You can’t take it with you - a Law Society Gazette roundtable - Boodle Hatfield

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24 Oct 2022

You can’t take it with you – a Law Society Gazette roundtable

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Private Wealth Partner, Clare Stirzaker was recently invited to partake in an expert Law Society Gazette roundtable looking at how Covid-19 focused the minds of the wealthy on their legacies – on life, death and what exactly it is they want to leave behind. 

During the roundtable, Claire Stirzaker was joined by Claire Randall, Farrer & Co, Helena Luckhurst, Fladgate, Jenny Cutts, Wedlake Bell, Tim Stalkartt, Evelyn Partners, Sophie Dworetzsky, Charles Russell Speechlys, Charlotte Fairhurst, Evelyn Partners, Frederick Bjørn, Payne Hicks Beach, Helen Ratcliffe, BDB Pitmans, Alexander Erskine, Taylor Wessing, Chris Springett, Evelyn Partners, Alex Ruffel, Irwin Mitchell and Eduardo Reyes, Law Society Gazette. 

Over the next 25 years, it is estimated that $68tn in private wealth will transfer to a new generation globally. That is a staggering sum. Dwarfing the wealth of many nations, it seems to exceed the imagination of Scott Fitzgerald in his most spectroscopic imaginings of the very rich.

But the lawyers who serve the needs of high-net-worth and ultra-high-net-worth clients are not engaged in a search for a diamond the size of the Ritz. The world described by them is composed of more relatable building blocks.

Those blocks are, variously, the manufacturing, services, celebrity, duties or land use that are the source of that wealth; the values and conditions that get attached to a legacy; family ‘governance’; and, increasingly, a search for the ‘purpose’ of that wealth – from philanthropy to environmental considerations. So $68tn is a force in the global economy, and what happens to it – how it is used – matters.

This roundtable meets after ex-chancellor Kwasi Kwarteng’s mini-budget, but before his departure and the government’s full-spectrum U-turn. The negative response of the financial markets threatened economic chaos on top of rising inflation, and war in Ukraine is having widespread effects on the world economy.

Such uncertainty has consequences for this group’s clients too. Many plans were made on the basis of greater stability. That is especially true for clients outside the ‘bubble’ of the ultra- or very-high-net-worth bracket.

During the roundtable discussion Private Wealth Partner, Clare Stirzaker adds:

Ultra-high-net-worth clients, aka the super-rich, are insulated from such turbulence. But its effects are prompting conversations about the focus of philanthropy. ‘They’ll be even more mindful of the problems that have been faced by people in society… who aren’t wealthy.’ Clients ask whether ‘they are looking at the right courses [of action] given the state of the economy and the state of UK society’.

Where there will be a requirement to show who a ‘beneficial owner’ is for a transaction, a corporate structure may also be more straightforward. The growing popularity of ‘family investment companies’, which have the advantage of allowing a division of ‘controlling rights and economic rights’. Here the beneficiaries are more closely involved in decisions, meaning: ‘It’s a nice way of bringing the family together on how they can own and manage that company.’

‘I know there was scepticism about ESG, but I think certainly for younger beneficiaries, who care very much about how their money is being invested and what difference it’s making to society, that’s becoming an area that’s being focused on more and more.’ As a result, ‘there are some jurisdictions… looking to reform some of their trust laws to facilitate more investment flexibility in that respect.’

‘For some families, [philanthropy] may give them enough comfort on how they’re managing their contributions to society. But for others, it won’t be enough.’

Conversations around ‘family governance’ were begun for the same reason, with clients asking: ‘How do you get succession right when it comes to your business?’ In some instances, gifts of shares have been brought forward, with the intention of ‘getting that next generation used to understanding what it means to be a shareholder of a company and understanding some of the leadership opportunities that arise from that’.

In the same vein, there has been a growing use of ‘family constitutions’. These are non-binding documents that set out how a family agrees it should manage its affairs. ‘I think people can be quite negative and cynical about family constitutions and I’ve seen lots of examples where they haven’t achieved anything. But similarly, I have seen lots of great stories where they really work and families are very proud of their family constitutions and can remember them easily. Not surprisingly, where they’re shorter they’re probably easier to refer to and remember.’

A full write up of the key themes from the discussion can be found in The Law Society Gazette.  Clare’s comments were first published on 21 October 2022.

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