Concerns Raised Over Potential Impact On Family Financial Planning

The European Union is currently in the process of implementing proposals to crack down on money laundering and tax avoidance and evasion, including measures which could have an impact on the financial planning of families.

Following a debate, the European Parliament is to vote on the introduction of a public register of the owners and beneficiaries of all EU companies, specifically to provide more clarity around the money and assets held by them.

However, an amendment means that trusts are now also included, with such a register meaning families would be forced to reveal details of their financial assets kept in trust funds. 

Concerns have been raised across the legal and tax industries in relation to the potential impact such a move could have on the UK, where such trusts are used more commonly then in other European countries.

According to reports, David Cameron and other politicians have voiced concerns regarding the plan, with the Daily Telegraph stating the Prime Minister had written to the European Council president Herman Van Rompuy regarding the plans last year.

Expert Opinion

The creation of a public register is likely to lead to one thing – an increase in disputes related to trusts. Like we see in numerous cases related to will disputes, knowledge of another person’s entitlement can often lead to disagreements and costly legal battles. <br/> <br/>"A register of Trusts may not only lead to difficulties between beneficiaries, but also between beneficiaries and trustees. It is arguable that those who consider themselves as fitting into a wide class under a discretionary trust could begin to demand what they believe they are entitled to from trustees. <br/> <br/>"This in turn may mean trustees are faced with new challenges, such weighing up their obligation to the beneficiaries of obtaining the best return on investments with the risk of moral judgement over unethical investments. <br/> <br/>"In addition, this could have consequences for will drafting and any disputes which arise from such documents. No longer will the concept of the Secret Trust be available to testators who want to provide for people without it becoming public knowledge. <br/> <br/>"This creates a ‘catch-22’ situation for testators – provide for someone ‘controversial’ under the will and risk embarrassment or litigation, or alternatively do not provide for that person at all and risk litigation being initiated by the omitted person. <br/> <br/>"It will also be interesting what all of this will mean for privacy laws and it would not be surprising to see such legislation challenged using Article 8 of the European Convention of Human Rights. <br/> <br/>"While the wealthy will have to weigh up the value of keeping their finances private with the other advantages that derive from Trusts, this will also affect many other people as well. For example, whilst the Land Registry can be pointed to as a public record of land ownership, it does not include details of declarations of Trust which sit behind the legal title and set out the beneficial interest. <br/> <br/>"It should be remembered that there are legitimate reasons why someone would want to make use of a trust or similar vehicle to protect assets or wealth, it is not just about tax evasion and or any other unscrupulous activity. <br/> <br/>"These changes by the EU, if implemented, could have a massive effect on a huge number of people and could – ultimately – lead many families and individuals to move their wealth outside of the area." Paula Myers - Partner