This month’s comment comes from Simon Rylatt. Simon Rylatt is a Partner at Boodle Hatfield. He specialises in UK and international tax and estate planning for individuals and trusts. His work includes estate planning strategies for wealthy families and their businesses, wealth protection structures, pre- and post-nuptial agreements and generational succession planning.

Surviving and succeeding in today’s world requires wealthy individuals and families to acquire and evolve their skills and aptitudes on a constant and ongoing basis, particularly when it comes to preserving and enhancing their privately held wealth. But these requisite characteristics are no longer limited to excellent investment management, business skills and tax management.

Families are increasingly judged by their contribution

At a time when society has access to instant information and a narrative exists about the division of global wealth between those who “have” and those who “have not”, the holders of significant private wealth are under increasing pressure to demonstrate their moral compass. 

Success, wealth accumulation and, especially, its long-term retention is no longer lauded as a reflection of the desirable traits of capitalism and something that is to be congratulated when attained. Instead, such characteristics lend themselves to ongoing criticism and assertions of greed, selfishness and a failure to share with the wider community.

Wealthy families now, more than ever, are “judged” by others, including government and administrative authorities such as HMRC, as to their societal worth and contribution. This is regardless of whether such families openly seek or attract public attention or attempt desperately to hide from it, as the ability to maintain personal privacy continues to reduce.

Wealthy individuals and families, and those responsible for advising and helping them, are obliged to develop and grow their own abilities to cater for the way they present to and are perceived by the public. They must be aware of the likelihood of moral judgment (and its instant transmission over social media and otherwise) and the potentially devastating impact that a damning public assessment will have.

Checking risks against a family philosophy document

So, how are legal advisers approaching such new challenges with clients? In short, they are constantly learning too. But natural instinct and advice tend towards disciplined, organised and monitored governance structures with clear constitutions and objectives. 

Lawyers tend to be systematic and so methodologies which have risk management at their centre are favoured. There is of course also a desire for sufficient flexibility to accommodate changes of circumstances, both good and bad. Governance will now regularly have an eye to multiple risk factors, including:

• personal (e.g. divorce or death)
• fiscal (e.g. change of tax rates or attitudes to particular structures such as trusts or partnerships)
• environmental (e.g. changes in legislation which might impact on a family estate or agricultural business)
• reputational (e.g. risk of being characterised as failing to treat staff of the family business fairly)
• technological (e.g. risk of a disruptor entering the family business market)

Many of these risks, and the strategies adopted in relation to them, are also then tested and monitored against a family philosophy document and associated policies, such as a business or family tax policy, which sets out what behaviour is considered acceptable or aspired for versus what is unacceptable and to be avoided.

The need for thinking ahead and accepting unavoidable change cannot be overstated. But looking back also has its value. As Confucius rightly noted: “By three methods we may learn wisdom: first, by reflection, which is noblest; second, by imitation, which is easiest; and third by experience, which is the bitterest.” 

Simple and accurate in its phraseology, but nonetheless leaving the significant challenge of observance.

Simon Rylatt is a Partner at Boodle Hatfield. He specialises in UK and international tax and estate planning for individuals and trusts. His work includes estate planning strategies for wealthy families and their businesses, encompassing jurisdictional and conflicts of laws considerations; wealth protection structures; governance; divorce issues; pre- and post-nuptial agreements and generational succession planning. Simon also advises on high-value, contentious trusts and estate disputes for both onshore and offshore clients.