Michael Powell, director of Hawksford, the trust company, examines why India-based high net worth individuals should consider Jersey for wealth planning and structuring purposes.

Michael Powell, director of Hawksford, the Jersey-based trust company, examines what he says are the reasons for India-based high net worth individuals and families to consider Jersey for wealth planning and structuring purposes. The article highlights a trend of Asia-based individuals using such jurisdictions. This publication invites readers to respond.

Some five years ago, when I first joined a colleague on her 12th trip to Mumbai, I was asked to give a presentation on establishing structures primarily designed for estate planning and succession purposes. While politely received, it was evident that although the concept was of interest in principle, most of the professional advisors present admitted that they were unlikely to have clients who were willing to divest themselves of the legal ownership of their principal assets, particularly the shares in often very valuable private companies.

Some five years later it seems that priorities may have changed, and whilst Indian fiscal constraints may impact on what can be done, in particular for resident Indians, the overall principle of estate planning and succession – which of course sits at the very core of the trust concept – appears to be gaining an increasing foothold. Jersey should be well positioned to play its part.

While in practice it may take some time before structures are actually established in numbers, there are a variety of reasons why the concept of establishing potentially longer term and more complex structures are being seriously considered. These appear to include one or more of the following:

-- The  percentage of new wealthy Indians probably exceeds any other country;
-- Many of the new wealthy, or their children, have received western education and adopted (for better or for worse) western culture and commercial outlook;
-- The new rich include many women who may have a different attitude to the devolution of their wealth;
-- The patriarchal society and religious and cultural and customs are less influential than they used to be;
-- The impact of increased rate of divorce;
-- Recognition that the financial aspects of multiple corporate financial activities should be kept separated;
-- Increased recognition of benefits of establishing protocols for the future retention, management and the potential assimilation of wealth according to the settlor/patriarch/matriarch’s wishes, and
-- Increased fiscal transparency.

It would be unwise to prioritise, but one or more of these elements may well be contributing to an increased interest in establishing structures, which will be professionally administered. In Hawksford’s experience, drawing on a number of recent cases suggest that the long existing links between Jersey and Indian families looks set to continue, albeit in a rather different format, and perhaps with rather different objectives.

It should also be said at this point that estate planning for Indian resident families using offshore structures is now challenging in all bar very specific circumstances, although it is understood that a change in political outlook might lead to generally greater freedom in the transfer of assets. This might, for example, result in the sums that can be transferred utilising the liberalised remittance scheme returning to previous levels, or indeed increasing.

Perhaps in part due to internal concerns and also commercial pressures, many families are spreading their activities across the globe. In certain cases, family members will move to low-tax jurisdictions where they can establish structures which may benefit not only their own families, but potentially also the members of their family who remain resident in India.

Once the concept of establishing a structure has been accepted, the next and equally important question likely to arise both in deciding whether to, for example, establish a trust or a foundation, is the issue of retaining control; it is entirely understandable that a prospective settlor or founder will wish to retain some control. The following form part of the armoury available to accommodate:

Bespoke drafting
Bespoke and flexible drafting, without abrogating trustee responsibility to the extent a trust may be a sham, is increasingly standard. With sufficient skill and careful drafting it should be possible to agree documentation which vests significant powers in the settlor, (which may constitute a reserved power trusteeship). This reservation of power is becoming increasingly common, as the dynamics of fiduciary responsibilities and entrepreneurial flair have to co-exist.

Investment management committee
In certain instances where there is an entrepreneurial settlor (and the value of the trust fund justifies it), the trustees might consider establishing an investment management committee or advisory board to sit alongside the trustees. In one case an application is shortly to be made to the court in relation to a pre-existing trust to approve the establishment of an investment management committee, which will comprise a number of successful business people with considerable appropriate experience in the areas in which the settlor operates.  
These people will come together as a committee to consider every recommendation made by the settlor before deciding which of those recommendations should be forwarded to the trustee with an indication that they should be approved. It would be quite possible to build such provisions into a new trust if thought appropriate – even if couched in terms that would enable such a committee to be established at some point in the future rather than from the outset.

Family protocol
It is increasingly common for families to agree the terms of a protocol which will seek to lay down guidelines as to how and who should deal with the various assets of the family and respond to and, where appropriate, adjudicate in certain situations.