Heading into 2025, African families face a complex financial landscape, ripe with both challenges and opportunities as they strive to protect and grow their wealth. While Africa is projected to be the world's second-fastest-growing economic region, realising this potential requires a nuanced approach. A well-crafted wealth management strategy is crucial, mitigating regional risks while capitalizing on the continent's dynamic economic growth.
This edition explores how these global shifts are reshaping wealth management, covering topics from life insurance strategies for affluent families to the UAE’s emergence as a wealth structuring hub, and the latest updates on UK inheritance tax reforms. We invite you to delve into these insightful articles to confidently navigate the evolving financial landscape.
LIFE INSURANCE: AN ESSENTIAL TOOL FOR YOUR WEALTH PLANNING
The primary function of insurance is to mitigate the financial repercussions of an insured event, such as theft, fire, or accidental damage. In the context of life insurance, this translates to providing financial security for dependents.
Life insurance plays a crucial role in estate and succession planning, ensuring that children have the necessary funds to cover probate costs, inheritance tax (if applicable), and other obligations incurred by the deceased. This enables the seamless transfer of assets to beneficiaries without the need to liquidate property or compromise family businesses.
Most importantly, life insurance provides peace of mind. Knowing that your family is financially protected allows you to focus on living your life and pursuing your endeavours without the constant worry of unforeseen circumstances.
In essence, life insurance serves as a critical safety net for long-term financial protection and security, making it a vital aspect of sound wealth planning.
The most common types of life insurance policies are:
- Term life insurance: This policy provides coverage for a set term (e.g. 10, 20 or 30 years) and is usually chosen by those who want to cover the period while their dependents are still financially dependent on them.
- Whole life insurance: Unlike term insurance, this policy covers the insured for their entire life and can be useful for estate planning or covering lifetime financial liabilities.
- Critical illness insurance: Although not life insurance per se, it can be added to life insurance policies and provides a pay out in the event of a serious illness, making it a popular addition among entrepreneurs.
Wealthy and affluent families, especially those with multi-generational wealth or family businesses, significantly benefit from incorporating life insurance into their estate and succession planning. These policies can provide liquidity to cover potential inheritance or wealth taxes, particularly in countries where these taxes are significant, such as the UK, where 40% inheritance tax is currently levied on assets above £325,000. In addition, life insurance policies can facilitate intergenerational wealth transfer while maintaining privacy and circumventing lengthy probate procedures.
Even in countries without inheritance taxes, life insurance can effectively ensure the smooth transfer of assets to beneficiaries, preserving and potentially enhancing the deceased's financial legacy.
For business families in particular, life insurance is indispensable for successful Business Succession Planning, providing a smooth transfer of shares or business operations to heirs. In African countries, particularly Nigeria, where family businesses amount to approximately 70-80% of the total number of businesses, life insurance can help deal with the financial challenges that arise when a key person dies.
However, life insurance can also provide significant benefits during the insured's lifetime under certain circumstances.
In addition to the critical illness coverage mentioned above that pays out upon diagnosis of a covered health condition or policies covering permanent or temporary disability, some life insurance policies with investment‑linked features, can serve as an effective w
ay to build wealth in addition to providing death benefits. Wealthy individuals can use life insurance as an alternative to traditional investment portfolios, taking advantage of the policy’s accumulation of cash value over time, which can be accessed during the insured’s lifetime through loans or withdrawals.
Furthermore, if structured properly, these insurance policies can effectively become self-funding, as the returns on the funds linked to the insurance often exceed traditional benchmarks. After several years, the accumulated value of the policy, plus the death coverage inherent in the insurance, far exceeds that of a traditional portfolio, increasing the financial legacy left to the family.
W8 Advisory specialises in assisting high- net- worth families with their estate and succession planning. Where appropriate, we assist in helping you to determine what is the most suitable life insurance policy, alongside establishing trusts or private foundations, creating a fully integrated wealth planning strategy to safeguard your family's financial future and preserve your legacy for generations.
UNITED ARAB EMIRATES: A PRIME JURISDICTION FOR WEALTH STRUCTURING
The United Arab Emirates – UAE – has emerged as a leading jurisdiction for wealth structuring, particularly for high net worth individuals (HNWIs) and families, driven by a confluence of strategic, legal and financial advantages implemented primarily by Dubai and Abu Dhabi.
Here are some of the top reasons to consider Dubai or Abu Dhabi as a destination for structuring your wealth and family business:
Strategic location: Dubai and Abu Dhabi are ideally located between Europe, Asia and Africa, making it a hub for international business, trade and investment, and a great place to centralise wealth management and estate planning in a geographically favourable location.
Tax-Efficient Environment: Both Dubai and Abu Dhabi offer an environment free from personal income tax, capital gains tax or inheritance tax, making it highly attractive to individuals seeking to preserve and grow their wealth.
Favourable Corporate Tax Rates: UAE provides competitive corporate tax rates, particularly within free zones where certain companies can operate with zero tax liabilities.
Estate & Succession Planning: The UAE has no inheritance tax or estate tax and has also introduced legal reforms allowing individuals to structure their wealth through mechanisms such as trusts, foundations and wills. The Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) offers a common law structure, which provides greater security and flexibility for structuring assets.
Access to Sharia Law Alternatives: For those wishing to align their wealth structuring with Islamic law, UAE offers Sharia-compliant structures that can be tailored to suit the needs of Islamic HNWIs.
World-class infrastructure: Dubai and Abu Dhabi both boast state-of-the-art infrastructure, including advanced air transport, communications and logistics networks.
Thriving Real Estate Market: A diverse range of investment opportunities for HNWIs looking to diversify their portfolios can be found in Dubai and Abu Dhabi’s dynamic real estate market.
Access to alternative Investments: The vibrant financial sector, whether in Dubai or Abu Dhabi, provides access to alternative investments, private equity and venture capital opportunities, along with a growing fintech ecosystem.
Lifestyle and quality of life: Dubai and Abu Dhabi offer a luxurious lifestyle with high-end shopping, fine dining, luxury hotels and entertainment. It also boasts high security standards, a cosmopolitan society and excellent healthcare and education facilities.
Residency and citizenship options: The UAE offer various residency options, including long-term visas for investors, entrepreneurs and individuals with significant wealth. This has been further enhanced with the introduction of the “Golden Visa” program, offering long-term residency in any of the seven emirates that make up the UAE.
Free Zones: UAE hosts numerous free zones that offer significant advantages, such as 100% foreign ownership, tax exemptions and minimal regulatory hurdles, making it ideal for structuring wealth or starting a family business with maximum flexibility.
Ease of doing business: The UAE consistently ranks highly for ease of doing business, with efficient processes for business setup, licensing and immigration procedures, making it an attractive choice for those looking to streamline their financial affairs.
Political stability: Dubai and Abu Dhabi both benefit from the wider political stability of the UAE, which is one of the most stable and progressive regions in the Middle East, in contrast to the political or economic instability that most African countries can face. Dubai’s stable, secure and business-friendly environment makes it an ideal place for African families to protect their wealth from such risks, and W8 Advisory’s expertise can help them implement strategies to move assets into structures such as trusts, foundations or holding companies.
Confidentiality laws: The UAE offers strong privacy laws, making it an appealing option for high-net-worth individuals and families seeking to maintain the confidentiality of their wealth structuring endeavours.
Affluent families possess assets in multiple countries, facing complex legal and tax challenges due to varying national regulations. Given the unique financial landscapes, regulations and business environments in such countries, The UAE offers several advantages that align well with the needs of African families seeking to optimize their wealth and protect their assets.
With extensive experience serving African clients, W8 Advisory possesses the expertise to develop comprehensive wealth structures that effectively address both the client's home country and the UAE's unique requirements. We help clients navigate the complexities of tax treaties, legal structures, and property laws between their home countries and the UAE.
Working with a broad network of trusted local business partners, W8 Advisory provides expert guidance and ongoing support to high-net-worth families in structuring their wealth in the UAE to maximize tax efficiency, protect assets, and ensure long-term generational wealth. This includes implementing fiduciary structures such as trusts and foundations, facilitating family business transfers, and leveraging the benefits of the UAE Golden Visa long-term residency program.
We invite you to schedule a meeting to discuss your specific requirements.
NAVIGATING THE UK’S TAX REFORMS
The UK's tax landscape is undergoing significant changes, particularly concerning inheritance tax (IHT) and the status of non-domiciled (non-dom) residents. These reforms have profound implications for the internationally mobile individuals residing in the UK, many of whom have maintained strong financial and familial ties to their countries of origin.
Understanding the Reforms
Historically, the UK's non-dom regime allowed individuals whose permanent home (domicile) was outside the UK to be taxed primarily on their UK income and gains, with foreign income and gains taxed only if remitted to the UK. This provided a level of tax efficiency for many expatriates.
However, from 6 April 2025, the UK government plans to abolish the non-dom status, replacing it with a residence-based tax system. Under the new regime, (and subject to some transitional rules) all UK residents will be taxed on their worldwide income and gains as they arise, regardless of their domicile status.
The concept of domicile for inheritance tax purposes will also be replaced with a residence-based test. Individuals considered 'long-term residents'—those who have been UK resident in 10 of the 20 tax years will be subject to IHT on their worldwide assets.
Implications
These changes necessitate a thorough re-assessment of financial and estate planning strategies:
- Global Asset Exposure: Assets held overseas that were previously outside the UK tax net due to non-dom status, may now be subject to UK taxation. This includes properties, investments, and business interests.
- Inheritance Tax on Overseas Assets: The shift to a residence-based IHT system means that estates comprising assets in both the UK and abroad could face substantial tax liabilities. Families may need to consider how these taxes will impact the transfer of wealth to future generations.
- Trust Structures: Many individuals have utilised offshore trusts to manage and protect assets. With the abolition of non-dom status, the protections afforded to such trusts are under review, potentially leading to income and gains within these structures being taxed directly on UK residents.
Strategic Considerations
To navigate these changes effectively, UK resident individuals should consider the following steps:
- Comprehensive Asset Review: Conduct a detailed analysis of all global assets to understand potential tax exposures under the new rules.
- Estate Planning Revisions: Update wills and estate plans to reflect the new IHT implications, ensuring that wealth transfer strategies remain tax efficient.
- Trust Evaluation: Assess existing trust arrangements to determine their continued effectiveness and compliance under the new tax regime.
- Professional Consultation: Engage with tax advisors who specialise in cross-border taxation to develop tailored strategies that align with both domestic and international tax regulations.
Conclusion
The UK's tax reforms represent a significant shift for non-dom residents, particularly affecting those with transnational ties. Proactive planning and informed decision-making are crucial to mitigate potential tax liabilities and ensure the preservation of wealth across generations.
Morag Ofili is a Barrister and Partner at London law firm, Edwin Coe LLP specialising in tax issues for high-net-worth individuals. For further information contact the author morag.ofili@edwincoe.com
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