Client sets up a discretionary family trust to benefit his wife and children during his lifetime
Wife to benefit from trust income during her lifetime and capital at trustee discretion
Family home, investments and cash get vested into trust
Wife and children enjoy the benefit of living in the family home and any replacement home
Wife gets benefit of husband’s pension during her lifetime and receives death in service benefit
Scenario Two
Overview
Client, successful entrepreneur, married with two adult children, X and Y who are married
Client’s adult children involved in the family corporate business (“ICO”) of which he is the sole shareholder owning 100 shares
Client independently wealthy external to the family business
Client has supported his adult children throughout their lives and wishes to transfer the ownership of the family business to them, but is concerned about their giving them any further wealth directly because of possible divorce issues and the impact on the family business should one of his children get divorced
Client wishes to still direct family business because he believes his children need his support as they lack experience
Client wishes he and his children to receive income from the family business but to separate this from ownership of the business
Potential Solutions
Client sets up two family trusts, one for X (Trust X) and one for Y (Trust Y).
Trust X and Trust Y are discretionary settlements, the beneficiaries of which for Trust X is child X, his wife and children. Trust Y similarly benefits child Y, his wife and children.
Client arranges for the Constitution of ICO to change and inter alia provides:
Chairman, the Client, has a casting vote at any board meeting equivalent to 2 votes.
The 100 Shares the client owns are changed into 10A, 30B, 30C and 30D all of which are initially held by the Client
The rights of the various share classes are as follows:
Class A shares are entitled to a vote and to receive dividends
The Class B, C and D Shares are entitled to receive a dividend and share in any surplus on the winding up of ICO.
The dividends payable on any share class is determined by the directors of ICO.
The Client then gives to X and Y personally 2 Class A shares each (4 off) whilst retaining 6 shares.
The Client then gives to the X Trust 30 C Shares and to the Y Trust 30 D Shares.
A suitably worded shareholders agreement is executed by all shareholders.
The benefit of the strategy is that:
The Client still retains control of the board of directors of ICO;
The client determines what dividends are paid in respect of any of the shares in issue. The basic salary of the Client and his adult children can be augmented by receiving a dividend on the A Shares; and
Additional dividends can be paid to benefit any B, C or D shareholders.
On clients demise his A Shares can be given to:
X and/or Y;
X Trust and/or Y Trust; or
His Wife
On client’s demise his B Shares can be given to:
X and/or Y;
X Trust and/or Y Trust; or
His Wife
Any shares given by the Client to his wife can go on her demise to:
X and/or Y;
X Trust and/or Y Trust; or
His Wife
Scenario Three
Overview
Client, a successful entrepreneur with family business, is married with adult children
Client’s adult son is proposing to get married and he is seeking to provide his son with funds to acquire a new family home and to provide him in the future with funds by way of an inheritance
Client’s future daughter in law is European and pre-nuptial agreements are common place in her home jurisdiction and throughout mainland Europe
Ireland does not recognise pre-nuptial agreements and whilst an Irish Court may take the terms of such an agreement into consideration, it is not obliged to enforce them.
Client is concerned about raising with his son and prospective daughter-in-law the issues of pre-nuptial agreements and the financial issues of any divorce settlement if their marriage is unsuccessful
Client seeks a solution to the predicament of giving his son money to fund a new house purchase and part of a future family inheritance plan, but is wishing to ensure at the same time that he is helping his son and the family as a whole in avoiding a loss of wealth and causing issues for the family business should the son’s marriage unfortunately fail
Potential Solutions
The Client could consider setting up a simple form of discretionary trust (the “Trust”) where the appointment of income and/or capital from the Trust is subject to the sole discretion of the trustee
The Client’s interest in the Trust or any part thereof is transferable
Having the interest in the Trust is beneficial to the Client and his family and provides the normal trust benefits
Client can transfer part of the interest he acquired in the Trust to his son or any other person or party, which would include another settlement
Outcomes
On any divorce settlement the Client’s son is better placed to return the benefit of the shares in the family company
Client’s motive for setting up the Trust is not tax orientated
Scenario Four
Overview
Client company is a well know and successful property developer operating locally and in the UK
Client is seeking to acquire a number of parcels of land to undertake a single or multiple property developments
Client has consulted a leading firm of property consultants over its requirements and a number of prospective sites and/or properties have been identified for acquisition
Property consultant has advised the Client that should the Client’s interest in the prospective sites and/or properties become public knowledge that the price the client will have to pay for any of the individual sites and/or properties is likely to increase by between 20% and 30%, especially were the Client is seeking to acquire a number of properties close to each other to undertake a single development
Client has also been advised by its legal advisers that acquiring any of sites and/or properties through a special purpose vehicle utilising the services of “nominees” will not necessarily assist the client due to the provisions of beneficial ownership/control legislation and/or providing details as to the source of funds
Client seeks a solution to the quandary being presented
Potential Solutions
Client’s problem is solely a commercial one. To do nothing could mean that the Client will pay between 20% and 30% more for any of the prospective sites and/or properties
Client wishes input into any acquisition of the prospective sites and/or properties and to how they will be developed going forward
A potential solution to the problem is for the client company to consider utilising a trust, directly or through a company owned by a trust, to acquire the prospective sites and/or properties
The difficulty for the client is that the type of trust required by the client is not common place. These can be sourced by UHY Trust
Outcomes
The Client has the ability to acquire the land at a “normal open market price” and not which is artificially uplifted because of his “land assembly ambitions”.
The Client can dispose of the land acquired through assignment of an interest(s) in the trust
Client’s motive for acquiring the interest in the Trust is not tax orientated, it is purely commercial
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.Ok
