This article was first published in the Financial Times.
A question that has often been asked within the finance industry is how to manage changing family dynamics from a wealth and succession planning perspective?
In recent months it is most probably more appropriate to ask a similar but subtly different question more along the lines of, how do you manage families through a changing world?
In 2024 alone, more than 70 countries will have held elections equating to approximately half the world’s population and just over half of global GDP. Many of these elections will change the governments in several of the world’s largest economies, just as Labour has done in the UK. Even where incumbent governments have clung onto power against a tide of populism, many now have to seek coalition governments and would be naive to ignore the populist movement. The US elections in November this year are far from a done deal for either Donald Trump or Kamala Harris. The outcome of the US election is likely to be the most widely anticipated which could, depending on the victor, lead to new far-reaching foreign policy.
Further afield, the unfortunate Russia and Ukraine conflict continues to grind on with no sign of easing. Conflict is not just restricted to European shores either with the unrest in the Middle East looking increasingly likely to spread beyond its current borders.
Against this tumultuous backdrop, what does the Bailiwick of Guernsey have to offer globally mobile families? The key answer for me is stability!
As a Crown Dependency Guernsey is self-governing and self-funding jurisdiction. This means Guernsey has its own elected legislative assembly, The States of Guernsey, and independent administrative, fiscal and legal systems.
In a recent Guernsey Finance and Eprivate client 2023 review published by PAM Insight Limited,[1] [RB2] 91% of respondents said protecting themselves against political instability in their home country is a key driver of decisions regarding their wealth structuring. The next key driver was tax neutrality, both of which Guernsey offers to families wishing to protect and pass on family wealth.
Guernsey has a highly respected court system, applying the law of the Island, which originates in Norman customary law, though nowadays heavily influenced by English common law principles in trusts, corporate law and financial services. Appeals from decisions of the Royal Court are made to the Guernsey Court of Appeal (comprised of the Bailiffs of Guernsey and Jersey and senior judges from England and Scotland), with a final right of appeal to the Judicial Committee of the Privy Council in London (comprised of members of the UK's Supreme Court).
As a leading international finance centre Guernsey has lots to offer global families looking to structure their wealth overseas. Guernsey in its 50 plus years of private wealth management experience has a plethora of structures that can be used to structure a client’s wealth from simple Anglo Saxon trust arrangements to private investment funds and everything in between. For clients in civil law jurisdictions or those not necessarily comfortable with the concept of trust arrangement the Guernsey Foundation is a viable alternative.
A private foundation allows for some elements of control to still be exercised by the patriarch or matriarch of the family to ensure the family wealth is kept intact whilst facilitating younger family members to have exposure to and benefit of the wealth in a controlled manner, rather than it being fully vested in them when the inevitable happens. The latter often results in deterioration of family relationships as well as the reduction in overall wealth, with many disagreements and feuds being played out in courts around the world which are often little more than tit for tat arguments among siblings!
Much of this can be avoided if proper planning is undertaken and the future is well considered by the incumbent guardian of the family’s wealth.
As well as structuring solutions, Guernsey has a whole ecosystem which has evolved to service the finance industry with many leading and internationally recognised lawyers, banks, investment houses and advisors all situated on the island.
Finally, Guernsey offers a tax neutral environment, while committed to EU principles of fair taxation and taking a robust stance against tax evasion. It has a headline corporate income tax rate of 0% and an intermediate and higher rate of corporate income tax of 10% and 20% depending on the activities of an entity. Guernsey does not levy any form of capital gains, wealth or inheritance tax making it an ideal jurisdiction for private wealth structures.
Guernsey can also proudly display its credentials as a jurisdiction of substance. As an island we have implemented the major OECD initiatives such as the Common Reporting Standard, Economic Substance and Pillar I and Pillar II BEPS rules to name but a few and invariably tax is almost always paid when funds are repatriated onshore.
The takeaway from the above can be summarised as no matter what uncertainty there is in the world there is an archipelago of islands known as the Bailiwick of Guernsey that can provide stability, certainty and continuity to global families to support then in managing and preserving the family wealth for future generations.
