With the rapid increase of high net worth individuals (HNWIs) in China, more and more wealthy families are looking for effective solutions to manage, grow and protect family wealth across generations. Setting up an offshore company in the UK and establishing a family trust are proven tools that can help optimize returns, minimize risks and smoothly transfer wealth. This article summarizes key steps and best practices of setting up family investment structures in the UK.
Choosing the right jurisdiction for company registration and trust establishment
The UK has a stable political environment and boasted legal system ideal for company registration and trust establishment. Key UK jurisdictions include England and Wales, Scotland, Northern Ireland, Crown Dependencies (Jersey, Guernsey and Isle of Man) and British Overseas Territories (BVI, Cayman Islands etc.). Each jurisdiction has its own unique benefits. For instance, BVI and Cayman Islands have simple registration procedures and fewer compliance requirements more suitable for investment holding companies. Alternatively, Jersey, Guernsey and Isle of Man provide more flexibility for family trust establishment and asset protection.
Opening a company bank account after registration for flexible fund management
After registering a company in the UK, the next step is often opening a business bank account associated with the company for efficient cash management and investments. To open an account, standard due diligence documents and procedures mandated by regulatory regimes such as KYC will apply. Major global banks like HSBC, Standard Chartered and CitiBank have private banking teams to serve HNWIs and offer privileged services catered to investing preferences and risk appetite.
Using family trusts to legally avoid taxes and ensure smooth wealth transfer
Family trusts set up under UK common law jurisdiction offer unmatched flexibility in appointing trust assets beneficiaries while significantly reducing tax liability through estate planning. Under a discretionary trust, the settlor gives up ownership of the trust assets while appointing a trustee to manage and distribute assets to beneficiaries at the trustee’s discretion. As the settlor no longer legally owns the assets, the value of trust assets will not be subject to UK inheritance tax when the settlor passes away.
Allocating assets globally through the overseas company and family trust
After the company and trust structures are set up properly, they provide ideal vehicles for global asset allocation and diversification based on investment objectives and risk tolerance. For instance, real estate properties in UK can be purchased under the name of overseas company registered earlier. Similarly, shares of growth enterprises can also be held by the family trust to hedge risks while pursuing higher returns.
In summary, More and more Chinese HNWIs are leveraging overseas structures like UK companies and family trusts to systematically allocate assets globally, efficiently manage wealth, legally avoid tax and smoothly transfer wealth across generations. With proper planning and setup, family investment structures can go a long way in growing and protecting hard-earned wealth.