Trust Estate

Financial Advice, Planning In A Fast-Moving World – In Conversation With Stephenson Harwood

Tom Burroughes Group Editor 8 October 2024

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!”

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