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18 May 2021

Dear Richard and Montserrat,

Not unlike the concerns of Chaucer’s characters in the Canterbury Tales the wealth of our day has to be protected as much as won. Of Chaucer’s well-woven personalities it is the ‘Friar’ and the ‘Knight’ that, oddly perhaps, drew on the same protection.

In the 1200s the Franciscan friars' vows of poverty forbad property ownership so local communities became title owners of their dormitories to prevent confiscation or sale on an individual patron’s death. This ability developed further during the Crusades when Knights entrusted estate ownership to a relative to manage and pay and receive feudal dues, provided that lands and property were conveyed back on their return.

Whilst benign for the Friar, the ‘entrusted’ by the Crusaders often refused to return property! Forced to petition the Lord Chancellor and subsequently ‘The Court of Chancery’, it became codified that ‘legal holders’ had to convey land back to the Crusader "beneficiary" and this right of "use of land" became what is now today's Trust.

For business, by the 1680’s the trust adopted a contracting entity being an ‘unincorporated joint-stock company’ (business trust company) with tradable shares, shielding, liquidation rights, and beneficiary protections which has become the Limited Liability Company of today.

Thus today’s pilgrims have two options for protecting wealth from taxes and family problems. Many reach for Trusts but these surrender control, and Trustees, as owners, have reporting and governance issues that can restrict Settlors intentions.

While Trusts have their place one should also look at the ‘de facto’ Trust of the Family Company.

Although the beneficial owners and those with significant control are recorded for both entities and thus anonymity has largely gone, the Trust is an easy entity to tax, expensive to run if active and rigid in its function. The Family Company however is fluid with a broad range of significant tax and other key advantages.

Carefully implemented, assets can often be transferred into the Company tax-free. Additionally, with proper advice, special share classes can be created for key family members to retain control so that dividends, including potentially to minors, can be given with discretion whilst restrictions block shares from sale and use as unapproved collateral.

In this, it is important to ensure that the Family Company is a dynamic entity with the shareholders involved in decision making and questions of risk and reward. Here it is important that the history of endeavour is part of the legacy to ground the family in the realities of life.

Interesting too is that Companies can be moved to different jurisdictions, and statutory provisions can, with guidance, make the family company and its assets effectively exempt from IHT.

As with Chaucer’s ‘Merchant’, those of wealth and entrepreneurship need to be mindful of threats both from within the family, as much as externally from taxation and hostile commerce. Think carefully before surrendering hard-won assets into Trust and instead look at the widespread opportunities from carefully thought through Corporate Structuring and Governance.

Best Regards,


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