Most people only ever come across the more common types of company, being a private limited company or a public company, but there are more and they can generally be classified into different types depending on their particular mode of creation / incorporation, the liability of any members and the number of members. The most common types of companies found in Ireland are listed below. We have some basic information on each in this article. For further information on each of the registered or incorporated company types click the link to open a factsheet on each. Royal Chartered Companies Statutory Companies Registered or Incorporated Companies Private Limited Company Designated Activity Company Public Limited Company Unlimited Companies Companies Limited by Guarantee Types of Company based on their mode of incorporation Companies can be classified in broad terms into three types based on whether they are created by a Special Act, Special order or are registered by way of an application to the Companies Registration Office. Royal Chartered Companies A Royal Chartered Company is one created by Royal Charter of the UK Crown. This means they are granted specific powers or rights by a monarch or by special order of a King or Queen. A number of Irish institutions were established by or received royal charters prior to Irish Independence. These are no longer under the jurisdiction of the British Privy Council and their charters can thus only be altered by a Charter or Act of the Oireachtas (Irish Parliament). Trinity College Dublin is a well-known institution which was originally founded by Charter of Queen Elizabeth I in 1592. Statutory Companies Statutory companies are those which are incorporated by means of a special act or statute passed by a state legislature (Parliament) which in Ireland is the Oireachtas. Examples of Irish state bodies are the: IDA (Industrial Development Authority); ESB (Bord Soláthair an Leictreachais being the Electricity Supply Board); and RTE – (Raidió Teilifís Éireann, being Radio and Television of Ireland) Registered or Incorporated Companies All other companies which are incorporated in Ireland are incorporated under the Companies Act 2014 passed by the Oireachtas or its earlier equivalent acts. These companies only become into existence after the appropriate corporate documentation has been filed with and approved by the Companies Registration Office in Dublin. Private Limited Company Is the most common form of company in Ireland and through which assets are held or trades undertaken. A private limited company, whose corporate name ends with the word “Limited” or suffix “Ltd” or in Irish “Teo” (teoranta), is one where the liability of a member (otherwise known as a shareholder) to claims of company creditors when a company is wound up (liquidated) is limited to the amount, if any, unpaid on the shares registered in the member’s name at the relevant time. A private limited company may have only one member, but cannot have more than 149. See our Factsheet for more information Designated Activity Company First introduced under the Companies Act 2014 a Designated Activity Company (“DAC”) is:a private company limited by shares with the capacity, including the power, to do only those things set out in its constitution ora private company limited by guarantee and having a share capital with the capacity, including the power, to do only those things set out in its constitution. All Designated activity companies’ names shall end with ‘Designated Activity Company’ or “Cuideachta Gníomhnaíochta Ainmnithe”. There is an exception to this as there is a power to dispense with DAC in the name of charitable and other companies under section 971 of the Companies Act 2014. This exemption refers to not-for-profit companies only. See our Factsheet for more information Public Limited Company Public limited companies, whose corporate name ends with the suffix “plc” or in Irish “cpt” (cuideachta phoibli theoranta), are generally larger corporate bodies or those seeking to be publicly listed on a recognised stock exchange. Such companies are required to have an allotted share capital of €38,092 of which 25% or more must be paid up. A public limited company must have a minimum of 7 members, but is there is no maximum. See our Factsheet for more information Unlimited Companies An unlimited company can either be a private or public company. A private unlimited company, whose name ends with the suffix “ULC”, must have a share capital whilst that of a public unlimited company can have either have a share capital (in which case its name ends with the suffix “PUC”) or have no share capital (in which case its name ends with the suffix “PULC”). Unlike a limited company the members of an unlimited company are liable to contribute to the assets of the company an amount sufficient to pay all of the debts and liabilities of the company as well as any costs, charges and expenses of its winding-up and for the adjustment of the any contributions of any members amongst themselves. See our Factsheet for more information Companies Limited by Guarantee In the past Irish companies which were limited by guarantee could be incorporated with or without a share capital. Only companies now limited by guarantee and having no share capital, whose name ends with the suffix “CLG”, can be incorporated. Such companies have members whose liability is limited to the amount they have undertaken to contribute to the assets of the company, in the event it is wound up, not exceeding the amount specified in the company’s Memorandum and Articles of Association. See our Factsheet for more information   If you would like to discuss setting up a company in Ireland then please contact me at: Richard Windrum T: +353 42 9339955E: richardwindrum@fdw.ie   Disclaimer This overview is for guidance purposes only.

AROUND THE WORLD, UHY MEMBER FIRMS SERVICE THE INCREASINGLY COMPLEX NEEDS OF PRIVATE CLIENTS AND THEIR FAMILIES For those looking for insight into the current needs and priorities of high net worth individuals, the most recent Knight Frank Global Wealth Report provides interesting reading. According to the company’s research, wealthy individuals are more mobile than ever, with a record number (26%) planning emigration in 2019. At the same time, the report notes an increasing anxiety on the part of governments around the world with regard to tax evasion and avoidance (often mistakenly conflated with legitimate wealth management), and the tightening of rules in some jurisdictions in relation to foreign nationals and property investment. All in all, the report suggests that while high net worth individuals are, increasingly, citizens of the world, lawmakers are scrutinisingtheir financial activity in ever finer detail. Staying compliant while legitimately protecting wealth can be fraught with complexity for private clients. Tax efficiency, cross-border compliance, personal and family finance, succession planning and wealth protection are all of concern. Coupled with this, the individuals involved may not necessarily be very wealthy, but simply people who want to protect the money they have earned and make it work harder on their behalf. We asked a panel of UHY experts from our member firms in Costa Rica, the Isle of Man, the UK and the US about their approach to supporting private clients. Trust and Concern Nigel Rotheroe, director at UHY Crossleys LLC, Isle of Man, believes that the increased complexity of tax and compliance laws, in the UK and abroad, is behind an increase in the number of private clients seeking professional advice on how best to approach tax, wealthprotection and estate management. “Individuals and families often create trusts for wealth and estate protection, as well as for confidentiality reasons. Trusts are a good way to pass on the family business, protect assets from creditors, and pass on wealth in a careful, considered way,” says Nigel. The recent establishment of UHY Trust & Corporate Services Limited, a joint initiative between UHY Crossleys and UHY Farrelly Dawe White Limited, Ireland, designed to aid the formation and administration of companies, trusts, foundations and partnerships in Ireland and the Isle of Man, is helping to support this, Nigel explains. In the US, Joe Falanga, managing director, UHY Advisors NY, Inc, agrees that while private clients approach him for a variety of services – personal tax strategy management, life management services (such as asset management), and philanthropic planning andadministration among them – some of their concerns are more acute today than they have been for many years. “Private clients face economic uncertainty, changing tax laws, issues with children and inheritance, and geopolitical issues,” says Joe. “Add to that an increasingly complex cross-border trade and tariff situation – and of course they still want their wealth to work for them, to generate the highest returns while managing risk. This is why they need the best professional advice.” The Right Relationships Joe emphasises that finding the right solution is based on developing the right kind of relationship with the client, which requires rather unique skills and knowledge. Discretion and sensitivity is key, because to delve into the financial affairs of individuals and families isto open a window into their lives. “Private clients do not want to trust another professional with their financial information unless that individual is personable, real, smart, understands family dynamics and has empathy for them,” he says. “To understand a private client, whether an individual or a family, you need to build the relationship and build trust. We, as professional advisors,need to show that we understand wealth and how the responsibilities associated with it are important. And we need to show a human side – clients like to know what an advisor does outside the office.” Joe and Nigel also agree on another important aspect of working with private clients: the necessity of working with other professional services providers. “The type of work we undertake often involves lawyers, accountants, other professionals and financial institutions,” says Nigel. “One has to be a team player, especially if the service a client is seeking is to be provided on a timely and cost-effective basis.” “You have to be able to work with a client’s full team of advisors, which might include an investment manager, a solicitor, an insurance advisor and bankers,” says Joe. “We might recommend solicitors to draw up paperwork for a transaction, prepare wills and trustagreements.” Joe acknowledges that this is beneficial to all involved – but most importantly, this collaborative approach is key in enabling clients to access the precise expertise they need. An International Outlook Neela Chauhan, private client tax partner, UHY Hacker Young, London, UK, has also built up trusted contacts in a number of areas, from banking to property. Based in the city that claims the world’s largest population of ultra-high net worth individuals (people whose net worth exceeds USD 30 million, excluding the value of their primary residence), she believes that working across national borders will also become increasingly important in providing services to private clients. The world is shrinking, according to Neela. Wealthy individuals lead an increasingly international lifestyle, as the Knight Frank report suggests. They might live in several countries over the course of a year, or work in one jurisdiction and live in another. By doing so they inevitably encounter the complexities of divergent tax systems. Without the right advice, this can lead to double taxation and an excessive tax burden. “As an example, a US citizen renting out a property in the UK must absolutely obtain the right advice, or they may end up paying income tax in both countries without unilateral relief, as there is a mismatch in the domestic reliefs available. This also applies to capital gains tax on the sale of the property,” says Neela. She also points to similar mismatchesbetween tax systems in various European countries and the UK, too. Individuals who reside, invest or work abroad need specialist advice or risk paying far more than they need to. This is not tax avoidance, Neela adds – it is simply organising tax affairs so as to avoid punitive charges when overlapping between different fiscal regimes. Global and Local Nigel Rotheroe also notes the increasingly international nature of private clients, which he says puts an onus on members of a global network like UHY to work together to offer the very best private client service. “Crossleys has provided assistance in relation to clientstructure work to other UHY member firm offices, and has in recent years assisted UHY offices in Ireland, Israel, Italy, Malta, the UK and the US with various client offerings,” he says. Neela adds: “The advantage of being part of the UHY network is that, while you can only ever expect to be a true expert in the tax regime of your home country, if I need information about the nuances of the tax system in another country, I can quickly pick up the phone and ask a colleague in that part of the world.” This is especially important, because it is not just the arcane details of tax or property law that differ between jurisdictions. The culture of wealth protection and inheritance practice ishighly dependent on local circumstances. Around the world, UHY member firms offer private client services shaped by local priorities. In Saudi Arabia, for example, UHY Abdul Jabbar specialises in establishing ‘family offices’, a type of financial device to manage family wealth, plan for family financial futures and provide other services to members of the family under their ongoing oversight. In Australia, UHY Haines Norton has expertise in the creation and management of Testamentary Trusts, which provide more control over the distribution of assets to beneficiaries, as well as tax advantages. In Costa Rica, Omar Pérez, partner at UHY Auditores y Consultores, S.A, explains that the estate planning services his firm offers to private clients, in some ways, is fundamentally different from that offered in Europe or America. Omar says: “The interesting thing with Latin America is most people manage their personal wealth through their companies. I am pretty sure that is because we do not have a liquid stock exchange in Costa Rica, so if you have your money in a personal bank account or personal investments, you will not have the same return as if you have it in a business. And it is so much easier to handle inheritance this way too. It is important to remember that the majority of businesses here are family businesses.” An Informed Choice Both high net worth individuals and less wealthy individuals keen to make the most of their money are increasingly well informed. “People are more financially astute, with informationbeing more readily available through advanced technology and media coverage,” says Neela Chauhan. “They know that there are more ways to make their finances more efficient. They realise they have more choice.” It is against this background that UHY member firms around the world are developing specialised private client services. The number of financially literate individuals and families seeking to exploit new opportunities, while remaining fully compliant with ever more complex rules and regulations, is growing. They demand real expertise and a relationship with their advisors that is built on trust. For more information about UHY’s capabilities in private client services, email the UHY executive office, info@uhy.com , or visit www.uhy.com

This is the first of two articles that seek to provide an overview of the taxation of family trusts in Ireland. By the nature of the topic, the articles are not all encompassing and my best advice to those wishing to consult with professionals over trusts is to go with an open mind and speak plainly about your wishes, desires and what it is you want to achieve for your family. The articles also assume that the reader has a small knowledge of trusts and certain terminology associated with them. I can recommend anyone requiring further practical advice on trusts to look at the blog section of this website. Download our factsheet ‘Trusts and Irish Tax Implications’ to learn more about planning for the future Though not used as much as they should be in Ireland (but changing as of the time of writing) trusts can assist greatly in succession planning for the family business and protecting family wealth for future generations, as well as offering a large degree of flexibility in providing for young children, beneficiaries with disabilities or vulnerable adult beneficiaries. This article focuses on trusts and the family business. The second article will deal with disability trusts and the taxation issues associated with them. Overview There are three broad categories of trusts for Irish tax purposes being Bare, Fixed or Discretionary trusts. Bare Trust A bare trust (sometimes known as a simple trust or nomineeship), is one where the beneficiary(s) has an immediate and absolute right to both the capital and income of the trust and the Trustee(s) has no discretion over the assets held in trust. The trustee of a bare trust is a mere nominee in whose name the property is held and must follow the (lawful) instructions of the beneficiary(s) in relation to the assets held in trust. Bare trusts are ‘look through’ for tax purposes, and the beneficiary, rather than the trustee, remains liable for any taxes which arise. Fixed Trust In a fixed trust, each beneficiary has a fixed entitlement to a specific share or interest in the trust property. The entitlement may not necessarily be immediate but rather the beneficiary may be entitled to the property after a specific time period (known as “a period certain” ) has passed, such as on the death of a person who has an interest in the property for the duration of their lifetime or otherwise. Discretionary Trust A discretionary trust is one where the Trustees are responsible for the administration of a trust and its assets for the benefit of one or more of the trust’s beneficiaries. Unlike other types of settlement, the Trustees have the absolute discretion as to how to use the trust’s income and to utilise (i.e. provide benefits) or distribute (appoint) the trust’s capital and income to beneficiaries and the conditions, if any, they may impose on the recipients. It is important to understand the concept and differences between each type of trust above as the tax treatment and the tax implications for all the parties involved in a trust can vary. Taxation of Trusts Income Tax The Trustees The income tax (“IT”) position regarding a trust is determined by the tax residence of the trustee(s), such that: (a) If all of the Trustee(s) are Irish resident, then any worldwide income of the Trust will be liable to IT1 * ; and (b) If all the Trustee(s) are not resident in Ireland, then the Trustee(s) will only be liable to IT on any Irish sourced income. Trustees will pay IT at the Irish Standard Rate of 20% and have no entitlement to credits, reliefs or allowances as apply to individuals. However, Trustees are not subject to USC2 * or PRSI3 * in relation to trust income. Where Trustees make a payment from capital funds that is treated as income in the hands of a beneficiary the Trustees have withholding tax obligations. Irish tax law provides for a surcharge on undistributed income of certain accumulation and\or discretionary trusts. If income arising to a discretionary trust has not been distributed within 18 months of the end of the year of assessment in which it arises, to a person who receives it, as income, it will be subject to a surcharge of 20%. Income which has been treated as income of any person other than the Trustees is excluded from the surcharge. The usual income tax return deadlines and filing requirements that apply to individuals apply equally to Trustees. The Beneficiaries Case law has established a principle that a beneficiary who has a vested interest in possession in a trust asset is subject to tax on any income that asset generates as if he had received the income himself when it arose. If a beneficiary of a trust is absolutely entitled to the income then the Trustees are not assessable to IT and Irish Revenue will assess the beneficiary on the income directly. Where a beneficiary is absolutely entitled to income as it arises, a trustee’s expenses are not deductible against the income of the beneficiary. Capital Gains Tax The Disponer When a person creating a trust, known as a “Disponer” in Ireland (“Settlor” in the UK) creates a trust during their lifetime, he/she will transfer assets to the trust and these will form the basis of the trust’s “Trust Fund”. Depending on the type of assets transferred to the Trustees, capital gains tax (“CGT”) may arise. CGT is assessed on the market value of the asset(s) transferred (gifted) to the trust. If the market value of the asset gifted is greater than the original acquisition cost (value) to the Disponer, then CGT could arise. No CGT will arise, however, where cash (euro currency) is transferred to the trust by the Disponer. If the trust is created by a Will, becoming operational on death, then no CGT arises on the initial creation of the trust as the Trustees will inherit the assets at their open market value at the date of death of the Disponer. This is the base cost for any future disposal of the trust asset(s) concerned. The Trustees Whether CGT arises on the trust assets depends on the residence and ordinary residence status of the Trustees. In the event that the majority of the Trustees are resident and ordinary resident in Ireland and the general administration of the trust is carried out in Ireland, then the Trustees will be liable to CGT on the trust’s worldwide gains. If the majority of the Trustees are not resident or ordinarily resident in Ireland, then the Trustees will only be liable to Irish CGT on gains arising on the disposal of specified Irish assets, namely: (a) Land and buildings in Ireland; (b) Minerals in Ireland including related rights such as exploration and exploitation; and (c) Unquoted shares in Ireland deriving their value or the greater part of their value from (a) and (b) above. However, special rules apply for professional Trustees or trust companies. If the Trustee is a professional trustee and the settlor is neither Irish resident nor ordinarily resident in Ireland when the assets were settled on trust, the professional trustee is deemed non-Irish resident and is therefore not Irish resident for CGT purposes. The Beneficiaries If CGT arises then it may be credited against any capital acquisitions tax which may be payable by the beneficiaries of the trust who inherit the assets on cessation of the trust. Stamp Duty The Trustees Stamp duty (“SD”) may be payable on the lifetime transfer by a Disponer of assets into a trust. If the transfer comprises residential property then SD will be payable on the value of the asset transferred. The first €1 million will be subject to SD at a rate of 1% and thereafter at a rate of 2% on any balance. If the transfer is of commercial property then the rate is 7.5%. If cash is transferred (gifted), no SD duty arises. However property can lawfully be vested in Trustees without the need for a written instrument (e.g. paintings, jewellery) and in which case no SD will arise nor will there be any liability to SD arise where assets are transferred to a trust under a Will. The Beneficiaries Where correctly structured appointments of assets to beneficiaries in accordance with the terms of the trust should not give rise to SD. Capital Acquisitions Tax The Disponer For the Disponer, capital acquisitions tax (“CAT”) applies to gifts and inheritances. There is no CAT on the transfer of assets to a trust by a Disponer as the legal title to the assets vested into the trust have not yet passed to the beneficiaries. The Beneficiaries Where a beneficiary receives assets/benefits from the Trustees, they are taxed as if the transfer/benefit had been given to them by the Disponer/the deceased. It should be noted that CAT is a lifetime tax, so any previous gifts or inheritances received since the 5th December 1991 may reduce or “consume” the entire tax-free threshold. Assets appointed out of a trust settled on or after 5 December 1999 will be within the charge to CAT:(a) If the recipient beneficiary is resident or ordinarily resident in Ireland on the date the benefit is received; (b) The donee or successor is resident or ordinarily resident in Ireland; (c) Where the Disponer is resident/ordinarily resident at the date of death, CAT will arise on any benefit taken on his/her death; and (d) Where assets are situated in Ireland. A foreign domiciled4 * person will not be deemed resident for CAT until they have been resident in Ireland for five continuous tax years5 * . In some circumstances distributions from a trust can give rise to both an IT and CAT liability in the hands of a beneficiary. Distributions can be classed as capital or income in nature and it is the character of the payments in the hands of the beneficiary that will determine the tax consequences. The nature of distributions has been the subject of case law in the past. Regular or periodic distributions to a beneficiary can be both subject to IT and CAT. A revenue concession exists where CAT is chargeable on the net benefit received (i.e. the net after tax amount). The income received by a trust is broken down into the actual sources from which it has arisen. Thus, Irish rental income would be taxed in the individual’s name under Schedule D Case V, foreign rental income under Schedule D Case III, etc. If the beneficiary has a contingent interest in the income (i.e. no right to the income until a future event) or the Trustees have the power to accumulate income, the Trustees are subject to IT while the income remains within the trust. The additional 20% surcharge may arise on any undistributed income. If income is passed to a beneficiary upon which IT tax has already been assessed on the Trustees, the beneficiary can claim a credit for the tax already paid by the Trustees and the income is grossed up in the hands of the beneficiary and assessed in the normal manner. The Trustees should provide the beneficiary with a Revenue Form R185 (which shows the 20% tax paid by them) and the beneficiary will then receive a credit for the tax paid. If the income is not paid to the beneficiary, but is applied for his or her benefit by the Trustee e.g. for maintenance, education etc., then an amount equal to the financial benefit is treated as the beneficiary’s income. Specific Tax Rules for Discretionary Trusts In a discretionary trust, those persons the Disponer wishes the trust to benefit (the “class of beneficiaries”) is set out in the trust deed. The Trustees then have the discretion to distribute the trust property between those beneficiaries as they see fit. A discretionary trust also exists where property is held on trust to accumulate income or part of the income from that property. For further information on the trust law aspects of discretionary trusts please refer to the article on the website of UHY Trust and Corporate Services Limited entitled “Types of Trust and Whose Involved” .From a tax perspective, discretionary trusts can potentially allow a situation to arise in which no beneficiary ever becomes “beneficially entitled in possession” to a trust asset thereby resulting in a potentially indefinite deferral of a CAT charge. To address this, discretionary trust tax in the form of a one off initial levy of 6% and thereafter an annual levy of 1% of the value of the assets in the trust, was introduced (see DTT section below for further details). These discretionary trust charges, as well as the surcharge imposed on undistributed trust income, can often dissuade people from using discretionary trusts on the basis that they are not tax efficient and erode the value of the trust property. However, a one off levy coupled with an annual 1% levy is a cost that a Disponer may be willing to bear if the trust otherwise meets the Disponer’s commercial/personal objectives (i.e. to protect family assets and to ensure flexibility in terms of who gets what and when). The flexibility inherent in a discretionary trust may, in appropriate cases, also be utilised to allow time to pass and a benefit be deferred until such time as all necessary conditions have been met for a tax relief to apply, such as agricultural relief or business property relief. Discretionary Trust Tax (“DTT”) Discretionary trusts are subject to a one off charge of 6% of the capital value held in a trust, followed by an annual charge of 1% arising on 31 December in every subsequent year (except the year in which the 6% is paid). The initial DTT charge of 6% is generally payable on the later of the death of the Disponer or on the date on which the last principal object of the trust (if any) reaches the age of 21. The 1% charge will not arise within 12 months of the initial 6% charge. If the trust is wound up such that the entire property within the trust is appointed out of the trust within five years of the initial 6% charge a refund of 50% is repayable to the trust. If the trust is created under a Will, and all of the beneficiaries are over 21, then the liability to DTT arises on the later of either the date of death or the date the property becomes subject to the trust. The estate of the deceased has four months to settle the DTT payable. There are a number of exemptions from the DTT tax. These include trusts that are set up exclusively for: (a) People with certain disabilities;(b) Public or charitable purposes; and(c) Approved superannuation schemes. Specific Tax Rules for Fixed Trusts Another way to pass wealth to the next generation is through the use of a fixed trust. In a fixed trust, the entitlement of the beneficiaries to the income or capital of the trust is fixed by the Disponer. However, just because the share or interest taken by the beneficiary is fixed, the Disponer still has some flexibility as to what should happen and when. For example, the beneficiary may be entitled to the property; (a) Immediately;(b) After a specific time period (“a period certain”) has passed; or(c) On the death of a person who has an interest in the property for the duration of their life (i.e. on the death of a life tenant), or otherwise. Common examples of fixed trusts are: (a) A trust for a minor (“e.g. until they reach the age of 21”);(b) A life interest (“e.g. to pay an annual income for a beneficiary’s lifetime”); or(c) A remainder interest (“e.g. to transfer the asset to the beneficiary after another person’s death”). For example, a Disponer may ultimately want his assets to pass to his children but a fixed trust gives him the option of first allowing his wife to enjoy the income of those assets during her lifetime. Appointing a life interest rather than an absolute interest can make sense in the case of older beneficiaries. Apart from the CAT cost being much less (with the possibility of a CAT refund if the life tenant dies within five years) using a life interest ensures that the underlying capital is protected for the benefit of the next beneficiary(s). A Life Interest/Tenancy A life tenant is a person who currently holds a life interest in trust property. In other words, he or she currently has a present right to the income or enjoyment of some or all of the trust assets (for example, the right to live in a house owned by the trust) but has no interest in the underlying asset) CAT arises when a beneficiary becomes “beneficially entitled in possession” to property. This means in the case of a trust that any present rights to the enjoyment of property to a life tenant are liable to CAT immediately. The CAT liability is based on a multiplying factor related to the beneficiary’s age and gender6 * at the time they become beneficially entitled in possession to the property. In contrast, a future interest to trust property is not liable to CAT until an event happens (such as the death of another person) whereby this future interest becomes a present interest. As set out above, income that the beneficiaries of a trust are entitled to receive as it arises and which is mandated and paid directly to those beneficiaries (rather than accumulated within the trust) is not assessable on the Trustees; it is taxed in the beneficiaries’ hands and can be subject to both IT and CAT depending on the nature of the payment. It is common, where a beneficiary has an interest in possession in a fixed interest trust, that the Trustees may have a discretionary power to appoint capital from the trust fund to the life tenant. For CAT purposes, the power to appoint capital is treated as a contingency. Until the trustees exercise their discretion to make a capital appointment no CAT liability will arise. Therefore, the life tenant is taxed on what he or she receives during their lifetime. In the event the trustees make a capital appointment then the CAT position of the life tenant or other beneficiary needs to be reconsidered as a liability to CAT may arise. Summary It is important that the legal and taxation implications of establishing a trust, of whatever nature, are understood before one it is established. The taxation of trusts is complex and proper taxation advice must be taken by both Disponers and Trustees. If you would like to know more about the points raised in this Article then please contact me or one of my colleagues. Niall Donnelly I am a Qualified Chartered Tax Advisor, working in public practice and currently Head of Corporate Tax Structuring at UHY Farrelly Dawe White Limited. I am actively involved in advising domestic businesses, private companies and high net worth individuals on a range of taxation issues. I have extensive experience dealing with family business succession, business exit, tax efficient investment structures, corporate reorganisations, property transactions and tax matters surrounding privately held wealth. UHY Farrelly Dawe White LimitedFDW HouseBlackthorn Business ParkCoes RdDundalkCo. Louth T: +353 42 9339955E: nialldonnelly@fdw.ie Disclaimer This overview of the Irish tax implications of trusts is for guidance purposes and given on the assumption that any interested party is fully aware of the classification of trust in which they are involved or contemplating establishing. Any definitive advice can be provided after review and due consideration of any trust deed and ancillary documents and any other pertinent documentation. Find out more about our Trust Services Contact our team here   1Save for where the Disponer of the trust and its beneficiaries are not resident in Ireland and the income is “mandated” to the non-resident beneficiaries.2USC being the Universal Socia Charge which is levied on annual income in excess of €13,000.3PRSI being Pay Related Social Insurance.4Determining an individuals domicile is not straight-forward, especially where a person has become resident in Ireland and suitable advice should be obtained if the domicile status is not “cear cut”.5A tax year in Ireland being a calendar year beginning on 1 January and ending on the following 31 December.6The gender of the beneficiary is important as the multiplying factor takes into consideration that females, on average, live longer than males.

In September 2019 the Central Bank of Ireland issued new “Anti-Money Laundering and Countering the Financing of Terrorism Guidelines for the Financial Sector” (the Guidelines). The Guidelines set out the expectations the Central Bank has when Firms are identifying, assessing and managing Money Laundering (ML) and Financing of Terrorism (FT) risk. The Guidelines are a result of changes to Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) risk and will result in banks and other financial institutions (collectively referred to as FI or FIs), asking for more information and documentation from trustees; whether they be licensed and regulated trustees or otherwise Risk Based Approach Specific Guidance The Guidelines expand on the risk based approach required by the Criminal Justice (Money Laundering and Terrorist Financing) (Amendment) Act 2018 (CJA) which amended the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 (Act). The application of a risk based approach means that FIs will require information from trustees about all the parties to a trust to assist them in determining whether there are any high risk factors which warrant enhanced due diligence (EDD). If an FI decides that EDD is required, this could result in further documentation or information being requested, lengthening the time that it might take for an account to be opened and in some cases, a charge being applied for the EDD and the ongoing maintenance of any account. Where a high risk status is applied to an account, this can lead to increased scrutiny and in some cases may result in the account being declined if it is outside of an FI’s risk appetite. In addition, any need to conduct a review of any existing due diligence or change of bank mandate will act as a “trigger event” within an FI such that renewed due diligence, which may have to be enhanced EDD, may need to be undertaken. EDD Specific Guidance Sections 37 to 39 of the CJA prescribe a number of circumstances where FIs are required to apply EDD measures including; where a party to a trust is a politically exposed person (PEP), there is exposure to high-risk third countries, or the business relationship is identified as presenting a higher degree of risk for example due to the complexity of the trust and any underlying or associated arrangements. PEP Specific Guidance Identification of PEPs and application of EDD to PEPS is required under Section 37 of the Act. This was broadened in 2018 to include all PEPs irrespective of residency in Ireland. The Guidelines advise that EDD requirements for PEPs are also extended to immediate family and known close associates of the PEP due to the risks presented by PEP status. In practice, this means that Trustees will need to ask questions and conduct enough customer due diligence to ensure that PEPs are accurately and timely identified so that they can advise an FI of PEP exposure. It is often part of an FI’s terms and conditions that the Trustees advise of any change to the parties to the account, e.g. where a change of trustee takes place and this could include a new party to the trust who is a PEP or an existing party to the trust becoming a PEP. Where an FI is aware of PEP exposure within a trust structure, this will lead to additional information being requested in relation to the source of funds and source of wealth and so Trustees should ensure that they have this level of information readily to hand and updated periodically. Given these enhanced AML/CFT requirements, it is clear that new and existing relationships between trusts and FIs will be subject to increased scrutiny. Familiarity with the requirements is essential to be able to respond to requests for documentation and information in a timely fashion. FIs often set specific timeframes in which responses need to be provided, particularly where a review of an existing account has identified the need for additional documentation and information, and we are familiar with instances where accounts have been subject to closure notices when the requested information has not been supplied. A professional trustee will often have developed relationships with the relevant FIs and will be cognisant of the requirements, enabling them to identify what information and documentation might be required at an early stage and importantly when it might be appropriate to challenge the requests made by an FI. The continued drive by regulators and those that they regulate to “stamp out” or more practically minimise the risk of AML/CFT activities makes it harder for those seeking to establish a trust to have as the sole trustee(s) a family member(s). Not having a regulated person acting as a trustee inevitably increases the risk to the lay person of being found guilty of a criminal offence by virtue of the provisions of the Act and other legislation.   Sinead O’Connor & Kathryn Sharman Regulatory & Compliance ServicesDQ Advocates February 2020 E: sinead@dq.im E: kathryn.sharman@dq.im Find out more about our Trust Services Contact our team here

There are several structures that can be used to pass family business assets to the next generation. Family companies, family partnerships and discretionary trusts are all popular vehicles for business succession planning. In this article we highlight some of the key benefits and advantages of discretionary trusts over other structures. What is a discretionary trust? Structure A trust is not a legal entity. It is a legal arrangement whereby a person (known as the “settlor”) transfers ownership of his or her assets (such as property, shares or cash) to another person (the “trustee”) who will look after those assets and use them to benefit one or more other persons (the “beneficiaries”). Details of the arrangement are usually set out in a trust deed. The trust deed will usually list one or more classes of beneficiaries (usually children, grandchildren and remoter descendants of the settlor) who may benefit from the trust. Control In a discretionary trust structure, the trustees have absolute discretion as to who (from the class or classes of beneficiaries named in the trust deed) should receive the capital or income from the trust. The trustees have the legal ownership but no beneficial interest in the trust assets. The beneficiaries have no automatic right to income or capital as it arises. They merely have a hope or expectation that the trustees may exercise their discretion in their favour such that they receive appointments or use (loans) of funds and/or receive other benefits. Advantages of discretionary trusts Flexibility The discretion given to trustees of a discretionary trust ensures that they can determine who should be the recipient of trust funds or other benefits, the quantum of any such provision and when. This allows greater flexibility in dealing with the changing needs and circumstances of the beneficiaries. Discretionary trusts are therefore an ideal vehicle for settlors who have identified a particular group of persons they would like to benefit, but are unsure which of them will need financial help in the future and in what proportions. Protection against marital breakdown One of the main problems in gifting assets to children directly is the risk that those assets may become available to their spouses in the unfortunate event of a marital or relationship breakdown. Uncertainty as to the enforceability of pre-nuptial agreements in Ireland accentuates this risk. By placing those assets in a discretionary trust instead of gifting them directly to children, children can receive the benefit of those assets without the assets forming part of their personal property, and therefore reducing the risk of those assets being exposed to claims from a former spouse or partner on breakdown of the relationship (although a court may make an order on a clean break as to the value of such assets or that on receipt of funds from a trust a proportion should be given to a spouse). Avoiding oppression actions Family business successions are typically structured so that the current value in the family business assets is locked in for the benefit of the current owners (i.e. the parents who have founded and grown the business ), while the next generation will benefit from subsequent growth in the value of those assets. At the same time, key decision making power in relation to the assets / business typically remains with the parents. Family company structures achieve this by creating different share classes and issuing non-voting growth shares to the next generation (although in some instances voting shares are issued to the next generation, otherwise the parents’ shares may retain a disproportionately high value for CAT purposes). However, by acquiring shares in a company, the next generation automatically have access to a range of minority shareholder protections under statute and common law. A shareholder will be able to avail of these protections notwithstanding that he or she only holds non-voting shares and does not participate in day-to-day management of the business. These protections include the right to bring an action for oppression under the Companies Act, 2014, which is an extremely broad and powerful remedy for shareholders. Oppression actions can be very disruptive to a business, both in terms of the negative publicity generated and the impact they can have on day-to-day operations. Oppression type remedies are not available to discretionary beneficiaries of a discretionary trust and the voting rights of any shares settled into a discretionary trust lie with the trustee(s) in any event. Disgruntled beneficiaries are generally limited in their grounds of recourse to establishing that there has been a breach by the trustee of the terms of the trust, or other unlawful conduct on the part of the trustee. There is no general entitlement on a beneficiary’s part to complain that a trustee is conducting the affairs of the trust (or an underlying company) in a prejudicial or discriminatory manner. Protection against sale of business outside the family Placing assets in a discretionary trust avoid the problem of children selling those assets outside the family. Although restrictions on share transfers are common in family companies, typically these are structured so as to give other shareholders a so-called “pre-emption right” (or right of first refusal) on a sale, rather than an outright veto. In such cases, remaining shareholders may not have the resources or desire to buy out an exiting shareholder. Creditor protection Beneficiaries of a discretionary trust do not own any trust assets unless and until the trustees make an allocation to them. This means that a creditor of the potential beneficiary will not have access to the assets in the discretionary trust to discharge a debt owed to them by the beneficiary. It also means the Official Assignee in Bankruptcy Trustee usually cannot access assets in a discretionary trust in the event of a beneficiary’s bankruptcy. Protecting family members with illness or special needs A discretionary trust is an ideal vehicle to provide for children or other family members who require medical care or have special needs, or who are unable to manage their own affairs. A discretionary trust can provide protection for such persons against other family members who may intend to assume control of the family assets for themselves, following the death of the settlor. Protection against spendthrift beneficiaries Discretionary trusts can provide for long-term protection of family assets where there are concerns as to how particular family members manage their own financial affairs. The income or capital needs of these family members can be provided for through a trust as they arise rather than gifting significant sums or assets to the individual outright, who may squander those assets and be left in a poor financial state in the long term. Introducing new members Although a family company structure can allow for new family members to be admitted as shareholders, it cannot match the flexibility of a discretionary trust arrangement, whereby new family members can automatically form part of a class of beneficiaries as and when they are born. In a family company structure, shares would have to be transferred or allotted to them, which can give rise to immediate capital acquisitions tax (CAT) and capital gains tax (CGT) issues. Privacy In the past, private family trusts in Ireland enjoyed total privacy with no obligation to make any information regarding settlors, beneficiaries or assets public. However, under new regulations which came into effect at the beginning of 2019, trustees must now collate information on the beneficial owners of a trust, i.e. the settlor, trustees, protectors, beneficiaries (or classes of potential beneficiaries) and persons exercising ultimate control over the trust. This information must be kept in a beneficial ownership register, details of which will ultimately become available to the public. However, whereas details of dividends paid to shareholders in a family company may need to be included in publicly filed annual accounts, there is no requirement to publicise details of allocations from trust funds made by trustees to beneficiaries in respect of any dividends they receive. Delegation A key benefit of a discretionary trust is that the decisions as to which of the beneficiaries of the trust, e.g. children of the settlor, should benefit and when, is effectively “outsourced” to the independent professional trustee. This can help to avoid family disputes and allegations of favouritism. Minors Although minors are permitted to own shares in a company, it creates complications and is avoided in practice. Generally, shares allocated to minors are held in trust, at least until they reach the age of 18. As a trustee acts under a fiduciary position, a minor’s own interests are better protected, and not least because a professional trustee typically has professional indemnity insurance to cover claims of negligence and fidelity. Preservation of capital value and avoiding fragmentation of ownership Holding family business assets through a discretionary trust protects the capital value of those assets for current and future generations, rather than passing all the assets to the next generation only. In addition, in a family company structure, ownership becomes fragmented as different branches of the family pass their shares on to future generations. This is avoided in a discretionary trust, where shares remain in the hands of the trustees. Advantages compared to family partnerships The key advantage of a discretionary trust over a family partnership as a vehicle for holding business assets is the protection of family beneficiaries from personal liability for the debts of the business. In a general partnership, all partners have liability for the partnership’s debts. Although limited partnerships are sometimes used to avoid this scenario, these have their own limitations. In particular, in a limited partnership, so-called “limited” partners (who do not have liability for the partnership’s debts) are precluded from participating in the day-to-day management of the business (if they do participate they lose limited liability protection). This may not be appropriate where it is intended that certain members of the next generation will play a key role in the business going forward. Disadvantages of discretionary trusts Loss of control Once personal assets are transferred to a trust, the trustees will control those assets. The trustees will have total discretion as to what allocations of income and capital are made out of the trust fund and to whom. A “letter of wishes” is one way to mitigate this loss of control. This is a private letter issued by the settlor to the trustees which sets out how the settlor wishes the trustees to manage the trust fund and exercise their discretion in favour of beneficiaries. However, this letter is for guidance only and is not legally binding on the trustees. Trustees need to remain free to use their own initiative if changing circumstances of the beneficiaries require it. As a result of the power and freedom given to trustees under a discretionary trust it is also important to think carefully about who should be appointed as trustees. The settlor must have the upmost faith (trust) in the trustees appointed. This is a personal decision, but usually trusted family members or close friends are chosen. In some circumstances it may be appropriate to appoint a professional trustee, who will be regulated and offer expertise in trust administration. In complex discretionary trusts, a combination of a professional trustee and one or two family trustees may be appropriate, especially where tax reporting under CRS and/or FATCA reporting may apply. A settlor can also retain some control by holding the power to appoint and/or remove trustees, although this could have adverse trust or tax consequences. Alternatively and more appropriately, a settlor can appoint a close friend, family member or solicitor as a “protector”, with power to remove a trustee. No equitable or legal interest in trust property for beneficiaries The flexibility that is one of the major advantages of a discretionary trust can also create problems. No potential beneficiary of the trust will receive any income or capital allocation from the trust unless the trustees exercise their discretion in his or her favour. The amount of any allocation is also at the complete discretion of the trustees. A settlor may at some point have promised (following representations to the trustee(s) and/or in expectation that his wishes would be considered) a beneficiary some allocation from the trust, or the beneficiary may simply expect equal allocations to be made to all beneficiaries, but such a decision is ultimately the trustees. This can give rise to resentment, disgruntlement and potential challenges when the trustees make “unequal allocations” of income and/or capital between beneficiaries, even if they may have perfectly valid reasons for doing so. This is not specifically a downside of a discretionary trust though; it is more the result of the settlor promising or implying that things will be done over which he has no control. Tax issues Settlors need to be advised as to the potential tax implications of establishing and maintaining a discretionary trust. While these tax implications are beyond the scope of this article, they need to be carefully considered and managed in order to avoid multiple layers of taxation for the trust. The creation of a trust and the transfer of assets into that trust can give rise to potential liabilities for capital gains tax and stamp duty, and the discretionary trust itself may be subject to discretionary trust tax and / or surcharges on undistributed income at some point. Conclusion Depending on the circumstances, discretionary trusts as a standalone solution may be an ideal vehicle for passing family business assets to the next generation, particularly when combined with an underlying company. Ultimately, a combination of a discretionary trust and and un underlying investment company would provide a perfect solution to passing over wealth to the next and future generations. For additional information, please contact: Billy Brophy Partner, Corporate Clark Hill E: bbrophy@clarkhill.ie T: +353 4 661 3960 Find out more about our Trust Services Contact our team here

What is a Company Secretary? A Company Secretary is one of a company’s named officers on legal documentation. It is the responsibility of the Company Secretary to ensure that the company and its directors (of which the Company Secretary may be one) operate within the remit of their roles, providing guidance to enable compliance with relevant statutory legislation, in particular the requirements of the Companies Act 2014 (the “Act”). Unlike a company director, a Company Secretary can be a natural person or a corporate entity that specialises in providing such services to other businesses. The main legislative provisions regarding Company Secretaries are set out under Part 4 in sections 129 to 167 and under Part 5 in section 226 of the Act. Qualifications Required to Become a Company Secretary There are no formal qualifications needed to become the Company Secretary of a private company. However, the Company Secretary of a public limited company (PLC) must have either: a relevant qualification from the Institute of Chartered Secretaries and Administrators (“ICSA”) or at least 3 years’ experience as a Company Secretary. Eligibility Directors must make sure that the person they appoint as Company Secretary has the skills to carry out their legal and other duties 1 * . The Companies Act does not allow the following to be appointed as Company Secretary: an undischarged bankrupt; any person disqualified from acting as a Secretary by the Courts; a restricted person – any person who fails to satisfy the Courts that they acted honestly and responsibility in relation to an insolvent company. When an individual/corporate entity is appointed as the Secretary of an Irish company, they will sign a statement to the effect that “I/we acknowledge that, as a Secretary, I/we have legal duties and obligations imposed by the Companies Act, other statutes and at common law”. What are Company Secretary’s Duties and Obligations? Company Secretaries’ responsibilities are wide and diverse and in addition to the duties set out below, additional duties can be allocated by the Directors, as they see fit: Disclosure of personal information When appointed, a Company Secretary must give the company: (a) their full name, residential address, nationality and occupation; and(b) details of any shares or loans they have in the company or a related company. Administrative duties: From an administrative perspective a Company Secretary should: maintain the company’s registers arrange the company’s Annual General Meeting (“AGM”) and any Extraordinary General Meetings (“EGMs”); organise Director meetings any sub-committees and ensuring that all documents (as applicable) are circulated in advance; prepare the minutes of general meetings and meetings of the board and its sub-committees. (the minutes describe what was said and agreed at the meeting); maintain the company’s registers, minute book and other relevant documents available for inspection by the board and the public (as applicable); submit all statutory documents (on time) to the Companies Registration Office (“CRO”) and other relevant bodies; publish legal notices in the media; keep custody of the company seal – a device with the company’s name engraved on it for stamping company documents; and provide the directors with legal and administrative support. Legal Duties of the Company Secretary, under the Companies Acts: Together with at least one Director, the Company Secretary must: complete, e-file, sign and send the company’s annual return to the CRO each year; certify that the financial statements attached to the annual return are true copies of the originals; and prepare an accurate statement of the company’s assets and liabilities (what it owns and what it owes) if the company goes into liquidation or receivership. Personal duties of the Company Secretary: A Company Secretary must exercise due care, skill and diligence in the interests of the company and its shareholders, (that can be reasonably expected from a person with their level of knowledge and experience) and act in good faith and in the company’s interest. Company Secretaries can be penalised if a Court finds that they or the company have breached the Companies Act. They can be made liable (responsible) for any loss arising from their own carelessness. What powers does a Company Secretary have? The power of the Company Secretary is limited to a few legal powers and any other powers the directors assign to them. Powers include: entering into contracts relating to the day-to-day running of the company; entering into other contracts that are approved by the directors; and whatever other powers the directors delegate to them. A Company Secretary, as an authorised officer of a Company, can also sign tax registration forms and tax returns on behalf of the company. The taxes Acts hold the Company Secretary as one of the responsible officers in relation to a company’s tax affairs and failure by the company to comply with the requirements under the taxes Acts may lead to additional penalties being imposed on the Company Secretary. If you would like further information in relation to the role and responsibilities of a Company Secretary within a company, please contact our team who will be in a position to advise you further.   Richard Windrum Corporate Compliance Director E: richardwindrum@uhytrust.com Find out more about our Trust Services Contact our team here     1Section 129 of the Act

Is AEOI just an acronym that you’ve seen in the business news or is it something that you’ve spent time considering to understand whether you have a personal responsibility? AEOI or ‘Automatic Exchange of Information’ represents the exchange of information under the US’ Foreign Account Tax Compliance Act (“FATCA”) and the OECD’s Common Reporting Standard (“CRS”) which seek to combat tax evasion. The terms of FATCA and the CRS from one jurisdiction to another are effectively common. Tracing its origins as far back as the European Savings Tax Directive in the early 2000’s, FATCA first appeared on the radar in 2008 and eventually, after wrangling with how compliance with it could actually be achieved by countries around the world; information began to be exchanged under it in 2014. The willingness of countries to exchange information under FATCA, spurred on of course by the punitive measures which might be imposed for non-compliance, gave the OECD the ability to build on the FATCA principles and to introduce the CRS; reporting under which began in 2017. For the avoidance of doubt, FATCA applies to US citizens wherever they are resident. CRS applies to residents of the countries which are signatories. The US is not a signatory to the OECD’s Multilateral Competent Authority Agreement regarding CRS and so parallel reporting regimes have to be operated by those entities which have reporting obligations. Ireland is a signatory to both FATCA and CRS and so compliance with the reporting framework is mandatory if there is an obligation to report. Whether there is an obligation to report has been the subject of much debate amongst those who provide trust services and has led, in our experience, to conclusions being reached that the obligation doesn’t apply or that the decision as to whether it does apply lies elsewhere. Trustees of trusts do, however, have direct responsibilities to understand whether the trust meets the criteria of a financial institution and, if so, who will take responsibility for the reporting. There is also the risk of the need for reporting being overlooked because the arrangement isn’t viewed as a trust. For example, holding shares as nominee, is equally a service where consideration needs to be given to reporting obligations. The term ‘financial institution’ is broad ranging within both FATCA and the CRS. Within the definition, which is the same for both, there is the class of ‘investment entity’ which will place a trust in the category of a ‘financial institution’ if it earns more than a certain percentage of its income from investment sources over a given period of time. The first responsibility, therefore, for a trustee is to understand whether the trust for which they are acting meets the “investment entity test”. If it does, there could be reporting obligations under both regimes (FATCA and CRS) in respect of the parties connected to the trust which encompasses the trustees themselves, the settlor, the protector and certain classes of beneficiaries. The responsibility for this reporting lies with the trust and as a trust is not a separate legal entity it creates an obligation on the trustees to undertake this reporting on behalf of the trust; using the relevant portals that are available from various tax authorities to exchange the correct information in the correct format. Where a professional adviser, such as an accountant or lawyer acts as trustee of a trust (even if this is in a personal capacity but is invoiced through the firm), it is imperative that they understand how the trust has been classified and why, what impact the classification has on the need to report and what documentation there is in place to support the classification and any reporting that might be required. This documentation extends to internal documentation to evidence the reasons for the classification, the receipt of self-certifications from the parties to the trust to evidence residence and citizenship as well as potentially the completion of documents for banks or investment houses which could also (usually) have reporting obligations in respect of the trust. It is important for trustees to also be aware that due to the time period used for classification purposes, the classification has to be revisited on an annual basis so that any change in classification can be reflected into reporting and internal documentation. In addition, any change of residence for the parties to the trust needs to be treated as a ‘trigger event’ in order that any impact on reporting can be taken into account. With this myriad of responsibilities and the criminal and financial penalties for non-compliance, we often see trustees wanting to ensure that any reporting [their] obligations are looked after by a regulated trust service provider. The ability to do this is provided for in both FATCA and CRS although the trust service provider itself needs to meet certain criteria in order to be able to accept responsibility for classification and reporting. What is clear is that AEOI shouldn’t just be an acronym for anyone who is acting as the trustee of a trust. To treat it as such would be foolish. Instead, each trustee should know and understand their responsibilities and how those are being met including whether the services of a regulated trust service provider would assist in meeting those responsibilities. Documenting compliance is vital in ensuring that evidence can be produced in the event of enquiries from local and overseas tax authorities which have escalated as a result of AEOI and which have doubtlessly been helped along by data leaks such as Panama and Paradise Papers. This combination of data in the public domain and data which may be exchanged on the activities of a trust, for example by a bank at which the trust has an account, puts the spotlight firmly on trustees to ensure that they are wholly compliant with the various requirements. DQ provides advice and support in relation to FATCA and CRS compliance including training, the provision of classification templates and the provision of procedures should these be required. Sinead O’Connor Head of Regulatory & Compliance Services DQ Advocates April 2019 E: sinead@dq.im   Find out more about our Trust Services Contact our team here

This is the sixth article in a series of eight about leaving family wealth to the next generation(s). The other Articles are entitled: Why you should make a Will? Why create a trust? Types of trust and who’s involved One trust or two? Trusts and passing on the family business Trusts and Forced Heirship Protectors, the ups and downs Powers of Attorney and Family Wealth On occasion I am faced with the prospect of a client getting older and the issues for the client and other members of the client’s family if a parent becomes incapable of looking after their financial affairs and invariably themselves. Whilst this is not the only reason why someone may wish to consider granting a power of attorney (“POA”) it is perhaps the most common, especially where the client may become incapacitated or suffer from dementia. However, whilst a POA is very useful they do have their limitations. A POA is a deed executed by a person (the “Grantor” – donor or principal) which empowers another person(s) (the “Attorney” – donee or agent) (often an adult child or a professional person) to act on their behalf. The POA can be general, whereby the Grantor authorises the Attorney to do anything which the Grantor could lawfully do, or alternatively limited such that the Attorney may have authority to only deal with a particular matter or transaction. The power(s) conferred by the POA may be limited in time or on the happening of an event. A POA is only valid as long as the Grantor is alive and compos mentis, i.e. of sound mind. If the POA is to last post the Grantor becoming mentally incapacitated, i.e. of unsound mind, then a Grantor is advised to grant what is called an Enduring Power of Attorney (“EPA”) and when the Donor becomes mentally impaired the Attorney(s) needs to apply for and have the EPA registered with the Court. A POA is typically granted: Where someone is going away on holiday or for work and they are completing on the sale or purchase of a property; By an elderly person about to become resident in a care home and they want someone to look after their home and pay any utility bills, sell it or deal with their investments and other finances; and In commercial banking transactions such as allowing a bank as lender/mortgagee to sell a property if the mortgagor/borrower defaults. Usually a Grantor of a POA will appoint one person to act as their Attorney. Where more than one person is appointed as Attorney the POA will state that they will either have: a joint power whereby all the attorneys must act together, no single attorney can bind another and if one attorney dies the POA comes to an end; or a joint and several power is given in which case any of the attorneys can act independently of each other, one attorney can bind another and if one attorney dies the POA remains in force. I personally prefer a POA to be a joint power as there tends to be less family arguments over controlling a parent’s assets and more importantly gives more comfort to anyone agreeing to be an Attorney, the client’s family and third parties alike. An Attorney is usually appointed from one of the following: relatives friends solicitors accountants A Grantor needs to give careful consideration as who is to be nominated to act as an Attorney, but whoever is to be appointed, the Attorney(s) should be a person(s) (individual or entity) the Grantor can trust. Some of the points a Grantor should bear in mind when choosing who is to be the Attorney are: There may be situations when not to appoint someone as your Attorney could cause offence, such as where the Grantor has several children living nearby and not appointing all of them as Attorneys could cause issues, even if one of the children may be untrustworthy. There is always the risk that relatives or friends may abuse the power vested in them by the POA to benefit themselves rather than the Grantor and although they can be held to account for any misuse of money or property, such right is of little use or benefit if the Grantor has little to no assets. The Grantor and the Attorney are often related and they will frequently not expect to be paid for the work they do. However, if there is no suitable friend or relative, a solicitor, accountant or other professional person may be appointed and they will expect to be paid for the work they do. Professionals or licensed entities which are appointed as Attorney usually have professional indemnity insurance from which the Grantor or the estate of the Grantor can seek redress for any act of negligence or theft. This is not the case for a relative or friend who is not acting in a professional capacity. Professional or licensed entities who act as Attorney are more accustomed and used to dealing with statutory and regulatory requirements than the lay person. Unfortunately as the law becomes ever more complex, having Attorneys who are not “in the professional world” invariably means that recourse to a professional(s) is inevitable and with it the associated cost. There are some practical issues about POA that should also be borne in mind: Financial Institutions, e.g. banks, will generally need to have an original copy of a POA for their own records or have sight of an original copy of a POA to make their own copy to comply with their internal policies. The requirements are not industry standard and so what is acceptable to one institution may not be to another. If the POA is to be used to manage assets outside Ireland you may need to get a certified translation of the POA from “an approved source” and this can be expensive and time consuming. An English and foreign language translation side by side is usually the best format and the services of an individual or firm with an individual(s) who is perhaps a member of the Irish Translators and Interpreters Association is a good place to start. Such POAs also tend to have to be signed before a Notary public. Some institutions will not accept a POA that is over 6 months old. Some institutions require a POA to be on their own forms or have specific provisions within their wording. At many institutions the “counter staff” will not be able to act on a POA once they receive it as it will need to be approved by internal legal departments and there may be a cost associated with having the POA processed and approved. So before a Grantor has a POA drafted it is worth considering: Finding out from any key financial institution(s) is there anything specifically that needs to be inserted in the POA or requirements that need to be met for the POA to be accepted, e.g. identity and proof of address of the named Attorney(s). How many Attorneys need to be appointed? Some institutions like to see at least two Attorneys to reduce the risk of an Attorney acting contrary to the provisions within the POA. Make sure the POA is drafted by someone who is suitably qualified and that it covers what needs to be covered. Also ensure that an original copy of the POA is kept with your solicitor in case you need to obtain certified copies to send to a variety of parties. A POA has a useful role to play in managing an individual’s wealth but it should not be considered to be a standalone and “one size fits all” solution. Having been involved with POAs on occasion and indeed serving as one of a large estate at present, consideration should be given to the use of trusts to deal with the more valuable aspects of an estate and using a POA to address the more, dare I say, mundane items such as bill payments and operating a personal bank account. If you would like to know more about the points raised in this Article then please contact me or one of my colleagues at: Nigel Rotheroe T: +353 42 933 9955E: nrotheroe@uhytrust.com   Read The Next Article in the Series: Trusts and Forced Heirship Read The Previous Article in the Series: Trusts and Passing on the Family Business

This is the eighth and final article in a series about leaving family wealth to the next generation(s). The other Articles are entitled: Why you should make a Will Why create a trust? Types of trusts and who’s involved One trust or two? Trusts and passing on the family business Powers of Attorney and Family Wealth Trusts and Forced Heirship Protectors, the Ups and Downs When a trust is first established the first trustee(s) (known as the “original trustee(s)”) is usually someone that is known to and in whom the settlor “trusts”, i.e. is able to rely upon and has the integrity, strength, ability and surety, to look after the funds vested into the trust for the benefit of the trust’s beneficiaries. As time progresses the relationship between a settlor and “his or her” trustee(s) and similarly with a beneficiary(s) and a trustee(s) usually deepens, but on occasion (usually following the appointment of an alternate trustee(s)) it becomes fraught and at such times having a protector(s) of the family trust, with suitable expertise and powers, can be extremely useful. Personally I am a supporter of having a protector and where I have been involved in administering a trust which does not provide for the appointment of a protector, one of the first steps I take as trustee is to vary a trust deed to allow for the appointment of a protector(s) should one ever be required. Of the trusts I am currently involved with less than half have a protector appointed even though the provisions to have one are there. So what is a protector? A protector, who may be an individual or a company, is a person who has some control or influence over the trustee(s) and/or the trust. The powers and responsibilities of a protector are set out in the trust deed and it is usual, if the protector has no other power, for a protector to be able to remove a trustee as well as to appoint additional or replacement trustees.The trust deed may also provide that the protector has some degree of control over whom the trustee may use as investment adviser to the trust, or who may become a beneficiary of a trust from the family of a settlor after a given event, e.g. such as on the death of the settlor or any principal beneficiary. A protector will usually seek to ensure that: The trustee: administers the trust in accordance with the provisions of the trust deed; makes a suitable account to the beneficiaries of the trust’s income and expenditure and investments; and has due regard to the contents of any Letter or Memorandum of Wishes executed by the Settlor(s) of the trust. He/she acts as an independent intermediary between the trustee and any of the beneficiaries to resolve any misunderstanding and disputes. If the actions of a trustee are found wanting, then a protector may well seek to appoint an additional or replacement trustee; He/she maintains his independence to avoid any conflict of interest issues; and He/she does not breach any fiduciary duties as set out in the trust deed or otherwise. Who is typically appointed a protector? A protector, as with a trustee, is usually someone the settlor(s) trusts and where the settlor(s) and/or his spouse are not the protectors during their lifetime, protectors tend to be: A family friend; A relative; An accountant; or A solicitor, although at times a company (more commonly now a licensed trust and corporate service provider) may act as a protector. If a trust deed provides for more than one protector to be appointed, which is not unusual, the trust deed will usually provide that the protectors must act in unison, i.e. together, which is the case where there is more than one trustee. I have been involved with trusts for most of my professional career and having worked with lay and professional people who have fulfilled a protector role, I must admit that I prefer a professional to act as a protector of a trust and this is because, inter alia: They tend to have already some knowledge of the role of a protector and indeed may have acted in the capacity previously; They are better in understanding the complex issues which may arise between a trustee(s) and a beneficiary(s); I believe they are better placed to represent and safeguard the interests of a beneficiary; and They are generally more capable when it comes to holding an errant trustee to account. What are the typical powers given to a protector? The powers provided to a protector in a trust deed are fiduciary in nature and vary. They may be: Negative such as where the protector’s consent is required before a trustee can carry out certain transactions, e.g. making investments; or Positive overriding powers enabling the protector to direct the trustee(s) in certain matters or to appoint or remove trustees. Some examples of the powers expressly given to a protector are powers to: Monitor and agree the trustee’s fees; Require an accounting or audit of the trust or any underlying company and to nominate any auditor; Be consulted or have the power to veto any decision of the trustees to make any discretionary payments to beneficiaries; Withhold the consent to a trustee(s) proposed exercise of a power to amend the administrative or other managerial terms of the trust; Be consulted or have the power to veto sales of particular shareholdings or other trust property; Add or remove someone from benefiting from the trust; Amend any clause in the trust deed; and Transfer the administration of the trust to another jurisdiction. As a protector merely has powers vested in him/her and not trust property he/she or it is not a trustee. Whilst a protector may not be a trustee, the more powers vested in a protector, the more a protector becomes akin to a trustee. Sometimes a protector may be regarded as a Trustee De Son Tort [of his own wrong] which is where a person is not a regularly appointed trustee but because of interference with the trust can be held by a court as a constructive trustee which results in the protector being personally liable for losses to the trust. Remuneration of a protector As with a trustee, a professional person who acts as a protector, tends to be paid for any services they perform and in addition they are usually able to seek legal opinion on matters affecting the trust or their relationship with the trust providing their actions are not as a result of, for instance, any intentional wrong doing. Are protectors ever held to account? A protector acting in breach of his/her fiduciary duties is usually held accountable by way of an application to the Court by a beneficiary(s) and/or the trustee(s); such action being usually brought on account of a breach of fiduciary duties and/or conflict of interest. Nigel Rotheroe If you would like to know more about the points raised in this Article then please contact me or one of my colleagues: T: +353 42 933 9955E: nrotheroe@uhytrust.com

This is the seventh article in a series of eight about leaving family wealth to the next generation(s). The other Articles are entitled: Why you should make a Will? Why create a trust? Types of trust and who’s involved One trust or two? Trusts and passing on the family business Powers of Attorney and Family Wealth Protectors, the ups and downs Trusts and Forced Heirship Most people have never really heard of the term “forced heirship” although they do tend to know that the law as to who and what you can leave to others does differ throughout the world. One tends to come across it first of all when you buy property overseas and a local lawyer seeks to advise you of the need to perhaps have a local Will on account of how your estate will be distributed on your demise. This in fact happened to me in 2009 when I bought a home in France and having regard to my wife and I having been married previously and having children, we were advised to acquire the property in a French property company known as a Société Civile Immobilière (SCI) so that we could leave our respective interests in the SCI how we wished. Thankfully the law as regards succession changed in the EU on 17 August 2015 when the EU Succession Regulation (EU/650/2012), known as Brussels IV, came into effect and which now allows an individual to choose which rule of law will apply to the distribution of their estate on death. So what is forced heirship? In many jurisdictions throughout the world the person making a Will, a testator, has complete freedom to decide, without any legislative restriction, how their estate should be distributed on their death. Unfortunately this is not universal and many countries have incorporated provisions into their succession laws which require an individual’s estate to be distributed in “shares” (portions usually expressed as a percentage and/or fraction) in accordance with the law with regard to status and connection with the deceased. Such individuals, known as “protected heirs”, typically include any surviving spouse, children and other relations of the deceased. Forced heirship provisions typically only apply to a portion of the deceased’s estate, with the balance being distributed at the discretion of the testator. However, under Sharia [Islamic] law things can get complicated for instance a man or a woman, married or not, can only distribute a third of their estate to whoever they wish, with the remaining two thirds being distributed in accordance with the law (with the person receiving any proportion of the third of the estate not benefitting from the remaining two thirds) and a daughter for instance may only be only entitled to receive half of what a son may receive. Sharia law aside, one generally finds that Moveable Property (sometimes called “Personal Property”) devolves [is distributed] in accordance with the laws of the jurisdiction where the testator is resident, whereas “Immoveable Property” (sometimes called “Real Property”) is devolved in accordance with the laws of the country in which it is situated. What is the rationale for Forced Heirship? The argument for Forced Heirship is that a deceased should make adequate provision for his/her family and dependants; the counterargument being that neither the state nor religion should impose restrictions on the distribution of a person’s estate in death that it could not impose in life. Which jurisdictions have Forced Heirship? Whilst Forced Heirship is generally a feature of most civil law jurisdictions it also applies to some Common Law ones and Ireland is no exception. Under Irish Law a spouse has certain rights to inherit and section 111 of the Succession Act 1965, as amended, provides that where there is a Will a: Surviving spouse with no children has a legal right share to have 1/2 of a deceased spouse’s estate; and Surviving spouse and children have a legal right share to 1/3 of a deceased spouse’s estate. The estate to which the surviving spouse is entitled to a share in is the ‘net estate’ being “all the estate…not ceasing on his/her death’ after the settlement of any testamentary expenses, debts and liabilities. So this excludes for instance trust property, joint property passing by survivorship and property in which the deceased had a limited interest. Mitigation of Forced Heirship As one would expect most people have no issue with leaving funds to their spouse and children but statutory provisions and/or religious ones can be restrictive in terms of who and what may be given to whom. So what can you do in practice to alleviate some of the issues? One immediate thought, although not necessarily practical especially where all your family live in the same country, e.g. Ireland, is to move to a jurisdiction where forced heirship does not apply and preferably one where specific legislation has been passed to prevent its application. You can of course give away assets during your lifetime, although some jurisdictions do have legislation to prevent lifetime dispositions defeating a claim by a “protected heir” within a given period prior to death. Consider establishing a family trust which benefits those you want to benefit and set out your wishes to the trustee(s) as to your intention behind the creation of the trust and what you would like the trustee(s) to consider when exercising their discretion. If you have a family business think about how you and members of your family hold shares and/or other interests. Above all seek legal advice as to how forced heirship is going to apply to your estate, where ever it may be and take appropriate steps to limit its application through your Will, life time gifts or otherwise. Nigel Rotheroe If you would like to know more about the points raised in this Article then please contact me or one of my colleagues at: T: +353 42 933 9955E: nrotheroe@uhytrust.com   Read The Next Article in the Series: Protectors, the Ups and Downs Read The Previous Article in the Series: Powers of Attorney and Family Wealth