Despite an order to freeze Roman Abramovich’s Assets the Government admitted that they were unable to seize a property where there is ‘insufficient evidence of ownership’
This is a practical example of how to use a trust to protect your assets from seizure. The same methods used by this wealthy Russian to protect his property from seizure by the UK government can be used effectively by anyone.
Roman Abramovich is a high profile Russian businessman. He’s has a multi-billion dollar fortune. He has appeared in lists of the world’s richest for over 20 years. Abramovich was best known in Europe for his ownership of Chelsea Football Club.
How to Use a Trust to Own Assets While Keeping Control
Like many of the world’s richest people Abramovich uses trust structures to own his assets. The benefit of trusts are that they don’t have a legal owner. Trusts have a settlor, trustees and beneficiaries. The Settlor is the person who sets up the trust. The trustees control the day to day management of the trust. The beneficiaries are those who will benefit from the assets or the income of the trust at a future date.
The Settlor will normally define who the beneficiaries are. Conditions can be put in place, setting out exactly how and when beneficiaries can receive income or capital from the trust.
As a high profile Russian, Abramovich was a target for sanctions after Russia invaded Ukraine. He was accused of being close to Russia’s president. Western governments froze his assets. He was banned from selling his assets in the UK and EU.
Even paying utility bills or taxes on his properties would have been almost impossible under the sanctions imposed on him by the UK government.
This is the Exact Structure he Used
Documents show, however, that his lavish house in London’s Kensington Palace Gardens has no restrictions on it. Any restriction preventing its sale would have to be publicly registered with the land registry. No such restriction is in place.
The house, which is worth over $150m is owned by A Corp Trustee, a company based in Cyprus. The Cyprus company is, in turn, owned by a trust called KPG Trust. Documents, leaked to a British newspaper show that Abramovich himself was the beneficiary of the trust until February 2022. At this time, just before Russia invaded Ukraine, Abramovich’s children became the main beneficiaries of the trust. This simple move saved the house from being seized by British authorities.
Under UK and EU law sanctions can be placed on a trust if someone is a beneficiary of more than 50% of a trusts assets. They can also take action against a trust if someone is able to exercise control over it. Legal documents were put in place in February 2022 preventing Mr Abramovich from exercising any control over 7 trusts in Cyprus where he was previously a beneficiary. The trusts control at least $4 billion in assets.
Insufficient Evidence of Ownership
The UK Land Registry told the Guardian newspaper that even when a property is publicly linked to a person, they are unable to place restrictions on a property where there’s insufficient evidence of ownership. Anonymous trusts are all but impossible for the land registry to restrict.
Abramovich set up at least 10 trusts in Jersey and Cyprus. Last year he reorganised all of them so that his beneficial interest was less than 50% in all of them. His children became beneficiaries. At least one of his children has spoken out against the war in Ukraine after becoming a beneficiary to the trust.
Governments and legal pursuers will always find it difficult to pierce the veil of an offshore trust. Abramovich appears to have made some errors in his initial set up of the trusts. He was the main beneficiary of the trusts until last year. It looks like he only changed the beneficiaries when facing the imminent threat of western sanctions.
How to Use a Trust: Errors to Avoid
This move saved billions of dollars in assets for his family. He should have been more careful when he first set up his trusts.
He could have kept control of the assets without ever being a beneficiary. This would have prevented any assets being lost to legal pursuers. Anyone considering setting up a trust to protect their assets can learn from this basic error.