November, 2020
As one of the first and leading trust companies in Liechtenstein, for over 90 years, Allgemeines Treuunternehmen (ATU) has represented global families and investors in developing tailored wealth management and business solutions. ATU's consulting services focus on asset restructuring, protection, and investment, as well as estate and succession planning.
Why do High Net Worth (HNW) Families Choose Liechtenstein?
Many high net worth families choose Liechtenstein because they face one or more of the following challenges: political instability, complex family structures, economic instability, or a business environment with high risks.
For example, transferring assets to foundations or trust companies can provide these families with greater security, making assets immune to changes in personal circumstances. High net worth families typically have multiple bases globally. This means their legal and economic situations are particularly complex. We believe this will not negatively impact their investments.
Liechtenstein is able to promise these families a high degree of political continuity and stability. Of course, the principality also has direct access to the following two markets: the EU/EEA and Switzerland. In addition, Liechtenstein offers the following advantages:
- Strong business diversification.
- Free economic policies.
- Moderate corporate tax system and simple fiscal system (unified tax).
- Free company law.
- Solid public financial policy.
- AAA rating.
- Swiss Franc as legal tender.
- Perfect infrastructure.
- Elimination of bureaucracy, achieving flexibility and quick decision-making.
- Well-funded public sector.
- Encouragement of R&D.
Cooperating with international high net worth families itself involves a series of challenges, including negotiating cultural differences, overcoming family discord, and revealing and addressing the legal complexities of overseas investments. Trustees must maintain continuous dialogue with all relevant family members, remain transparent during transactions, and ensure no red lines are crossed.
How Does Liechtenstein Law Protect Beneficiaries of Discretionary Offshore Trusts?
The person establishing the trust is the client, or settlor (legal term). They have the right to anticipate various rights and obligations in the trust deed. The settlor can decide or define:
- Whether the deed is revocable.
- Rights of the protector.
- Rights of the settlor.
- Conditions under which the trustee must consult or accept instructions.
- Whether beneficiaries have the right to claim. The settlor can also decide if beneficiaries are discretionary beneficiaries, or if beneficiaries enjoy reversionary rights.
- Reporting requirements and their conditions.
- Duration of the trust deed.
- Subject assets of the trust, and the extent of trustee supervision and/or intervention (whether it is a star/vista trust).
- Trustee's internal control systems. Individual or corporate trustees are typically components of large enterprises bearing clear control/reporting obligations.
- Balance between obligations, rights, confidentiality, Common Reporting Standard (CRS), and tax implications.
Liechtenstein trust companies aim to be a flexible asset protection tool. Settlers and regulated qualified trustees should provide high net worth families with complete detailed information on beneficiary rights and levels of protection. When it comes to asset protection, it is best to choose several possible beneficiaries. This ensures that beneficiaries do not make third-party legal claims attachable against them.
Do Increasingly Strict Global Regulatory and Compliance Requirements Affect Your Clients, and How?
Regulatory and compliance requirements mainly target cross-border activities. Therefore, trustees are under immense pressure to increase "gatekeeper" activities. This is driven by compliance (rather than service) and affects all clients. In the past two years, more so-called "third-party evidence" has been accepted. No correspondent bank, collecting bank, trustee, asset manager, or fund manager may accept information obtained from regulated professionals. They must obtain third-party evidence directly from the client; third-party evidence regarding fees and bureaucracy needs to double or triple. However, these are changes that must be faced, and there appears to be no trend towards making them easier. Additionally, there are impacts on high net worth families such as increased transparency and fee-for-service information exchange.
Currently, Which Business Structure/Service Is Most Favored by Your Clients? Where Are the Main Regional Demand Sources? Has This Demand Changed in Recent Years? How Will It Change in the Future?
Many of our clients are choosing to change their domicile and passports; this seems to be an evolving trend. Of course, cross-border circulation and activities have elevated legal complexities to a new level. Clients are no longer as indifferent as before; they are adapting to higher regulatory levels and agreeing to increased compliance costs. Due to increased costs, they strongly desire practical and effective solutions. Future shifts will be led by high net worth families who refuse to passively accept their home government's regulations regarding taxation, transparency, and foreign exchange. This shift will support our business, and due to growing demand, we need more professionals, greater flexibility, and willingness to serve.
Today, we live in a world that seems increasingly dissonant. On one hand, politicians advocate open borders and free flow; on the other hand, with the increasing number and strictness of regulations, we are subject to stricter controls. I feel we are approaching economic mercantilism more closely, a situation reminiscent of 40 years ago.
The G20, Financial Action Task Force (FATF), and OECD Are Pushing for Public Registers of Corporate Beneficial Ownership and Argue That by 2023, Public Registration of Beneficial Ownership May Become a Global Standard. What Is Your Stance on This? How Will It Affect Your Client Base?
To me, this is a war against the right to confidentiality. The purpose of introducing public registers of beneficial ownership is to combat tax evasion, money laundering, and terrorist financing. Of course, you can kill mosquitoes with a forest fire!
We will certainly implement the EU anti-money laundering directives. What else can EEA countries do? In any case, most clients will deposit their money in EEA jurisdictions seeking asset protection. Therefore, the question is, how to implement these rules in practice? And what are the consequences? We have some understanding of our clients' ultimate reactions. We believe that more high net worth families will change their passports and residences. Currently, some popular countries include: Malta, Greece, Cyprus, Monaco, Italy, Portugal, Switzerland, Hong Kong, and the UK.
Is Liechtenstein Launching New Investment Portfolios or Products to the Market? How Will the Jurisdiction Innovate to Cope with the Future?
Liechtenstein is a strong driver of innovation and has always supported startups and SMEs. Support methods include several, such as business plan competitions ("Ideenkanal"), R&D opportunities, and Liechtenstein's investment market. Although readers need to speak German, the website innovation-standort.li provides a complete overview of the various funding documents provided. Liechtenstein implemented a unique token law effective January 1, 2020, to promote the adoption of tokenization technologies similar to blockchain services.
As a member of the European Economic Area, Liechtenstein offers entrepreneurs an EU passport, enabling them to conduct business outside Liechtenstein and trade with all EU countries.
Can Liechtenstein Classify Itself as One of the Default Jurisdictions for Successful Wealth Preservation Globally?
Liechtenstein's wealth preservation business is very professional. The long history of protecting high net worth family wealth has earned the principality a good reputation. For example, the foundation/trust acts formulated in 1926/1928. Its tax law complies with EU/OECD standards.
From any perspective, Liechtenstein is not a major market participant, partly due to its small land area. However, Liechtenstein focuses solidly on its strengths, prioritizing continuous development and growth according to international standards and meeting clients' customized needs. For these reasons, I am confident that Liechtenstein's business will continue to thrive.
