After a year of unprecedented political and social instability, what does the coming year look like? This week, we are looking at what our Global Elite lawyers, have identified as the biggest areas of growth in the private wealth sector for 2021 and what a few of the biggest challenges will be. 

Increased jurisdictional movement

There will be a continued uptake in movement from the USA, both in the shape of offshore trusts as a safe haven in case of domestic unrest, and as UHNW clients make the move to Europe. 

Similarly, following Brexit, there may be an increase in moves from the UK to elsewhere in Europe (although, it’s worth noting that this might mainly be due to the weather). 

Where are they going? Some of you have seen increased movement into Switzerland, for its political, legal and tax stability; Italy, due to the favourable Italian ‘non dom’ regime; and Spain due to their ‘5-year Beckham rule’. 

Some disagree, and see movement into the US and UK. Reasons cited include their relative tax and political stability when compared to many jurisdictions. 

Looking to Asia, many predictions point to increased work from Hong Kong as UHNW clients move their assets into offshore trusts due to the political turmoil of this year. Increased work in Singapore and Hong Kong could also be because they’ve been less adversely affected by the pandemic in terms of economic activity.

Restructuring of trusts 

Across the board there has been an increase in trust and estates planning as UHNW clients have found time to reassess their existing structures, and (perhaps) to consider their own mortality and how their trusts should be structured for the next generation. 

Tax advice in relation to trusts, as well as cross-border estate and succession planning, is and will be requested from clients more than ever – particularly with recent and upcoming administrative tax guidelines on trusts and the implementation of register of beneficial ownership of trusts. 

More planning is needed than ever to minimise the exposure of trusts to the potential adverse tax changes which could be on the horizon to pay for the pandemic.

Litigation

Over the year there has been an increase in contentious trusts work, which is likely to continue. This could be because of the pandemic – due to sudden deaths or poor planning leading to succession or trust disputes. As economies recover, contentious work in general is likely to only continue to increase.

Tax authorities are likely to take a tougher stance and challenge more trusts as a consequence of exchange of information arising from DAC6 and CRS, and to assist with tax revenue deficit caused by the pandemic. As a consequence, Private Client lawyers will need to review their clients’ trusts or similar structures to ensure that they are compliant with all current reporting requirements.

Connected, there are likely to be more insolvent trust cases, as we saw during the 2008 financial crash, and more fraud cases being exposed. 

Growing focus on the third sector

There is, and will be, an increased focus on philanthropy as UHNW clients look to support the third sector in everything from arts and culture, to medical research. This is parallel to a growing drive towards sustainable investments, especially among the next generation.

What were identified as the top five challenges to face in 2021?

  • An unstable political and social landscape, and the subsequent increased difficulties of ‘horizon-scanning’, or predictions for UHNW clients;
  • Client management and relationships. In a world that remains predominantly virtual, it’s more important than ever to maintain and grow those relationships with continuous contact with clients;
  • New taxation that will inevitably be introduced to pay for the pandemic – and the constantly changing regulatory landscape and compliance fatigue which might lead to ‘innocent’ non-compliance with serious consequences for clients;
  • The shifting attitudes towards the wealthy;
  • To continue to motivate the broader legal team as they work remotely, and the uncertainty of the changes in the recruitment of talent in the industry due to the changes of working practices.