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Even though you won’t be around to play a part in managing your estate, you do have a say in what happens with it once you’ve passed. Consider doing some of the following things to look after your money and loved ones. 

Create A Will

A core part of estate planning involves drawing up a will. A will or testament is a formal, legally-binding document that outlines your wishes once you have died, such as who you want to manage your estate and how you wish your assets to be divided. A will can also outline instructions for any dependents or pets. 

According to a 2021 Gallup poll, less than half of US adults don’t have a will, and the results have been relatively similar in poll results dating back to the 1990s. While it can be challenging to think about your passing and put instructions in place for how your family can manage it, it can be crucial to have your money and family looked after. 

Failure to create a will can mean that your estate is divided in probate court, and someone other than who you wanted may end up with your assets. Not making a will may also mean that your family can wait months, or even years, for a resolution, and the details of your probated will can be a public document for anyone to read.   

Name Your Beneficiaries

Telling certain friends and family members what they can expect from your estate upon your death doesn’t guarantee that your wishes will be followed. Unless you have legally named people and assets, there is a genuine risk of your wishes being contested. 

To prevent this from happening and ensure your money goes to the right people, legally name beneficiaries for your assets, and don’t forget to update them as the years pass. If you have a retirement fund or life insurance, you may be able to name beneficiaries at the time of their creation. 

In some states, such as Colorado, transferring properties to your loved ones upon your death can be made much easier with beneficiary deeds. These are legal documents that allow you to pass titles to property under a grantee-beneficiary at death, with no need for probate administration. These deeds must be recorded before your passing. 

Keeping your preferred beneficiaries up-to-date is crucial, for any discrepancies between a will and deed will see the deed beneficiaries prioritised. 

Set Up Trusts

It’s natural to worry about what your family will do with your money once you pass. You might have concerns about specific family members misspending it, or you have a large estate that will see someone receiving hundreds of thousands of dollars upon your death. 

One of the most sensible options to look after your money is a trust. You can appoint a trustee who will distribute your wealth as you see fit, and the money within the trust isn’t subject to estate taxes. However, once your assets are in a trust, they no longer belong to you. 

Setting up trusts can be a complicated undertaking, particularly when several assets are involved. Estate planning attorneys may be necessary for ensuring your money is taken care of how you would have preferred. 

Gift Your Money

Money giftWhen your estate is subject to hefty taxes that could see your family members receiving less than you would have liked, consider gifting them assets and money while you’re still alive. In the US, you may give one person up to $15,000 per year without having to pay tax. However, if you plan to gift assets in this way, be mindful of value appreciation. Depending on when you provide the gift, they may need to pay tax on it if its value is adjusted upon your death and ends up being worth more than $15,000. 

Switch To Roth Accounts

Your heirs may be required to pay a significant amount of tax on an IRA or 401(K) account, which means they may not receive as much as you had anticipated upon your passing. This is especially true on accounts with large balances since heirs must withdraw all money from the account within 10 years. 

By converting your traditional retirement accounts to Roth accounts, your heirs may be able to make tax-free withdrawals. They will still need to pay income tax, but it will likely cost less than it would if you hadn’t converted the account. 

Final Thoughts

As challenging as it can be to think about your death and the future of your assets when you pass, it can be necessary to ensure your money is managed in a way you would have wanted. Now might be the right time to put a will in place and start thinking about family members you’d like to take care of.

It can be argued that “modern trust law” was born in 1983 when South Dakota – the first state in the US to do so – abolished the rule against perpetuity, creating the dynasty trust, a powerful trust planning tool allowing assets to remain in trust over multiple generations, conceivably avoiding federal estate tax forever. South Dakota’s move to “modernise” US trust law prompted a race among certain states to ascend as a “top tier” trust jurisdiction, resulting in a proliferation of progressive modern trust laws around asset protection, privacy, sophisticated tax planning strategies, and planning tools to deliver far more direction and control to families with regard to important aspects of trust administration over generations through the directed trust and trust protector concepts.

The Directed Trust

Academics and advisers agree that, in many ways, the directed trust revolutionised the US trust industry by unbundling fiduciary functions, particularly asset management and trust administration, allowing settlors of trusts, their families, and advisers far more control over investment and distribution decisions, while removing clear conflicts of interest that exist in the traditional model.

Only a handful of states have directed trust statutes that essentially bifurcate fiduciary roles, allowing settlors of trusts, family members, and trusted advisers to serve as the Investment Committee, directing investment decisions including asset manager selection. The structure also allows the settlor to select a Distribution Committee which can be comprised of disinterested family members and trust advisers. These two committees essentially direct the trustee as to both investment and distribution decisions, allowing families to exercise a great deal of control and direction over important aspects of trust administration.

The Trust Protector

The trust protector – often used in conjunction with the directed trust and referred to as a super trustee – delivers great control to settlors of trusts, beneficiaries, and their advisers. The inclusion of a trust protector allows the settlor, beneficiaries, and their advisers to modify and control many important aspects of the trust and provide direction to the trustee with respect to investment management, jurisdiction, and trust distributions. The trust protector concept enhances the control aspects of the directed trust because it provides for direction or restraint of powers of the trustee.

Some of the reasons why a settlor may wish to appoint a trust protector include:

Domestic Asset Protection

Domestic asset protection trusts – available only in a small number of states – are a formidable planning strategy that legally shields assets from third-party liability (including spouses in a divorce proceeding) and lawsuits while permitting settlors to retain some control over the trust assets and enjoy a discretionary benefit during their lifetime.

A domestic asset protection trust is fully discretionary, meaning settlors can receive financial benefit from the trust (income and discretionary principal distributions) and protect trust assets from creditor claims and lawsuits while maintaining control over the investment management function through the directed trust structure. With its two-year “look back” fraudulent conveyance statute, South Dakota’s domestic asset protection statute is considered among the best in the nation.

Privacy (Not Secrecy)

Privacy has always been of paramount concern to wealthy families and is one of the primary reasons billions of dollars have been and are being moved into the US – and to South Dakota in particular – for trust administration from around the globe. South Dakota is considered to have the best trust privacy and quiet trust statutes in the US, as noted in a recent article appearing in Trusts & Estates Magazine, the January 2020 edition, wherein the authors, Daniel G. Worthington, Mark Merric, John E. Sullivan, and Ryan Thomas note: “Of the top tier trust jurisdictions, South Dakota has the best trust privacy laws.”

Privacy and South Dakota’s Total Seal

South Dakota’s privacy statute provides for a total seal forbidding the release of trust information including names of settlors, beneficiaries, and the contents of a trust to the public during litigation.

Quiet Trusts

South Dakota is universally considered by advisers and academics to have the most comprehensive and flexible quiet trust statute in the US, granting the settlor, trust protector, and the investment/distribution adviser the power to expand, restrict, eliminate, or modify the rights of the beneficiaries to discover information about a trust.

Fiscal Soundness

When selecting the proper trust jurisdiction, an often overlooked, but extremely important factor coming through the pandemic is a state’s fiscal soundness and economic stability. Currently, top tier trust jurisdictions like South Dakota have no state income tax which is one of the factors that renders the state so attractive to planners. However, there is no guarantee this will always be the case which is why evaluating the fiscal strength of a state when selecting a trust jurisdiction is essential. An objective evaluation, considering multiple factors, reveals that South Dakota is unequivocally the most fiscally sound of all the top tier trust jurisdictions.

Top Tier Trust Jurisdictions Compared

With regard to top tier trust jurisdiction comparisons, it is imperative that families and their advisers carefully consider analytic nuances of each state’s trust laws. “The devil is in the details” and this objective and well-researched chart comparing top tier US trust jurisdictions provides a clear comparison of modern trust law concepts.

As we continue to move through and out of the pandemic crisis and prepare for changes in the tax landscape, selecting proper trust jurisdiction has never been more important with respect to compelling tax planning opportunitiesasset protectionprivacyfiscal soundness, and powerful modern trust laws, all delivering more direction and control to settlors of trusts, beneficiaries, and their advisers than ever before.

 

Bridgeford Trust Company is an independent trust company providing trust and fiduciary services to domestic and international families across the country and around the world. To learn more, visit their website at www.bridgefordtrust.com or contact their team at info@bridgefordtrust.com.

Investment trusts date back to the 19th century, when the F&C Investment Trust was launched in 1868. There are 23 investment trusts that have been around for over a hundred years, surviving both world wars, the Spanish flu pandemic and many market crashes. Michael Born, Senior Investment Analyst at EQ Investors, offers Finance Monthly an in-depth look at what these investment trusts have to offer.

What are investment trusts?

Unlike open-ended funds, investment trusts are listed companies, and are traded on stock exchanges like the London Stock Exchange (LSE). ‘Closed-ended’ structures are so-called as the number of outstanding shares is fixed, unlike in an open-ended product which requires that investors can tender (redeem) their shares to the manager in order to get their cash back on a daily basis, so the number of shares changes from day-to-day.

Instead of trading with the fund manager, investors in investment trusts will trade with each other throughout the day. This means that the “price” of an investment trust can float independently of its net asset value (“NAV”) the fair valuation of the shares underlying value.

Buying portfolios at a discount

When investment trust prices move above the NAV (as investors clamour for shares, and demand outweighs supply) the trust is said to be on a “premium”, and when the price is below the NAV, a discount.

One of the key advantages for investment trust investors here is the potential to buy a portfolio at a discount, and then sell at a premium, which adds to investors’ returns. However, a negative swing in sentiment can exaggerate losses through down markets and if we are in an environment where most investment trusts are on a premium, this means that investors will have to pay over the odds for popular strategies.

As with most types of investing, it pays to be patient and wait for opportunities.

One of the key advantages for investment trust investors here is the potential to buy a portfolio at a discount, and then sell at a premium, which adds to investors’ returns.

Intraday trading

Whilst open-ended funds offer investors liquidity on a daily basis, as investment trusts are listed companies, investors can trade in and out at any point when the LSE is open. This allows investors to reposition their portfolios in response to real time newsflow, whilst open-ended investors have to wait for their books to clear.

Not constrained by liquidity

As the managers of an investment trust are not bound to offer investors daily liquidity, they can invest in assets which are not manageable in an open-ended strategy, like assets which are not publicly traded such as property, infrastructure and private equity. These investments, which do not have “mark-to-market” risk (when values are determined by supply and demand on the open market) add considerable diversification benefit as they will not necessarily fall on bad news.

In addition to being able to invest in less liquid assets, managers of investment trusts do not have to hold a cash buffer to manage liquidity, which is essential if you have flows in and out of the product on a daily basis, so the cash “drag” resulting from the portfolio not being fully invested is minimised. Similarly, there is no obligation for managers to sell assets at unfavourable prices to provide daily liquidity.

Gearing

One of the unique features of investment trusts is the ability to gear the shares, where trusts borrow debt and then leverage their returns. Although this certainly increases the potential for upside, losses can also be magnified by gearing, and one of the attributes of a manager is their ability to know when to deploy debt.

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Corporate governance

Legally, investment trusts are required to have a board who oversee the investment manager as well as interacting with shareholders via the annual general meeting (AGM). The board has the ability to fire and replace the manager if they determine the company is not being run in the interests of shareholders (e.g. for poor performance) in addition to making key decisions on strategic areas like share buybacks (to tighten the discount) and dividend policy. As a listed company, there is a higher burden of disclosure required for investment trusts as compared to their open-ended cousins.

A constrained universe

Like stocks, investment trusts must go through an IPO process, so the costs of bringing a product to market are considerably higher than for the open-ended space, which results in a much smaller universe. Many sectors only offer 4-5 choices with regard to strategy or manager and there are strategies which are not covered at all by the investment trust market. This also means that it is not possible to deploy large amounts of money in the investment trust space, as the premium would be driven up significantly. This is one of the main reasons that the investment trust market remains niche and is often overlooked by institutions.

Relative value opportunities

There are several managers who run both investment trust and open-ended versions of their products, which provides investors with the opportunity to choose between the two, as well as trade them if valuation opportunities open-up. However, investors should also be aware of the differences between “versions”.

Although strategies may be run pari-passu (side-by-side), the freedom of the manager from liquidity constraints can often result in the investment trusts running a longer tail and being closer to the manager’s “ideal” portfolio.

We speak with thought leader Andrew Morris - a wealth transfer expert who’s dedicated his career to helping clients plan, grow and protect their assets. For over 25 years now, he’s been passionate about helping families with setting up charitable remainder trusts and assisting families with special needs to secure their future through the use of insurance. As a Social Security Analysts, Andrew helps clients maximise and understand their Social Security benefits to optimise their retirement planning.

What trends are you seeing in the current insurance landscape and how do you intend to keep up with these?

The current trend I see in the industry is the tremendous need for an alternative form of guaranteed lifetime income in addition to social security for the aging baby boomer population. Since many major corporations no longer offer a defined benefit type pension plan, many retirees are looking for ways to have a guaranteed lifetime income stream which can only be offered through insurance companies and their living income benefit riders. The recent DOL (Dept. of Labor) legislation regarding the fiduciary rule has made the return of guaranteed lifetime benefit riders popular again, since many companies have now lowered fees and have simplified the benefits to adhere to the new rules.

Another trend that I see in the insurance industry is the need to make sure that older whole life policies are upgraded to make sure that the aging 76 million baby boomer population has adequate life insurance coverage. With the increase in American retirees living longer and the standard life expectancy numbers increasing from age 78 to age 85, life insurance mortality tables had to be updated a few years ago to reflect these longer life expectancy rates. This increase in the mortality tables has left many old policies old and ‘underinsured’. Clients can now enjoy receiving larger coverage increased face values for old permanent life policies for a lower cost or the same amount due to the recent change in mortality tables. The only way I can keep up with the amount of new service for these older policies and aging clients is through the use of technology.

What is the biggest challenge the US insurance sector faces today? What would be your solution?

The biggest challenge the insurance industry faces today is technology and the ability for insurance companies that are considered old and antiquated to keep up by updating their systems for servicing and cybersecurity. As a result, I anticipate that there will be further consolidation within the insurance industry over the next couple of years. With the baby boomer population turning 65 at a daily rate of 10,000 per day, it is an enormous number to keep up with. So, the companies that are not up to speed technology wise will fall by the waste side and will be acquired by larger insurance companies.

The only solution for companies that are currently behind in their technology would be to establish a new strategic alliance or joint venture, where they partner up with a third-party vendor and potentially outsource the work. Very few insurers have all the resources they need to become truly cutting edge. Technological advances are changing business and operating models, which is challenging to an industry that is accustomed to slow evolution.

What do you find businesses commonly fail to consider when it comes to insurance?

Businesses commonly fail to consider the fact that that they are ‘underinsured’ in relation to price. Many businesses will value good price as opposed to the proper amount of insurance for their business. Having a good insurance adviser or consultant can help business owners who are underinsuring themselves to start saving them money. Insurance is one of the most important needs for a small business, yet it is something that many owners skimp on. People don’t reevaluate their insurance needs as their companies grow and numerous small businesses don’t have business interruption insurance in addition to property and casualty coverage, even though it is something that can put their companies and livelihoods at risk. I think that it is vital for company owners to consider and be mindful of the damaging impact that an emergency incident can have if your business is not properly insured.

 

 

 

 

Sandy Tao Chen serves as Executive Director – Head of Trusts of the First Advisory Group’s Hong Kong branch and its entities. First Advisory Group is a wealth planning group that was founded in Liechtenstein in 1954.

Sandy’s professional career has been split between New York and Hong Kong, having accumulated more than 20 years’ experience in the provision of wealth planning solutions, specializing in asset protection and succession planning.  She is a full member of Society of Trust and Estate Practitioners, the NYS Certified Public Accountant (CPA) and is a member of AICPA. Below, Sandy speaks to Finance Monthly about First Advisory Group and trust and wealth planning trends in Hong Kong.

 

Tell us about First Advisory Group and its mission?

First Advisory Group is a leading independent financial services provider with offices in Geneva, Hong Kong, Panama, Singapore, Vaduz and Zurich and has more than 300 experienced employees working around the world to fulfil this commitment. With expertise backed by 62 years’ experience and a diversity of external specialists, the Group offers an independent, one-stop and results focused advisory service for its clients’ wealth management needs.

Furthermore, the Group has formally operated in Hong Kong as a jurisdiction for a number of years, establishing a physical presence in 2010. First Advisory is present and active in all-important financial and business centers worldwide. With its head office in Vaduz, Liechtenstein and further offices in Zurich and Geneva, Switzerland, the Group offers unique locational advantages to its clients, i.e. banking and professional secrecy, highly flexible company law, high legal certainty, high political and economic stability and continuity, highly professional approach to financial services and central location in the heart of Europe.

First Advisory Group offers further attractive locations to its clients in Asia, namely Hong Kong and Singapore, as well as in Central America.

 

How can trusts be set up and structured in Hong Kong?

 

How can trusts provide tax efficient solutions for clients?

 

What other wealth planning structures are available in Hong Kong?

At First Advisory, we offer clients diverse and innovative wealth planning services through a single platform. These include international asset structuring by using trusts, foundation and/or corporate solutions. The Group is positioned to deliver a dynamic and sophisticated service, precisely tailored to client needs.

 

Can trusts be structured in such a way that they can be open to abuse? Which preventative measures can be taken?

Although under the modern trust laws, settlors are given certain powers (i.e. investment power) on the trust, to executive certain investment decisions. The Group’s compliance has taken precautious measures to make sure that we, as a trustee, have the full discretionary power on the trust fund distributions. The investment powers given to the settlors/beneficiaries are only at the limited power of attorney basis. If there is a private company held under the trust structure, one of our Group subsidiaries must act as the director and shareholder of the company. Our compliance department has implemented a strict and powerful system to monitor our clients on an ongoing basis to make sure they are not involved in any legal transactions i.e. money-laundering, drug-tricking, etc.

 

What makes First Advisory’ services unique when compared to your competitors in Hong Kong?

First Advisory Group offers an independent, one-stop advisory service for our clients’ wealth management needs.

The wealth planning solutions that our Hong Kong office offers are flexible and enduring, aiming at smooth transitions of wealth from generation-to-generation. As all the services derive from one single platform, the Group’s offices can guarantee a seamless and effective solution for our clients. We are one of the very few independent trust companies in Hong Kong that can provide both trust and foundation wealth solutions to high-net-worth clients.

 

Contact details:

Telephone:  +852 2537 9478

Facsimile:   +852 2537 9476

Email: sandy.chen@first.li

Venture capital trusts (VCTs) remain front of mind for both SMEs and investors. In the 2016/17 tax period, fundraising stood at £542m – the highest figure in more than a decade – according to the Association of Investment Companies (AIC). Also, measures in last year’s budget and recommendations in the Patient Capital Review indicate that policymakers continue to see the strong value VCTs provide for both SMEs and investors and so, for 2018, the signs point to another strong year for the sector.

Here, Bill Nixon, Managing Partner at Maven Capital Partners, looks at the growth of VCTs as an asset class, their appeal to investors, and gives his view on the continuing value of VCTs as a source of SME finance.

The success of new share offers by the leading managers over the past few years illustrates how VCTs have increasingly been recognised as a mainstream asset class in investment planning and are becoming a common part of tax efficient and income-focused portfolios. Fundraising across the VCT sector as a whole has climbed steadily in each of the past five years, including a rise by around a fifth in 2016/17.

This burgeoning demand for VCT investments has been driven by strong long-term returns. Research by the AIC last year revealed that the top 20 VCTs returned on average 82 per cent by share price total return (a measure which takes into account both capital returns and dividends paid to shareholders) over the past decade. The very best performers achieved overall returns well into triple digits: for example, Maven’s Income and Growth VCT returned 187 per cent in that period. Top up share offers by Maven VCT 3 and Maven VCT 4 remain open, for both 17/18 and 18/19 tax years, with around £27m already raised from more than 1500 investors.

VCTs are attractive partly because they enable investors to enjoy significant tax benefits when putting their money into smaller, entrepreneurial UK businesses and participating in their growth. Investors in VCTs receive a 30 per cent upfront tax break, as well as tax free capital gains and dividends – provided they are willing to remain invested for at least five years.

The Government's aim in providing these reliefs is to encourage more capital to flow into riskier, early-stage companies. While this investment risk is an inherent feature of VCTs, it can be managed effectively for an investor by carefully choosing the VCT manager. The leading managers have up to 20 years’ experience of VCT investment and will employ a range of measures to achieve significant diversification and robust asset selection. An experienced manager will work closely with every business it backs, providing strategic counsel and operational expertise as the business grows.

Despite some concerns ahead of last year’s Budget that the levels of tax relief might be reduced, it instead adjusted investment criteria to ensure than VCT schemes continue to focus on investment in companies for long-term growth and development, rather than ‘lower risk’ investment primarily aimed at preserving capital. These changes confirm the position of VCTs as a vital means of drawing private investor capital to the SME sector and should ensure that VCTs remain attractive for investors. The continuing availability of long-term patient capital, at what is an increasingly important time for the UK economy, should give comfort to dynamic smaller businesses that they can continue to access vital equity finance, whilst allowing investors a route to participate in their success.

During the past couple of years it had also become clear that significant improvements were needed to HMRC’s Advance Assurance process, which had resulted in unnecessary delays to receiving VCT clearance on a large number of potential VCT deals. Streamlining Advance Assurance had been highlighted by managers across the sector as an important step in more efficiently directing capital to entrepreneurial businesses, and potentially boosting returns for investors. It was therefore encouraging that the Budget also announced that HMRC aims to enhance that approval process during the early part of 2018, which should help to improve the rate of new investments receiving VCT clearance and allow VCT managers to provide funding to the best available companies in a timescale that suits their growth plans.

Overall, VCTs have shown their worth from both an SME and investor perspective and this year’s fundraising is going well, with one or two VCT offers having already closed to investments. In the three years to mid-2017, VCTs had injected around £1.4bn of investor money into SMEs, illustrating their role as growth company funders and their performance and returns should see them further consolidate their position as an increasingly mainstream asset class in tax efficient and income-focused investment portfolios.

Cherie Butler is a Senior Trust Administrator at the Winterbotham Trust Company Limited, which offers various services including Trust, Corporate and Fund administration. She has been working in the financial services sector for nine years, spending almost two years at Winterbotham. During her experience in the trust industry, Cherie has had the opportunity to interact with clients and their advisors on a day-to-day basis. Some of her duties include administering trusts and managing underlying companies for High-Net-Worth Individuals, while also assisting her team members with the day-to-day administration of their structures. Here Cherie shares her insights into the current state of trust planning in the Bahamas and tells us about her work within the sector.

 

In your opinion, how robust in the current legislation surrounding trusts in the Bahamas? 

The current legislation surrounding trusts in the Bahamas is and remains very robust. The Central Bank of The Bahamas is our principal regulator; it regulates Banks and Trust Companies in The Bahamas to ensure that they meet the specific rules and regulations to operate as a licensed trust company. With the ever-changing legislation being implemented around the world, such as the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standards (CRS), the Bahamas has also had to adapt and update its legislation. Recently, The Bahamas Trustee Act was amended to align with international practices.

 

Do you believe there is potential for further significant legislative development in the trusts practice?

Yes, definitely. Trust services are offered by most international financial centres. Although the Bahamas is one of the premier offshore jurisdictions, there will be an ongoing need for further legislative developments in trust services, as the world is constantly evolving and new products and services are developing to meet client needs. Our industry organization, the Bahamas Financial Services Board, assists government in keeping up with these global changes. Trusts are traditionally known for their confidentiality, which was attractive to clients because they knew that their private information would not be disclosed to third parties. Unfortunately, the days of complete confidentiality are now over and transparency is paving the way to automatic exchange of information between countries. The Bahamas has adapted to the new legislative changes for FATCA by signing the Model 1 Intergovernmental Agreement with the US. We will also be adopting CRS with effect from July 2017.

 

What are the typical challenges that clients approach you with in relation to trust planning?

Some of the typical challenges faced in relation to trust planning are obtaining all of the required due diligence from the client. If a trust structure is very complex, it may be difficult to obtain all of the due diligence at the initial stage. It usually takes a lot of effort, time and persistence to receive all of the necessary documents. Other challenges that may arise are: determining whether an underlying company will be incorporated to hold the assets of the trust or will the trustee hold assets directly; who will be appointed the investment advisor over the trust / underlying company; and the benefits of appointing a protector.

 

What strategies do you employ when assisting individuals with trust planning? What are some of the key considerations that need to be taken into account to achieve a satisfactory outcome for your client?

Some of the strategies that I employ include understanding the client’s needs through various discussions to establish whether a trust is an appropriate structure for the individual and always advising the client to seek independent tax advice (sometimes in multiple jurisdictions) prior to establishing a trust. This will ensure that they are fully aware of any adverse taxes consequences that they may encounter as a result of creating a trust. I also ensure that clients are aware of the tax reporting requirements that the trustees have to comply with in light of FATCA and CRS. One of the main considerations that should be taken into account to achieve a satisfactory outcome for a client is to be open and honest about the trustee’s role within the structure. The client needs to be aware of how the trust will be administered and what to expect from the trustee.

 

What are the typical complications that are likely to arise in relation to establishment and administration of trusts?

Some of the typical complications that are likely to arise in relation to the establishment of trusts include determining whether a declaration of trust or trust deed is required, who the beneficiaries will be, whether the trust is discretionary or settlor directed, if a protector will be appointed and what powers will be reserved to that person. The process of establishing and finalizing a trust is very time-consuming because the client’s advisor and the account officer may have to review the trust instrument on a number of occasions before it is signed to ensure that all the necessary provisions are captured. With respect to the administration of trusts, one of the major complications that can arise for a trustee is inadvertently not following the provisions of the trust deed. This is very crucial as the trust deed governs what the trustee can and cannot do such as making distributions, investments and loans for a trust. How do you overcome them? First and foremost, you need to understand what the trust deed says. As much as possible we try to use our own deeds but we have many situations where the trust deed is drafted by an external person. Another way of overcoming complications is to educate the client on what a trust can and cannot do. This can be achieved by having ongoing conversations with the client and his / her advisor to explain the trust in detail. With regards to the administration of a trust, the trustee will have to ensure that the trust instrument is properly drafted and to include all of the necessary provisions such as removal and appointment of a successor trustee, distributions, and investments.

 

What motivates you about assisting clients with trust planning?

Being able to understand the client’s needs is very rewarding and intriguing because it allows me to interact with them on a daily basis, build long-term relationships and provide the best service I can to them. I am able to learn new things and enhance my knowledge about trusts. Also, knowing that I can provide solutions to client queries regarding the trust in a timely manner is very motivating because it lets me know that clients and their advisors trust and value my opinion.

 

What are the Winterbotham Trust Company’s key priorities towards its clients?

Winterbotham's vision statement is very client-focused: "Your objectives. Our Objectives. Enabling your business to thrive." In addition, as an organization we also have three "non-negotiables": (1) we are a relationship-driven organization and not a product-driven organization; attention to detail and quality of service is paramount; (2) we continue to be a bank which is an integral part of our overall business; (3) trust is the foundation of our business, which is fundamental to everything we do (e.g. integrity, reputation, honesty, character of our staff). We believe in providing the best quality service to our clients by building and maintaining long-term relationships through consistent communication and honesty. We also seek to provide innovative solutions to our clients to meet their needs by improving the products and services that we offer as a financial service provider. We also believe in team work which is at the heart of our company. Our trust department at Winterbotham has a great team of professionals willing to work very hard to ensure that clients continue to be satisfied with our services.

 

Website: https://www.winterbotham.com/

 This month, Finance Monthly introduces you to STM Malta Trust & Company Management and its Managing Director and thought leader with twenty years’ experience in the financial services -Deborah Schembri.

 

STMM primarily provides pensions administration services to international clients. The company is registered as a Retirement Scheme Administrator with the Malta Financial Services Authority. It is also authorised to act as trustee or co-trustee to provide fiduciary services in terms of the Trusts and Trustees Act.

The company administers a number of pension schemes, both trust-based and contract-based. Some of these schemes also qualify as QROPS (Qualifying Recognised Overseas Pension Scheme) or QNUPS (Qualifying Non-UK Pension Scheme) as applicable. STMM is part of STM Group plc - an independent firm listed on the London Stock Exchange. STM Group has offices in Gibraltar, Spain, Malta, Jersey and UK.

Deborah Schembri, the youngest member and the only woman on the STMM Board, is a Certified Public Accountant, who holds a Masters in Business Administration from Henley Management College, as well as a Diploma in Retirement Provision, pursued with the UK Pensions Management Institute. With over twenty years’ experience of holding senior managerial roles in the financial services industry, Deborah has formulated new strategic directions and implemented the necessary changes, while making a lasting impact in these organizations.

Deborah joined STMM in 2012 and was appointed Managing Director in 2014. Over the past five years, as a result of Deborah’s hard work and entrepreneurial spirit, the Company has registered exceptional and extraordinary growth.

Over the past few years, Malta has established itself as a centre for the management and administration of personal pension schemes. While it has primarily been catering to the UK market, other European cross-border schemes are currently being established and rapid growth in the pensions in Malta market is expected.

The creation of international pension plans in Malta became a possibility fairly recently, as pension provision has traditionally been considered from a purely domestic perspective; however, the increasing mobility of both people and companies has facilitated this paradigm shift.

The Retirement Pensions Act (Chapter 514 of the Laws of Malta) came into force on 1st January 2015. The new Regulations and Pension Rules also came into force on 1st January 2015.

A new set of Regulations and Pensions Rules have been issued under the Act to supplement the legal framework for the licensing and regulation of Retirement Schemes (both Occupational and Personal), Retirement Funds and Service Providers related thereto, as well as for the requirement of recognition for persons carrying on back-office administrative services.

For major multinationals, administering pension schemes in multi jurisdictions can be an expensive and highly complex process. This presents a key opportunity to introduce an international pension solution that enables multinationals to use Malta as a centre from which to manage and centralize their retirement benefits schemes and consolidate their employee pension schemes benefiting from greater economies of scale, while achieving sizeable cost savings by operating from one jurisdiction under one regulatory regime.

As a member of the EU, Malta provides a pan European platform that is secure, well-regulated, and innovative. Backed up by a professional support structure and experienced skills base, Malta's new pensions legislation has been well-received internationally and the provision of international pensions is considered as the next major development in the jurisdiction's financial services offerings.

 

Benefits of Pensions and Retirement Schemes in Malta

 

STM Malta will be pleased to receive any enquires on the below contact details:

E-mail address: info@stmmalta.com

Telephone number 00356 21 333 210

 

 

To hear about tax practices in the UK, this month we spoke with Rebecca Potton - a Chartered Tax Advisor with 15 years’ experience and Head of the Private Client department at Myers Clark, Chartered Accountants.

 Established in 1912, Myers Clark is one of the largest independent firms of chartered accountants in Watford, UK. Myers Clark offers a broad range of services for thousands of businesses and individuals, as well as national and local organisations in the Not-For-Profit sector.

 

Can you tell FM a little about the services you provide and the kind of clients you deal with?

 We are able to provide a full range of services including accounts, tax returns, tax planning, trustee and executorship. I also act as an expert witness often in cases of matrimonial disputes.

Myers Clark is very fortunate to have a varied client base, comprising sole-traders and partnerships to high net-worth individuals and top executives.

 

What are the most common tax planning solutions that you offer to your clients?

 Assuming the role of a trusted advisor and professional friend, our clients seek our guidance on trusts, inheritance tax and estate planning, together with the routine compliance matters such as self-assessment tax returns. Many clients utilise the expertise of our department to arrange their affairs tax efficiently whilst also maintaining their current standard of living.

We frequently act on behalf of a director both in an individual and business capacity, which affords us a unique perspective from which to advise. Such cases require us to consider a mutually beneficial tax solution for the business and the individual without incurring increased tax liability to either party.

 

What would you say are the specific challenges of assisting clients with tax-related matters?

 Many of our clients seek tax planning because they wish to pass their wealth to their families, however in most cases they wish to do so without comprising their current standard of living. Similarly, there are a number of clients who prepare their finances to facilitate a comfortable retirement whilst achieving the greatest tax efficiency. We ensure that tax is not the sole motivation behind our advice, it needs to be the most effective solution for that client’s individual needs.

 

 

Do you have any examples?

 A client, let’s call her Alison, was widowed in her early sixties and was worried about her inheritance tax liability because she was still earning a significant salary. Not unlike many people in the South East, Alison’s home fully utilised the inheritance tax reliefs available. Alison also had a stock market portfolio and an investment property, which was becoming cumbersome to manage. When organising her affairs, Alison was clear that she did not want to distribute her assets to her children immediately, but wanted to prepare effectively.

As a result of the planning, Alison was able to sell her rental property and decided to invest in products which gave her sufficient income to maintain her lifestyle, retained her capital and reduced her exposure to inheritance tax.

Another example is Bill, who sought advice on an exit strategy from his trading company to minimise this tax liability and whilst enabling him to access sufficient funds to spend his retirement sailing. Like many individuals, Bill had not worried about inheritance tax nor had he made sufficient provisions for his retirement. An issue for Bill, which is also faced by many other clients, is that the value of his shares in his company were exempt from inheritance tax by virtue of business property relief. However, as soon as he retired and sold his shares, Bill would have a cash asset liable to inheritance tax, in his case generating a tax liability of approximately £300,000.

Our priority for Bill was to ensure he would have enough capital to buy his boat and built this into the planning, which when completed saw Bill with a pension providing him with income for his retirement and an inheritance tax saving of £60,000.

 

As a thought leader, how are you ensuring that clients are engaged and informed about the development of new tax regulations or permissible strategies in the UK?

 We pride ourselves on being the go-to accountants for many businesses and individuals in Watford, and have established a reputation of excellence, integrity and innovation. Our specialists are trusted by clients to provide accurate information about tax regulations. We provide our clients with the opportunity to actively engage with this information through a calendar of seminars and events, as well as targeted communications.

 

Can you tell FM about your involvement in the community?

 Myers Clark has a CSR policy which includes charity fundraising events, being involved in corporate charity partner networks and establishing partnerships with local schools. This year we are introducing a new programme of work experience and summer job placements to local students in Year 10, Sixth Form and University Students.

 

In terms of market competition, where does Myers Clark stand nationally and what are its goals moving forward?

 Myers Clark is one of the largest independent firms of Chartered Accountants in Watford with a well-established reputation for highly skilled specialists. Our goal moving forward is to continue to provide support to individuals and businesses navigating the complex maze of tax and facilitating tax planning to ensure a profitable future.

 

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