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Solutions for Asian Clients
Dharshi Wijetunga
Partner
Anaford Attorneys at Law
Todistrasse 53
8002 Zurich
Switzerland
19 January 2017
Objectives
2
1. Understand the key objectives and concerns facing Asian families
today.
2. Understand the tools available for passing wealth in the context of
Asian families.
3. Understand the benefits of Trusts and Foundations for clients from Asia.
4. Be able to explain why Trusts and Foundations remain relevant for
clients from Asia in light of global tax transparency.
Topic 1:
What are the Key Objectives and Key Concerns
facing Asian Families today?
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1.1 General Tendencies of Asian Clients
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• May be unwilling to discuss details of wealth
• Unlikely to have the full picture about assets / asset holdings
• Usually have a casual approach to succession:
not a priority/not important;
It will work out;
• Usually have an aversion to structuring – high cost and complexity
1.2 Key Objectives of Asian Families
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• Structures to transfer wealth to chosen heirs
• Control over assets during lifetime
• Divorce protection
• “Second” families
• Tax
• Structures to protect wealth
• Privacy
• Business succession
• Special assets, art, toys and more
1.3 Key Concerns of Asian Families
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• Political risk / Kidnapping / Security
• Freedom to move cross-border or relocate
• Confidentiality
• Freedom to leave assets as they please despite Forced Heirs
• Protection of global business interests and assets
• Tax
1.4 Impact of Recent Events
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• Recent events:
Data leaks, e.g. Panama papers
Amnesties, e.g. Indonesia
Voluntary Disclosure Programs, e.g. US, UK
Exchange of Information / Common Reporting Standards
• What has been the impact for Asian Families?
CRS continues to be a hot topic
Privacy is at the forefront of every conversation
Amnesties = an opportunity
Topic 2:
What Tools are Available for Passing Wealth in
the context of Asian clients?
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2.1 Key Tools for Passing Wealth
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Do nothing!
Intestacy
Forced Heirship
Disputes
Probate
2.1 Key Tools for Passing Wealth
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Do something!
Will – over assets or in jurisdiction of domicile
Trust solution
Foundation solution
Insurance solution (with or without a trust or foundation)
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Underlying Co
Discretionary
Trust Solution
Cash, deposits,
securities
Bank/External Asset
Manger
TrusteeSettlor and
Family Members
or Friends
Holds for Transfers
Assets
Advisory
Committee
Provides Financial
Advice to the Trustee
Beneficiaries
Appoints
Investment
Manager
Protector
Committee
Monitors the
Trustee/ looks
after Beneficiaries
interests after
death of the Settlor
Gives recommendations
to the Investment
Manager / may
supervise on behalf
of the Trustee
2.2 Trust Solution
What is a Trust?
Settlor /
Grantor /
Asset Owner
Charities
Trust Deed
Letter of Wishes
2.2 Trust Solution
Key Features
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• A trust is a relationship based on equitable principles of care and
responsibility;
A trustee is a fiduciary;
Trustee is the legal owner – not the trust;
Other parties include a settlor / beneficiaries / protector / investment
advisor.
• The essence of a trust is the split of legal and beneficial ownership;
This allows for assets to fall outside the estate on death;
Requires a client to give up control – which may prove difficult for
some Asian clients
Revocable vs. Irrevocable
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An irrevocable trust cannot be converted into a
revocable trust
A revocable trust can be converted into an irrevocable
trust
When talking to a client about a structure for asset
protection the starting premise should be to establish an
irrevocable structure
2.2 Trust Solution
Key Legal Features
Discretionary vs. Fixed
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Trustees have a discretion over
distributions to beneficiaries
No absolute entitlement for
beneficiaries
The discretionary element can
help for asset protection
Beneficiary has a fixed
entitlement
Can be fixed in the Trust Deed or
Letter of Wishes
Fixed Trusts can create issues in
the event of matrimonial disputes
or creditor claims
May also trigger tax up front in
home country
2.2 Trust Solution
Key Legal Features
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• Who can be a settlor?
• An individual?
• A company?
• What is a dummy or nominee settlor?
• Can there be more than one settlor?
2.2 Trust Solution
What is a Settlor?
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• Guidance and non-binding
• Letter of Wishes vs Trustee Memorandum
• Beware of including references to a Letter of Wishes in the Trust Deed:
Could render the Letter of Wishes mandatory
2.2 Trust Solution
What is a Letter of Wishes?
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• No limitations as to who or what can be a Trustee:
Bank owned
Independent trustees
Individuals
In a Private Trust Company structure, the trustees can be one or all of
the above
• The trustees are not agents of the settlor
2.2 Trust Solution
Who are the Trustees?
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• Fiduciary duties – akin to a caretaker
• Duties are owed to the beneficiaries, not the Settlor
• In many cases the duties are statutory, e.g. there may be a codified duty
of care when carrying out the investment functions
2.2 Trust Solution
Duties of Trustees
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• Usually a trusted friend or advisor
• Acts as a policeman on the Trustee
• What should happen if a Protector:
goes missing/cannot be contacted;
Is incapacitated
goes bankrupt or is charged with a crime
2.2 Trust Solution
What is a Protector?
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Cash, deposits,
securities
Bank/External Asset
Manger
Settlor and
Family Members
or Friends
Holds for
Transfers
Assets
Provides Financial
Advice to the Trustee
Beneficiaries
Appoints
Investment
Manager
Guardian or
Protector or
Supervisory
Board
Monitors the
Trustee/ looks
after Beneficiaries
interests after
death of the Settlor
2.3 Foundation Solution
What is a Foundation?
Founder
Charities
Foundation Solution
Foundation Board
/ Council
Prescriptive
Foundation
Charter
Certificate of
Establishment
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• A foundation is a separate legal entity:
The Foundation Council administers the Foundation and owes duties to
the Foundation and not the beneficiaries;
The Foundation is the legal owner, not the Foundation Council;
By-Laws and Statutes regulate the activities of the Foundation and the
Foundation Council.
2.3 Foundation Solution
Key Features
A corporate vehicle with trust like features
– but prescriptive, not discretionary
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2.3 Foundation Solution
Some Key Differences to Trusts
Concepts involving
certainty and sham do not apply – so a
foundation cannot be
declared invalid or a
Sham.
A foundation cannot be
declared invalid for want of initial corpus.
A foundation is
registered or recorded
publicly.
Unlimited perpetuities period.
In a foundation, the rights of
the founder may carry more weight and can be
prescribed in the
statutes and by-laws.
Foundations by their very nature are inflexible, with
rights and obligations
codified.
In a foundation the
act of registration gives the
foundation legal entity
status.
2.4 In addition to Trusts and Foundations - Don’t Forget!
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• Wills
• Companies – offshore and onshore
• Insurance Products
Topic 3:
What are the Benefits of Trusts and Foundations
in the Asian Context?
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Possible but may dilute
objectives
3.1 Structuring using a Trust vs. a Foundation
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Trust Foundation
Control
Flexibility
Lifetime/Duration
Tax Planning
Re-domiciliation
Asset Protection Planning
Forced Heirship Planning
Statutes and By-laws may
be treated as a code
Depends on jurisdiction,
not always unlimited
Look for Asset protection
legislation for certainty
Relatively easy More difficult
3.2 How do Asian Families deal with Succession?
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Will Ability to use Trust
Solution?
Ability to use
Foundation Solution?
Singapore
Hong Kong
China
Malaysia
Thailand
Indonesia
Philippines
3.3 Trust Solution
Benefits for Asian Clients
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Underlying Co
Assets
Client Benefits
1. Can plan for succession of assets to next
generation.
2. Can assist in protecting against claims of
creditors.
3. Can assist in mitigating forced heirship
issues.
4. Can use a revocable trust for a client that
wants control although may weaken
asset protection.
5. Tax treatment in the home country needs
to be considered.
Trust Solution
SuccessionForced Heirs Creditor Claims
Foundation
Solution
3.3 Foundation Solution
Benefits for Asian Clients
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Underlying Co
Assets
Client Benefits
1. Can plan for succession of assets to next
generation.
2. Can assist in protecting against claims of
creditors however control characteristics
may dilute asset protection benefits.
3. May not mitigate forced heirship issues.
4. Tax treatment in home country needs to
be considered.
SuccessionForced Heirs Creditor Claims
29
Foundation solutions may be more
suitable for clients:
• From civil law jurisdictions;
• Who want certainty;
• Who want minimal discretion, e.g.
a structure to hold a specific asset
for a specific purpose, akin to a
corporate vehicle;
• Who require entrenched control;
• Who require unlimited duration.
3.4 How can these Solutions assist?
Trust solutions may be more
suitable for clients:
• From common law jurisdictions;
• Who want flexibility and are
comfortable with giving up
control;
• Who may be interested in asset
protection (by considering trust
solutions in certain jurisdictions,
e.g. Bahamas, Singapore).
Topic 4:
Given the impact of Tax Transparency, are
Trusts and Foundations still relevant for Asian
Families?
31
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Commitment to Common
Reporting Standards?
CRS translated into Local Law?
Singapore
Hong Kong
China
Malaysia
Thailand
Indonesia
Philippines
Taiwan
4.1 Impact of Global Transparency
2018
2018
2018
2018
2018
Not currently
committed
Not currently
committed
Not currently
committed
In process
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1. Wealth Owners in Asia will continue to require succession solutions.
2. Given the nature of the wealth in Asia, wealth owners will continue to
need complex succession solutions.
3. Solutions have a Tax and a Non-Tax component;
- a tax neutral solution should be the focus;
- there is a marked shift in focus to planning for non-tax reasons.
4. A return to quality and simplicity in terms of structuring.
4.2 Relevance of Trusts and Foundations for Asian Families?
Summary
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1. Asian families have both tax and non-tax concerns that need to be
addressed.
2. Global transparency has not changed this.
3. A well structured Trust or Foundation solution can still be used to
achieve succession objectives.
4. The nature of the wealth in Asia means that succession will become
even more important for the next generation.
Contact Details
Miami
Anaford PLLC*1401 Brickell Avenue,
Suite 550 - Miami, FL 33131
+1 305 529 3590 | Tel.+ 1 305 529 3599 | Fax
* Practice limited to Federal Tax Law
Zurich
Anaford AGTödistrasse 53
8002 Zürich
+41 44 567 88 05 | Tel.
+41 44 567 88 06 | Fax
Geneva
Anaford AGRue de Mont-Blanc 3
1201 Geneva
+41 22 544 88 90 | Tel.+41 22 544 88 91 | Fax
Valencia
Anaford Abogados, S.L.PGran V. Marqués del Túria
67, 46005 Valencia
+34 960 300 075 | Tel.
Anaford Abogados,.Avda. Diagonal, 601, Pl.8a,
08028 Barcelona
+41 44 567 88 05 | Tel.
Barcelona
Dharshi Wijetunga
Anaford Attorneys at Law
www.anaford.com
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Disclaimer
This presentation was given by Anaford AG. Anaford AG has taken all reasonable care
to ensure that the information contained in this presentation is accurate at the time of
publication.
This presentation is intended solely for information purposes. The information provided in
this presentation should not be construed as legal advice or legal opinion regarding any
specific facts or circumstances. You should consult an attorney about your situation and
specific facts. You should not act on any of the information in this presentation as the
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