Succession planning in the Middle East

12 March 2021

While Middle Eastern nations hold traditions close to heart, there are increasingly new considerations influencing how (U)HNW families and their advisers are structuring wealth and estates.

Abigail Tipton, Senior Relationship Manager, Geneva, works extensively with clients in the Middle East. Here, she gives her insights into the factors affecting how Middle Eastern families and their advisors are approaching estate planning.

New leadership

Family dynamics are also changing, which is affecting how HNWI and families are approaching succession. It used to be relatively standard that the eldest son or closest male relative would inherit and take control of a family business or the family’s wealth. This isn’t necessarily the case anymore. Multiple family members might be considered for leadership roles, depending on their capabilities, education, skills and interest in the business. In many cases, younger generations will also need to show they have the aptitude to handle managing, protecting and generating wealth.

Global families

A family’s global ties also have to be considered. Long gone are the days when families created wealth solely within the Gulf, and beneficiaries only lived in the region. Today’s Middle Eastern families are globally mobile. They may move away from their home country to receive further education abroad. Others may seek new business opportunities in other countries and live and work there. Living in different countries is also increasingly common. Advisors and service providers like ZEDRA consider all these elements when setting up structures to ensure they are efficient, especially when our client’s global footprint is likely to be larger than ever before.

Considering Sharia law

Sharia law and its inheritance principles must also be considered for families from the Middle Eastern region. Some families and individuals would like our support to structure their estate completely in line with Sharia inheritance principals. Others will look to work partially in line with Sharia principals but taking a slightly less strict approach. Others will require our support with structures that sit outside Sharia law’s scope. As always, we work with our clients and their advisors to set up and manage the structures that best meet their needs.

Increasingly, women in the Middle East also have successful careers, changing the estate planning landscape as they make their own plans for their wealth. Equally, younger or less senior members of a wealthy family might be given a fixed sum or some kind of financial provision, which is increasingly actively deployed, for example, to set up a business or in dynamic and global investments. This can often mean that younger family members can generate significant wealth of their own, away from a legacy business.

Thinking forward

Over the past few years, Middle Eastern clients have set up estate planning structures. Governance has been a critical consideration, and most HNW families want to set up structures in jurisdictions with an excellent reputation and compliance framework. The Channel Islands, Cayman and Singapore remain popular in this respect.

But just as in other countries, sustainable investing, governance, social considerations, philanthropy, and charity are also key considerations that shape how families invest, the opportunities they pursue, and the way they structure their estates.

Practically, we might see that clients have a particular cause that they want to support – perhaps something close to their heart or a movement they have close links to. Younger clients also want to protect the environment and invest sustainably. Reputation, compliance and appropriate governance are also increasingly important, and we expect that these are trends that are here to stay.

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