The hand that feeds you

Arayan lives in the UK, but was born in India and grew up in UAE. He came to see me a few days ago with some questions.

Although Arayan has a prestigious business track record - from property development to key roles on boards of large technology companies - he is also an exceptional human being to whom people are drawn as if by a magnet. His knowledge on a broad range of topics is extensive but they are always tempered by a deep love of people and his opinions are therefore always thought provoking, independent and intuitive.

Having known him and his family for many years, I was keen to ask after his wife and children – growing up all too quickly. But on this occasion his attention was on his mother Pari.

Arayan’s father had been very successful in the petrochemical, oil and gas industry when he was growing up. However, he died nearly twenty years ago and Pari had inherited the family fortune. She had taken advice and settled her husband’s estate on trust in Guernsey and made Arayan the Protector. After a few years of living as a widow in UAE, she returned to India to live just outside Mumbai in a substantial home where she spent much of her time indulging her grandchildren.

Pari is in good health but at 86, Arayan was concerned that she should be protected from any family dispute or tax investigation. Arayan, who is always mindful of his close family and friends has been following the OECD initiatives on the erosion of privacy on offshore financial information with concern and interest.

‘There is no doubt in my mind that the Indian Tax Authority will use the information exchanged from Guernsey about our family trusts to harass my mother now that she is living in India. The fact that she is unlikely to be taxed on the trust fund, since she has not received a benefit, will not deter it. The case Commissioner of Wealth Rajkot v Estate of HMM Vikramsinhji of Gondal, 2014, is very helpful, but once the Indian tax authority see the size of our trust fund it will want to see how else it can raise taxes. I do not want my mother to be involved in any form of investigation or family dispute which would be extremely distressing for her’.

He went on, ‘My mother made me Protector of her trusts and over the years has relied on me completely.  The trustees always look to me before making distributions to my siblings, two of whom are dependent on her trusts for their quality of life. They have also invested extensively into my projects – which has resulted in a quadrupling of the trust fund’.

‘I am concerned that the Indian Tax Authorities will argue that because of my close relationship with her trustees that it will argue the trust is a sham and tax her as if she continued to own the fund outright. Such a claim, which is of course ridiculous, could give rise to years of distressful and unnecessary correspondence with my mother’.

Arayan and I discussed the situation in some depth and I came up with a number of solutions for him to consider.

With regard to his siblings’ dependency on the trust fund he said ‘My brother and sister have never worked. They live in the UAE totally dependent on my mother’s trusts for their quality of life. It would suit them if the trusts were set aside, since in her Will all her assets are to be divided between her five children equally.’

Arayan looked to me for solutions - should she change her Will, and if her trusts were not to be put aside, what could he do to make his mother’s wishes more robust?

I had to agree with Arayan, I was not convinced that her Letter of Wishes would deter his siblings from mounting a claim. ‘I have seen so many Letters or Wishes and non-binding Family Constitutions torn up if the beneficiaries are not provided for as generously as they had hoped' I explained to him.

I put to Arayan a number of options based on my decades of experience – which we also discussed at some length.

Please watch the press releases for our books below:

'When you are Super-Rich who can you trust'

'Uncovering Secrets: Winning business from Private Clients' 

Feel free to contact us if you have similar concerns or would like to discuss matters surrounding CRS, privacy and control of our wealth ownership structure. 

Contact :          svetlana@garnhamfos.com

                        020 3740 7423