When high net worth and ultra high net worth Middle Eastern families establish structures to preserve their wealth across generations, they are often looking for such structures to reflect their values and protect their legacy whilst providing for future generations. Success lies in understanding what families seek to achieve and designing structures that deliver their objectives whilst navigating the legal, cultural and practical landscape effectively.
In this piece we have set out six key structuring touchpoints which frequently arise when advising Middle Eastern families on the establishment of long-term wealth holding structures.
Understanding family objectives and obtaining clear instructions
A critical first step in any successful succession planning process is understanding what the family seeks to achieve and obtaining a clear view of their priorities. Families often have specific objectives around wealth preservation, provision for future generations and alignment with religious and cultural values.
Taking time to understand each family's particular objectives and to document these clearly ensures that the resulting structure truly serves the family's purposes. This process may involve sensitive conversations with multiple stakeholders.
We regularly work with families, family offices and key advisers to determine how best to obtain an understanding of the wishes of key stakeholders and then proceed to document those wishes. Our experience in facilitating these discussions helps develop solutions that preserve family harmony across generations.
Honouring family values and religious principles
Middle Eastern families often seek to structure their wealth in ways that honour Islamic inheritance principles and reflect deeply held religious values. Many families wish to ensure that their structures can accommodate Sharia succession requirements, which prescribe fixed inheritance shares.
Solutions may involve appointing Sharia advisory committees, implementing reserved powers that allow settlors or family members to guide distributions according to Sharia law, or crafting specific distribution provisions that are considered to satisfy both religious requirements and common law frameworks. We work extensively with Sharia law specialists and local counsel to develop these mechanisms, ensuring that structures align with these paramount faith-based principles whilst maintaining legal validity under the relevant local and international laws.
Families also seek structures that can withstand potential challenges under forced heirship rules in many Middle Eastern jurisdictions, which guarantee certain relatives a portion of an estate. This may be particularly important for families wishing to protect a family business or to account for children who have already received substantial gifts.
However, even where great care has been taken to design structures in line with Islamic principles, families should be aware that dissatisfied beneficiaries may still attempt to challenge those structures. This risk necessitates careful analysis of which succession laws might apply to the assets and the likelihood of successful challenges. Relevant factors include the jurisdiction where assets are located, the habitual residence of the deceased and the jurisdiction of the asset holding structure. We have experience advising on structures designed to withstand potential attack.
Distinguishing control from benefit
In some cases, families seek to provide financial security for a wide class of family members while seeking to pass decision-making authority to one designated successor or a smaller group. This objective recognises the distinction between who controls the family's wealth and who benefits from it.
Achieving this requires careful structuring, and the succession of control across generations demands particular attention. Families wish to determine who makes decisions after the current generation passes and how authority transitions to designated heirs over time.
Designing culturally appropriate governance
Many Middle Eastern families seek to maintain family control and ensure that designated heirs or successors can exercise appropriate authority across generations. Standard trustee arrangements, where professional trustees hold broad discretion, may not align with families' desire for direct oversight of their affairs.
Alternative governance structures can better serve these objectives. Private Trust Companies or Private Trust Foundations may be structured to enable the appropriate level of family oversight or safeguards.
When assessing different trust and foundation jurisdictions, it is important to consider the various governance mechanisms available. For example, foundations in jurisdictions such as Jersey, Guernsey and the UAE have governance mechanisms resembling company boards, which can appeal to business-oriented families more than traditional trusts, but the most appropriate choice of structure will depend on the specific circumstances. Structures can be designed so that family members can provide strategic oversight whilst preserving independent management and control by professionals. We have extensive experience in designing bespoke governance frameworks that reflect each family's decision-making culture whilst maintaining robust legal structures across multiple jurisdictions.
Addressing global transparency and tax requirements
It is also important that structures comply with the evolving international regulatory and tax landscape while preserving legitimate privacy and asset protection objectives. The Common Reporting Standard, beneficial ownership registers and economic substance requirements are highly relevant to offshore structures, alongside increasingly complex tax reporting obligations.
Families need to understand what information will be reported and to which jurisdictions, how transparency initiatives affect legitimate privacy expectations, and what tax implications arise from different structuring choices. Ongoing compliance obligations and economic substance requirements also require careful consideration.
We are experienced in ensuring structures meet current and anticipated regulatory and tax standards whilst preserving legitimate asset protection and succession planning objectives.
How we can help
Our Private Wealth team's distinctive value lies in serving as the central point of coordination for families seeking to achieve these objectives. Drawing on our extensive experience, we orchestrate the expertise of specialist local lawyers and Sharia advisers to deliver integrated solutions that work cohesively across all dimensions of the family's needs.
If you would like to hear more about how we can help, please do get in touch.
