Ethical Legacy Funds

This page is an incomplete work in progress about an idea I am researching and developing involving the creation and tax-efficient structuring of a private investment portfolio. I have named the investment model an ‘Elf’ which stands for ‘Ethical Legacy Fund’. If the idea is practical, I will write a legal manual, along with other legal, tax, regulatory and fund management professionals, about the model and tax-efficient structuring (including IHT planning). This project is barely on the drawing board and is likely to take at least two years to develop. 

Proposed Legal & Tax Manual Title:  ‘How to create an Ethical Legacy Fund’

Introduction to ethical investing

Introduction

Conceptually, an Elf is an FSA regulated and professionally managed family wealth fund set up during a person’s lifetime along with other investors (who  for example may be: family members; friends; business partners; co-workers, or members of an investment club), which enables them to:

  • purchase ESG Investments;
  • receive dividends during their lifetime;
  • exit by selling/gifting their share of the fund; and
  • make gifts of shares in the fund to a trust for the benefit of e.g. their children/grandchildren.

Following a founder’s death, his children as shareholders can use the fund as a clearing house for converting unwanted estate assets into cash to be re-invested in the fund.

Alternatively a founder can gift legacies of cash and assets to the fund, e.g. art and crypto assets.

Assets can be gifted or donated to the fund to either sell and invest the proceeds in the fund (i.e. by leaving a legacy in a will), or to apply for charitable purposes.

The structure will therefore include a charitable trust or a non-resident purpose trust.

I will also examine the special tax rules that apply to EBT’s.

The design will take account of the availability of the remittance basis of taxation for UK-resident non-doms (see my book Tax-Efficient Wills Simplified (2016), which is available from Amazon: https://www.amazon.co.uk/Tax-Efficient-Wills-Simplified-Carl-Islam-ebook/dp/B00R4RL1AA as a Kindle Book.

Ethical investment funds already exist, see: ESG and Islamic Finance collaboration could be major revenue boost for sustainable investment: report (responsible-investor.com)

See also:

  • my blog about the ‘Keystone Structure’ use the search on the blog to find:  http://blog.wealthplanning.tv/?p=102

Objectives

Size

Investors

ESG portfolio principles

Asset classes

– Crypto-assets

– RFT’s

see: https://www.bbc.co.uk/news/technology-56371912

– Equities

Instruments

Funds

Key concepts

Definitions

Introduction to private investment funds

Purpose

Form

Business

Law

Regulation 

Taxation

– Ownership and situs of assets

– UK resident non-doms and the remittance basis

– Income Tax

– CGT

– Corporation Tax

– Inheritance Tax

Vehicles

–  Trusts (UK resident and non-resident private trusts and charitable trusts)

–  Companies

– LLP’s

– Foundations

Creation of an ELF

Business Plan

Partners/Investors

Vehicle 

Constitution and registration

Asset pool

Governance structure

Fund management

Management structure

Administrative powers

Fund management duties (including fiduciary duties)

Investment policy

Liquidity management

Selection evaluation and monitoring of investments

Risk assessment & due diligence

Regulatory compliance (including MLC compliance)

Transaction management and record keeping

Execution rules and protocols

Auditing

Legal and Data Protection compliance

An offshore Elf

Guernsey