In trusts we trust

The last time I was at Queen’s Club was for the tennis tournament which I thoroughly enjoyed with friends and family. But on Wednesday evening with the stands and tents gone, it looked eerily quiet in the pale moonlight. I had come – not to play tennis, but to hear a debate.

Normally, I am content to read what journalists and commentators have to say about current affairs or listen to them on the TV, or radio. However, on this occasion, I wanted to hear directly what Isabel Oakshott, presenter on the BBC, Daniel Johnson editor of Standpoint and Alan Lockey former adviser to Labour MP Tristram Hunt and former senior adviser to the Labour Party – had to say.

The topic was Brexit, but neither Isabel nor Daniel seemed particularly perturbed about Brexit – what was really of concern for their country was the threat of Corbyn getting in to No 10!

Isabel said ‘There is no ‘money tree’ - other than what you can borrow’.

But Daniel was more forthcoming,

‘If Jeremy is elected’ he said ‘there will be queues to leave the country - 90% wealth taxes’. It was clear that in his view with swingeing taxes everyone who could make money for the country would leave.

Alan meanwhile, confessed that he had never voted any party other than Labour all his life, but could not and would not, vote Corbyn.

Following the debate, deeply disturbed by what I heard, I telephoned a friend who is high up in the Tory establishment ‘Surely now is the time for the Tory party to speak up for Britain; a world class financial centre – the new Singapore or Switzerland – post Brexit’ – Her reply – ‘There is no political appetite for appeasing the rich!’

 Given that no political party seems to want to support our biggest tax payers, it is time to go back to the drawing board.

I have been serving UHNW clients for over three decades and this is no time to be defeatist.

Trusts have been used for centuries to protect wealth for future generations and if they can be used in Britain as recently as August of last year on the death of the 6th Duke of Westminster to save for his family the lion’s share of their £9.35billion they can continue to be used for our clients, whether Brit or not – with one massive word of warning.

Governments across the world are united in their enthusiasm to stamp out tax evasion – and quite right to. But within the ambit of tax evasion, they want to lump aggressive tax avoidance – and under this umbrella they wish to include trusts. But even Governments cannot step outside the law, although we must be mindful as to what laws they intend to use to get what they want!

From the manual written for tax inspectors across the world for the financial information they will automatically receive when CRS kicks in – any trust of any significance – with a Protector – is to be investigated – if the Settlor is still alive.

Why, is this combination so relevant - because if the trust has a Protector, the Government is justified to investigate as to whether the trust is genuine or a sham? If a sham, then the trust can be ignored and the settlor taxed as if the monies were still owned by him or her.  

Trusts are an invaluable tool which, when set up correctly, is superior to most other wealth ownership structures. What we do for our families is to use trusts as the core of their set up but include corporate elements which give the proper checks and balances, the Ring of Confidence and it is a scenario they feel more comfortable with.

To quote Lord Tomlinson in the case taken by a former Duke of Westminster concerning planning in 1936

‘Every man is entitled if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it would otherwise be. If he succeeds in ordering them so as to secure this result, then however, unappreciative the Commissioners of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be compelled to pay an increased tax’

In other words – the law is the law – and if in planning we, in the industry, can stay well within – not only the letter of the law, but also the spirit, and here I mean watching out for what HMRC and other tax authorities are up to, our clients ‘cannot be compelled to pay an increased tax’.

If you would like to meet Caroline and hear how the world has shifted in its approach to UHNW individuals over the years, join her to celebrate the launch of her two books at the Institute of Directors on Tuesday 7th November 2017 at 6.00pm. We will also be celebrating the launch of BConnect Club, the digital tool used by UHNWIs, their Family Offices and the industries which serve them.

To get an independent trust review or discuss all matters relating to privacy, control and protection of your assets please contact us direct.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

Press Release videos for our books below:

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

'Uncovering Secrets: Winning business from Private Clients' 

The grandfather who saved the day

Last Tuesday I was introduced to a new client who I will call Arpad. His father, who lives in Kenya, set up trusts for his son and his family which were now being administered in the Isle of Man. Arpad and his family were pleased with his trustees which had operated the trusts smoothly for the last twenty-two years.

Arpad’s children are now adults; Tina lives with her husband in the US and Franki is thinking of moving to Portugal with his family. Arpad, his wife and youngest daughter Amie continue to live in the UK.

A few months ago, Arpad was contacted by his trustees in the Isle of Man who asked him to fill out some forms. He did not like how the frequently the trustees had began asking for more and more information which he did not like giving, he was paranoid, especially at the thought of it being exchanged.

Arpad was particularly anxious that his father would be exposed in Kenya to queries and was not comfortable with this idea. His father was well-known nationally and had always been an outspoken person. Even though very successful, he was not universally liked.

During our long meeting I asked how the trusts had been set up; Arpad told me that twenty-two years ago, his father had been working for Arpad’s grandfather in Kenya. They worked well together and Arpad’s father was put in charge of one of his grandfather’s companies. Due to his hard work, the company was a great success and his father and grandfather found a buyer and sold it.

It was about this time that Arpad’s father decided to immigrate to the UK with his young wife and family and he took advice as to what best to do. Arpad’s father was advised to set up a trust before becoming resident, which he did, but the trust was in fact funded by his grandfather, which makes the grandfather, not his father, the economic settlor.

I told Arpad that this distinction is in fact quite material. Whereas there is no express guidance on the position, it is logical from the Implementation Handbook and the responses to the Frequently Asked Questions issued in June 2016 that the year in which the settlor dies his ‘equity interest’ (such as it is under the CRS) is regarded as having closed. It follows that if his equity interest has ceased, there is then no ‘equity interest’ capable of being reported and equally he cannot be a Controlling Person of a trust. This position is understood and accepted by HMRC – which is hopefully the same position in other countries as well.

Arpad looked relieved. I said he would need his trustees to seek independent legal advice to confirm what Arpad believed to be correct to back up a decision not to report the grandfather as a Controlling Person. He may also need to seek tax advice to know what the tax consequences of his grandfather having been the economic settlor rather than Arpad’s father and whether there were any tax consequences on his death.

Arpad quizzed me about his exposure as a Protector. I told him that we were seeing an increasing number of clients giving up their role as Protector as we advise them to have a more hands-on role that does not leave them exposed. Our structure is far more robust and flexible and gives him the opportunity to have a meaningful involvement without the danger of sham argument. Arpad was keen to find out more.

Arpad had seen the press release for my book ‘When you are Super Rich – Who can you Trust?’ and wanted a structure in which his Ring of Confidence – close circle of advisers would be represented. I suggested he join us for the book launch on the 7th November at the Institute of Directors and for us to arrange a time to discuss further.

To get an independent trust review or discuss all matters relating to privacy, control and protection of your assets please contact us direct.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

Press Release videos for our books below:

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

'Uncovering Secrets: Winning business from Private Clients' 

Got a bodyguard yet?

Last week I went to a private exhibition at the Serpentine Sackler gallery. I started a conversation with a Dutch lawyer Reinier who expressed an interest in my book ‘When you are Super Rich who do you Trust?’ In Reinier’s opinion ‘The Dutch trust no-one; they are paranoid about privacy. None have profiles on Facebook and they do everything they can to keep away from publicity’.

This paranoia stems, so he told me, from Willem Holleeder known to the Dutch as the ‘Nose’ who faced trial in May this year in Amsterdam, for a number of gangland killings after years of ruling the Dutch underworld. He is the most famous gangster in the Netherlands; best known for his role in the kidnapping of the beer tycoon Freddy Heineken in 1983.

Freddy Heineken’s daughter, Charlene de Carvalho-Heineken, was so disturbed by it that now aged 63, she is a reclusive figure; her alleged net worth is said to be around $10 billion.

Holleeder’s crime was years ago but he still lives on in the minds of the wealthy Dutch. It all started on 9th November 1983, when Freddy Heineken and his chauffeur were kidnapped in broad daylight. They were eventually released on payment of a large ransom; 35 million Dutch guilders (US 21.73 million) which was buried in woods near the town of Zeist.

It is not so much the kidnap which has instilled terror into the hearts and minds of the Dutch because Freddy and his chauffeur were released unharmed, it is knowing what Holleeder was capable of. He is accused of six murders and four attempted murders. His long-time friend and fellow conspirator Hout was shot dead in 2003 and another friend Willem Endstra, whose real estate business was allegedly being used for money laundering, was seen on a bench in front of Endstra’s office with Holleeder, only hours before he was killed. Endstra, was said to be worth 350 million euros.

In 2015 a film was made of Holleeder and Hout ‘The Kidnapping of Freddy Heineken’, which Holleeder tried to prevent being distributed because he was apparently unhappy with the way he was portrayed. His nickname is "The Nose", because of his prominent proboscis, but in the film he was played by the handsome Australian actor Sam Worthington. British actor Jim Sturgess starred as Van Hout. Holleeder is not intimidated by the publicity, he is feared, that is all he needs to know. The publicity only increases his reputation as ruthless, and the fear of him amongst the rich and famous.

The attitude of the Dutch is not unique. In 2008, a total of 4,820 people held close protection licenses in Britain. Now there are 14,073. Before this surge of business, the only people who wanted close protection were those who needed it - due to their political profile or public opinion, and those who wanted to be seen to need it – pop stars, celebrities and other people who seek attention.

Now, however, there is a third type; the ordinary, rich, anxious. The type of bodyguard they are looking for is covert surveillance; bodyguards who blend into the background, who are trained to have peripheral vision – who can see tension building or who know when something is out of the ordinary. They are there to avoid trouble, to pull you out of danger, once suspected. They are there to protect wives on shopping trips, kids to and from school and teens on a night out.

Where I live there has been a sharp increase in bodyguards – I see them sitting in halls, walking up and down the street and riding in escort vehicles, some have tell-tale earpieces, but others are just ordinary folk, ‘hanging around’.

The private client industry should be keen to serve this growing concern of their clients. They need protection not just against physical attack, but from information getting into the wrong hands. Our clients are being villainised as ‘fat cats’.

Tax authorities around the globe have combined forces to eradicate offshore structures. Regardless of their legality, governments now have the means and power to investigate and impose heavy fines on anyone with a trust structure. Trusts are seen as a vehicle to avoid tax and should therefore be eradicated. This puts the responsibility on us to protect our clients and their freedom - as well as our industry.

Governments, the press and the public think it is ok that the privacy of the rich is compromised – whether financial or personal. It is not ok, for the personal safety of anyone – whether rich or poor, to be compromised without good reason!

At GFOS we view CRS as an opportunity to plan, think of new ideas and find solutions to protect our clients. It is however, essential that our clients are tax compliant, with this as our benchmark, we then do what we can to protect their privacy, in an honest, law abiding manner.

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 privacy and control of our wealth ownership structure or any other relevant matter.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

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

When you are Super-Rich, who can you trust?

What is it like to be Super Rich? By all accounts, it is better to be rich than poor! 

So if all is good, what keeps the Super Rich awake at night?

My book ‘When you are Super Rich who can you trust?’ gives food for thought – it is for everyone who is rich, will one day be rich, has ambitions to be rich and/or serves the UHNW community.

One of my clients, who I will call Francis, came to see me several years before he sold his company which was then worth, just north of, $200 million. He wanted to know whether he should set up a family office and if so what he needed to do.

I took him through the eight step plan which I outline in the book. As we talked about his aspirations, vision and concerns about being liquid rich, it soon became clear that he was not interested in setting up his own family office to manage his investments and non-liquid assets, he just wanted to make sure that, post liquidity, he had a lifestyle, such that he and his family could feel good about money, know they wanted to achieve and had the right people around them who they could trust to get them there.

Once we had worked through the eight step plan it took us a few months to implement it, which included how to pick his cabinet of advisers - his Ring of Confidence –and the structure needed to keep them in line. 

In my book, I discuss the pitfalls which many Super Rich fall into which is to choose their advisers on the recommendation of a friend. Why do you think Madoff did so well once he had got established? He had a good track record on the surface, but no credible reason for producing these returns year on year – the rest was personal recommendation.

At first blush, recommendation sounds an excellent way to choose an adviser, but only if you do not leave your suspicions on the doorstep. I have seen some shocking choices of professionals in positions of key responsibility which on a little scrutiny would have been weeded out long ago.

The analogy I use in my book is, would any professional you engage survive a board room of experts following an annual report? If you had thrown Madoff into this ring – would he survive? If the answer is yes – you have the wrong ring!

Most of us imagine the thrill of having huge wealth but it can be daunting and expensive if you trust the wrong advisers.

Unlike what many advisers may say - there is no right or wrong. If you want to blow your money at the Casino – fine, but at least make sure it is in accordance with your plan so you are not led astray by others, who have a plan – but not in your best interest - theirs.

With a serious set of goals, you can then move onto the second step; planning. The aim of the book is that by the eighth step you will have developed a lifestyle to manage your wealth and your advisers so that you can sit back and enjoy it.

Contact :          svetlana@garnhamfos.com

                        020 3740 7423

Caroline's books 'When you are super rich who can you trust' and 'Winning Business from Private Clients' will be republished on 11th October at Waterstones Piccadilly.