Can I keep control and still protect my assets?

1. Can I keep control and still protect my assets? Justine Markovitz and Jay Rubinstein Withers LLP

2. Overview • Threats to family wealth • Divorce • Forced heirship • Regulatory aspects • Preserving family wealth • Will • Joint accounts • Foundations • Corporate structures • Trust structures

3. Threats to family wealth - Divorce • Why is this important? • In many countries, at least 4 in 10 marriages end in divorce • Divorce can be very expensive • Often no concept of separate property • More applications to join trustees • Assets available for division maximise

4. Threats to family wealth - Divorce • Recent case law – the English Court’s new approach • White v White (2000) – yardstick of equality. ‘Reasonable requirements’ held to be discriminatory to homemakers (usually women) • Cowan v Cowan (2001) – departure from 50% justified on the basis of husband’s exceptional contribution. Wife received 38% • Lambert v Lambert (2002) – wife awarded 50%. Marriage of 23 years • Miller v Miller (2006) – short marriage, no children. Wife awarded £5m upheld by House of Lords • Charman v Charman (2008) – family trust established by husband. Trust treated as resource of husband. Wife awarded £48 million.

5. Threats to family wealth - Forced Heirship • Testamentary freedom vs ‘reserved portions’ • Conflict of laws • Clawback feature

6. Threats to family wealth - Regulation? • Licensing requirement • Required level of third party involvement • Increasing amounts of disclosure

7. Keeping wealth in the family • Will • Joint accounts • Foundations • Corporate structures • Private trust company (PTC) • Trust structures

8. Will • Advantages • Full control during lifetime • Control over who benefits • Control over who administers • But • Forced heirship • Marital regimes • Tax

9. Joint accounts • Advantages • Full control during lifetime • Control over who benefits during life and on death • Avoid probate • But • Forced heirship • Marital regimes • Tax

10. Foundations • What are they? • Where are they? • Civil law jurisdictions • Evolving in common law jurisdictions • Founder’s purpose • Control • Privacy • Tax treatment?

11. Corporate structures • Advantages • Control during lifetime • Control over who benefits during life and on death • Restrict probate • But • Forced heirship • Marital regimes • Tax • Corporate restrictions

12. Trust structures • Tax planning • To protect assets from … • Creditors • Disinherited heirs • Financially unsophisticated heirs • Ex-spouses • Minimise impact of forced heirship rules?

13. Private Trust Company (PTC) • What is a PTC? • A company limited by shares created to act as a trustee of a specific trust or trusts • Advantages • Legal personality • Customisation • Privacy • Flexible ownership of shares (e.g. purpose trust) • Settlor/beneficiaries as directors

14. Choice of trustee – Private Trust Company – merits / issues • Tailor structure to family needs • Combine input of professional trustee, family members and key advisers • Control of information • Continuity • Location • Formalities • Limitation of liability

15. Trustee of purpose trust appoints directors of PTC Purpose Trust Protector has power to hire and fire trustees Private Trust Company Directors of PTC exercise trustee powers Protector has power to hire and fire trustees and block key decisions Private trust company (PTC) Family Trust

16. Exercises overall control • Selects institutional trustee and therefore controls directors of PTC • Appoints protector of trusts Appointor Trustee of appoints Purpose Trust Enforcer • Consents to key decisions of trusts • Appointment of trustees • Distributions of and/or income capital Protector Owns Private Trust Company Manage Directors Supports administration Trustee of Family Trust 3 Family Trust 2 Family Trust 1 Trust company (as service provider) Holding Company Holding Company Holding Company Assets Assets Assets Trustee (Institution)

17. What about a US State as an APT orPTC jurisdiction? • Must look to individual state law • Complexity of regulations of PTCs • Requirements of local activity • Costs • Trust perpetuities period • Statute of limitations on claims • “Directed trusts”

19. Conclusion • Too much control is dangerous • Planning is essential • Identify the issues involved and understand family dynamics • Identify the appropriate solution • Identify the pitfalls and problems • Establish the structure • Monitor the structure

20. Getting in touch Jay Rubinstein Partner Withers LLP 63 rue du Rhône CH-1204 Geneva Switzerland Direct telephone: +41 (0)22 593 7704 Fax: +41 (0)22 593 7778 Mobile phone: +41 (0)79 210 3928 Email: jay.rubinstein@withersworldwide.com Justine Markovitz Geneva Office Managing Partner Withers LLP 63 rue du Rhône CH-1204 Geneva Switzerland Direct telephone: +41 (0)22 593 7711 Fax: +41 (0)22 593 7778 Mobile phone: +41 (0)79 590 8665 Email: justine.markovitz@withersworldwide.com

21. 430 Park Avenue 10th Floor New York, New York 10022-3505 Tel: + 1 212 848 9800 Fax: + 1 212 848 9888 16 Old Bailey LondonEC4M 7EG telephone: +44 (0)20 7597 6000 fax: +44 (0)20 7597 6543 157 Church Street PO Box 426 New Haven, Connecticut 06502-0426 telephone: +1 203 789 1320 fax: +1 203 785 8127 Via Cesare Mangili 6 20121 Milan telephone: +39 02 2906 601 fax: +39 02 29 002 161 660 Steamboat Road Greenwich, Connecticut 06830 telephone: +1 203 302 4100 fax: +1 203 869 0558 63 rue du Rhône CH-1204 Geneva telephone: +41 22 593 7777 fax: +41 (0)22 593 7778