New York, August 4, 2021: An exclusive virtual conference on ‘Integrated Asset Protection,’ was held on 30 July, by Respada, an invitation-only niche platform providing private market opportunities to the ultra-affluent. The discussion was moderated by John C McLeod, President, and CEO of Global Fiduciary Partner Alliance Limited. The conference hosted an expert panel of thought leaders to discuss risk management and resilience-building through an integrated framework for asset protection. Panelists included Michael G Pfeifer, Of Counsel at Day Pitney LLP, David Lesperance JD, Managing Director of Lesperance & Associates and Rupert Morris, Partner and Head of Walkers’ Private Capital and Trusts Team.
Setting the context for the discussion, McLeod said, “From my experience of working with wealthy families globally for over 25 years, I have observed that asset protection is their main concern. Regardless of whether the families live in free and open societies or less secure countries, the concerns remain the same although the risks may vary.” He alluded that there is no silver bullet to achieve effective multigenerational asset protection, but the best place to start is by talking about risk.
Furthering the discussion, Pfeifer pointed out that the most obvious risks in protecting multigenerational assets are personal and commercial litigation risks. He said, “Families face the same risks that anybody with commercial or personal properties face. While families can be protected by a trust, it should be noted that a trust can also be sued and people can go against the trust. Further, there are reputational risks such as claims against the family”.
Families face the same risks that anybody with commercial or personal properties face.
Morris mentioned the traditional risks to asset protection such as protection from creditors, the financial risk to assets, divorce, and disputes between family members. He then addressed an important aspect of asset protection, namely internal risks. This includes “general transfer, globally mobile family members, the relationship between a family and its trustees, and generational interest”. “It is important to consider family dynamics, the jurisdiction of the family members and succession plan for decision making,” Morris elaborated. Moreover, he suggested that building a flexible structure for asset protection that allows different views has a greater chance at longevity and is a better means of ensuring engagement across generations.
Speaking about the impact of sovereign issues on asset protection, Lesperance said, “World events such as pandemics or regional issues are continuing risks since they are unpredictable. However, to protect assets not just for immediacy but across generations, it is imperative to have a strategy to deal with unpredictable events”. Drawing from his experience as a leading international tax and immigration advisor, Lesperance recommended a strategy to offset such sovereign risks. He said, “The fact is that a passport belongs to a country and not an individual. Your country allows you to use it until they decide otherwise. So, I would advise families to focus on obtaining second passports, second residences, and assets in various structures and jurisdictions”. However, Lesperance cautioned families to also take into account factors such as tax ramifications and physical presence requirements to either maintain status or to get naturalized in the chosen region.
Moving on to the topic of asset diversification to reduce the impact of unpredictable geopolitical events, Morris talked about the trend of satellite family offices. He explained, “Family offices that are based predominantly in a certain region, have set up satellite family offices in other places like Europe, the US, and Singapore. Part of the reason is a genuine business interest in the region. Another part is to have a basis of infrastructure in a secure jurisdiction where the family offices can be shifted to during a crisis”. Lesperance added that another emerging trend is “the use of investment treaties for clients who have assets that are difficult to shift and are worried about nationalization and seizure.”
Further, Pfeifer touched upon core issues to be considered when drafting an intergenerational asset protection strategy. He emphasized that it is crucial to know all the nationalities and residences of the family, jurisdictions of the assets and to identify good tax and immigration planners. “This is particularly important to avoid the common mistake of hiring lawyers and accountants who are not familiar with multi-jurisdictional families with different kinds of wealth,” Pfeifer observed. Adding on, Morris underlined the importance of taking into account the various focus areas of different stakeholders and generations. He said, “The goals for asset protection differ across generations. Weightings for aspirations such as increasing the family wealth, education for the children and philanthropy may vary widely between generations”. Alluding to Pfeifer, Morris stated that asset protection is not only a humongous task logistically but also on the human engagement aspect.
The event culminated with a Q&A session and McLeod addressed a popular question from the audience on “Who should be on the advisory team when drafting an intergenerational asset protection strategy?” He responded, “The team must include personal and corporate internal legal counsels. This includes the family office staff with a line of sight to family assets and an external legal counsel with extensive asset protection and ownership structuring capabilities. Independent asset protection advisors are also crucial given their in-depth knowledge of the industry and the various structures”. “Most importantly, family members across generations should participate since they are part of the long-term solution and will have a robust memory that will help the resilience of the structure,” McLeod concluded.