What is a top consideration for wealthy families from the Middle East?
Succession and estate planning is increasingly a top consideration for families from the Middle East. While structures are being set up for traditional…
By Abigail Tipton, ZEDRA / April 30, 2021
Succession and estate planning is increasingly a top consideration for families from the Middle East. While structures are being set up for traditional reasons – asset protection and tax planning – there are also new factors at play.
'Where tax planning used to be a prime focus, wealthy families are also thinking about succession and estate planning through the lens of ensuring family harmony and avoiding conflict. It's not to say that tax isn't still a consideration, simply that today more factors are contributing to a family's objectives for their estate planning. Wealthy families are also motivated by ensuring that wealth is protected for the future, with the right structures in place to make sure wealth is managed properly and becomes inter-generational,' says Abbey Tipton, Relationship Manager, ZEDRA Geneva.
The changing landscape of the Middle East
In November last year, the UAE also changed some of its laws to allow for more liberal living. The new legislation included changes to rules around alcohol consumption for foreigners and the inheritance laws applicable to expats, as well as legislation changing some rules for citizens.
The legal changes were officially proposed to make the UAE a more attractive location for expats (and by extension, an alluring place for foreign investment) as well as a top tourist destination. However, they reflect – at least partially – the changing society of the wider Middle East, which is seeing more women working and supporting their families economically, being highly educated and having more visible roles in their communities and families.
At the same time, wealthy families and individuals from the region are also changing how they approach succession and estate planning.
'We assist clients from across the Middle East, and we've seen a gradual trend of our clients and their advisors re-thinking how the family will split assets between beneficiaries, and the structures and entities they will use. Our clients may choose to follow Sharia principles for all their offshore assets. Others want offshore assets to be divided equally between their male and female beneficiaries. Others still might want daughters to benefit from offshore wealth if their sons are better off under Sharia inheritance laws for assets and wealth which falls under that umbrella. Currently, we see more points of reflection when it comes to succession planning than ever before,' explains Abbey.
Considering jurisdictions
Practically, Middle Eastern clients and their advisors find Reserved Power Trusts can be a popular choice because settlors can reserve some influence. Particularly for clients who have spent a lifetime carefully building wealth, maintaining some decision-making ability is sometimes easier than completely relinquishing control.
'Increasingly, we also see an inclination to clients wanting to set up structures in places with a very robust approach to regulation and compliance. Structuring in jurisdictions with an excellent reputation, political and economic stability, a highly educated workforce and status for being 'best in class' is critical. Cayman and Jersey structures tend to be the most popular in this respect,' adds Abbey.
With thanks to Zedra for their excellent article. The original can be found here.