1. Hong Kong Geneva London Greenwich New York Milan New Haven 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. Private trust company (PTC) Family Trust Directors of PTC exercise trustee powers Protector has power to hire and fire trustees and block key decisions Private Trust Company Purpose Trust Trustee of purpose trust appoints directors of PTC Protector has power to hire and fire trustees

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

17. What about a US State as an APT or PTC 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”

18. JurisdictionPTC RegimeTrust Rules Creditor Protection Directed Trust Statutes Delaware  PTCs are regulated  PTC statutes aimed at commercial rather than private trust companies  Min. capital required is $500,000  PTC must employ at least 2 full-time staff who are resident in Delaware, one of whom must have trust expertise 4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer. Yes, tested and upheld by Delaware courts. Trustees are relieved from liability for any loss resulting from following the direction of adviser except in the case of willful misconduct and from the duty to monitor the adviser and warn beneficiaries of potentially improperly conduct. South Dakota  PTCs are regulated  Min. capital require is $200,000 + a surety bond of $1 million  At least one of the directors must be a resident of SD and 3/4 of the directors must be US citizens 4 years after the transfer is made or, If later, 1 year after the creditor made or reasonably should have discovered the transfer. Yes. Although not yet tested by courts, SD statute relieves the directed trustee from liability and at the same time designates the advisor as a “fiduciary” for trust law purposes. SD also codified the concept of investment trust advisor and distribution trust advisor. Alaska  PTCs are regulated  PTC statutes aimed at commercial rather than private trust companies  Min. cap. required $400,000 + paid in surplus equal to 20% of paid-in capital  Applicant must provide a statement of assets and liabilities.  AK Banking Department may examine or investigate applicant  Annual certification required  Minimum contact with AK is required 4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer. Yes, but not tested by courts yet. The trustee is not relieved from any liability for actions or decisions taken upon the advice of an advisor unless the trust instrument exonerates such liability. The advisor has no fiduciary duty, unless the instrument provides otherwise. New Hampshire  PTCs are regulated, but statute is new and untested  Min. capital requirement - $ 500,000 4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer. Yes, not yet tested by courts. The trustee is relieved from liability unless the direction is contrary to terms of trust or trustee knows direction is serious breach of fiduciary duty of advisor. The advisor is considered a fiduciary. Wyoming  PTCs are not regulated  No license required provided the PTC does not offer its services to the general public and acts as trustee of trusts for a specific family  No min. capital requirement  Minimum contacts with WY is required  Trustee activities can take place outside of WY 4 years after the transfer is made or, if later, 1 year after the creditor made or reasonably should have discovered the transfer. Yes, not yet tested by courts. The statute requires the trustee to follow the direction of an advisor but is silent as to whether the directed trustee is relieved of liability. Advisor is considered a fiduciary.

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 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 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

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