The federal government proposed sweeping new tax rules earlier this month that would dramatically affect family businesses, investment partnerships and other entities. These rules, which could become final and binding as early as the end of 2016, would artificially inflate the value of interests in family entities for gift and estate tax purposes. Families should now consider whether to accelerate their plans to transfer family business and investment assets ahead of these rules.
Trust and Estate Planning
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As an employer, you may receive a notice from a health insurance Exchange that an employee has applied for coverage and is eligible for a premium assistance tax credit. These Exchange notices—and its relationship to the assessment of employer shared responsibility tax penalties under the Affordable Care Act (“ACA”)—have generated both confusion and concern among employers.
A great deal of focus has been placed on the next generation of business leaders, beneficiaries, and philanthropists. Rarely discussed, however, is the next generation of trustees that will guide them through so many crucial life decisions. Serving as trustee is a natural extension of an estate planning role, and the next generation of trustees knows that in-depth knowledge of the nuts and bolts of estate planning is only one part of the foundation needed to be a truly trusted advisor to families.
A Dynasty Trust is often referred to as a family bank since it serves as a primary resource for the funding of the needs of a family's beneficiaries in successive generations. Given the unsteady economic times and tax uncertainty, there is no better time than now for wealthy families to establish a Dynasty Trust to achieve optimum results, including tax advantages, flexibility, and control.
Asset ownership, insurance, irrevocable trust, limited liability entities, and asset protection trusts are key vehicles when it comes to protecting your assets. Having an overview of what is protected under these vehicles—including the costs, administrative considerations, income tax treatment, and the estate and gift treatment—provides an easy, at-a-glance understanding of the options available in preserving family wealth.
The Foreign Account Tax Compliance Act (FATCA) is in full swing. Non-US financial institutions have completed reporting of US account holders for tax year 2014 and will soon begin compiling for their 2015 FATCA reports. Just as international families and their advisers are getting used to myriad requests for FATCA Form W-8 certification forms, more than 90 other countries have indicated that they wish to address tax evasion through a global exchange of financial information by implementing the Common Reporting (CRS) which, like FATCA, will affect non-US trusts and their trustees.
Today’s PFTCs bear little resemblance to ‘private trust companies’ of the 1990s, the gestation era for the PFTC. The modern US PFTC also differs markedly from a third form of ‘private trust company’: its ‘offshore’ single family private trust company (OFTC). Limited federal taxation of foreign trusts and privacy protections as good as or better than those found in traditional offshore jurisdictions have led some commentators to call the United States the ‘new offshore’ jurisdiction for trusts.
Most family offices that serve U.S. families are well aware that special planning considerations can arise when a U.S. citizen family member marries a noncitizen. Should the client’s estate plan be revised to incorporate a qualified domestic trust (QDOT) to ensure that assets passing to the surviving noncitizen spouse qualify for federal estate tax marital deduction?
In early April 2016 files leaked from a large Panama-based law firm (known as the ‘Panama Papers’) brought to the attention of many the ways in which offshore companies and structures can be used to obscure the identity of beneficial owners, some of whom have used such entities to avoid paying tax in their country of tax residence.
Even though a trust may be established under the laws of a US state and have a US trust company serving as trustee (hereinafter a ‘US-based trust’), this does not mean that it is a US domestic trust for income tax purposes. If non-US persons make substantial decisions for the trust, the US-based trust will be classified as a foreign trust under US tax law. Regardless of whether the US-based trust is foreign or domestic, if it has accounts with financial institutions, it must provide certification of its status for Foreign Account Tax Compliance Act (FATCA) purposes.