Wealthy Chinese individuals and families are looking to the Channel Islands for well-established asset protection structures with reserved powers.
Asia-Pacific is a hotbed of economic activity resulting in ultra-rich and high-net-worth individuals (HNWI) being created at a faster rate in the region than anywhere else on Earth. So, there’s a growing need for wealth management services, as wealth is transferred from the generation that created it to the generation that will maintain and protect it.
Wealthy Chinese individuals and families looking for offshore wealth management vehicles have traditionally established trusts in jurisdictions such as the Cayman Islands and the British Virgin Islands. However, in recent years, many have started looking to Jersey as the domicile for their wealth management solutions.
In this article, we look at why Jersey trusts are finding favor with increasing numbers of Chinese HNWIs and their families.
Setting up a trust for sophisticated wealth management
As wealth creation has grown in China, so has the need for more sophisticated wealth management strategies. Chinese people who have built wealth from their business activities want that wealth to be maintained for the benefit of themselves and their families, ideally for generations to come, through succession planning.
Trusts are the most popular form of asset protection structure. They can create tax efficiency, reduce creditor risk, and assist in estate and succession planning, while maintaining confidentiality and ensuring compliance with all local and international laws.
Trusts—and the trustees that run them—ensure assets are transferred to the next generation in an orderly and legally compliant manner, and in accordance with the wishes of the person who set up the trust, the settlor. Those wishes might include a coming-of-age requirement, for example, or the stipulation that beneficiaries achieve a good education before gaining access to trust assets.
A trust can also hold assets in underlying entities, including family businesses and property. A settlor may want the business they built from scratch to remain in the family, and can stipulate that in the deeds of the trust. So, there are all sorts of good reasons for using a trust for wealth management and asset protection. The question is, why use a Jersey trust in particular?
Benefits of a Jersey trust
Jersey trusts are popular around the world for a number of reasons. The island is known as a leading jurisdiction for trusts and can point to a large body of relevant case law, a sophisticated tax and regulatory system, and a long history as a domicile for wealth protection vehicles. Jersey is recognized as transparent and well-regulated by the Organisation for Economic Co-operation and Development (OECD).
Jersey is a safe and stable self-governing dependency of the UK, with strong links to London and the financial centers of the EU. Therefore, Jersey is especially popular with wealthy individuals and families who want to retain a measure of control over their trust and the assets held in it, as Chinese HNWIs often do.
Jersey trusts allow settlors to reserve a range of powers in favor of themselves, and Jersey trust law explicitly states that this doesn’t affect the validity of the trust. These “reserved powers” may include a settlor wanting to add another beneficiary or exclude another, wanting a say in investment decisions, or having the ability to appoint or remove an investment manager. They may also want to restrict or expand the powers of the trustee. Such powers tend to reassure HNWIs who have concerns about handing over their hard-earned assets to third-party service providers.
Setting up a trust: How CSC can help
All of this appeals to Chinese HNWIs so much so that Jersey Finance, the not-for-profit organization that represents Jersey’s international finance center, is actively promoting Jersey trusts in China through its representative in Shanghai and office in Hong Kong SAR. Its business development consultant, Maria McDermott says, “Jersey is an award-winning leading international finance center with more than 60 years of expertise in delivering private client wealth management—from trusts and estates for future succession planning to popular foundation structures.
“Thanks to its forward-thinking approach, we’re at the forefront of private client wealth management and philanthropy, and provide a strong and respected regulatory framework that sets us apart from other international finance centers,” Maria adds.
Chinese HNWIs and families who want to establish a Jersey trust naturally want to deal with a service provider closer to home. We offer the best of both worlds. CSC meets all regulatory requirements in Jersey while offering Chinese clients an administration team and trustee service based in Hong Kong or Singapore, removing inconveniences around time zones, language, and culture. We can also administer any entities established to hold assets under the trust structure, wherever they’re domiciled. We offer these services for trusts anywhere in the world.
Earlier this summer, CSC launched a limited webinar series, Doing Business Internationally, that spotlighted markets across Europe, the Americas, and the Asia Pacific that featured our panel of in-market experts discussing critical aspects for doing business in each market. Watch Doing Business Internationally: Jersey to hear more on why the island is such an attractive financial center for so many.
Why CSC?
CSC offers a global solution for subsidiary governance, fund strategies, and capital markets transactions with tools to help fund managers navigate the ever-changing compliance and regulatory environment they face. With capabilities in more than 140 jurisdictions, we’re able to do business wherever our clients are—and we accomplish that by employing experts in every business we serve.
Over 62% of staff on our APAC team have been with us for more than 10 years; 29% have worked with us for more than 15 years. Several of them have achieved the highest grades in the country for their ICSA and STEP exams.
We offer a full suite of private client services around the world, including asset protection, trustee services, succession planning, philanthropy, and the establishment of family offices and trusts. We can provide you with all the essential services required to support your entrepreneurial, personal, family, commercial, and charitable interests.
Our global presence enables us to provide you with the best and safest environment for your private trust.
