Are you an Ultra-High-Net-Worth Individual (UHNWI)?

Then you may be familiar with many of the unique challenges that come with having such substantial wealth.

Whilst you might possess significant financial resources that give access to exclusive opportunities and privileges, this wealth level also raises concerns that require careful consideration when navigating your personal, professional, and financial life.

We look at 10 of the top concerns of UHNWIs and why they hold so much importance:

1. Wealth Preservation

Preserving wealth is a primary concern often motivated by the desire to pass on wealth to future generations. Effective wealth preservation can provide financial security for your children and grandchildren, ensuring the continuity of your family’s prosperity and preserving your family legacy.

Wealth preservation can also be important in sustaining a desired standard of living, including covering ongoing expenses and retaining exclusive privileges and access to luxury goods and services.

2. Asset Protection

As an UHNWI you generally face a higher risk of litigation and legal threats due to your sizeable wealth and high-profile status.

However, frivolous lawsuits, business disputes, or personal liability can put your assets at risk making asset protection strategies vital in shielding your wealth from legal threats and ensuring financial security.

Equally to wealth preservation, effective asset protection plays a crucial role in succession planning for those who aim to pass on their wealth to future generations while minimising estate taxes and protecting assets from disputes or mismanagement among beneficiaries.

3. Family Governance and Succession Planning

Whilst it is likely you have a desire to preserve and pass on your wealth to future generations, often it involves a wide range of assets and, potentially, many beneficiaries. Implementing effective family governance structures and succession plans ensures the smooth transition of your wealth, minimises potential disputes and maintains family harmony. By establishing clear roles, responsibilities, and decision-making processes, you can provide a framework for effective wealth management and uphold your family’s values and vision.

Succession planning is particularly important as it allows you to shape your legacy and secure the financial well-being of your heirs. It involves thoughtful considerations such as selecting appropriate successors, determining equitable distribution of assets, and minimising estate taxes.

As you strive to ensure a seamless transfer of wealth to the next generation while providing the necessary guidance, education, and support to your successors, comprehensive succession planning can preserve family wealth, maintain continuity in business operations, and foster a sense of responsibility and stewardship among your heirs, ensuring the sustainable management of your financial legacy.

4. Philanthropy and Impact Investing

Equipped with the means and resources to contribute to social causes, address pressing issues, and support initiatives that align with your values, philanthropy and impact investing allows you to make a positive difference in society and create a lasting impact beyond your financial wealth.

Engaging in philanthropy allows you to leverage your financial resources, expertise, and networks to effect meaningful change and improve the well-being of communities and the environment. Many view philanthropy as an opportunity to leave a legacy and contribute to the greater good, addressing societal challenges that governments or traditional institutions may not adequately address.

Impact investing has also emerged as a concern for those who seek to align their investment strategies with their social and environmental values. By deploying capital into companies and projects that generate measurable positive social or environmental outcomes, you can combine financial returns with positive impact.

Impact investing provides a platform for you to leverage your wealth for both financial gain and to drive social change.

5. Estate Planning

It is important to engage in estate planning to maintain control over your wealth, protect your legacy, and avoid potential disputes among beneficiaries. Working closely with estate planning professionals, including lawyers, accountants, and financial advisors, you can develop comprehensive strategies that address your unique needs and objectives.

This may involve establishing trusts, creating charitable foundations, setting up family offices, or implementing strategies such as gifting or life insurance. By carefully crafting your estate plan, you can ensure that your wealth is transferred according to your wishes while also considering the impact on future generations and the communities you aim to support.

Moreover, estate planning extends beyond financial considerations with philanthropic endeavours and the preservation of family values often taking priority. Through estate planning, you can articulate your philanthropic goals, specify how your wealth should be allocated to charitable causes, and create mechanisms for ongoing family involvement in philanthropic activities. Estate planning allows you to leave a lasting impact on society, empower future generations to continue your philanthropic work and establish a meaningful legacy that extends beyond your financial wealth.

6. Tax Optimisation

With diverse sources of income, international investments, and global business operations, tax optimisation is often a significant concern as you seek to maximise tax efficiency, preserve your wealth, and enhance your overall financial well-being within the boundaries of legal and ethical frameworks.

Tax optimisation allows you to strategically manage your assets and income streams utilising certain jurisdictions and their favourable tax regimes. This may involve structuring investments through the use of tax-efficient vehicles such as companies, trusts or foundations.

Employing a team of professional service providers like tax advisors, accountants, legal experts and corporate service providers can enable you to identify opportunities for optimisation whilst remaining compliant with applicable laws, legislation and regulations.

By proactively managing your tax obligations, you can allocate resources effectively, enhance your investment returns, and maintain long-term growth of your wealth.

7. Privacy and Security

As an UHNWI, you are more likely to find yourself in the public eye, attracting attention from the media, the general public, and potentially malicious individuals.

Privacy is therefore invaluable as it allows you to navigate your personal and professional lives without undue interference, ensuring the safety of you and your family and confidentiality around your personal and financial affairs.

Maintaining personal privacy is therefore central to protecting your well-being, assets, and reputation. Privacy breaches can be dangerous, leading to things like identity theft, extortion attempts, or unauthorised access to sensitive information.

Additionally, due to your affluence, you face an elevated risk of security threats. Criminals may view you as lucrative targets for theft, kidnapping, or ransom attempts. Security measures such as physical protection, surveillance systems, and trained security personnel are vital to safeguarding your personal safety and the security of your residences, offices, and other properties.

By prioritising privacy and security, you can enjoy peace of mind, focus on your endeavours, and maintain control over your personal lives in an increasingly interconnected and potentially volatile world.

8. Reputation Management

Having a public profile requires careful reputation management.

Reputation management involves proactive measures to build, enhance, and protect a positive image. It is therefore recommended you employ public relations teams, media consultants, and communication experts to navigate media interactions, public appearances, and online presence as you strive to be seen as responsible and influential members of society, engaging in philanthropic activities, supporting social causes, and promoting ethical business practices.

By managing your reputation effectively, you can preserve your credibility, maintain strong relationships with key stakeholders, and uphold your standing within your local communities and industries.

Additionally, reputation management is crucial for your personal and professional networks. Your reputation impacts your ability to secure business deals, form partnerships, attract top talent, and maintain the loyalty of clients and customers.

You will already understand the significance of your reputation in cultivating opportunities and maintaining long-term success. Therefore, you should invest resources and effort into reputation management to ensure your public perception aligns with your values, aspirations, and overall strategic objectives.

9. Geopolitical and Economic Instability

Many UHNWIs often have diverse international investments, business ventures, and global financial interests. Geopolitical events, such as political unrest, trade disputes, or economic sanctions, can disrupt markets and adversely affect your assets and investment portfolios. It is therefore important that you closely monitor geopolitical developments to assess potential risks and adjust your strategies accordingly.

Economic instability, including market volatility, recessionary periods, or currency fluctuations, can significantly impact your financial holdings, which are exposed to risks associated with economic cycles, industry disruptions, and changing market dynamics.

Employing sophisticated risk management techniques and diversification strategies to mitigate these risks whilst also engaging in active wealth management practices, leveraging expert advice and market insights can help navigate economic uncertainties and preserve the value of your assets. Geopolitical and economic stability are paramount as you strive to protect and grow your wealth in a constantly evolving global landscape.

10. Lifestyle Management

Often having demanding schedules, multiple residences, and various personal and professional commitments, you may see lifestyle management as a concern.

Managing such aspects efficiently while maintaining a high standard of living requires careful attention to detail and specialised services as you seek to optimise your time, delegate responsibilities, and ensure seamless integration of your personal and professional lives.

Lifestyle management encompasses a wide range of services, including travel arrangements, event planning, household management, personal shopping, and concierge services. It may be that you already rely on expert professionals and dedicated teams to handle day-to-day tasks and provide personalised assistance however if not, doing so can help you to focus on your core priorities, such as business ventures, philanthropic activities, or personal well-being, while enjoying the convenience and comfort of a well-managed lifestyle.

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At Sentient International, we specialise in providing comprehensive corporate and trust Services that enable individuals, families, and organisations to safeguard their assets and ensure their legacy for future generations.

Whether a structure is for the purpose of providing privacy, philanthropy, succession planning, wealth preservation, holding investments or even for the purpose of trading, we work with our clients to provide them with a holistic view of their needs.

We understand that implementation is key to the success of any form of structure and to this end we work closely with their chosen advisors and representatives to ensure that we provide a solution that is fit for purpose and yields success. Our Sense. Your Future.

Holding property in a company can have both advantages and disadvantages. Here are some pros and cons to consider:

PROS

Limited liability: One of the biggest advantages of holding a property in a company is that it can provide limited liability protection. This means that if something goes wrong with the property, the owners of the company are not personally liable for any damages or debts that may arise.

Tax benefits: Holding property in a company can offer tax advantages. For example, the company may be able to deduct expenses related to the property from its taxable income, reducing its overall tax liability. Additionally, if the property is sold, the company may be able to take advantage of certain tax breaks.

Investment flexibility: Holding property in a company can offer greater investment flexibility, as it may be easier to transfer ownership or raise capital by issuing shares of the company.

Capital Accumulation and Funding: A company structure can facilitate capital accumulation and access to funding. By pooling resources from multiple investors or shareholders, it becomes easier to acquire and manage larger properties or real estate portfolios. Additionally, holding property in a company can provide opportunities to secure financing through business loans, lines of credit, or issuing shares, enabling expansion and growth.

Succession Planning and Transferability: Property held within a company can be more easily transferred or inherited. Through the process of share transfer, ownership interests in the company can be passed down to heirs or sold to interested parties. This feature offers greater flexibility in succession planning and allows for a smoother transition of ownership without the need for complex legal procedures or property transfers.

CONS

Increased Costs: Creating and maintaining a company incurs additional costs compared to personal ownership. Legal fees, registration fees, annual filing requirements, and accounting expenses contribute to the financial overhead of running a company. Moreover, ongoing administrative tasks, such as bookkeeping and compliance, may necessitate the engagement of professionals, which adds further to the expenses.

Complexity and Administrative Burden: Operating a company involves additional administrative tasks and legal obligations. Establishing a company, maintaining proper documentation, conducting regular meetings, and adhering to corporate governance requirements can be time-consuming and burdensome. This complexity may deter some individuals who prefer a more straightforward approach to property ownership.

Limited personal control: Decision-making and property management may require consensus among multiple shareholders, limiting the owner’s flexibility and control over the property. Decisions related to the property will also need to be made by the company’s board of directors, rather than the individual owners.

Higher tax rates: Depending on the jurisdiction, holding property in a company may be subject to higher tax rates than if the property was held personally. Additionally, the profits from the company may be subject to double taxation, making it vital to obtain the appropriate professional advice before entering into transactions of this nature.

Privacy concerns: Companies are subject to public disclosure requirements, which may involve the publication of financial statements, ownership details, and other corporate information depending on the jurisdiction in which your company is registered.

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In summary, holding property in a company presents several advantages and disadvantages that individuals and businesses should carefully consider before deciding whether to proceed with this structure.

Ultimately, the decision to hold property in a company depends on individual circumstances, financial goals, and the legal and regulatory framework of the specific jurisdiction. Seeking advice from legal and financial professionals is always recommended to make an informed choice.

For more information or for assistance in establishing a suitable entity for property ownership, call +44 1624 616544 or email info@sentientinternational.com.

The Register of Overseas Entities (‘ROE’) is essential in promoting transparency and combating illicit financial activities.

It shines a light on the true owners of overseas entities, ensuring accountability and safeguarding against money laundering, corruption, and tax evasion.

Our latest infographic looks at the purpose and significance of the ROE, who it applies to, its key features and its benefits.

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❔ What is the difference between title and ownership of property?

Title and ownership are two distinct concepts when it comes to property. The title refers to the legal right to own and use the property, while ownership refers to the actual possession and control of the property.

The title is typically established through legal documents, such as a deed or a title certificate, which proves that a person has the legal right to own and use the property.

Ownership, on the other hand, refers to the actual possession and control of the property. A person may have title to a property, but not necessarily own it if they do not have possession or control over it.

It’s also worth noting that ownership can be transferred without a title change. For example, if a person inherits a property from a family member, they may become the owner of the property even if the title remains in the name of the deceased family member’s estate.

In summary, while the title refers to the legal right to own and use the property, ownership refers to the actual possession and control of the property. It’s important to have both title and ownership to fully control and benefit from a property.

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❔ What are the main types of property ownership?

Sole Ownership: For individual property owners, giving them complete control over all decisions related to the property, including its sale, lease or transfer to another person. Upon death, the property would be sent into probate.

Joint Tenancy: Commonly used by married couples as both parties have equal liability and financial responsibility for the property. Right of survivorship means that when one owner dies, their share in the property automatically passes to the surviving owners without the need for probate.

Tenancy in Common/Common Ownership: Allows each tenant to sell, will or otherwise transfer their ownership share without the permission of the other owners. Should one tenant die, their ownership passes into probate before being transferred to any named heirs as survivorship rights do not apply.

Partnership/LLC: Commonly used by unrelated multiple owners of a single property as it offers more privacy and limited liability, and can also offer tax benefits.

Owning Trust: Commonly used for minor children or adults with disabilities as it entrusts the care and management of the property to trustees acting on behalf of the beneficiaries. It is an effective way to pass on a property to your designated beneficiaries without the need for probate when you die.

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❔ What is the simplest form of property ownership?

Depending on your circumstances, sole ownership or joint ownership are the most common and most straightforward types of property ownership.

Sole ownership is where a property is legally owned by a single person.

Joint ownership or joint tenancy is where two or more tenants equally own the property, giving each party equal rights, income and use of the property. Should one tenant die, ownership passes on to the surviving tenant(s) through the right of survivorship.

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❔ What is the most common form of property structuring?

The most common form of property structuring is owning property as an individual or as a joint owner.

Direct ownership is a straightforward form of property structuring, and it is the most common way that individuals own property. This can be either as a personal residence or as an investment property.

However, another common form of property structuring is owning property through a limited company. This is known as indirect ownership, where the property is owned by the company rather than the individual.

Owning property through a limited company can offer various benefits, including limited liability protection, potential tax advantages, and greater flexibility in terms of ownership and management.

Overall, while owning property through a limited company can be beneficial in certain circumstances, direct ownership remains the most common and straightforward form of property structuring.

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❔ Can a company own property?

Yes, a company can own property.

For property portfolios, it is not uncommon for property investors to use multiple companies. This usually takes the form of a holding company that owns several subsidiary companies, each holding and managing a single property. In this instance, the holding company is not involved in the day-to-day operations of each property but plays the role of a parent company.

Owning property through a company can also offer several advantages including asset protection, confidentiality and security, there are no restrictions on the number of shareholders, simplified management, reduced tax liabilities, personal liability protection, flexibility in the transfer of property and/or shares and they can also be effective for estate planning as it can avoid the need for probate.

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❔ What is a property holding company?

A property holding company is a type of limited company that is established for the primary purpose of holding and managing one or more properties. The company owns the property, and any income generated from the property is received by the company.

A property holding company can be established for various reasons, including for tax purposes, to protect personal assets, or to provide greater flexibility in the management and ownership of the property.

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❔ Is it better to own property through a company?

Whether it is better to own property through a company depends on a variety of factors, and there is no one-size-fits-all answer. However, there are undoubtedly several potential benefits of owning property through a corporate structure.

That said, there are also potential drawbacks to owning property through a company, including additional costs and administrative responsibilities, such as complying with company law requirements, filing annual accounts and returns, and paying corporation tax. In addition, there may be restrictions on the types of properties that can be owned by a company, depending on the laws of the relevant jurisdiction.

Ultimately, it will depend on individual circumstances, including factors such as the size and type of the property, the tax laws in the relevant jurisdiction, and the personal preferences and goals of the owner or shareholders. But most importantly, you should seek the appropriate professional advice before making any decisions about how to own property.

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❔ What are the benefits of putting a property into a limited company?

Putting a property into a limited company has several potential benefits:

1. Putting a property into a limited company can provide limited liability protection as the company becomes the legal owner of the property, and the liability for any debts or legal claims associated with the property falls to the company, rather than to the individual owner or shareholders. This can help protect the personal assets of the owner or shareholders in the event of any legal disputes or financial problems.

2. Depending on the individual circumstances, putting a property into a limited company can offer tax advantages. For example, rental income received by the company can be subject to lower rates of corporation tax than the individual income tax rates, and the company may also be able to claim certain expenses as tax-deductible, reducing its overall tax liability.

3. Owning a property through a limited company can provide greater flexibility in terms of ownership and management. Shares in the company can be easily transferred or sold, and the company can also more easily raise funds through share issuances or loans.

4. For individuals with significant property assets, putting a property into a limited company can be a useful estate planning tool. Shares in the company can be passed on to heirs or beneficiaries, providing greater control over the distribution of assets after death.

It’s worth noting, however, that putting a property into a limited company also involves additional costs and administrative responsibilities, such as complying with company law requirements, filing annual accounts and returns, and paying corporation tax. Therefore, it’s important to seek professional advice before making any decisions about incorporating property into a limited company.

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❔ Can I lose my property if my company gets struck off?

Simply put, yes! If your property is owned by a company that gets struck off, there is a risk that you could lose the property. When a company is struck off, it ceases to exist as a legal entity, and any assets owned by the company, including the property, may be deemed the property of the Crown or the state.

To avoid this risk, it’s important to ensure that the company is in good standing with all of its legal and financial obligations and to take steps to prevent it from being struck off. This may include ensuring that all annual returns and accounts are filed on time, maintaining accurate records, and ensuring that any outstanding taxes or other debts are paid.

If a company has already been struck off, there may still be options available to recover the property, but this will depend on the specific circumstances and the laws of the relevant jurisdiction.

While there is a risk that you could lose your property if your company gets struck off, this risk can be mitigated by taking proactive steps to ensure that the company is in good standing and by seeking professional advice as necessary. Engaging a professional service provider with the knowledge and expertise in the administration and governance of companies, such as a corporate services provider like Sentient International, is a good way to manage this risk.

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❔ Can I live in a property owned by my limited company?

Yes, it is possible to live in a property owned by your limited company, but there are some important considerations to keep in mind.

First, it’s important to ensure that the property is being used for a genuine business purpose. If the property is being used solely for personal use, or if the primary purpose of owning the property is for personal use, then this may not be considered a genuine business purpose and could be viewed as tax evasion.

Second, if you are living in a property owned by your limited company, you may be subject to certain tax implications. For example, if the property is provided to you as a director or employee of the company, then this could be considered a taxable benefit in kind, and you may need to pay tax on the value of the benefit.

Third, if you are living in a property owned by your limited company, it’s important to ensure that the company is properly accounting for all expenses associated with the property, including mortgage payments, maintenance costs, and any improvements or repairs.

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❔ Can I sell my house to a limited company?

Yes, you can sell your house to a limited company. However, there are some important factors to consider before doing so.

Firstly, you will need to ensure that the sale is made at market value and that you receive a fair price for your property. This is important to avoid any potential tax issues, such as capital gains tax, which may arise if the sale price is below market value.

Secondly, you will need to consider the legal and financial implications of selling your property to a limited company. This may include issues related to company law, taxation, and financing.

For example, if you are the sole director and shareholder of the limited company, the sale may be considered a related-party transaction, which can have implications for tax and accounting purposes.

It is therefore important to seek professional advice before selling your house to a limited company to navigate the legal and financial complexities of this kind of transaction and ensure that you are aware of any potential risks or issues.

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❔ Can structuring property ownership preserve my family’s wealth?

Yes, structuring property ownership can be an effective way to preserve your family’s wealth. Structuring property ownership can protect your assets from legal claims, disputes, and taxation.

One way to structure property ownership to preserve your family’s wealth is through the use of trusts. Another way to structure property ownership is through the use of holding companies.

In addition to protecting your assets, structuring property ownership can also help to minimise estate taxes and other taxes that may be incurred when passing on your assets to your beneficiaries. By utilising various tax planning strategies, such as gifting, trust structures, and other estate planning tools, you can ensure that your wealth is passed on to future generations in a tax-efficient way.

Structuring property ownership requires careful planning and consideration, and should be done in consultation with legal and financial professionals who specialise in estate planning and asset protection. With the right strategies in place, however, structuring property ownership can be an effective way to preserve your family’s wealth for future generations.

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❔ How can property structuring enhance confidentiality and protect my asset(s)?

Property structuring can enhance confidentiality and protect your assets in several ways:

Using a trust: A trust is a legal arrangement where the property is transferred to a trustee, who manages the property on behalf of the beneficiaries. By placing your property in a trust, you can ensure that the beneficiaries of the trust (which can include you) have access to the property while keeping the ownership and details of the property private.

Establishing a holding company: A holding company is a type of limited company that is established to hold and manage other companies or assets. By establishing a holding company, you can create an additional layer of protection between yourself and your assets, and keep your ownership and control of the assets private.

Creating a layered ownership structure: By creating a layered ownership structure, you can separate the legal ownership of the property from the beneficial ownership. This can help to protect your assets from legal claims or disputes and enhance confidentiality.

Utilising offshore structures: Offshore structures, such as companies, trusts, and foundations, can be used to provide greater confidentiality and asset protection. By establishing an offshore structure in a jurisdiction with strong privacy laws, you can keep your ownership and control of the property private, and protect your assets from legal claims or disputes.

It’s important to note that while property structuring can enhance confidentiality and protect your assets, it must be done carefully and in compliance with all legal and regulatory requirements. It’s recommended to seek professional advice and assistance from a professional service provider with expertise and understanding in asset protection and structuring to ensure that your property structure is effective and legally sound.

Using a nominee director or shareholder: A nominee director or shareholder is a person or company that is appointed to act as a front for the actual owner of a company or property. By using a nominee, you can keep your ownership of the property private, and ensure that your details are not disclosed in public records.

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❔ How can property structuring tie in with tax planning?

Property structuring can tie in with tax planning in various ways:

Income tax planning: By structuring your property ownership through a company or trust, you can potentially reduce your income tax liability, i.e. rental income received by a company may be subject to lower rates of corporation tax than individual income tax rates, and a trust can allow for more flexible distribution of income to beneficiaries.

Inheritance tax planning: Property structuring can also be used for inheritance tax planning, which involves minimising the amount of tax payable on your estate when you die. By placing your property in a trust, for example, you can potentially reduce the value of your estate for inheritance tax purposes, and ensure that your beneficiaries receive the maximum benefit from your estate.

Capital gains tax planning: When you sell a property, you may be subject to capital gains tax on any increase in value since you acquired the property. By structuring your property ownership through a company or trust, you may be able to minimise your capital gains tax liability, i.e. a  company may be able to claim certain expenses as tax-deductible, reducing its overall tax liability, and a trust may allow for a more flexible distribution of gains to beneficiaries.

Stamp duty land tax planning: When you purchase a property, you may be subject to stamp duty land tax. By structuring your property ownership in a particular way, you may be able to reduce the amount of stamp duty land tax payable, i.e. if you purchase a property through a company, the stamp duty land tax payable may be calculated differently than if you purchase the property as an individual.

It’s important to note that property structuring for tax planning purposes must be done in compliance with all legal and regulatory requirements and that the appropriate professional tax advice is always sought before setting up any kind of structure to ensure that it is fit for purpose and legally sound.

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❔ How long can a property be held in a structure?

There is no fixed time limit on how long a property can be held in a structure. A property can be held in a structure, such as a company, trust, or partnership, for as long as the structure remains valid and continues to serve the intended purpose.

The duration of the structure will depend on various factors, such as the type of structure, the intended purpose of holding the property, and the specific legal and regulatory requirements of the relevant jurisdiction.

For example, a company can be established for an indefinite period, subject to compliance with ongoing legal and regulatory requirements, such as filing annual returns and maintaining accurate records. Similarly, a trust can be established for a specified period, such as for the lifetime of the beneficiaries, or an indefinite period, subject to compliance with the trust’s legal requirements.

In some cases, a property holding structure may be established for a specific purpose, such as to hold a property for a specific development project, and may be dissolved once that purpose has been fulfilled.

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❔ How can a trust protect my house?

A trust can be a useful tool for protecting your house and other assets, particularly in the event of legal disputes or financial problems. Here are some ways that a trust can protect your house:

1. When you transfer ownership of your house to a trust, the house becomes the property of the trust, rather than your personal property. This can provide a degree of asset protection, as the trust owns the house, and any legal claims or liabilities associated with the house are borne by the trust, rather than by you. This can help protect your assets in the event of any legal disputes or financial problems.

2. A trust can also be used as part of an estate planning strategy to ensure that your house passes to your heirs or beneficiaries according to your wishes and to minimise estate taxes. By placing your house in a trust, you can specify how the property is to be distributed after your death.

3. When you transfer ownership of your house to a trust, the property is no longer part of your estate and therefore does not need to go through the probate process. This can save time and money and help avoid potential disputes among family members.

4. A trust can also offer greater privacy than a will, as the terms of the trust are generally not a matter of public record, whereas a will becomes part of the public record during the probate process.

It’s important to note that setting up a trust involves certain costs and administrative responsibilities, and it’s important to seek professional advice and engage a professional and experienced trust services provider to ensure that a trust is the right tool for your specific needs and circumstances, and subsequently that it is set up and administered effectively and efficiently.

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To find out more about our property services or to discuss your specific requirements contact us on iom@sentientinternational.com or telephone +44 1624 616544.

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Property: Summary of Services

Many South Africans are looking to offshore structuring opportunities as they seek to protect and grow their wealth. Offshore structuring involves creating a legal structure in a foreign jurisdiction to manage one’s wealth, assets, or investments. A structure can include one or more companies, trusts or foundations.

The Isle of Man offers a favourable tax regime, political stability, and a strong financial infrastructure, making it a popular choice for individuals and businesses seeking to manage their financial affairs.

A British Crown Dependency located in the Irish Sea between England and Ireland, the Isle of Man is a reputable offshore financial centre with a stable political and economic climate. The Isle of Man has a zero corporate tax rate for most types of companies, including holding companies, trading companies, and investment companies, and there is also no capital gains tax, inheritance tax, or wealth tax in the Isle of Man.

In addition, the Isle of Man has strong privacy laws that protect the identity of individuals who establish offshore structures, which makes it an attractive destination for those seeking to protect their privacy and confidentiality.

In terms of asset protection, the Isle of Man offers a strong legal framework that provides a high level of protection for individuals who establish offshore structures. Trusts and foundations, in particular, are popular structures for asset protection in the Isle of Man, as they can provide significant protection against creditors and legal claims as well as being an effective estate and succession planning tool.

It’s important to note that not all South Africans like offshore trusts, and those who do have varying reasons for doing so. However, there are some common factors that may make offshore trusts an attractive option for some South Africans.

One reason is the potential tax benefits. Offshore trusts can be structured in a way that allows for the reduction of taxes on income, capital gains, and inheritance. This can be especially appealing to South Africans who are subject to high taxes in their home country.

Another reason is asset protection. Offshore trusts can provide a layer of legal and financial protection for assets by placing them outside of the jurisdiction of the South African courts, shielding them from potential lawsuits or other legal claims.

Offshore trusts can also be used as part of estate planning to provide for future generations and ensure the transfer of wealth to heirs in a tax-efficient manner.

Offshore trusts can offer greater privacy and confidentiality as they can make it more difficult for others to determine the extent and nature of a person’s wealth, which can be important for individuals who value their privacy or are concerned about potential threats to their safety.

Offshore trusts also offer more flexibility than South African trusts, which are based on Roman Dutch Law, which can be somewhat more restrictive. For example, South African trusts recognise just one type of ownership, ‘dominion’, whereas most offshore trusts recognise two types of ownership, ‘legal’ and ‘beneficial’. Furthermore, South African trusts are based on contract law so any changes must follow contractual principals – this makes it harder to make changes once one of the parties dies. In contrast, an offshore trust can be amended whether the Settlor is alive or not.

It should be noted that offshore structuring is not a way to evade taxes or hide assets from the authorities. Individuals who establish offshore structures must comply with all relevant tax laws and regulations in their home country and the jurisdiction in which the structure is established.

In summary, the Isle of Man offers attractive offshore structuring opportunities for South Africans seeking to protect and grow their wealth. However, it is important that the appropriate professional advice is sought before embarking on any offshore structuring strategy to fully understand any legal and tax implications before establishing an offshore trust and ensure compliance with all relevant laws and regulations.

Whether it is for the purpose of succession and estate planning, to protect your assets, to manage forced heirship rules, to preserve family wealth, to navigate tax and regulatory issues or to plan for the future of your family or business – identifying the most appropriate structure is crucial to ensure that it sufficiently protects what you care about and that such assets are retained in the way that you desire.

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At Sentient International we have the knowledge and experience required to deliver the solution best suited to your needs and offer a comprehensive range of fiduciary services which can include acting as Trustees.

For more information on our trust services or to discuss your requirements in more detail, please contact us by telephone on +44 1624 616544 or email iom@sentientinternational.com.

Trust structures can play a crucial role in families by providing a means to manage and protect assets, as well as facilitating the transfer of wealth across generations.

A trust is a legal arrangement that allows individuals to transfer ownership of their assets to a third party (the trustee) who then holds and manages said assets on behalf of the designated beneficiaries. Assets can include real estate, luxury assets, businesses, life insurance policies, investment portfolios, stocks and bonds, cash, antiques, cars, art and more.

Families may use trusts for a variety of reasons, depending on their specific needs and circumstances. Some common reasons include:
Asset protection: A trust can help protect a family’s assets from creditors, divorce settlements, potential lawsuits, and other potential threats. This is especially important for high-net-worth families and those with complex financial holdings.

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Estate planning

A trust can be a useful tool for managing and distributing assets after the death of a family member. Trusts can help ensure that assets are distributed to beneficiaries according to the Settlor’s wishes while minimising taxes and avoiding probate.

Probate avoidance

Assets held in a trust can often be distributed more quickly and efficiently than those that go through the probate process. This can save time and money for the family and help ensure that assets are distributed according to the Settlor’s wishes.

Minors or special needs beneficiaries

A trust can be used to provide for minors or beneficiaries with special needs. A trust can be structured to provide ongoing financial support while also ensuring that the beneficiary’s needs are met.

Privacy

Unlike a will, a trust is a private document and does not become part of the public record. This can help families maintain their privacy and protect sensitive financial information.

Providing for future generations

Trusts can be set up to provide for future generations of a family by ensuring that assets are preserved and managed appropriately.

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Trusts can also help to facilitate communication and cooperation within families, as they provide a structure for discussing and planning for the future. By establishing a clear plan for the management and transfer of assets, trusts can help to minimise disputes and ensure that everyone is on the same page.

Overall, trusts can be a valuable tool for families looking to protect their assets, plan for the future, and provide for their loved ones. However, the decision to use a trust should be made in consultation with the appropriate professional advice ensuring that it considers your circumstances and specific needs. It is also important to engage a professional service provider with the expertise and experience of establishing and managing such trust structures. A Trustee holds a position of significant trust and is expected to perform their duties to the highest ethical standards and with complete integrity. It is therefore important that you find a professional trustee who fully understands and appreciates the importance of yours and the family’s wishes.

❔ What is the definition of estate planning?

Stated simply, Estate Planning is a process through which an individual, whilst alive and able, prepares for the management, care and disposal of their estate should they become incapacitated or die. Typically, this will include the bequest of assets to heirs, the settlement of estate taxes and debts, and considerations for the guardianship of minors and/or pets.

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❔ What is included in my estate?

Your estate comprises many things. It fundamentally refers to everything that you possess or have a share in, including:

• Real estate
• Investments
• Bank accounts and savings
• Insurance policies
• Pensions
• Stocks
• Annuities
• Luxury assets
• Collectibles
• Digital assets – cryptocurrency, NFT, tokens etc.
• Personal possessions – jewellery, vehicles, antiques, household furnishings etc.
• Debts

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❔ How does estate planning protect my assets?

If you don’t have an estate plan, you will be considered intestate which means that your estate, comprising all of your assets, will be distributed according to the rules on intestacy. This means that certain parts of your estate may be given to people you don’t intend or want them to go to. Instead, the law will dictate the best people to receive your inheritance, whether that’s your partner, children or another.

One of the best ways to protect your assets is a trust. With a trust, you can distribute your assets in the way that you desire plus assets are not subject to estate taxes, so are a tax effective way of providing for and dividing your estate and assets to your designated beneficiaries.

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❔ Who needs estate planning?

There is one thing that is certain in life and that is death. For this reason, it is important that you give thought and action to estate planning to ensure that your wealth, assets and information are looked after and/or distributed in the way that you desire when you die.

So many people think that estate plans are for the ultra-wealthy but they couldn’t be more wrong. Everybody needs an estate plan.

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❔ Do I need an estate plan if I have no heirs?

Even if you are single and have no children or family to inherit your estate, estate planning is still important. Creating an estate plan gives you control of who will receive your assets; whether or not you are married or have children, you will likely still wish to leave your inheritance to someone. Without an estate plan, your next of kin, who is determined by the state, will decide for you, even if they are a distant relative that you don’t know or perhaps even dislike. So, rather than let the state decide on how your assets should be divided and distributed, you can specify a partner or friend, or even a charity should you wish to go down the philanthropic route and consider setting up a charitable trust.

Furthermore, an estate plan goes beyond your financial assets and personal belongings. It should also be used to appoint an appropriate individual who will be responsible for making critical decisions should you become incapacitated i.e. regarding financial and legal matters, and healthcare and medical decisions.

You may also wish to choose someone to take possession of your beloved pet(s) and put money in a trust for their subsequent care when you are no longer around.

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❔ Do I need an estate plan as a single person?

The short answer is yes! Whether you are single, married or divorced, you will still have some form of estate.

The need for an estate plan is not determined by your relationship status. As a single person you will still need to consider a power of attorney for your financial and legal affairs, a healthcare directive and a living will.

If you are a single parent you will also want to ensure that your children are protected and cared for when you are gone, and that your assets are passed to your children as you want and see fit. If you do not have children, you may have siblings, nieces and nephews or godchildren that you wish to benefit from your assets.

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❔ When should estate planning begin?

There is no specific age for when you should create an estate plan however, it is recommended that you should start estate planning when you become a legal adult.

An estate plan is important irrespective of your wealth status. Most young people have a bank account, personal belongings, other financial accounts, a life insurance policy and even a home, all of which should form part of their estate plan.

Furthermore, an estate plan dictates an individual’s wishes in respect of end-of-life medical care, guardianship of any children and may even include desired funeral arrangements.

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❔ Do I need a lawyer for estate planning?

Drafting a will or a living trust are two key ways of legally forming an estate plan.

A will is a legal document that details exactly what you wish to happen to your estate when you die. Whilst you can set up a will yourself, it is recommended that you engage the help and advice of an experienced professional to ensure that all considerations are covered and that it has been done in a legal and effective way.

A trust is a legal arrangement by which you transfer legal ownership of your assets to Trustees to hold and administer subject to the defined terms of a Trust Deed and in accordance with the governing law, for your chosen beneficiaries. It is advisable to engage either a lawyer or a licensed trust service provider like Sentient International, who can coordinate the drafting of a Trust Deed, establish the Trust and act as Trustees of the same.

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❔ Who will make my decisions if I cannot?

When putting an estate plan in place, it is important to think about who you wish to make important decisions on your behalf should you become incapacitated and unable to do so yourself.

Powers of attorney in respect of financial and legal affairs and medical decisions should be given to someone that you know and trust to ensure that when making any decisions they are acting in your best interest at all times and according to your wishes.

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❔ What is a Power of Attorney?

A Power of Attorney provides legal permission for a designated individual to act and make decisions about another individual’s property, finances or care.

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❔ What is a living will?

A living will provides written instructions on how you wish to be treated in respect of end-of-life medical care should you be unable to communicate or make that decision for yourself.

If you don’t have a living will, the decision will sit with your family and your medical team.

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❔ What happens if I die without a will?

It is estimated that 2 out of 3 adults in the UK do not have a will. Without a will, intestacy may result in your loved ones not being provided for in the way that you desire nor will your personal possessions go to or be gifted to family, friends of favoured charities as you might like them to.

Should you die without a will and have no respective next of kin, you will be considered to have died ‘intestate’ which means that your affairs are transferred into the hands of the law, which can lead to a court case and become complex if there are no obvious beneficiaries.

For more on this topic, check out our blog post ‘In Respect, Don’t Die without a Will’.

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❔ How often should I review my estate plan?

It is recommended that you review and update your estate plan every three to five years.

You should also review and update your estate plan after any major life event, i.e. marriage, divorce, death of a spouse, birth of a child/grandchild, moving house etc.

Reviewing your estate plan is a must. Check out the slideshow for more on this topic.

The Yacht Engaged in Trade (YET) Scheme is a dual-use operation programme which allows eligible private non-EU flagged yachts that are commercially compliant to carry out charter activity in French and Monegasque waters.

Our latest slideshow looks at the benefits of the Scheme, as well as the rules and eligibility criteria to register a yacht on the Scheme.

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Owning a private yacht can be a luxurious and exciting way to explore the world and its many wonders. But for yacht owners, it can also be a complicated process when it comes to navigating international waters and the laws that govern them.

Fortunately, the Temporary Admission regime can provide private yacht owners with an easier and more efficient way to navigate these waters.

In her latest article, Head of Marketing and New Business, Lesley Walker explores the regime, also known as TA, how it works and how it can help make the experience of owning a private yacht more enjoyable.

Yachts and VAT

VAT is chargeable on yachts imported into the EU and on yachts purchased and owned by residents of the EU who are using their yachts within the EU. VAT is also chargeable on yachts, irrespective of ownership, which spend more than 6 months in any calendar year cruising in the EU, although there is scope to enable an owner to use a yacht in the EU without being liable for VAT.

In general terms, any EU resident who buys a new build or second-hand yacht, which is not VAT paid, will be required to pay VAT on the hull at the VAT rate applicable at the place of delivery unless the yacht is acquired for commercial purposes or through a leasing scheme.

What is the TA Regime?

Temporary Admission is a Customs tax relief regime that enables non-EU resident owners of private yachts the ability to bring their yachts into Europe for a limited time without having to pay VAT on the value of the yacht.

It is undeniably an important mechanism, without which many non-EU resident yacht owners would likely avoid visiting European waters due to the prohibitive cost of paying VAT on arrival that would ordinarily be applicable.

Eligibility

The TA conditions are fundamentally concerned with accommodating non-EU residents, flag states and owning entities. The main eligibility requirements are:

1. The yacht is registered outside of the Customs Union – the flag state of the Yacht is non-EU, for example, the Isle of Man, United Kingdom, Cayman Islands, or Marshall Islands.
2. The yacht is used by an individual established outside of the Customs Union – the owning entity is established outside the EU, for example, in the Isle of Man.
3. The yacht must be operated by an individual established outside of the Customs Union – the Ultimate Beneficial Owner must be resident outside the EU.
4. The yacht must be operated for pleasure/private use only.

Other conditions to note:

1. The goods must be imported with the intention of re-exporting at a later date, maximum 18 months.
2. No alteration of the goods is intended (allowing for maintenance/upkeep), i.e. no value is to be added.
3. The yacht can be clearly identified, e.g. hull identification number etc.
4. The overall Customs requirements are met.
5. A guarantee is provided if required (specific to the Member State).  

Subject to the above and meeting the broader TA conditions, an owner would subsequently be entitled to use the yacht in the EU under TA.

Time Limit

Under TA, a yacht can operate in the EU for a period of up to 18 months, for a maximum total period of 10 years. TA begins when the yacht enters the EU and ends when the yacht exits the EU.

Before the 18-month period is completed, the yacht must either pay EU import VAT or leave EU waters, calling at a third country port and obtaining appropriate evidence of the same.

Restrictions

A yacht will not be eligible for Temporary Admission if the importation is for the purpose of:

1. Refit and repair – Inward Processing Relief is applicable.
2. Boat shows – Temporary Admission for Exhibition is applicable.
3. The sale of the yacht (under TA, this would breach the conditions of the relief).

Be Prepared

When entering the EU under TA, it is important to be prepared should the yacht be required to complete/provide documentation to local authorities that evidences/supports the yacht’s temporary admission status.

Such documentation might include an oral or written declaration to the competent authorities, particularly to the Customs office of the first port of entry within the EU; an official temporary admission document completed when the yacht first enters the EU at the start of the 18-month period; a Costituto D’Arrivo, if entering Italian waters, which is issued by the maritime authority; or evidence to show that the principal user of the yacht is genuinely not established in, or a resident in the EU.

Conclusion

From simplified border crossings, reduced paperwork, and streamlined customs procedures, TA is a great way for private yacht owners to operate their yacht without the need for it to be formally imported, thus avoiding the Customs formalities, inevitable import VAT costs and structuring costs associated with EU importations.

However, it should be highlighted that there is far more to TA than that above, particularly in respect of EU crews, guests travelling on board, time limits and EU works undertaken etc., so the above only provides an overview of TA for the purpose of this article.

For this reason, I would always recommend that an owner seek appropriate professional advice from a qualified tax/VAT advisor, both in the form of written advice and practical safeguarding recommendations, before entering into any transactions of this kind.

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Superyachts range in size, starting from 24m and the largest in the world, reaching nearly 200m; they are the definition of opulence and luxury.

Many people have the perception that the world of Superyachts is reserved for the rich and famous, and when it comes to owning a yacht and fitting the bill for the annual running costs, they just might be right.

There are many variables to consider when looking into the running costs of a Superyacht, and each yacht will vary due to factors such as engine size, maximum speed, size of the crew and size of the yacht.

The average amount of running a Superyacht annually is 10% of the yacht’s value. In a 2015 report by Towergate Insurance, on average, a 100-meter Superyacht with a top speed of 25 knots and 50 crew members should cost around $274 million per annum.

Crew

Let’s start with the crew… The crew live on board, some during the busy summer months or some year-round depending on the itinerary and requirements of the yacht. Crew costs include salaries, training, living expenses whilst crew are on board, travel expenses and insurance.

A more experienced crew will require higher salaries, and the bigger the yacht, the more crew it will require. Some of the larger superyachts have multiple chefs, a whole team of interior staff managing service housekeeping and laundry, an engineering team keeping the yacht running and a deck team to ensure the yacht’s exterior is always in pristine condition as well as driving the tenders and being navigational experts.

It is not unusual for crew salaries on larger yachts to reach €100,000 per month, whereas a smaller yacht with three crew would be closer to €16,000.

The crew will also need uniforms, which are supplied by yachting uniform companies and are embroidered with the yacht’s name and logo. The crew often have various outfits for day and night, water sports, casual and formal and a number of accessories to match.

Water Toys

Superyacht owners love to have the latest and greatest water sports toys and equipment on board, which all cost a pretty penny. Most yachts will be equipped with paddle boards, snorkelling equipment, kayaks, jet skis, sea bobs, a tender and a variety of inflatables. As an example, one jet ski can range between $5,000 – $20,000 depending on the make, model and spec, while the cost for a luxury tender can be in the millions.

Berthing and cruising

Where you plan to keep the yacht is another major factor to consider when looking at the running costs of a Superyacht. The fees charged for a berth in a marina are based on the size of the yacht, the demand for the marina as well as the amenities available for your yacht. For example, a berth in St Tropez in the summer months will cost a lot more than a winter berth due to the high demand in the summer. Ports can charge between €2,000 and €3,000 per night, and VAT, the use of electricity, water and garbage disposal will be chargeable on top of that.

Equipment

Keeping the yacht stocked with spare parts, filters, pumps, cleaning supplies, and equipment needs to be factored into the running costs of the yacht. These costs vary depending on the equipment on board as well as the itinerary of the yacht, as onboard stores will need to be well-stocked if the yacht is cruising in remote areas where supplies are not readily available.

Insurance, Medical & Maintenance

The 2015 Towergate Insurance report averages insurance costs at +- $240,000 per annum, which would include hull insurance, crew medical insurance and PNI.

The report also states that repairs and maintenance, depending on the age and usage of the yacht, can cost millions per annum. Maintenance includes regular servicing of the generators and engines; this is normally done once they reach a certain number of running hours. Maintenance on all interior and exterior finishings, paintwork, woodwork and equipment needs to be carried out regularly in order to keep the Superyacht at a high standard.

Depending on the material from which the hull is made, yachts need to be lifted out of the water every year, two years or five years for a hull inspection and survey. This will need to be done in a shipyard with the facilities to lift the yacht out of the water. These are called periodic surveys. Each yacht will need to comply with the regulations specific to that yacht, depending on its gross tonnage and hull material. The costs will be based on the yacht’s size.

Fuel

Fuel is a huge expense for a yacht as not only does the yacht need fuel for cruising, the generators require fuel to keep the vessel running while at anchor and underway, as well as many of the water sports toys requiring fuel. As an estimation, a 70-meter yacht will consume 500 litres of fuel per hour when the engines are running, but the yacht is not moving, so this would be an example of when the yacht is at anchor.

The fuel consumption would be significantly higher when the yacht is cruising and could cost up to €24,000 for an overnight cruise of 12 hours at 18 knots.

Safety equipment

Yachts, by law, need to comply with certain safety and security regulations, and this requires specific equipment to be on board. Each yacht, depending on size, design and maximum number of crew and guests on board, will have unique requirements. This equipment will include firefighting equipment, life jackets, immersion suits, life rafts and medical supplies. This equipment needs to be regularly updated and serviced as requirements and maritime regulations change.

Shore personnel

The last expense is on-shore personnel, which includes the services of a management company or charter brokerage if the yacht is commercially registered. The management company will manage items such as expenses, crew payroll, crew holidays and any booking of refits or maintenance works. A charter management company will market the yacht in order to reserve charters for the yacht in the months it is available.

Management fees will depend on each company as well as the services you procure.

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