Guernsey - a centre for multi-generational wealth planning
Russell Clark, partner, Trust and Private Wealth, Carey Olsen
Constitutionally autonomous in almost all matters, the island of Guernsey is a popular jurisdiction for international families and successful business-owning families to establish structures for the orderly protection of, and succession to, private wealth.
Clients from around the world recognise that Guernsey is now a thriving and well-established international finance centre which offers banking, trust and company service providers, insurance and investment services. The long-term stability of the jurisdiction, the quality of its Courts and professional services, and the clarity of its legislative framework and regulatory regime are all cited by advisers and international families as reasons why the jurisdiction is attractive to those wanting to undertake wealth structuring.
At its most simple, this might be a limited liability company holding a portfolio of investments and a Will. Typically, however, a discretionary trust is used as a framework for family governance and succession planning. Settling assets in trust removes them from the estate of the settlor, and if the settlor is domiciled in a jurisdiction which gives certain heirs indefeasible interests in the estate (forced heirship), a Guernsey trust can protect the assets from such a regime.
More sophisticated planning might involve limited partnerships, foundations, charities or purpose trusts – all of which can be established in Guernsey under modern, robust but flexible legislation with service providers whose fitness and probity to act is confirmed by an independent regulator, the Guernsey Financial Services Commission.
The challenge of wealth preservation and orderly succession is well known. The adage of rags to riches to rags in three generations finds its expression in many different societies. There are numerous challenges for wealth planners to have to anticipate and overcome – divorce, conflict within the family, and differing expectations of what exactly is the purpose of the wealth.
Selecting the right jurisdiction in which to centre whatever vehicle is used as a platform for wealth planning is an important element of creating something that has the chance of enduring beyond that three-generation cycle. Guernsey trusts and companies are capable of perpetual existence for those whose ambitions extend beyond provision for their grandchildren.
Picking a favourable jurisdiction is, however, only one part of the puzzle. It is also essential to pick the right administrators – professionals who should not be seen as mere functionaries but who should become trusted family advisers. There are circa 150 regulated trust companies in Guernsey, ranging from large bank owned fiduciaries, offices from multi-jurisdictional trust businesses to small, locally-owned boutique businesses providing clients with a range of different types of service.
Engagement and communication are also crucial, regardless of jurisdiction and provider. When estate planning is only disclosed to the family once the wealth creator has died, they are often left uncertain as to the purposes of the plan and their own financial security. Dictates from the grave may not be welcomed and overly restrictive conditions on benefitting can be easily resented. Seeking engagement with successive generations and securing their buy-in to the plan is a good remedy to avoid subsequent family disputes. Each generation will have their own vision of what the future looks like, and the planning will need to be flexible to cater for that.
The wealth of experience within Guernsey's service providers and professional advisers ensures that not only can people be found with the required technical expertise to administer diverse types of assets but also who are alive to the all important "people" issues that can trip up the unwary.