Category: Private Client

Introduction

Families are becoming more and more mobile. There are many attractive residence schemes available around the world, which have added to the popularity of moving to different countries. As this trend continues the management and control of family wealth across jurisdictions becomes even more vital.  

Cyprus is well known as a lively international business centre, with a straightforward and attractive tax regime for foreign investors. Its geographical location, advanced infrastructure, business orientated environment and high level of professional services, are all factors that contribute to the benefit of establishing a Cyprus Family Office that can be used to preserve and grow the Family’s wealth for the next generation.

What is a Family Office?

A family office is generally a private company engaged by a single family or a group of families to manage all of their financial and legal affairs.

What Services are Offered by a Family Office?

Family office services generally involve the management of the following activities:

• Accounting and reporting: the family office needs to provide timely and accurate accounting, tax and performance reporting.
• Assistance in avoiding Intergenerational conflict.
• Direct investments: many families will have made their money through operating a business, real estate developments, private equity investing or entrepreneurial activities. These skills can be applied to increase the family’s wealth through direct investments in similar enterprises.
• Education of younger generations about their future responsibilities.
• Investment management: a primary task is to manage the wealth effectively, on a large scale and over many decades. This is probably the most challenging and critical issue for most families.
• Management of a family-owned business: a forum for discussing how such a business will be managed and governed.
• Philanthropy: the pursuit of fulfilling charitable projects for the family.

What Should you be Looking for in a Family Office Provider?

There are a number of important points to take into account when selecting a provider of family office services, including,

professional expertise; in asset management, taxation and succession planning.

Other important factors to consider are:

• A legal or fiduciary professional who is not tied in to any one bank, investment manager or fund adviser. This helps to ensure impartiality of advice and allows for the selection of appropriate third-party support, free from any conflict of interest.
• Providers who have multi-jurisdictional coverage either through their own offices or through a global network or association membership. This helps achieve a well-coordinated organisation of a family’s global affairs.
• A provider with proven experience in dealing with family office positions or, at minimum, complex, multi-jurisdictional and multi-generational structures.

Provision of Family Office Services by Dixcart

Dixcart Cyprus is experienced in offering Family Office services to its clients. At Dixcart Management (Cyprus) Limited we are happy to gain an in-depth understanding of your needs and to propose appropriate structures, and support for your Family Office.

If you require any additional information, please speak to your usual Dixcart contact or to the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

The data contained within this Information Note is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time

Background

It is important that UK inheritance tax is taken into careful consideration, in particular by individuals who have assets in the UK.

This Information Note examines how, with careful planning, some UK inheritance tax obligations can be mitigated for certain individuals.

What is UK Inheritance Tax?

UK inheritance tax (IHT) is a tax on money or assets held at death, and on some gifts made during a lifetime (most importantly those gifts made less than 7 years prior to death).

A certain amount can however be passed on tax-free. This is known as the ‘tax-free allowance’ and/or the ‘nil rate band’.

Each individual has a tax-free inheritance tax allowance of £325,000. This allowance has remained the same since 2010/11.

On death, inheritance tax in the UK is at a rate of 40%.

Additional Nil Rate Allowance

Individuals, with an estate value greater than their tax-free allowance of £325,000, due to the value of their home, may be able to take advantage of an additional tax-free allowance known as the  residence nil rate band (RNRB).

This additional tax allowance is worth up to £175,000 (2023/24), and is available when an individual’s main residence is passed to their children or grandchildren.

Does UK Inheritance Tax Apply to a Non-UK Tax Resident?

The UK inheritance rules are different depending on a person’s domicile.  The concept of domicile is based on a complex set of laws (outside the scope of this note). However as a broad overview, an individual is domiciled where he/she considers his/her home to be.  There may also be estate or inheritance taxation liabilities in other jurisdictions.  Therefore local advice should be taken in any jurisdiction where taxes might be chargeable.

For UK inheritance tax purposes, there are three categories of domicile:

• UK Domiciled – the worldwide assets of the individual will be subject to UK inheritance tax, whether the individual is UK resident or not.
• Non UK Domiciled (“non-dom”) – the assets of the individual, situated in the UK, will be subject to UK inheritance tax irrespective of whether the individual is UK resident or not.
• Deemed UK Domiciled – where an individual is a non-dom but has lived in the UK in 15 out of 20 tax years. According to UK inheritance tax rules he/she is considered to be UK domiciled and his/her worldwide assets will therefore be subject to inheritance tax on his/her death.

When an individual moves to the UK, dependent on all of the circumstances of the move and the new life adopted in the UK, there may be an argument that an individual has immediately become UK domiciled.  When this is not the situation, once an individual has lived in the UK for 15 years he/she will be deemed domiciled for UK inheritance tax purposes.

As is often the case, a complex set of laws is best considered through explanatory examples.

Explanatory Examples

Tom is an Australian citizen, he was born in Australia and has always lived and worked there. He is a non-dom in the UK and has a net worth of £5m.  He is divorced with one child aged 19.

Tom’s child, Harry, chooses to study at a university in the UK and Tom is aware that UK real estate has, over the last few years, shown some good returns.

Tom purchases a property in his sole name, mortgage free, near to his son’s university in the UK for £500,000, for his child to live in while studying in the UK.

Planning opportunity – 1

Even though Tom is not UK tax resident and is a UK non-dom, any assets that he has in his own name situated in the UK are subject to UK inheritance tax on his death.  If Tom dies while owning the property, leaving his whole estate to Harry, there will be a tax liability of £70,000 on his death.  This is 40% of the value of the property above the £325,000 nil rate band, assuming that Tom has no other UK assets.

• Tom could have considered purchasing the property jointly in the name of himself and his son. Had he done so, on his death, the value of his UK asset would have been £250,000.  This is below the nil rate band threshold and therefore no UK inheritance tax would be payable.

Planning opportunity – 2

Tom is getting close to retirement and decides to move to the UK to be with his child, who has settled in the UK after finishing university.   He sells his Australian home but keeps his Australian bank accounts and other investments and is still considering that he may return to Australia at some point in the future.  He sends £1m over to a newly opened UK bank account before moving to the UK, to live on, once in the UK.

• Tom would be better advised to remit these funds to a tax neutral, sterling jurisdiction, such as Guernsey or the Isle of Man. If Tom was to die before becoming domiciled for UK inheritance tax purposes, these funds would then be outside the inheritance tax net.
• By structuring such an account correctly, Tom could bring ‘capital only’ to the UK and thereby avoid any obligation to pay income tax. Please contact Dixcart to take advice on this topic, prior to moving to the UK.

Planning opportunity – 3

Tom dies having lived in the UK for 25 years of his retirement.  He leaves his whole estate to his son.  As Tom was deemed domiciled at death, his entire worldwide estate, not just his UK situated assets, will be subject to UK inheritance tax at 40%, except for the nil rate band at the time of his death.  If his estate is still worth £5m, the inheritance tax payable will be £1.87m at current rates and nil rate band.

• Before Tom became deemed domiciled in the UK, he could have settled the non-UK assets he still had, into a non-UK resident discretionary trust (traditionally in a tax neutral jurisdiction). This would place those assets outside his UK estate for UK inheritance tax purposes. Following Tom’s death the trustees could have distributed the trust assets to Harry; achieving the same results as a will, but passing on the assets free from inheritance tax liabilities.

Planning opportunity – 4

Following Tom’s death, his son Harry, decides to leave the UK for New Zealand, having lived in the UK for the previous 30 years.  He sells all of his properties and other assets and deposits the proceeds in a New Zealand bank account. He dies within a year of moving to New Zealand.

As Harry only left the UK a year prior to his death, he will still have been UK resident for more than 15 of the previous 20 years.  He will therefore still be considered UK deemed-domiciled at death and his entire estate would be taxable to UK inheritance tax at 40%, even though he had no assets in the UK on his death.

• Rather than the trustees distributing the assets to Harry on his father’s death, it might have been prudent for the trustees to only distribute assets as needed by Harry over time. This would mean that the entire estate would not be in his name on his death and would not therefore be subject to inheritance tax in the UK.  The assets would remain in the trust and be available for future generations of the family. Advice should be taken on distributions from a trust to ensure that these are as tax efficient as possible.

Summary and Additional Information

UK inheritance tax is a complex issue. In particular for individuals with assets in the UK. Careful consideration and advice need to be taken regarding the best manner to structure the holding of these assets.

Advice should be taken as early as possible and should be reviewed regularly, to allow for any changes in the law and/or family circumstances. If you require additional information on this topic, please contact the Dixcart office in the UK: advice.uk@dixcart.com

The data contained within this Information Note is for general information only. No responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time.

Changes in terms of global tax regulations and increasing international tax transparency are vital to consider when implementing strategies to preserve family wealth and family business ownership structures.

To help address tax avoidance, the Organisation for Economic Co-operation and Development’s (OECD)/G20 Base Erosion and Profit Shifting (BEPS) project has built on the original measures applying to large multinational businesses, by implementing a two-pillar approach. Pillar Two relates to new global minimum tax rules and aims to ensure income is taxed and paid at an appropriate rate. These new rules are in addition to the familiar regulations such as the Common Reporting Standard (‘CRS’), the US Foreign Accounting Tax Compliance Act (‘FATCA’), Substance Requirements, and ultimate beneficial ownership registers.

Dixcart Expertise in Relation to Wealth Structures

Dixcart are familiar with the issues facing families in an ever-changing international world.

We provide advice in terms of the location of family offices, their members, and businesses, as well as offering management and coordination for family offices, and liaison across the family members. We also provide trustee services in a number of jurisdictions.

Location

It is very important to consider where each of the relevant family members are resident and also where they are tax resident.

Structuring options also need to be considered and/or reviewed. The use and location of holding companies and/or family wealth protection vehicles such as; family investment companies, foundations, trusts needs to be planned carefully.

International investment structures need to be evaluated, including the holding of real estate, from a tax and asset protection perspective, in particular in relation to ‘BEPS.’

Organisation

Key areas that need to be organised to ensure that a Family Office runs as efficiently as possible and achieves its objectives include:

Confidentiality Management

A procedure needs to be developed to deal with relevant confidential information requests from financial institutions and third parties.

Contingency Planning

Rules and procedures should be in place to protect the family business in the case of unexpected events:

• Policies and procedures to underwrite business continuity.
• Use of appropriate legal structures to provide as much asset and wealth protection as possible.
• Consideration of ‘citizenship by investment’ programmes in reputable jurisdictions, to provide options for the tax residence of family members to be diversified.

Family Governance

• Successors need to be identified and their role discussed with them.
• The development of open communication amongst family members regarding decision making strategies and processes.
• A ‘Family Constitution’ is a useful way to formalise family governance and to prevent potential future conflict.
• Creation or identification of education and training programmes, to groom the next generation.

Family Office Advisory Services

• The segregation of the family’s wealth from the family business(es), should be considered.
• Development of a strategy regarding use of the profits arising from the family business and investments, that are not going to be re-invested.
• Creation of a team to manage the wealth.

Succession and Inheritance Planning

• Establishment and/or review of policies and procedures to ensure the adequate preservation and transfer of wealth to the next generation.
• A review of the ownership structure of each family business and other relevant assets.
• Understand how relevant local laws would apply, in relation to inheritance (for example; Civil Law, Sharia Rules etc.).
• Putting in place the most appropriate legal structures such as wills or other legal vehicles to pass wealth to the next generation.

Liaison

Time must be taken, by those managing the Family Office, to establish and develop close relationships with the relevant family and with other professionals advising them. Dixcart believe this relationship is critical.

As well as providing technical expertise in terms of structuring, professionals at Dixcart also understand family dynamics and frequently assist in offering advice as to how to improve communication and how to avoid potential conflict.

Additional Information

If you would like further information regarding a well-considered and comprehensive approach towards succession planning, please speak to your usual Dixcart contact or to a member of the professional team at the Dixcart office in the UK: advice.uk@dixcart.com

Can Anyone Invest in a UK Real Estate Even Without a UK Passport?

Yes.  Foreign individuals (over the age of 18) and corporate entities (subject to being registered at Companies House) may purchase or invest in UK real estate.

What Types of Investment can be made?

There are many ways to invest in UK real estate. Some of the more conventional routes in England and Wales include:

• Ownership of a legal “estate” in land to realise capital appreciation

An estate is an abstract entity carried on from medieval times and used to describe nothing more than time in the land.  The most common forms of estate ownership are freehold (owning land in perpetuity or “forever”) and leasehold (owning land for a number of years). Generally a term of years in a lease of property will be born out of a freehold estate or a leasehold estate for a term longer than the one in question. The owner of a term of years in a leasehold interest will be a tenant.

• Buy to let investments

A purchaser can acquire a freehold or leasehold interest (as above) specifically to rent it out to reap the rewards of a rental income. An investor will be looking closely for high net yields when deciding what to invest in and where.

• Real Estate Investment Trust (or REIT)

Providing an easier and lower cost way to invest in  property, a UK REIT (often holding a portfolio of property) provides a way to invest in buy-to-let property without having to buy property directly.  UK REITs benefit from an exemption from UK tax on both rental income and gains relating to their property investment business allowing them to redistribute up to 90% of rental income to their shareholders.

• Property development

This can take many forms. You might wish to buy land and sell it onto a developer having secured planning permission over it; buy an existing commercial building and apply for planning to convert it into residential property, convert adjoining houses into one large property and letting it out as a house with multiple occupation and so on.

You Have Identified a Property, What Next ?

Let the buyer beware

In the UK, a seller of  land has limited duties of disclosure to a purchaser because of the principle of caveat emptor (let the buyer beware).  In effect, a purchaser buys at its own risk. It is therefore important to instruct a property solicitor to carry out the usual pre-contract investigations on “title”, apply for the relevant searches and raise relevant enquiries of the seller. Careful investigation should minimise risk whilst flushing out any potential burdens and obligations that decrease value.

Site inspection

It is also advisable to carry out a site inspection and note any discrepancies between the plans and what is on the ground. You will also want to check for signs of the presence of occupiers,  rights of way and/or to carry out investigations such as soil samples in the event you intend to develop the land. Your professional advisor will be able to advise you further.

Who will hold “title” to the property?

This might be a corporate entity or an individual. Whenever land is held by two or more people concurrently there must be a trust. The legal title to the estate may be held by up to four persons as “joint tenants” on trust for the beneficial owners so that if any one of the legal owners dies, title to the estate passes to the survivor(s). Holding property as “tenants in common” however allows you to hold the legal interest on trust for the separate beneficiaries in equal or unequal shares as the case may be.

Finance

How will you finance the purchase and a potential deposit? Mortgages are difficult to come by in the UK for foreign investors.

Use of the property

Consider whether there are any restrictions on the use of the property.

Relocation to the UK

If you are intending on relocating to the UK, have you consulted with an immigration specialist to ensure all rules are complied with?

Tax considerations

It is advisable to speak to a professional as to the tax implications of your impending purchase or look for tax efficient structures.

Further information

If you have any questions and/or would like advice on any UK Commercial Property, please speak to us at: advice.uk@dixcart.com

We are frequently asked by our clients about the often-difficult topic of exit and succession planning.

This gives rise to several practical issues, especially where a trade sale is not likely, or the existing management team are perhaps not in a position to be able to raise sufficient funds to affect a traditional “Management Buy Out”.

One Solution that is often overlooked is an Employee Ownership Trust (EOT)

An EOT can be used to acquire between 51% and 100% of a trading company’s shares which are then held on trust for the benefit of all the company’s employees, on the same terms.

Unlike traditional employee share schemes, which give rise to direct employee ownership, the EOT allows for indirect employee ownership overseen by selected employee Trustees.

EOT’s have been shown to promote better business performance, greater commitment, and productivity from employees with increased staff loyalty, lower staff turnover and absenteeism. They also allow staff members to benefit from being involved in the management and future direction of the business.

Benefits to the Shareholder

• The sale by the existing business owner of over 51% of his/her shares in the company to a qualifying EOT, would be Capital Gains Tax (CGT) and Inheritance Tax (IHT) free.  This can prove to be a valuable relief given that the Business Asset Disposal relief limit for the reduced 10% rate of CGT is only £1 million;
• A market is created for the shares that might not otherwise exist;
• Unlike in a liquidation situation (which is often the only choice for small business owners to realise the value of the business), the company can continue to operate, and the shareholders and employees can still be part of that business;
• Typically, the sale of shares in a company to an EOT is funded by a mixture of existing cash, from within the company, and external loan instruments;
• It avoids the need for often complex and expensive negotiations when selling to a third party.

Benefits to the Company and Employees

• A trading company owned by an EOT is able to pay cash bonuses of up to £3,600 per annum to all employees (on a ‘same terms’ basis);
• These bonuses will be tax-free but will be subject to National Insurance Contributions (NIC’s);
• The company gets corporation tax relief on these tax-free bonuses;
• There are benefits in terms of increased staff motivation and job retention, as set out above.

Summary and Additional Information

An EOT can provide a tax-beneficial way for shareholders to realise value and to involve employees in the company that they work for, although the structuring and funding of an EOT requires careful consideration.

If you would like to find out more about how an EOT may benefit you and your business, please contact us: advice.uk@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.

Introduction:

When it comes to protecting assets and securing wealth, individuals and businesses often seek legal structures that offer robust asset protection. Nevis, known for its strong offshore financial services, provides two popular options for asset protection: Nevis trusts and Nevis Multiform Foundations.

These entities offer a range of benefits, including confidentiality, legal protection, and flexibility, making them an attractive choice for individuals and businesses looking to safeguard their assets. In this article, we will explore the key advantages of Nevis Trusts and Nevis Multiform Foundations.

Asset Protection:

One of the primary reasons individuals opt for Nevis Trusts and Nevis Multiform Foundations is the significant level of asset protection they provide. These entities are designed to shield assets from potential threats such as lawsuits and creditors.

By transferring assets into these structures, individuals can safeguard their wealth, ensuring it remains out of reach from potential claimants and should anyone wish to attack the structure they must first place a bond of $100,000 for a Trust and $50,000 for a Foundation with the Nevis government before any action is considered.

Confidentiality and Privacy:

Nevis is renowned for its commitment to privacy and confidentiality. The island’s legal framework ensures that personal and financial information pertaining to Nevis Trusts and Nevis Multiform Foundations remains strictly confidential. The trust laws in Nevis do not require the registration or public disclosure of trust deeds, beneficiaries, or settlors. This level of privacy helps protect the identities of those involved.

Flexibility and Control:

Nevis Trusts and Nevis Multiform Foundations offer considerable flexibility and some control over assets. These structures allow individuals to shape the terms of the trust or foundation, including the distribution of assets and the appointment of trustees or foundation council members.

This flexibility ensures that the creator of the trust or foundation can maintain some elements of control while simultaneously protecting assets.

Nevis law permits the appointment of protectors, who can oversee the trustees or a supervisory board to oversee the Foundation council members, ensuring the assets are managed according to the creator’s wishes.

Estate Planning:

Nevis Trusts and Nevis Multiform Foundations are valuable tools for estate planning. By transferring assets into these structures, individuals can dictate how their wealth is managed and distributed after their passing. This allows for a seamless transfer of assets to beneficiaries while minimising estate taxes and avoiding probate. Additionally, the assets held within these structures are protected from any claims arising from the deceased’s personal liabilities.

International Recognition:

Nevis is a reputable offshore jurisdiction that offers international recognition and legal protection. Nevis Trusts and Nevis Multiform Foundations are established under the Nevis International Exempt Trust Ordinance and the Nevis Multiform Foundations Ordinance, respectively. These statutes provide a robust legal framework, ensuring the validity and enforceability of these structures globally. Many countries recognise and respect the legal protections offered by Nevis Trusts and Nevis Multiform Foundations, further enhancing their credibility.

Conclusion:

When it comes to asset protection, Nevis Trusts and Nevis Multiform Foundations offer a compelling solution for individuals and businesses seeking to safeguard their wealth. With benefits such as asset protection, confidentiality, flexibility, and international recognition, these structures provide a secure environment for managing and preserving assets. However, it is essential to consult with experienced professionals and understand the legal and tax implications before establishing such structures to ensure compliance with relevant regulations and laws.

Additional Information

If you require any additional information or wish to discuss Nevis trusts and Nevis Multiform Foundations further, please contact Beth Le Cheminant at advice.nevis@dixcart.com.

Whilst this note is intended to provide information regarding Nevis asset protection structures, it is not intended to form any sort of legal or tax advice. We strongly recommend that any individual considering setting up a wealth planning structure seek independent legal and tax advice before doing so.

Nevis Multiform Foundation Characteristics

Foundations are often regarded simply as the civil law version of the common law Trust. However, there are a number of distinct characteristics of a Nevis Multiform Foundation which make it stand out as a unique and advantageous wealth planning tool quite separate from a Trust and even that of a Foundation, formed elsewhere in the world. We shall explore these more fully throughout this note.

Legal Personality – the most notable difference between a Foundation and a Trust is that a Foundation possesses a separate legal personality and has the capacity to sue and be sued. A Nevis Multiform Foundation has the capacity, rights, powers, and privileges of an individual person.

Ownership and Purpose – A Foundation is a self-owned entity which does not have shareholders or equity holders, instead it is formed for any purpose which may be charitable, non-charitable, commercial or non-commercial which the management board will carry out on behalf of the Foundation.

Control – A concern some individuals face when considering settling an offshore Trust, is surrendering complete control in relation to the ownership, investment, and distribution of their assets. Conversely, the Founder of a Foundation (otherwise known as a Subscriber) can maintain an element of control, by becoming a member of the management board and assist in setting the purpose and investment strategy of the Foundation. Alternatively, they can form a supervisory board to oversee the management of the Foundation and fulfilment of the Foundation’s purposes by the Management Board.

Flexibility of Form – the most innovative and beneficial characteristic of setting up a Foundation in Nevis is that it can choose to take a number of different forms including; a trust foundation, company foundation, partnership foundation or a traditional foundation.

Its malleable nature means that it can also swap between forms over its life. This flexibility allows a Founder a broad scope in which to establish their structure and tailor it to suit their needs as they evolve over time.

Creditor Action – As with the protection provided againsta creditor pursuing any frivolous action against trust property held in a Nevis International Exempt Trust, there is similar protection afforded to a Nevis Multiform Foundation.

Before bringing any action or proceeding against any Nevis Multiform Foundation, a Creditor must first deposit a bond to the amount of: USD50,000, with the Minister of Finance.

Foreign Judgements – a judgement made in another jurisdiction is not recognised or enforceable in Nevis.

Validity – no multiform foundation, governed by the laws of Nevis, and no subscription of property to a multiform foundation which is valid under the laws of Nevis, shall be void, voidable or liable to be set aside or defective in any manner, by reference to the law of a foreign jurisdiction

Parties

A typical Nevis Foundation consists of the following parties:

Practical Uses

Family Business Succession Planning

By placing the ownership of a Family Business under a Multiform Foundation, continuity can be afforded to the business and the purpose can be clearly defined. Family members and descendants can also be members of the management board and therefore actively involved with the direction and management of the underlying enterprise.

Educational Foundation

There comes a point where junior members of a family must leave the security and protection of their family for the first time and enter the wider world for education or career purposes. This may mean that they are moving to a larger city or different country but are not yet ready to have full financial independence. A multiform foundation is a good solution in this situation by providing financial assistance to such a member of the family without giving them complete access to a lump sum.

Charitable Foundation

A Multiform Foundation can be established with a specific or multiple charitable purposes. Such purposes could include the relief of poverty, the advancement of education, the advancement of religion, the protection of the environment, the advancement of human rights or any other purpose which is beneficial to the community.

Corporate Stability

Defining the specific purpose for an overlying multiform foundation can ensure that the long term strategic plans of the underlying assets / company are followed and maintained in a consistent manner.

Overcome Forced Heirship

Should the Founder be resident in a country where forced heirship provisions are in force, he/she may wish to establish a Multiform Foundation in Nevis where there are no forced heirship rules and the assets would be distributed in line with the purpose of the Foundation.

Tax Planning

As part of a tax planning strategy, many individuals may utilise a corporate vehicle in a jurisdiction which they do not reside. However, in the jurisdiction of their tax residence they may well be required to report their ownership and interests in this company under controlled foreign corporation reporting requirements.

Instead of holding shares directly, an individual might establish a Multiform Foundation  affording anonymity and privacy for the subscriber.

Additional Information

If you require any additional information or wish to discuss your structuring needs further, please contact Beth Le Cheminant at advice@nevis.com.

Whilst this note is intended to provide information regarding Nevis Multiform Foundation structures and examples of how these can be used, it is not intended to form any sort of legal or tax advice. We strongly recommend that any individual considering setting up a wealth planning structure seek independent legal and tax advice before doing so.

Introduction

The Dixcart Group has remained privately owned by the Dixcart Family Office since it’s foundation over fifty years ago in 1972. Excelling in the implementation of advice and provision of support and services for both straightforward and highly complex international Estate and Succession Planning since its foundation, the Group is intimately experienced in the complex nature of Family Office matters and therefore uniquely placed to act.

Guernsey Trusts and Foundations

Estate and Succession planning is a key concern for high-net-worth individuals and families looking to ensure the smooth transfer of wealth to future generations. The use of trusts and foundations is a popular strategy for high-net-worth individuals seeking to manage and protect their wealth for future generations. Guernsey, a British Crown Dependency located in the English Channel, is a leading jurisdiction for the establishment and administration of trusts and foundations.

Not only is the use of trusts and foundations a popular strategy they are also powerful tools for succession planning in Guernsey, offering a range of benefits for wealth preservation and management.

Trusts

A trust is a legal arrangement in which a person (known as the Settlor) transfers assets to a trustee, who holds and manages those assets for the benefit of one or more beneficiaries. In Guernsey, trusts are governed by the Trusts (Guernsey) Law 2007, which provides a flexible and modern legal framework for the establishment and management of trusts.

Trusts are a popular choice for estate and succession planning in Guernsey. By creating a trust, a Settlor can transfer assets to a trustee who will hold and manage them for the benefit of one or more beneficiaries. The trustee is legally bound to manage the trust assets in accordance with the terms of the trust deed, ensuring that the Settlor’s wishes are carried out.

Benefits Offered through the Use of a Trust

Trusts offer a range of benefits for estate and succession planning, including:

• Continuity: Trusts can be designed to have perpetual existence, ensuring continuity of wealth management across generations.
• Asset protection: Trust assets are held by the trustee on behalf of the beneficiaries, providing protection against creditor claims and legal challenges.
• Confidentiality: Guernsey trusts offer a high degree of privacy and confidentiality, with no public register of trusts or disclosure of beneficiary information.
• Tax efficiency: Guernsey has a favourable tax regime for trusts, with no capital gains tax, inheritance tax, or estate duty.

Foundations

Foundations are another popular choice for estate and succession planning in Guernsey and are governed by The Foundations (Guernsey) Law, 2012. A foundation is a legal entity which while similar to a trust in many respects, has some key differences.

Unlike a trust where assets are held in the name of the Trustee a foundation is a legal entity in its own right. Assets are held in the name of the foundation which is managed by a council of members or directors. The foundation’s constitution sets out the rules governing the management and distribution of its assets.

Benefits Offered Through the use of a Foundations

Guernsey foundations offer a range of advantages for estate planning, including:

• Legal personality: Foundations have their own legal personality and are more easily understood in civil law jurisdictions where the common law concept of a trust is not always compatible with local legislation.
• Continuity: Foundations can be designed to have perpetual existence, ensuring continuity of wealth management across generations.
• Asset protection: Foundation assets are held by the foundation on behalf of its beneficiaries, providing protection against creditor claims and legal challenges.
• Tax efficiency: Like trusts, Guernsey foundations offer favourable tax treatment, with no capital gains tax, inheritance tax, or estate duty.
• Flexibility: The Foundation Charter can be tailored to each individual Founder’s requirements and circumstances.

Conclusion

Trusts and foundations are powerful and adaptable tools for estate and succession planning. With a favourable legal and tax environment, Guernsey is a leading jurisdiction for the establishment and administration of these structures. High net worth individuals and families can work with experienced professionals at Dixcart, to design and implement a tailored estate and succession plan that meets their unique needs and objectives, ensuring the smooth transfer of wealth to future generations.

Further Information

For further information or if you have questions regarding succession planning advice, services and support please contact the Dixcart office in Guernsey: advice.guernsey@dixcart.com

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission.

Dixcart Fund Administrators (Guernsey) Limited: Protection of Investors Licence granted by the Guernsey Financial Services Commission