Trust Estate
Guest Opinion: HK Tycoon's Saga Provides Strong Estate Planning Morality Tale

Editor’s note: The
author of this article, Marc Farror TEP, director, Vistra
(Jersey) Limited,
looks at how the wealth structuring misadventures of a Hong Kong
business
tycoon went awry, and the lessons that can be learned from the
saga. This
publication stresses that while it is grateful to share the
insights here, it
does not necessarily endorse all the views contained in this
article.
When you mention the high profile names of Dr Stanley Ho and
Nina Wang in Hong Kong, almost everyone will be able to regale
you with stories
about how Dr Ho lost his $3 billion casino empire and how Nina
Wang’s feng shui
expert allegedly tried to claim her rumoured $4.2 billion
fortune.
In Dr Ho’s case, it was suggested that the main cause of the
trouble was when he fell ill, his share of SJM Holdings was then
fought over
and divided up amongst his family comprising at least 4 wives and
17 children.
According to the media stories, it had reportedly been Dr Ho’s
intention to
pass his share of SJM to his second and third wives.
For Nina Wang, media reports described how her feng shui
expert claimed that they had allegedly had an affair for years
and it was Nina
Wang’s intention, it was maintained, to leave him a substantial
share of her
wealth rather than have her family inherit it.
The problems arose in Nina Wang’s case because supposedly
her will made no provision for the feng shui expert. In Dr Ho’s
case the
ownership of the assets was in personal names rather than through
a more
established and reliable asset protection structure.
These two cases illustrate well how important it is for
successful and wealthy businessmen to have a clear and robust
succession plan
that lays out how their own personal wealth is to be divided,
when the time
arises. With complex international high value estate planning,
structures such
as trusts and companies can be used to ensure that assets are
protected and a
wealthy individual is able to determine exactly who inherits
which assets going
forward. Such structures offer significant flexibility and
solutions can be
designed to accommodate the most demanding of client needs.
Options
In the case of the earlier example, one option for Dr Ho
might have been to use a range of companies to separate, hold and
protect his
assets. Each company is then owned by a trust.
This structure works from an asset protection perspective
and offers the underlying client many benefits, the first of
which is in the
distribution of an estate. Since the assets are separated into
different
holding companies, the risk of losing all of them simultaneously
is limited. If
an asset is going to be attacked and a company is sued, only the
resources held
in that particular company are under threat.
The owner of the assets will achieve an additional level of
protection using such a solution through the separation of
ownership. With a
trust owning all the assets and the underlying client becoming a
beneficiary of
the trust, legal and beneficial ownership is divided. Therefore
it makes it
difficult to take legal action against an individual who has
settled their
assets in this manner.
Trusts can be used to override the local legal and cultural
laws which can be particularly important with, for example some
countries
operating forced heirships, which can lead to an unplanned and
unwanted
division of assets taking place. Jersey trusts do not recognise
forced heirship
regimes and therefore it is only the named beneficiaries or class
of
beneficiaries who will ultimately benefit from the trust’s assets
as these are
effectively held and controlled from Jersey.
It is also possible with a Jersey trust for a
settlor to reserve the power to change the beneficial class and
therefore rule
individuals in and out from receiving trust assets, giving an
additional level
of ongoing control and flexibility with planning.