When you mention the high profile names of Dr Stanley Ho and Nina Wang in Hong Kong, almost everyone will be able to regale you with stories about how Dr Ho lost his $3bn casino empire and how Nina Wang’s feng shui expert allegedly tried to claim her rumoured $4.2bn fortune.
In Dr Ho’s case, it was suggested that the main cause of the trouble was when he fell ill, his share of SJM Holdings was then fought over and divided up amongst his family comprising at least 4 wives and 17 children. According to the media stories, it had reportedly been Dr Ho’s intention to pass his share of SJM to his second and third wives.
For Nina Wang, media reports described how her feng shui expert claimed that they had allegedly had an affair for years and it was Nina Wang’s intention, it was maintained, to leave him a substantial share of her wealth rather than have her family inherit it.
The problems arose in Nina Wang’s case because supposedly her will made no provision for the feng shui expert. In Dr Ho’s case the ownership of the assets were in personal names rather than through a more established and reliable asset protection structure.
These two cases illustrate well how important it is for successful and wealthy businessmen to have a clear and robust succession plan that lays out how their own personal wealth is to be divided, when the time arises. With complex international high value estate planning, structures such as trusts and companies can be used to ensure that assets are protected and a wealthy individual is able to determine exactly who inherits which assets going forward. Such structures offer significant flexibility and solutions can be designed to accommodate the most demanding of client needs.
In the case of the earlier example, one option for Dr Ho might have been to use a range of companies to separate, hold and protect his assets. Each company is then owned by a trust.
This structure works from an asset protection perspective and offers the underlying client many benefits, the first of which is in the distribution of an estate. Since the assets are separated into different holding companies, the risk of losing all of them simultaneously is limited. If an asset is going to be attacked and a company is sued, only the resources held in that particular company are under threat.
The owner of the assets will achieve an additional level of protection using such a solution through the separation of ownership. With a trust owning all the assets and the underlying client becoming a beneficiary of the trust, legal and beneficial ownership is divided. Therefore it makes it difficult to take legal action against an individual who has settled their assets in this manner.
Trusts can be used to override the local legal and cultural laws which can be particularly important with, for example some countries operating forced heirships, which can lead to an unplanned and unwanted division of assets taking place. Jersey trusts do not recognise forced heirship regimes and therefore it is only the named beneficiaries or class of beneficiaries who will ultimately benefit from the trust’s assets as these are effectively held and controlled from Jersey. It is also possible with a Jersey trust for a settlor to reserve the power to change the beneficial class and therefore rule individuals in and out from receiving trust assets, giving an additional level of ongoing control and flexibility with planning.
Where estates and legacies are to be protected, robust planning solutions which go beyond simple civil wills can be essential. Whilst individuals should always secure tax and legal advice which reflects their personal circumstances, organisations such as Vistra, which has an extensive Asian network of offices, and are familiar with providing sophisticated asset protection structures to a variety of clients, can have a valuable role to play in the process.
Category: Finance & Business