On 9 August 2016, 25-year-old Hugh Richard Louis Grosvenor became the billionaire 7th Duke of Westminster, when his father, Gerald Grosvenor, suddenly died of a heart attack aged 64.
The Duke and his family are estimated to be worth at least £10.1 billion (US$13 billion), according to the Sunday Times Rich List in May 2019. The exact amount of wealth is difficult to estimate, since most of it is held in trusts.
The current Duke is the world's richest person aged under 30. Other families appear higher on the Sunday Times list, but privately held property is undervalued compared to company shares on the stock market, and very few people have stayed in the top 10 as long as the Dukes of Westminster.
How have this extraordinary family maintained their vast wealth, passing down through the generations for 300 years? As the Chinese say, most family fortunes disappear after only three generations.
The first reason is smart tax planning.
If the Grosvenor estate been bequeathed directly to the young Duke, he would been liable for 40% inheritance tax, not far off the Treasury’s death duty take for the last financial year. Inheritance tax (IHT) usually involves selling off assets in order to pay the tax, which would wipe out the fortune within a few generations.
Hugh Grosvenor, like his father, legally avoided a massive amount of tax on his £10bn inheritance because the majority of assets within the estate are held in trusts.
UK trust law ensures the survival of many of the country’s largest fortunes, while less wealthy people and increasing the middle classes are forced to sell off family homes to cover IHT demands.
The second reason their wealth is still growing for centuries is the use of leases.
The Grosvenor Estate’s assets includes a privately owned property business which has £11.8bn of prime property under management. The 300-year-old London property business started in 1677 with 500 acres of then rural land covering much of Mayfair and almost all of Belgravia – adjacent to Buckingham Palace and the home of Harrods in exclusive Knightsbridge.
Grosvenor’s international property portfolio range from office space in Silicon Valley, a science park in Edinburgh and the freehold on the current US embassy in Grosvenor Square. Perhaps the most famous and exclusive streets in the empire is Eaton Square, built close to the Houses of Parliament during the housing boom after the Napoleonic wars.
There was recently a listing on Rightmove for a flat in Eaton Square for only £600,000. I thought, wow, that’s a bargain for an exclusive address in Knightsbridge. Alas, I looked closer I discovered that it was not such a bargain because the remaining lease was only 5 years.
The key to keeping hold of their assets is the use of leasehold titles, which means the freeholds eventually comes back to the family.
The final factor for keeping wealth together, and perhaps the most important, is that the family take the long view and employ long term planning.
Whilst most people plan to leave a legacy for their children or grandchildren, the Grosvenors, and other super wealthy families like the Rothchild’s or Rockefellers, think several generations ahead and have a wealth preservation strategy.
The previous Duke saw himself as the custodian of the family fortune and struggled with the burden of keeping it all together. The responsibility even led to his depression.
The fact that the business is largely made up of investment property from residential to some of the biggest farms in Britain is obviously a major factor compared to a family business which can go out of fashion or fail to adapt to changes. However, thousands of property businesses have gone by the wayside and the UK is littered with country estates now owned by the National Trust because the once wealthy aristocratic families could no longer afford to maintain them.
3 factors have kept the Grosvenor’s fortune intact:
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By Charles Kelly, Wealth Mentor, Property Investor, Author of Yes, Money Can Buy You Happiness and creator of Money Tips Podcast.
There are more examples and practical steps to getting rich and being happy in my book, Yes, money can buy happiness, I cover the 3 R’s of Money Management, the Money B.E.L.I.E.F System and much more. Check it out on Amazon http://bit.ly/2MoneyBook.
If you’d like further information on wealth mentoring and coaching, how to survive the crisis and even quit the rat race, email me at Charles@CharlesKelly.net or send me a message through Facebook or my Money Tips Daily community. See more articles at www.moneytipsdaily.com
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