What is a high value transaction?
A high value transaction is a high value purchase. This can be an expensive piece of prime real estate, possibly, a palace or chalet, a yacht, a private jet or an expensive valuable jewellery or one of a kind item, such as expensive and sought after art or sizeable gems. The purchaser is expected to spend well above several million.
The transaction becomes international when the buyer, the seller, the expensive item of interest and the funds dedicated to make the purchase are situated in more than one jurisdiction.
Here are some of the pointers that will help you to keep some important things in mind when planning an international high value transaction. This is when the decision is made that the purchase to be made is indeed desirable, the items are genuine and real and realistically command the value of the purchase.
5 steps to take before buying a high value purchase
1. Understand the specific requirements of the jurisdictions concerned
It is important to assess the legal rules in different jurisdictions that may apply for the specific purchase. There may be specific rules about the required title and the process of the purchase. There may be further restrictions as to the physical items sold can be moved and the specific procedures that may apply for moving goods after the purchase is made. Some very specific tax rules and considerations may apply for the purchase. Therefore, it is better to be well prepared.
2. Decide on the purpose of the asset to form a family heirloom and be in the family long-term
Certain valuable assets will not be purchased in the family name of a single individual as the intention of the assets is to form a family heirloom. Make it easy to pass from one generation within the family to another. Therefore, family trust and corporate structures may be considered to be useful vehicles for the high value purchase.
Important tax considerations will have to be made. Not only on how the current law stands now, but how it may change in the foreseeable future.
3. Consider of offshore structures, trust and corporate vehicles
The jurisdictions of these succession planning vehicles are important. A suitable family wealth structure needs to hold to the manor in the middle of Mayfair or an exquisite impressive yacht taking a break in the Mediterranian or the Caribbean.
A different mixture of planning techniques will need to be applied in relation to each of these assets. The assets themselves will dictate the suitable jurisdictions and the combination of family wealth planning vehicles.
4. Determine any third party lending involved in the purchase of the high value assets
Especially, in London property purchases may be generously financed through third party lending, such as, private banks.
To many the sweet spot of 75% of loan to value, can still be achievable. You need to be reminded, though, that the property market might have plummeted from the serious hype over the last couple of years. Nonetheless, the property market is expected to bounce soon again.
If a third party lending is considered, then one must need to be made aware that it is easy to lose confidentiality this way. There will be a number of different legal teams that will try to address the matter of the legal title, the loan and the funding.
Although the matter may be perceived as highly confidential, the involvement of numerous parties will diminish the confidentiality issues greatly.
I much prefer when high value transactions take place in a more discreet manner than described here.
5. Plan international currency transfers arranged by private banks
The transactions take place in different shapes and sizes. International transactions are more likely to involve international currencies.
In addition to significant compliance requirements that will have to be met when organising a high value transaction, the choice of the wrong currency, may stall or abort the transaction altogether.
Supervision pressure placed on the banks and their client transactions are increasingly intensifying. This may indicate more compliance costs necessarily incurred in order to protect the parties concerned.
However, the most obvious element may become apparent that the IT systems designed and operating in most private banks have only one goal in mind. This is to keep and preserve high value funds instead of facilitating high value international transactions on a daily basis.
In fact, facilitating high value transactions through private banking arrangements is by far the most expensive and inefficient way to organise your high value transactions.
Getting bespoke financial support with high value transactions
To assist our own clients we came up with our own bespoke solution to help facilitate high value transactions for some of our clients.
If you are planning your next high values transaction, please reach out and schedule a phone call with me.
Saule Voluckyte, M.A.E.S, LL.B, FAIA
I have been working exclusively with UHNWI in Mayfair, London since January 2008. I built specialist knowledge and expertise required to serve ultra high net worth individuals investing, operating and relocating to the UK or Switzerland.
Within the industry, I am the single adviser who is able to traverse the different areas of expertise and bring a comprehensive approach across: global structuring, UK immigration, international taxation and FOREX to develop their global wealth strategy, while they build, grow and expand their wealth worldwide.
Previous experience as one of the senior advisors for the government, made me a go-to person when delicate and uncomfortable scenarios involving heads of state need to be handled with care and preserve privacy.