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 to safeguard your family’s wealth for 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 a HNWI or UHNWI can use the self-sponsorship process to implement legacy and estate planning to protect their financial interests.
Leveraging the Self-Sponsored Route UK for Long-Term Wealth Preservation
The Self-Sponsorship route offers an 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 can work closely with wealth management firms, financial advisors, tax advisors, and legal experts to develop long-term strategies. These will 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 are to establish trusts, draft comprehensive wills, and even set up family offices.
Trusts:
Trusts enable HNWIs to transfer assets to a trustee who manages them on behalf of beneficiaries. Crucially, you can set them up to provide 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. This is because the assets placed in a trust may not be subject to inheritance tax, just like directly transferred assets.
Wills:
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. Moreover, 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. These updates should happen based on their current circumstances and wishes. You also have 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.
Family Offices:
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. They advise on matters such as laws, taxes, and accounting. By having access to centralised advice from a dedicated team of advisors, HNWI families can manage their wealth efficiently and consistently. According to their long-term goals and ambitions, they can ensure 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. This comes with personal fulfilment and many 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 they can use funds and ensure that their legacy aligns with their values and priorities, and
- Enhance their reputational standing. This is particularly relevant in the UK, where people see philanthropy as a hallmark of success and social responsibility.
UK Wealth Management Strategies for Securing Family Fortunes Across Generations
By diversifying investments across various asset classes, HNWIs can reduce the risk they face while securing their returns. This is particularly important for individuals with global business interests. The gains that come in one market can offset fluctuations in another one.
Another aspect of wealth management is ensuring that successors can set up a family office and manage family assets. Family offices can ensure that the successors can provide 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, you can lose significant portion of family wealth to taxes, particularly the inheritance tax. This specific tax 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). This investment offers significant tax relief for investors.
Final words
If you are seriously considering establishing residency, go with the Self-Sponsorship. This option opens 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!
