. Tailored Share Structures: FICs can issue different classes of shares to family members, with each class carrying specific rights. For example, some shares may have voting rights, while others may entitle holders to income distributions without voting power. This allows the family to tailor the structure of the FIC to their specific needs and objectives, giving flexibility in how wealth is managed and distributed.
4. Succession Planning: A Guernsey FIC is an excellent tool for long-term succession planning. By holding family assets within a company, the Founder can retain control over the management of those assets while gradually passing shares to the next generation. This helps to ensure continuity in wealth management and can prevent disputes or complications during the transfer of family wealth.
5. Asset Protection: FICs offer a level of protection from external claims, as family assets are held within a corporate structure. Provided the FIC was not set up with the intent to defraud creditors, this structure can shield assets from potential legal disputes or claims, ensuring the longevity and security of family wealth.
6. Governance and Regulation: As a company, a FIC is subject to corporate governance standards and regulations in Guernsey. This provides transparency and accountability in how the company is run, which can be particularly beneficial for large or multi-generational families.

Benefits of a Guernsey Family Investment Company

1. Control Over Assets: A key advantage of a FIC is the ability to retain control over how assets are managed and invested. By structuring the company with different classes of shares, the Founder can remain in control of key decisions while gradually transferring economic ownership to the next generation.
2. Cost Efficiency: Compared to other wealth management structures, such as Trusts, a FIC can be more cost-effective to establish and maintain. The corporate structure is familiar to many and does not require the appointment of a Trustee or the associated fiduciary duties, potentially reducing ongoing administration costs.
3. Flexibility in Wealth Distribution: The ability to create different classes of shares allows for flexible wealth distribution. For example, the company can provide income distributions to certain family members while retaining control of the underlying assets with senior family members. This flexibility is particularly useful when managing intergenerational wealth.
4. Privacy: FICs offer a high level of privacy. While the company is subject to corporate regulations, there is no public register of Beneficial Ownership as there is in the UK, and details regarding the company’s assets and investments remain private. This makes FICs an appealing option for families who value confidentiality.
5. Family Governance: A FIC can serve as a vehicle for family governance, helping to align the family’s wealth management with its long-term objectives. Family members can be appointed to the Board of Directors, allowing for structured involvement in the management of the company while maintaining oversight by more experienced family members or professional advisers.

Comparing Family Investment Companies to Trusts

Both Family Investment Companies and Trusts are popular structures for wealth management and succession planning, but they offer different benefits depending on the family’s needs, as highlighted in the following points:

• Control: One of the primary differences between a FIC and a Trust is control. In a Trust, control is transferred to the Trustee, who manages the assets in accordance with the terms of the Trust deed. In a FIC, control can remain with the Founder or senior family members, allowing them to retain decision-making power. This feature makes FICs attractive to individuals who are not ready to relinquish control of their assets.
• Ownership: In a Trust, the assets are legally owned by the Trustee for the benefit of the Beneficiaries, whereas in a FIC, the assets are owned by the company, and family members own shares in the company. This clear distinction in ownership can be advantageous in jurisdictions where Trusts are not fully recognised or where legal certainty regarding ownership is important.
• Tax Considerations: Trusts are often used for tax-efficient estate planning, particularly for families with international members. However, FICs can also be structured to provide tax efficiency, particularly in jurisdictions like Guernsey with favourable tax regimes. The choice between a FIC and a Trust may depend on the specific tax considerations for the family and their country of residence and advice should be sought in this regard.
• Costs: Trusts often require the appointment of professional Trustees, which can result in higher ongoing costs. FICs, on the other hand, operate as corporate entities and may not require the same level of fiduciary oversight, potentially making them more cost-effective to maintain.
• Flexibility: FICs generally offer more flexibility in terms of asset management and distribution. The ability to issue different classes of shares provides a level of customisation that may not be possible with a Trust, where the terms are typically set in the Trust deed and may be more difficult to amend.

However, while FICs offer significant flexibility and control, Trusts are often considered a more robust structure for succession planning, especially for families with complex needs or long-term generational planning objectives. Trusts are uniquely designed to ensure the smooth transfer of wealth from one generation to the next, with the Trustee’s fiduciary duty providing an added layer of protection and governance. In a Trust, the Settlor can clearly outline their wishes for how assets should be managed and distributed over time, ensuring that future generations benefit in a controlled and structured manner. Trusts also mitigate the risk of family disputes by removing decision-making power from family members and placing it with the Trustee, who is bound by law to act in the best interests of the Beneficiaries.

In comparison, a FIC requires shareholders to agree on decisions, which can be challenging in larger families or as generational differences arise. Additionally, Trusts can provide greater protection against unforeseen changes in family dynamics, such as divorce, bankruptcy, or disagreements, as the assets are held separately from individual ownership. Trusts also offer better protection from external claims, as the legal ownership is vested in the Trustee, rather than family members, reducing the likelihood of assets being vulnerable to creditors or legal claims. For these reasons, Trusts are often the preferred vehicle for families who prioritise long-term stability, governance, and asset protection across generations

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Guernsey FICs provide a flexible and efficient vehicle for managing family wealth, offering significant control, privacy, and tax advantages. By blending corporate governance with tailored wealth distribution, FICs are an ideal choice for families seeking to protect their assets, plan for succession, and retain control over their investments, although careful consideration should be taken for individual circumstances as to whether a Trust may be the better solution.

At Dixcart Guernsey, we specialise in establishing and managing bespoke and holistic structuring solutions, ensuring they are structured to meet your family’s long-term objectives. Contact Beth Le Cheminant at advice.guernsey@dixcart.com to discuss which structure could most benefit your family’s wealth management strategy.

Guernsey has long been a reputable jurisdiction for wealth management, and in recent years, its offering has expanded beyond trusts to include Foundations. A Guernsey Foundation provides an alternative solution to a traditional Trust structure, offering greater control and flexibility while being well-suited to modern wealth management, estate planning, and charitable purposes. This article provides an overview of Guernsey Foundations, explaining their key features, benefits, and the scenarios in which they can be used effectively.

What is a Guernsey Foundation?

A Foundation is a legal entity that holds assets for a specific purpose or to benefit a group of individuals. It has elements of both Trusts and companies, blending the flexibility and privacy of a Trust with the legal personality and structure of a company. However, unlike a Trust, a Foundation can own property, enter into contracts, and hold assets in its own name.

Foundations in Guernsey are governed by the Foundations (Guernsey) Law, 2012, which provides a clear regulatory framework while offering substantial flexibility for structuring the Foundation to meet the founder’s objectives.

Key Features of Guernsey Foundations

1. Founder Control: The founder, who establishes the Foundation, has significant control over the Foundation’s structure and purpose. They can outline the Foundation’s objectives in the Foundation charter, appoint Beneficiaries, and dictate how assets are managed. The founder can also reserve certain powers, such as the ability to amend the Foundation’s terms, add or remove Beneficiaries, or dissolve the Foundation.
2. Council: Every Foundation is managed by a council, similar to a board of Directors in a company. The council is responsible for managing the Foundation’s assets in accordance with the Foundation charter and its rules. The founder can be a member of the council, although at least one council member must be a Guernsey-licensed fiduciary (such as Dixcart).
3. Beneficiaries: Foundations can be set up to benefit specific individuals, families, or charitable causes. Guernsey Foundations can have two distinct types of Beneficiaries: enfranchised or disenfranchised beneficiaries. Enfranchised beneficiaries are entitled to a copy of the Foundation’s constitution and can even apply to the Court to amend key aspects of the Foundation including the purpose and dissolve the Foundation. Disenfranchised Beneficiaries do not have automatic rights to information about the Foundation or its assets unless specified in the Foundation’s rules. This enhances privacy and can be useful in situations where the founder wishes to maintain discretion over the Foundation’s purpose and beneficiaries, and is unique to Guernsey Foundation Law.
4. Guardian: Guernsey law requires that a Foundation appoint a Guardian if there are disenfranchised Beneficiaries, or if the Foundation is set up for a non-charitable purpose. The Guardian’s role is to ensure that the council acts in accordance with the Foundation’s objectives and complies with the terms of the Foundation charter. This provides an extra layer of oversight to protect the Foundation’s purpose.
5. Legal Personality: A Guernsey Foundation has its own legal personality, meaning it can own assets and enter into contracts in its own name. This contrasts with a Trust, where the Trustee holds legal title to the assets on behalf of the Beneficiaries. The legal personality of a Foundation offers clarity and certainty in jurisdictions where Trusts may not be fully recognised.
6. Flexible Purpose: Foundations in Guernsey can be established for a wide range of purposes, including charitable, family, or business objectives. They can also be used for commercial purposes, such as holding shares in a family business or acting as a Private Trust Company. This flexibility makes Guernsey Foundations an appealing option for a variety of uses.

Benefits of Guernsey Foundations

1. Privacy and Confidentiality: Guernsey Foundations offer a high degree of confidentiality. There is no public register of Beneficiaries, and the details of the Foundation’s assets and purposes are not publicly available. This makes them particularly attractive for individuals or families seeking privacy in their wealth management.
2. Control and Flexibility: Foundations provide founders with a high level of control over how their assets are managed and distributed. The ability to reserve powers and appoint members to the council allows the founder to retain influence over key decisions, even after the Foundation is established. This is often seen as a significant advantage compared to Trusts, where control is typically transferred to the Trustee.
3. Asset Protection: A Guernsey Foundation can offer robust asset protection, particularly if it is established with the intention of preserving wealth for future generations. Foundations can be structured to shield assets from potential future creditors or potential legal claims, provided that the Foundation was not set up with the intent to defraud creditors.
4. Succession Planning: Foundations are an excellent tool for succession planning, allowing founders to dictate how their wealth is passed on to future generations. Foundations can be structured to provide for family members over multiple generations whilst ensuring that assets are managed in line with the founder’s wishes.
5. Tax Efficiency: Guernsey is known for its favourable tax regime, and Foundations can be structured to take advantage of this. Whilst Guernsey does not impose taxes on capital gains, inheritance, or wealth, it is essential to seek expert tax advice to ensure compliance with tax regulations in other jurisdictions where the founder or Beneficiaries may be resident.
6. Philanthropy: Guernsey Foundations are often used for charitable purposes, enabling founders to establish a lasting legacy through philanthropic endeavours. Foundations can be structured to fund specific charitable projects, provide ongoing support to causes, or even act as a family’s Private Charitable Foundation.

Common Uses of Guernsey Foundations

1. Wealth Preservation and Estate Planning: Guernsey Foundations are commonly used to protect and preserve family wealth for future generations. They allow founders to manage how assets are distributed and to maintain control over family wealth, even after their death.
2. Philanthropic Foundations: Many individuals establish Guernsey Foundations for charitable purposes. These Foundations can fund specific charitable projects or support ongoing causes in a structured and tax-efficient way.
3. Holding Family or Business Assets: Foundations can be used to hold shares in family businesses, real estate, or other valuable assets. By consolidating ownership within a foundation, founders can ensure that assets are managed consistently and in line with their long-term vision.
4. Succession Planning for Complex Family Structures: For families with international members or complex relationships, a Foundation provides a clear and structured way to manage and distribute assets. The flexibility of Guernsey Foundations makes them ideal for handling these intricate family dynamics.

Conclusion

Guernsey Foundations offer a versatile and effective tool for wealth management, asset protection, and succession planning. Combining the best elements of Trusts and companies, they provide founders with greater control, flexibility, and privacy over their assets. Whether used for family wealth preservation, philanthropy, or holding business interests, a Guernsey Foundation can be tailored to meet the specific needs of its founder.

At Dixcart Guernsey, we have extensive experience in establishing and administering Guernsey Foundations, ensuring they meet both legal requirements and the unique objectives of our clients. Please contact Beth Le Cheminant at advice.guernsey@dixcart.com to learn more about how a Foundation could benefit you and your family.

Further to the previous article regarding the basics of Guernsey Trust Structuring (please see: Understanding Guernsey Trust Structures: A Guide by Dixcart Guernsey) we look to explore the practical uses of Trusts and detail case studies where Trusts are used as an effective tool for Estate and Succession Planning, and Asset Protection.

A Trust creates a division of ownership between the Trustee, who is the legal owner of the assets comprising the Trust Fund, and the Beneficiaries, who are the equitable owners. The Trustee is bound by a number of Fiduciary and Statutory duties to, at all times, act in the best interests of the Beneficiaries as a whole, whilst adhering to the terms of the Trust Deed. In the meantime, they must also protect, preserve and enhance the Trust Fund.

Trust Creation

When setting up a Trust, there are three certainties which must be fulfilled to validate and establish the Trust. These are:

• The certainty of intention: a clear intention that the Settlor intends to create a Trust by transferring legal ownership of the Trust Property to a Trustee to hold for the benefit of defined Beneficiaries. This is evidenced by an executed Trust Deed and supported by clear communication between the Settlor / their advisor(s) and the Trustee, discussing the goals and intentions the Settlor has for the Trust, prior to establishment.

• The certainty of subject matter: clearly defined Trust Property, the initial settled funds are usually a nominal amount of £1, £10 or £100 and this is indicated within the Trust Deed, with further assets to be added at a later date.

• The certainty of objects: clearly defined Beneficiaries or a Beneficial Class who will benefit from the Trust, which can include the Settlor.

Other considerations that the Settlor should make at the outset include; whether there are any contingencies to the Beneficiaries benefitting, and whether a Protector will be appointed to provide some oversight to the structure and to select a trusted and experienced Trustee to administer the Trust on behalf of the Beneficiaries.

Whilst the Settlor has given up legal ownership of the assets, the Settlor can request the Trustee to undertake certain actions and to determine guidelines and conditions as to how and when the Beneficiaries are to benefit from the Trust, however these should be expressed as the Settlor’s wish and are not legally binding. This protects the validity of the structure and supports the certainty of intention that the Settlor does intend to hand over the ‘reins’ to the Trustee. For a Discretionary Trust, the Trustee would make the ultimate decision as to whether a Beneficiary should benefit from the Trust, paying close attention to their fiduciary duty to consider the interests of all Beneficiaries, before making any distribution of Trust assets.

Whilst a Settlor can reserve some powers, such as to retain investment powers over the Trust assets (which is the most commonly used reserved power), by reserving too many powers, the Trust could be set aside as a sham, in contravention of the first certainty of intention.

We shall explore some case studies as to why a Trust might be settled in the first place and the benefits of doing so.

Case Study 1: The Spendthrift Beneficiary

There may be a family member who struggles to spend within their means, has faced trouble with addiction or perhaps has not had access to previous wealth and, on inheriting a lump sum, would risk quickly eroding their inheritance without saving for future events.

A Trust structure could protect this Beneficiary and the Trust Assets from depletion and provide continued support to the Beneficiary over their lifetime, without quickly diminishing the corpus of the Trust Fund.

Some examples as to how the Trust could assist would be by paying the Beneficiary’s medical and educational bills directly, purchasing a home for the Beneficiary to reside in, or by assisting with the financial support of the Beneficiary’s own child.

There could also be a contingent Beneficiary specified within the Trust Deed, that their benefit is contingent on a certain event such as them attaining the age of 25, or upon their marriage. This provides flexibility regarding future needs and/or potential contingencies.

Case Study 2: Tax Planning and Passing Assets to the next Generation

Whilst independent tax advice should be taken by all clients, the utilisation of a Trust could be an effective tax planning tool and centralise the ownership of worldwide assets, legally owned by the Trustee.

For example, there would be no inheritance tax payable on the assets held within the Trust upon the Settlor’s demise. Although Beneficiaries should seek tax advice before receiving a distribution from a Trust.

Case Study 3: Preservation of Wealth and Selected Distribution of Assets

This leads us nicely onto the preservation of Family Wealth and Estate Planning.

By settling a Trust, this would ensure an orderly succession of assets after the Settlor’s death, the retention of property within the family, and the continuity of ownership of a family business after the Settlor’s death.

The Trust would also establish a clear and unchallengeable basis for distribution of assets after the Settlor’s death and protects family property from dissipation.

By securing the services of an independent, expert person to manage and control the assets (the Trustee), capital can be preserved for the next generation and property can be held for minors or other dependants.

Case Study 4: Forced Heirship

In some jurisdictions the local law requires assets held in a person’s estate to pass to specified heirs in stated proportions. By settling a Guernsey Trust, the assets would be distributed in line with the provisions of the Trust Deed.

Case Study 5: Confidentiality

A common priority of a high-net-worth individual looking to establish a Trust is confidentiality. By transferring legal ownership of assets to a Trustee to hold within a Trust, this aids the Settlor in keeping their assets confidential.

There is no Beneficial Ownership Register in Guernsey, unlike a number of other offshore jurisdictions and Trusts are not registered in Guernsey.

Case Study 6: Asset Protection

A client may seek the protection of a stable, political and social environment for the ownership and management of their assets or be looking for a safe jurisdiction to maintain their assets, if relocating or working abroad.

They may also be seeking to protect the Trust Property from future litigants who would come to the court in the hope of setting the trust aside in order to access the Trust Fund. An attempt to attack a Trust structure could come from an array of complainants such as a disgruntled Beneficiary, a divorcing spouse, or a future creditor.

By ensuring that; the goals and intentions of the Trust are discussed with the Trustee at the outset, the three certainties are clearly in place and that the Deed is properly drafted upon setup, this will provide the Trust with a high level of protection against any potential attack.

Case Study 7: The Charitable Trust

Finally, a philanthropically minded individual might look to set up a Charitable Trust with a specific charitable purpose. This could include providing for, the relief of poverty, the advancement of education, the advancement of religion, the advancement of arts, culture, heritage, or science and the advancement of animal rights, amongst others.

If the charitable purpose specified by the Settlor at the outset cannot be carried out for any reason, the law provides that the court can order that the property can be applied to another charitable purpose similar to that originally intended.

Summary

In summary, there are many modern uses for offshore Trust structures, and these continue to develop.

An emerging trend is the addition of cryptocurrency assets to a Trust structure, although it is worth noting that considerable due diligence is required when accepting these types of assets into a Trust, and it is recommended that a specific clause be added to the Trust Deed to allow the investment of the Trust Property into such volatile, high-risk assets.

Should you require any further information or wish to discuss your requirements, please contact Beth Le Cheminant at advice.guernsey@dixcart.com.