For High Net Worth Individuals (HNWIs), gaining residency in the UK through the Self-Sponsorship route opens up a wealth of exciting opportunities, both financial and personal. Once in the UK, you can put in place legacy and estate planning strategies designed to ensure that your family’s wealth is safeguarded now and for future generations. The ability to implement robust legacy and estate planning is one of the main reasons why the UK has long been considered such an attractive destination for HNWIs and UHNWIs. In this article, we will delve into how you, as a HNWI or UHNWI, can use the self-sponsorship immigration route to implement legacy and estate planning to protect your financial interests.
Leveraging the self-sponsored route UK for long-term wealth preservation
The Self-Sponsorship route offers a new and innovative way for HNWIs and UHNWIs to establish UK residency without the need to invest significant sums or get third-party sponsorship. Once you have residency in the UK, you will be able to work closely with wealth management firms, financial advisors, tax advisors, and legal experts to develop long-term strategies that protect family assets and minimise the risk of future claims or disputes. Such strategies may include:
- Creating an estate/succession plan
- Entering into a nuptial agreement
- Inheritance tax (IHT) planning (e.g. lifetime gifting, using exemptions and reliefs, establishing trusts, and life insurance).
- Making tax-efficient investments
- Setting up a Family Office
- Setting up a limited liability company
- Setting up a Qualifying Non-UK Pension Scheme (QNUPS)
- Setting up trusts, and
- Writing a Will
Comprehensive UK estate planning for HNWIs – Trusts, Wills, and family offices
Estate planning is about making sure that family wealth is preserved, efficiently transferred, and protected for future generations. The key elements of effective estate planning for HNWIs include the establishment of trusts, drafting comprehensive wills, and, in some cases, setting up family offices.
Trusts enable HNWIs to transfer assets to a trustee who manages them on behalf of beneficiaries. Crucially, they can be set up in a way that provides significant flexibility and control over how and when wealth is distributed to heirs. By setting up a trust, HNWIs can protect assets from creditors, costly divorce settlements, and potential family disputes. Setting up a trust in the UK can also offer significant tax benefits, as assets placed in a trust may not be subject to inheritance tax in the same way as directly transferred assets.
Wills are another essential element of estate planning for HNWIs. A carefully drafted and well-considered Will should set out how an individual’s assets will be distributed upon death, and it should also provide an opportunity to minimise inheritance tax payable from the estate on death. For HNWIs with large asset portfolios, including international investments, it is important to ensure that their Will is regularly updated based on their current circumstances and wishes and to account for the nuances of UK tax law and overseas regulations. A family law solicitor will guide you through this process and help you keep your will current throughout your life.
Establishing a family office is another popular option for those with high net worth. A family office is a group of advisors whose role is to provide expert advice to HNWI families on their legal, tax, accounting, and other matters. The idea is that by having access to centralised advice from a dedicated team of advisors, HNWI families can make sure that their wealth is managed efficiently, consistently, and according to their long-term goals and ambitions, ensuring that future generations are well-provided for.
Creating a lasting legacy – How charitable foundations can support wealth transfer and tax efficiency
Setting up a charitable foundation in the UK enables HNWIs to give back to the community while also reducing their tax liabilities. In this way, UK charitable foundations for wealthy individuals can serve as vehicles for wealth transfer, providing personal fulfilment and practical benefits. Indeed, around 170 charitable institutions were established by HNW families from 2012 to 2022.
Contributions to a charitable foundation as a HNWI can:
- Reduce the value of an estate for inheritance tax purposes
- Provide tax relief
- Enable them to maintain a level of control over how funds are used and ensure that their legacy aligns with their values and priorities, and
- Enhance their reputational standing. This is particularly relevant in the UK, where philanthropy is often seen as a hallmark of success and social responsibility.
UK Wealth management strategies for securing family fortunes across generations
By diversifying their investments across various asset classes, HNWIs can reduce the amount of risk they face while securing their returns in the long term. This is particularly important for individuals with global business interests, as fluctuations in one market may be offset by gains in another.
Another aspect of wealth management is ensuring that successors can manage family assets in the future by setting up a family office. Family offices can help to ensure that successors are equipped to do so by providing education and financial training to younger generations.
HNWIs should also consider asset protection strategies to safeguard their wealth from factors outside of their control. These may include economic downturns, legal action, or periods of political instability. Setting up trusts and using other legal structures can help to protect family fortunes, while strategic investments in secure jurisdictions offer additional layers of security.
UK Tax planning for HNWIs – Reducing liabilities and maximising wealth for heirs
One of the biggest concerns for HNWIs in the UK is ensuring tax efficiency, and for good reason. Without careful planning, a significant portion of family wealth may be lost to taxes, particularly inheritance tax, which is currently set at 40% in the UK for estates valued above the tax-free threshold. To mitigate these liabilities, HNWIs should adopt a range of tax planning strategies, such as gifting and trusts. Lifetime gifting enables HWNIs to transfer some of their wealth to heirs in a tax-effective manner. The UK offers annual gift allowances, and gifts made more than seven years before death are exempt from inheritance tax.
Many HNWIs also invest in tax-efficient vehicles such as Enterprise Investment Schemes (EIS) or Venture Capital Trusts (VCTs), which offer significant tax relief for investors.
Final words
If you are seriously considering establishing residency, the Self-Sponsored route opens up new opportunities for comprehensive estate and legacy planning in the UK. The key to successful estate and legacy planning is finding professionals who understand your unique circumstances and whom you can trust to advise and represent you and your family in the future.
A Y & J Solicitors is a specialist immigration law firm with extensive experience with all types of visa applications. We have an in-depth understanding of immigration law and are professional and results-focused. For assistance with your visa application or any other UK immigration law concerns, please contact us on +44 20 7404 7933 or contact us today. We’re here to help!
