Wealthy Families in Asia – Passing On and Preserving Wealth

Marcus Dearle and Simon Michaels

Withers

8 October 2013

Asia's wealthy are placing greater attention on asset preservation and succession issues. In this article, Singapore, discuss conflicts within marriages and from non-matrimonial family disputes.

Asset preservation and succession issues are of major concern to wealthy families in Asia. This includes preserving assets from conflict within marriages but also from non-matrimonial family disputes.

Well-structured pre- or post-nuptial agreements can save high net worth and ultra high net worth clients millions of dollars.

Partly as a result of the huge media attention of the Florence Tsang case, which was, at HK$1.22 billion, the highest litigated award ever handed down by a court in Hong Kong, wealthy families in Asia are increasingly taking action to protect their wealth responsibly and legitimately with the use of carefully crafted marital agreements and “dynastic” trusts.

Hong Kong is the divorce capital of Asia: the most generous jurisdiction for the financially weaker divorcing spouse.

Increasingly, we are instructed to case manage complex international pre- and post-nuptial agreements with assets situated in numerous jurisdictions around the world.

The legal costs involved in undergoing a stress test of trust and succession structures is nothing compared with the millions of dollars that might be lost due to ineffective structures being in place, which are not going to provide the asset protection in life or after death that the customer originally expected would be provided. We are not only advising on the question of the protection of assets from the threat of divorce: a few dollars’ worth of advice checking that a will has been properly witnessed by independent witnesses in a solicitors’ office, for example, could prevent family members from becoming embroiled in highly public, embarrassing and expensive disputes over a will.

Private banks are increasingly more working hand in hand with law firms, advising their clients to seek legal counsel. Private banks, too, are keen to inform the children of their wealthiest customers about wealth preservation structures and wealth preservation know-how and regularly invite legal advisers to speak at their NextGen conferences.

We have seen a real growth in demand for multi-jurisdictional legal counsel around wealth preservation since our launch in the region five years ago, so much so that we now have a team of 30 professionals working across our Wealth Preservation Group.

Traditionally, clients have tended to focus on “external” predators, such as the taxman. There is, however, a growing concern among clients about the potential damage that can be caused by internal family conflict. This is perhaps most publicly visible in the context of matrimonial conflict, but is not limited to aggressive divorce proceedings – non-matrimonial family disputes have resulted in the complete destruction of substantial family wealth. In a region where much significant personal wealth consists of active family businesses, the impact of family disputes over that wealth can be even more pernicious.

An appropriate structure can, therefore, serve not only to minimise an exposure to internal family conflict over assets, but it can also reduce the impact that such situations can have, when they occur, on active family-owned businesses. Often assets are located in a number of different jurisdictions (each with their own laws governing ownership and property rights) and, where this is the case, it can be even more important that an appropriate structure is in place. Religious and localised non-religious forced heirship rules serve to complicate matters further.

Marcus Dearle is Withers’ Office Managing Director Asia, and represented Florence Tsang in the landmark Hong Kong case and HSBC International Trustee Limited in the recent Hong Kong Court of Appeal divorce and trust case of PLTO and KLK and HITL.

Simon Michaels is a partner at Withers Singapore and acts for a number of prominent families in Asia in respect of their tax, trust and succession needs.