Financial planning in uncertain times

We have faced unprecedented times in recent years. The global pandemic has encouraged people to take a closer look at their financial and succession planning, and this – along with more recent economic uncertainty around interest rates and tax changes – has meant that real thought needs to be given to planning opportunities in 2023 and beyond.

High net worth individuals (HNWIs) and families will always have a vision in mind when it comes to their financial planning. Unforeseen events, such as the pandemic, however, have reinforced the need for robust strategies capable of weathering all storms.

It’s becoming increasingly vital that clients are nimble in their planning and take into consideration ever changing circumstances – whether that be changes to personal circumstances, tax rates, interest rates or legislation, as well as any other economic or political instability. What is certain, however, is that passing away without a clear plan in place can cause families a lot of uncertainty and upset.

Historically, it may have been difficult to talk to clients about what might happen when they pass. COVID, however, has brought mortality to the fore of discussions; it is now less challenging to encourage clients to consider the ‘what ifs’ in terms of how their assets should be managed after their death. It’s much better to have a plan in place for the ‘what ifs’, as opposed to having to try and untangle the situation in the eventuality of their death.

Estate planning can be complicated and proper advice should be sought to ensure that all complexities have been considered. One excellent estate planning tool is a trust. A trust provides asset protection, legally separating assets from a client’s personal name, and can therefore remove a client’s assets from probate and minimise taxes. They also provide flexibility in allowing the settlor to set out their wishes in respect of how any assets should be distributed upon their passing.

A trust can also assist in putting in place strong family governane protocols, which is particularly useful when working with multi-generational families. A settlor can take comfort that the trustee is bound to act in the best interests of its beneficiaries and will act with due care and consideration at all times. The trustee can also take away the burden of navigating what is an increasingly complex world in terms of financial reporting and regulations. And should the settlor become incapacitated, a trust can allow for another individual to help manage their affairs.

Jersey remains one of the world’s leading international finance centres, having been at the forefront of private wealth for more than 60 years. The Island’s forward-thinking and robust regulatory framework, coupled with its political and economic stability, continue to attract family wealth. This, along with the stability and quality of Jersey’s tried and tested trust law – a template adopted by many other jurisdictions worldwide – remains highly attractive and comforting to international families in uncertain times.

Furthermore, thanks to an innovative foundations law, the Jersey Foundation also provides a popular alternative to a typical trust – largely due to its infinite duration, capacity, and clear and transparent registration with the Jersey Financial Services Commission (Jersey’s regulator).

It is worth noting that trusts and foundations are not solely used for protecting the wealth of HNWIs and families; they are also valuable vehicles for philanthropic purposes.

During times of such uncertainty in the world, ESG and philanthropic issues have become prevalent in the minds of our clients, and we are witnessing many re-evaluate the purpose of their wealth. Increasingly, they are considering not just themselves and their families, but also how they can help others, and are looking for innovative ways to have more of an impact on the causes in line with their values and closest to their hearts.

Through Jersey’s trust law, clients are able to adapt a range of structures to focus on their philanthropic objectives, all offering a degree of flexibility. Jersey’s charitable trust is a particularly attractive option, while a range of non-charitable trusts can cater for altruistic, but not directly charitable, objectives (including humanitarian, research and ecological causes).

On the other hand, a foundation can be created for purposes which are charitable, non-charitable, or a mixture of both, with approximately one third of Jersey Foundations being used for philanthropic purposes.

In summary, now more than ever, effective estate planning is key. International families and HNWIs are increasingly turning to trusts and foundations, as highly effective and efficient succession planning tools, not least for the certainty and peace of mind they can offer in a very uncertain and challenging world.