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
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)
- my blog about Islamic Finance: http://blog.wealthplanning.tv/?p=429
- my blog about the ‘Keystone Structure’ use the search on the blog to find: http://blog.wealthplanning.tv/?p=102
ESG portfolio principles
Introduction to private investment funds
– Ownership and situs of assets
– UK resident non-doms and the remittance basis
– Income Tax
– Corporation Tax
– Inheritance Tax
– Trusts (UK resident and non-resident private trusts and charitable trusts)
Creation of an ELF
Constitution and registration
Fund management duties (including fiduciary duties)
Selection evaluation and monitoring of investments
Risk assessment & due diligence
Regulatory compliance (including MLC compliance)
Transaction management and record keeping
Execution rules and protocols
Legal and Data Protection compliance
An offshore Elf