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

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.