Trust Estate
Financial Advice, Planning In A Fast-Moving World – In Conversation With Stephenson Harwood
As the UK moves to shut down the non-dom system, and other jurisdictions' charms wax and wane, a Singapore-based UK tax, private wealth, trusts and estate planning lawyer sets out themes and challenges for clients.
High net worth Millennials are concerned about saddling children
with complex inheritances, while the offspring of wealthy
families are far more internationally minded today, which has big
implications for financial advice, a senior lawyer says.
When parents move locations, they want to be near their children
and tax rates aren’t the only game in town, Suzanne Johnston,
partner at Stephenson
Harwood, told this news service in a recent call.
Johnston, who has been based in Singapore since 2013
– moving to the Asian city-state to work at Withers
– has been at her current firm since 2021 (she had a stint
before then at UBS). Her time in Asia has given her perspective
not only on the domestic Asia market, but also an angle on the
changes taking places in countries such as the UK.
Several of her clients have no connections to the UK at all; she
is also busy in areas such as working with family offices
– a large growth area for Singapore in recent years. Other
tasks include setting up Variable Capital Company structures
(VCCs).
This publication asked Johnston if the change of government in
the UK in early July, and the shift to the Labour Party with a
pledge to eliminate the resident non-domiciled system, was
driving business in her direction. (As of the time of going to
press, the UK awaits the 30 October budget from the government,
in which specific details may be added.)
Johnston pointed out that under the proposed residence-based
system which is due to replace the centuries-old non-dom one, the
situation for expats thinking of returning to the UK might be
more positive than is being painted. A person relocating to the
UK will be eligible for the four-year period during which their
foreign income and gains will not be subject to UK tax, if he or
she has lived abroad for at least 10 tax years. Further,
people moving to the UK who satisfy the 10-year non residence
rule, can bring non-UK wealth into the country (income, and
capital) and not pay UK tax on this during that four-year period.
(UK-sourced income/wealth is taxed – as is currently the
position).
“As things stand, the proposed new residence-based regime is
quite beneficial for UK expats,” she said. Under the current
non-dom regime, UK expats are subject to worldwide UK income tax
and capitals tax from the moment they return to the UK.
Options for change
"We are seeing non-doms look internationally and weighing up the
options across multiple jurisdictions when choosing a new `home'.
There are those non-doms who prefer to stay in Europe and so are
looking to Italy, Switzerland, Spain and Portugal. Other
non-doms, who perhaps originally relocated to the UK from Asia,
are looking to Dubai, Singapore, Thailand and Hong Kong," she
said.
Singapore has always been a popular destination for the wealthy
and that continues to be the case. There are multiple visa
options available to attract the best talent and a favourable tax
regime – low rate of income tax, no capital gains tax and no
inheritance or gift tax to worry about," Johnston said.
Johnston said a lot of her job, when working with families on
estate planning, is helping clients to avoid problems that will
vex their children in the longer term.
“Millennials are highly educated, often internationally, and many
have young children. I should know, I am one of them, albeit
a geriatric one! Under the great wealth transfer, they are set to
become the richest generation in history. A large part of our
role, is helping Millennials navigate this wealth transfer either
before or after it happens. We are working with a number of
families to streamline what their Millennial children will
inherit and when.
“This is particularly important when parents who are resident in
low tax jurisdictions, for example, Singapore and Hong Kong, are
transitioning wealth to children in high tax jurisdictions for
example, the US, UK and Australia. With considered and careful
planning, Millennials and their children are better able to
benefit from the wealth generated by their parents but
discussions need to happen early and communication is key,”
Johnston said.
This news service asked her about the rise of family offices in
Singapore and the region.
Single-family offices have been popular for high net worth and
ultra-high net worth individuals seeking to establish a presence
in Singapore since around 2017 (although the tax incentives and
funds' regime was established much earlier). The appeal of
single-family offices, in part, lies in the fact that no
licensing from the MAS is required and so the application process
has historically been fairly straightforward.
“However, as the application process for single-family offices
has evolved to become more complex, we are seeing an increasing
number of clients opt to set up multi-family offices and/or
variable capital companies instead, which require a full CMS
licence. The rationale is that these families want the
flexibility to manage other people's money as well as their own.
They would rather obtain a licence from the `get go’ to give them
optionality. It is also reflective of families becoming more
sophisticated in their use of family offices,” she
continued.
Family offices aren’t for everyone, however well off.
“Not every client needs a family office – in the same way that
not every client needs a trust. Sometimes a client will approach
us and say `I need to set up a family office'. Our first question
is usually, `why?' Often the answer will be "succession
planning" but a family office in and of itself doesn’t solve for
this, as the shares in the fund entity and single-family office
ultimately need to be dealt with whether by a will or a trust.
The second response is usually, "I need the tax
incentive." However, if succession planning and tax
neutrality are key, then often a trust alone benefiting from a
Singapore trust tax exemption is sufficient. This is particularly
the case where families are small, have no next gens who want to
participate in the family office, or next gens who all live in
high tax jurisdictions and, therefore, can't participate. It's a
cliché but as with everything, there is no one-size-fits-all
solution,” Johnston said.
WBA asked Johnston how easy is it to do business as a
private client lawyer in Singapore and how does this jurisdiction
compare with others in Asia and other regions?
“I moved to Singapore almost 12 years ago with a suitcase. I have
now lived here all of my thirties, met and married my husband
here and had my children here – it really is home – so I am going
to be very biased in my response to this question,” she said.
“For me, Singapore has presented huge opportunities as a private
client lawyer. I have been able to grow my expertise beyond UK
tax planning to international succession and estate planning and
family office/private funds' set up. I have had the opportunity
to work in private practice and in-house.”
“Singapore is a hub in South East Asia and we have clients
throughout the region in Thailand, Indonesia, the Philippines and
Malaysia. Further afield, we work with families in Taiwan and
China. I am grateful that I get to travel the region and learn
about the different cultures of my clients.
“I don’t think being a partner in a law firm can ever be
described as `easy’, in any jurisdiction, but I am hugely
grateful to Singapore for creating a country in which there are
many opportunities for all types of businesses and people from
diverse backgrounds. In contrast to other jurisdictions,
Singapore has a strong and stable political system, robust
banking institutions and an exceptional network of service
providers. Its food is pretty good too!”