Trust Estate
A Tangled Investment Web Causes Inheritance Migraines
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Investors look more widely to find yield in a low-rate environment, and that means their assets can be increasingly complex, illiquid and cross-border in nature. When it comes to estate planning and transfers, the rising complexity creates headaches.
One consequence of the pandemic has been a rapid shift to
handling tasks online rather than using paper-based systems. As
investments and the structures in which they sit become more
complicated, when problems arise, it can lead to lawsuits.
Greater use of international investments, and online channels can
add to the headaches.
In this article, Steven Barrett, barrister at Radcliffe
Chambers, talks about how increased complexity in investments
could threaten inheritance. This is a case of where investment
and estate planning considerations cross over.
The editors are pleased to share these views; as ever, the usual
disclaimers apply about external contributors’ views. To jump
into the conversation, email tom.burroughes@wealthbriefing.com
and jackie.bennion@clearviewpublishing.com
The legacy of the financial crisis has remained with us. Interest
rates across the globe are low and have remained persistently
low. This has created particular pressure for high net worth
individuals who need to look more widely when considering
investments.
For practitioners it has meant an increasing diversity of the
types of investment which are cropping up in litigation involving
individuals – from wind power production units to bitumen
deposits. But this has also raised very serious concerns for
their families after they have died.
The market pressure of low rates, has increasingly pushed
investments in two particular ways:
-- Investors seem increasingly more willing to go online;
and,
-- Investors seem increasingly willing to consider
international investments
These have caused difficulties in litigation already. They pose a
further problem now for those set to inherit.
The research published in September 2020 by Direct Line found
that some 88 out of 100 probate lawyers believe it is harder to
track down online bank accounts following the death of an
individual due to the lack of a physical bank card or bank
statements. Twenty five in 100 probate lawyers say they have
experienced problems themselves.
In pre-internet times, the jurisdiction which became synonymous
with secrecy was the eponymous Swiss bank account. I was
fortunate enough once to deal with a case where the account
information was inscribed on the inside of a gold ring.
Online banking and online investment platforms have simply
amplified this problem. It is not necessary now to have a regime
being actively opaque – failure by a loved one to ever mention
the specific name or existence of an account is now causing real
problems.
Direct Line also found in a separate survey that two-fifths of
the 2,007 people questioned did not know where a loved one held
details of banking and financial information.
Both the online world and increasing interest in global
investments have the same practical impact – necessary
information cannot be found. Both have similar additional
burdens. Independent sovereign jurisdictions each set and require
their own forms and levels of identification. Online investments
whether stored in a bank or inside the platform are each equally
free to and do require their own levels of security.
The rise of bitcoin and other products further amplifies the
issue. Bitcoin can be hard stored on any data storage device.
Hard drive capacity is now found in many devices such as a
telephone and even a fridge.
This is an issue which is seemingly easily solved – simply tell a
loved one, tell the beneficiary or tell your executor. The
reality is, as all practitioners know, far less simple.
The government has moved with remarkable alacrity in the area
modernising the remote witnessing of wills. Remotely witnessed
wills had, in theory, a similar weakness in the question of who
would store the video record of the signature – given that there
are still, regular challenges via litigation to witnessed
documents. It seems that the government is alive to these and
solving them by way of amending the portal process. That process
will be the gatekeeper to every will signed and witnessed in this
way.
The same seems sadly impractical for financial investments.
Unless a body like the Financial
Conduct Authority, the UK regulator, creates a final
repository – a 21st Century Land Registry of online assets, these
problems will sadly persist.