When you achieve a certain level of wealth, managing it effectively becomes a demanding job, and this is when whether or not to set up a family office becomes an important consideration, writes Emma Lejeune, partner at law firm Isolas.
Gibraltar has seen an increase in the establishment of family offices over the last few years. Patriarchs or matriarchs usually take the step of establishing a family office when they are looking to minimise the administrative burden that comes along with having significant wealth.
A family office allows for the delegation of that administrative headache to a dedicated office set up by the family to manage it. There are additional drivers that weigh into the decision of setting up a family office. The adoption of a set of rules, principles and objectives to be followed by the family with the aim of implementing governance, and the creation of a forum for communication allows for an easy transition from generation to generation.
A family office can be perpetual, outliving the patriarch or matriarch, which means business can continue as usual with minimal interruption when a key family member passes away. It promotes interaction between the family and creates an avenue for the education of the next generations.
Gibraltar has proven to be an attractive choice for families wishing to set up their family offices. A British Overseas Territory perfectly situated in the heart of Europe, it offers many benefits to support smaller or larger family offices and their respective needs.
Having its own parliament, the jurisdiction develops its own laws which are largely based on UK common law. It also has a strong and independent government creating political stability. Gibraltar’s favourable tax system currently has no inheritance tax, no wealth tax, no capital gains tax, no tax on passive income or VAT and only a 12.5% corporation tax.
For high net worth individuals who wish to take up residency in Gibraltar, there are special tax statuses available that add to the overall advantages. These are all key considerations that compel individuals to choose Gibraltar when determining what is the best jurisdiction within which to set up their family wealth management centres.
With the increase in families wishing to establish a family office and statistics showing the global market is projected to reach a value of $26.57bn (£21.51bn, €24.46bn) by the end of 2028 from a value of $17.70bn in the year 2019, it is more important than ever to choose a jurisdiction that can offer the tools, expertise but most importantly, a secure and stable environment.
It is significant to note, just because a family establishes a family office in one jurisdiction, does not mean the whole family need to live there. Equally, the family enterprise that is serviced by the family office may be cross-border in nature. We often see families that live in different parts of the world (or who have cross-border businesses) wanting to establish a family office in Gibraltar.
It is still viable to establish a family office when members of the family are spread across the world, although it may seem overwhelming – choosing Gibraltar has great cost benefits and is relatively straightforward. Implementing a robust family governance framework as part of the family office set-up, helps bridge the distance between family members located in different jurisdictions.
Additionally, by employing a team of specialists in Gibraltar, experts can communicate with members of the family or the nominated family consortium wherever they are and keep a centralised record of family assets.
Thanks to the jurisdictions’ financial services pedigree, Gibraltar also has a readily available pool of professional services required by family offices, including non-executive directors, lawyers, bankers, accountants, and advisers.
Family offices providing investment services that wish to expand these services to other families and become multifamily offices, can seek to be licensed by the Gibraltar Financial Services Commission under its Mifid regime.
In addition to these key services, Gibraltar has established itself as a hub for providing more holistic services to high net worth families. The adoption of family governance arrangements which include the establishment of family councils is becoming increasingly popular.
Family councils are made up of family members or their appointees and serve as an informal body that meets to discuss and decide matters relating to the family’s wealth. These groups are important in educating the next generation in the enterprise, thereby securing the family legacy through generations.
The advice provided to these groups in Gibraltar is helping to ensure that the Rock remains relevant for future generations – securing its place in the global financial system.
Gibraltar continues to be a leading jurisdiction in the space and proves to be a popular choice for ultra-high net worth individuals and their families.
This article was written for International Adviser by Emma Lejeune, partner at law firm Isolas.