Wealth Planning

Responsibilities In Managing Substantial Wealth

Family Office by Artorius delivers great family governance and by that we mean that decisions are made in the best interests of the family, decision-makers are empowered and advisors are held to account. We recognise the challenge of managing substantial wealth and the complexity that our clients face. Managing advisors and institutions, executing transactions, managing documentation, delivering great investment advice and dealing with the transfer of wealth; these are challenges made easier with a structured service.

In this example, an American woman ran a successful healthcare business, retiring a decade ago to live in the UK. She is married to an English man and they have three adult children - two daughters who live in the US and one son who lives in London. The parents are resident and domiciled in the UK but the mother and children are also US citizens, meaning the family is taxed on worldwide income and gains in both jurisdictions.

Over many years the family invested through several banks and accumulated an array of private businesses and private equity funds in countries around the world. Over time, the family’s assets grew beyond the size the family were able to govern and manage. The balance sheet began to resemble that of a small asset management business of which mother and father found themselves CEOs, CIOs, CFOs, accountants, and last but not least the administrative function. Inevitably, mistakes started to happen, record-keeping was insufficient, and they lost the ability to give due attention to investment decisions – this was the catalyst for our engagement.

The Solutions

At the outset we were introduced to all third parties, to coordinate the family’s banks, investment managers, accountants and lawyers to establish oversight of the family’s wealth. We consolidated the family’s assets into a bespoke quarterly report, examining asset allocation, currency exposure, pipeline, EIS schedules and flagging risks such as over-concentration and liquidity. This involves almost daily dialogue with the clients and their counterparties, to monitor and administer their investment affairs. With several investment managers and more than 30 investments in private companies, the family take comfort from having Artorius as a dedicated team of investment professionals oversee their affairs.

For multi-jurisdictional clients even the smallest mistakes can have expensive consequences. In our example, the mother had set up a trust in the US which is outside of her estate for UK Inheritance Tax (IHT), and also had significant ‘mixed’ offshore funds from her time in the US. These assets hadn’t been taxed in the UK and thus couldn’t be remitted to the UK without a significant tax charge. We worked closely with the family’s tax advisers to establish ground rules for each structure and account. As part of this process, the family’s banking relationships were simplified and the number of accounts was greatly reduced, making it easier and cheaper to monitor assets effectively. Other exercises included identifying offshore assets that might be able to be ‘rebased’, and establishing the book costs of investments in insolvent companies where there were clearly unused loss reliefs.

We now meet the family’s accountant each quarter to ensure they are aware of any important changes regarding the family’s financial affairs and to be proactive with regards to the intricacies of UK & US tax.

As we’ve worked with the family, we’ve provided a framework for governance and for decision-making. The parents have increasingly felt comfortable with involving their children more in their financial affairs. Each child is building a career, but all are now contributing ideas: we have instigated regular family meetings to discuss how the family wishes the assets to be managed and passed on, and to define the family’s values. It became apparent early on that there was a common desire to have a family philanthropy project. We set up a philanthropic vehicle for the family to manage collaboratively. The vehicle itself is a US/UK dual registered Donor Advised Fund (DAF) which allows the mother to benefit from tax reliefs in both the US and the UK on charitable donations.

Having been anxious for many years about discussing money with their children, the parents enjoy their participation in this project. And the children are learning important lessons that will be invaluable when it comes to handling their parents’ legacy.

“Artorius have made my life so much simpler and have removed a burden from my shoulders. I used to be CEO, CIO, COO and Admin Assistant to my own family office and now I have the support around all of those functions.”