Team players

I had a meeting last week with an old friend who works primarily in the Middle East, Lama. She has a client Farah who is the widow of a very wealthy businessman that died six months ago. Farah’s husband left a substantial family trust based in Jersey and five properties in London which he held in his own name. The Trustee was a professional who had been given a Letter of Wishes as to what it should do with the trust fund. It had been drafted by a reputable firm of lawyers and in it the trustees were expected to make ‘reasonable provision for the siblings’. Already the siblings were beginning to mutter between themselves and with the trustee as to what this could mean for them.

In addition to this trust he had left five substantial properties which he owned personally, having been encouraged to de-envelop last year to avoid ATED by his lawyer.

Farah was at a loss to know where to start. She had lost confidence in the trustees who seemed incapable of getting to grips with her siblings in law and were delaying in responding without an opinion from a QC.  With regard to the lawyers, which her husband had been using, she was also furious that they had encouraged him to de-envelope the five London properties to avoid paying the annual tax on enveloped dwellings without any consideration as to the Inheritance Tax consequences. She was now facing an inheritance tax bill of £3 million.

Farah asked Lama to fix a meeting with our Family Office, because she wanted to know what to do. She wanted to sue her lawyers and remove the trustee, but did not know how she should replace them.

After spending the first few hours getting to know her concerns, the family culture and background, I started by telling her that there was no easy solution. She needed to understand the law, her options and the consequences before choosing what and who she needed by way of professional guidance.

The most pressing need was to get a Grant of Probate for the five homes in London. Farah’s husband had not left a Will and as already mentioned he owned them personally. Under the Intestacy rules Farah was left with an outright gift of £250,000 and half of the remaining value (of around £8m) subject to inheritance tax.

I told her that she and her children could enter into a Deed of Variation and explained what was needed, including a probate lawyers to prepare the necessary forms and the Deed; I explained the process.

She then needed to put a halt to the dispute between the trustees and her siblings in law before it got out of control. I suggested she meet a member of our team who could advise her on what was needed to put a swift end to the dispute without incurring substantial professional fees and it made her feel delighted.

Next on our agenda was to address her right as Protector to remove the Trustee. I pointed out to her that her duty was fiduciary which meant that she could be made liable for any loss to the trust personally. Given that her siblings in law were beginning to show their appetite for a fight, she needed to address this exposure seriously.

I explained that she had the option of setting up a private trustee company which could be owned by a Bahamas Executive Entity and then put in place some good governance principles which a member of our team could guide her on the detail of this. She could continue to use her existing trustees to administer the trust, but they would not then make the decisions which could then be left to the board. She could possibly use the office as a director or member of the board to encourage one or more of her siblings in law to take a less aggressive stance and work with the trust not against it.

As we came to the end of a very interesting and fruitful discussion, she commented on how weary travel had become without a European passport. This of course is an area I advise on frequently and we are in the process of choosing a suitable EU country of which she can become citizen.

They say it is not what you know but who you know – which is true. However for many the difficulty is finding a Family Office at the hub of the wheel, that not only has the right connections but can  ensure that the correct contract is put in place to get the most out of them.