Third Annual STEP Alpine Conference January 17 & 18, 2019 Interlaken, SUI

STEP Alpine 2019 Sessions Recap

A well-attended and lively STEP Alpine Conference recently wrapped up at the Congress Center, Kursall, in Interlaken, Switzerland. Both Martine Rhoda, Director of European Development, and Greg Crawford, President of Alliance Trust Company of Nevada, attended the two-day event.

STEP Alpine Highlights

Opening Keynote

After the opening remarks and welcoming the Keynote speaker, Elhad As Sy, Secretary General, International Federation of Red Cross and Red Crescent Societies took the stage.

The Secretary-General reminded us all that global problems are much harder to solve in a fractured world, and that no one is truly isolated from global issues.

Those unfortunate enough to be born in situations (and regions or countries) are suffering misfortune that is beyond their control. What they want is what we all want–and should collectively strive for–freedom from disease and stability and peace.

These very basic desires are commonalities of humanity. The Secretary-General thanked the audience and those benefactors that the professionals in the audience represent for the continued support of these efforts.

It was an inspiring beginning to the two-day affair.

Compliance and Privacy, Still Prevailing Themes

The theme of the conference was two sides of the same coin. Both what is new and what is consistent in our industry. Day one focused on the “new,” the continued increasing regulatory and compliance requirements. Day two focused on the original goals of the field: providing valuable services to clients.

The first industry-focused presentation began with three presenters and a panel discussion from David Russell, Filipino Noseda, and Count Francis von Seilern-Aspang.

It was noted that the treatment of trusts, assets and cross-border families are now quite inconsistent with several other trends towards protecting information and personal privacy in the EU region.

GDPR is almost 100% inconsistent with the CRS, and yet seems to be okay because of “fiscal voyeurism” practiced by the media and certain tax authorities. Recent rulings by the European Court of Justice appear to support a fundamental right to privacy. The audience noted the hypocrisy that elected officials claim a right to privacy for themselves, but not for commoners.

Budgeting Challenges Governments

The government budget problems facing many of the developed countries may be at the root of the issue. Governments are not generally pursuing growth strategies and instead are appealing to voter frustration and populist uprisings. The political will to debate economic policies is minimal when it is much easier and more popular to scapegoat particular classes of people for political gain (e.g., immigrants, the upper-class).

Thus, in this environment, selective “transparency” for certain types of people–the wealthy–is now politically expedient.

The new level and detail of information gathered by multiple firms and government agencies are staggering and often redundant. Information is the new oil in the Odeon economy, and information has become extremely valuable. It is a matter of time before various databases are hacked, or the information gathered is sold into the black market (see the recent sale of personal information by Argentinian tax authorities).

While the GDPR has significant penalties for companies which fail to protect their data, there are no such penalties for governments.

Yet, despite all of this information being gathered in the name of transparency, it is not clear that this will lead to higher tax compliance. The analysis of the U.S.A.’s FATCA efforts and initial data coming from the OECD suggest that the amounts of levels of tax evasion ballyhooed to get both FATCA and the CRS passed were “exaggerated’” to put it mildly.

Looking Ahead: Trust Structures

So, what then does the future hold? Trusts have been in place for 1,000 or more years, and continue to be needed by families at all levels of wealth. Competence, expertise, professionalism, structure, and wisdom are not a given in all families and can be most effectively brought to the table or bolstered in the form of a trust structure.

Trust structures are needed now more than ever. They can provide solutions and continuity for the families who need them. Those that continue to advise families on how to help solve these age-old problems will continue to be in demand.

Combating Tax Fraud In the U.K.

The next presentation, “Data Exchange: Its Fate and Its Risks” began after lunch. Tessa Lorimer (Withers, U.K., Consultant) notes that the U.K. has dramatically increased its tax investigation capabilities now that it receives information pursuant to the Common Reporting Standards (CRS).

We reached out to Lorimer for more insight:

“The information will give Her Majesty’s Revenue and Customs (HMRC) reasonable grounds to suspect tax fraud and thereby access the international criminal treaties. The criminal treaties allow HMRC to send a Letter of Request to foreign jurisdictions requesting the use of coercive powers to have evidence remitted to the U.K. suspects located and extradited in the U.K. to stand trial and assets are restrained and confiscated abroad.

“Recent U.K. legislation has dramatically increased both criminal and civil penalties for tax fraud in anticipation of the aggressive international tax investigations of the future.”

David Walbank, QC, described the significantly increased risk to people who become subject to a CRS Criminal Investigation. Most significantly, the Criminal Finances Act of 2017 reverses the burden of proof in such cases. Additionally, the evidentiary trends regarding search and seizure are tending to give more power to the authorities. These powers now border on draconian “Unexplained Wealth Orders,” and he expects it authorizes to launch high-profile, headline-grabbing cases in the future.

Securing Enterprise Data

The presentation concluded with some practical insights into how to secure enterprise data from Dr. Cristian Zamfir, COO of Cyberhaven. We reached out to Dr. Zamfir for insight, and he stated, “Data is now the common denominator of most corporate risks. The foundation for managing these risks is to discover where sensitive data is, who is accessing it, and how it is processed: in other words “data flow mapping,” which is now done manually. The answer to modern risk management in the context of GDPR and other recent compliance legislation is to automate the data flow mapping process.”

Visit Cyberhaven to learn more.

New Regulatory Developments in 2020

The next presentation covered “New Developments On the Regulatory Front” and began with an update on new Swiss Trustee regulations coming into effect in 2020. David Wilson, partner at Schellenberg Wittmer, noted that 2020 is designed to be a transition period for Swiss trustees, who have not been licensed to date.

Wilson comments that “Trustees’ anti-money laundering policies remain but, going forward, their implementation will be supervised by Supervisory Organizations, that will replace the existing self-regulatory authorities.”

Wilson’s session garnered a lot of attention as his audience took extensive notes.

Global Regulatory Approaches

Richard Grasby then contrasted different types of regulatory approaches to the industry from jurisdictions around the globe. Regulators range from lighter approaches that are really just focused on AML policies, to large scope requirements that delve into the quality of trust operations and depth and experience of personnel.

Private Trust Companies, called Family Trust Companies in Nevada (NRS 669A), were raised as a possible structure for some as they can in some instances be exempt from pending Swiss registration requirements. Business and family ties are vital factors to consider for a Private Trust Company, which can be likened loosely to a single family office.

Fabianne De Vos Burchart cautioned that PTCs must be run professionally, or he fears that many will be challenged in the future for being little more than an elaborate nominee agreement.

Blockchain as a Trust Asset Worldwide

The final presentation of day one is a very popular topic at recent STEP Conferences around the world, Blockchain.

Philipp Buchel discussed the original benefits of bitcoin and the blockchain, a no Third-party, low fee currency, and transfer network. Unlike traditional assets, there could initially be no freezing or censorship. The blockchain itself is simply a ledger/database structure to prevent docile-spending.

How Blockchain Laws Are Evolving

But the laws are evolving differently in different countries regarding property rights in this new class of asset. In the U.K. the law is developing so that the coin holder is the owner, while in the U.S.A. courts are taking the position that the private key or code that unlocks the coin(s) is the legal owner. Regardless, storage is the most critical issue.

To date, trustees have been unwilling to hold the private keys to these assets. Bitcoin and other currencies titled to trusts are being done via LLCs, or special purpose trusts to limit trustee liability. However, it is clear that clients will need better answers going forward than the current trust company solutions.

The day concluded by noting that these are no longer just issues for early adopters or technology geeks; companies such as the shipping company Maersk which recently shifted its container procurement and management system to the blockchain are expecting to save hundreds of millions of Euros a year as a result.

After a terrific cocktail hour and dinner sponsored by Schellenberg Wittmer, the 300+ attendees turned in for the evening. Special congratulations go out to the STEP Swiss and Liechtenstein Federation Student Award winners who were recognized during dinner.

Day Two – Serving Client Needs

Day Two shifted the theme of the conference from regulation and compliance to serving client needs into the future.

Uncovering the Truth About Lost Family Fortunes

The first day two presentation, “The Next Generation: Challenges and Opportunities” covered a phenomenon that cuts across all societies and commonality of humanity discussed at the conference open by the Supreme General- it is the sad but simple fact that by the fourth generation, most family fortunes have been lost or squandered.

The psychology of attachment between a parent and a child was discussed in the context of tremendously busy, international families. Communication in these situations is commonly low, and children are patronized for too long.

A classic case study of an Asian family was discussed, as well as the fact that many financially successful parents just assume that their children will have the same passion and interest in the family enterprises that they do. As practitioners, we know this is often not the case. Parents who are strong role models need to allow children to find their own path.

It was a very skilled and diversified panel, with Her Supreme Highness Therese of Liechtenstein, Joshua Seth Rubenstein of Katten Muchin in New York and Dr. Marina Walter, MD from the University of Geneva.

We had to step out for networking meetings during the next two presentations which covered the mental capacity of aging clients and the special needs of globetrotting families.

The Swiss-U.K. Axis

The final presentation before lunch was titled the “Swiss-U.K. Axis.” It is often said that the U.S. and the U.K. have a historic “special relationship,” but there is also one between the Island of the U.K., and the island of stability in continental Europe, Switzerland.

Jane Owen, Her Majesty’s Ambassador to the Swiss Confederation and the Principality of Liechtenstein noted that there are over 150 flights from various U.K. airports to airports in Switzerland each and every day. Much of the discussion focused on what the U.K. could learn from Switzerland in advance of Brexit while noting much remains uncertain.

Global News

After lunch, the agenda continued with “News from Switzerland, Liechtenstein and the rest of the World.”

Joshua Rubinstein led off the discussion with an update on the U.S.A. tax law changes, and how it helps business owners. Litigation trends regarding trust issues in the U.S.A. are also increasing, mainly as age and dynasty trusts interplay with inheritance issues and expectations.

Modern relationships and 2nd and 3rd marriages only increase potential family friction and legal contests. It was also noted that the legal erosion of attorney-client privilege is eroding in the U.S. as well, but not to the same degree as other jurisdictions.

One important point – do not use a work email address to correspond on personal litigation matters. Create a personal email account specific to the case and only use it for sensitive correspondence to better protect privileged documents.

New Developments Worldwide

The rest of the world came next, with David Russell updating the conference on new developments in the Middle East. Jurisdictions there have taken different approaches to adopt model legislation, noting that Dubai has adopted a style of the American Uniform Trust Code.

There was actually a technical glitch in this section, so if you would like a copy of the slides or to discuss these sections further, please let us know.

Liechtenstein and Switzerland Updates

Saving the best for last, the update on Liechtenstein and Switzerland came next. Patrick Brunhart noted that this year is the 300th Anniversary of the Principality and its reputation continues to improve around the globe. The country will continue to be a small but important financial center in the future.

Switzerland will continue to be a jurisdiction offering top-end solutions to sophisticated clients. The country can never become a low-cost “factory” solution provider, as the cost of doing business here is simply too high to compete in that segment of the marketplace.

Influencing the Debate – Swiss Trust Laws and Regulations

The last presentation of the day blended many of the themes of the first two days and sparked a lively and important discussion to wrap up the conference. The presentation title was “The Great New Questions for Trustees – Your Chance to Influence the Debate.”

A discussion of the new regulations facing Swiss Trustees began the presentation, reviewing some of the highlights of the discussion from the day before.

The prospect of specific Swiss trust laws was discussed, and in classic Swiss fashion, an impromptu vote was held. The audience generally felt that the regulation of trustees was a good development, while they were less enthusiastic about new Swiss trust statues. The overall goals and purpose of regulations were also discussed in the context of protecting clients from bad actors in the world of trusts, and the practitioners in the room from being tainted by bad actors as well.

Looking Forward to STEP Alpine 2020

With that, the Third Annual STEP Alpine Conference concluded. The Fourth Annual STEP Alpine Conference is tentatively scheduled for the same location on January 16 & 17, 2020. STEP should confirm this in the weeks to come, and we at Alliance Trust Company of Nevada look forward to seeing you there!

If you would like to discuss the conference details further, or how Nevada trust structures can benefit your clients, please contact Martine Rhoda in Geneva at (add cell phone and email).

Using NING Trusts to Significantly Reduce State Income Tax Liabilities

Why Wealthy Families are Choosing to Shift Their Wealth to the Tax Favored State of Nevada

The state of Nevada is considered a tax-favored environment, allowing maximum tax protection over trusts and estates. That’s just one of the reasons why more and more people are choosing Nevada as to establish their trusts.

The “NING” trust or Nevada Incomplete-gift Non-Grantor trust reduces state income tax liabilities and simultaneously provides asset protection benefits.

For people with substantial income, assets or large capital gains who could generate significant Federal and state income tax shifting a trust from its current state to a state with more favorable tax laws, such as Nevada, could create significant income tax savings.

While moving to Nevada would allow someone to take advantage of these benefits, relocating family is often not an option. However, by establishing a NING and transferring assets from the existing trust into the NING, the trust will only face Federal capital gains taxes.

Non-Grantor vs. Grantor Trusts

Trusts are set up as either grantor or non-grantor, and it’s important to understand the difference.

Grantor trusts expose the creator of the trust to the taxes incurred by the trust. Non-grantor trusts are set up as their own entities incurring all taxes at the trust level instead of passing them on to the owner of the trust.

Things get murky because every state has its own taxation rules and definitions about which trusts should be considered a resident.

For example, to take advantage of a NING or Nevada’s favorable tax laws in general, a non-grantor trust with a Nevada trustee should be established. By establishing a non-grantor trust in Nevada and appointing a Nevada trustee you can be sure that you’ll minimize or completely eliminate taxes from your state of residence.

A New Aggressive Strategy for Substantial Gains

If a substantial gain is on the horizon, wealthy families can take advantage of ING trusts to adopt a more aggressive tax strategy. ING’s help reduce state income tax at the trust level by establishing it one or more years before a large gain becomes available.

One word of caution, there are specific steps you should follow to ensure that your strategy is not viewed as tax evasion, it’s always best to employ professional guidance to understand how to establish your ING ethically.

Structuring a NING for Maximum Benefit

Since the purpose of establishing a NING trust is to avoid additional taxing, it’s important to properly structure the trust to avoid gift tax. Proper structuring also ensures that the trust really is taxed in Nevada instead of the settlor’s home state.

Remember that NING stands for Nevada Incomplete-Gift Non-Grantor Trust, so when assets are transferred to the trust, it must be in the form of an “incomplete gift.”

Transferring assets as an “incomplete gift” allows the owner of the trust to include your investments in your estate without needing to file a Form 709 gift tax return.

NING Trusts vs. DING Trusts

The DING Trust did come before the NING trust, so one may wonder which is the better situs for a trust, Nevada or Delaware?

While both states allow settlors to appoint a grantor for their trust and take advantage of favorable tax laws, several Delaware rulings have allowed divorcing spouses and creditors to gain access to an asset protection trust. Nevada has never allowed such access in rulings and therefore has more iron clad protection than any other state.

How the Other States Feel About ING Trusts

It’s no surprise that other states aren’t happy about non-grantor trusts and their tax-avoidance benefits, some have even gone as far as banning such trusts.

While both Delaware and Nevada have successfully deflected attempts by other states to tax grantors, that likely won’t stop states from attempting to gain access whenever they can.

However, several statutes in the state of Nevada prove that the state values and protects trusts and estates which are established there and is the safest bet when choosing where to create an ING trust.

To learn more about establishing a NING, please contact Alliance Trust Company.

Alliance Trust Company of Nevada in The Economist

The Economist

Typically well-reasoned and published since 1843, many believe that the Economist is the finest English-print magazine in the world.  The magazine tackles complex global issues with a balance and perspective that only a 170+ year history can provide.  That is why, in the context of the media fury surrounding the “Panama Papers,” that the Economist’s suggestion to publish individual global tax returns (April 9th edition) deserved to be publically questioned.  To the credit of the publication, Gregory Crawford’s letter to the Editor is published in the April 30th print edition.  In the letter, the President of Alliance Trust argues that no benefit will come from such a disclosure plan or the OCED’s related “Common Reporting Standards.”  The impact of sharing detailed personal financial information with rogue governments around the world will not increase U.S. tax revenues by a cent.  In fact, the only meaningful outcome of the proposals is to violate basic personal privacy significantly increase the physical and financial risk to law-abiding citizens and their families around the world.

The Government of Kazakhstan knows my retirement account balance?

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The New York Times “Room for Debate” opinion pages recently asked Gregory Crawford, The President of Alliance Trust Company in Reno to comment on the Panama Papers and the advantages of and lawful usages of shell companies.  In this piece, Greg notes that the vast majority of these companies are used legally, providing a layer of security and privacy for international families in an increasingly dangerous world.

The interest of non-US citizens using foreign grantor trusts in Nevada is increasing dramatically.  Many countries are now recklessly sharing highly-sensitive and otherwise confidential individual financial information with rogue governments around the world under the OCED’s “Common Reporting Standards.” This program, which thankfully the United States is not participating in, gathers and automatically exchanges individual  names, addresses, tax identification numbers, and financial account balances with the governments of Azerbaijan, Cameroon, China, Georgia, Indonesia, Kazakhstan, the Philippines, Russia, Senegal, Tunisia, and Uganda, to name a few.  Where the information might go from there, no one knows.   Many of these countries have Horrific human rights records and serious corruption issues.  Automatically sharing this data will undoubtedly expose law-abiding individuals to the risk of extortion, kidnapping or worse.  The United States should remain proudly “non-compliant” with the CRS and its efforts to violate personal privacy.

it is worth noting that the State of Nevada offers excellent privacy provisions when establishing business entities such as LLCs, and there are options for the US and non-US citizens to keep their financial affairs private in trust.  Please contact Alliance Trust for more information at 775-297-4000.

 

Alliance Presentations in San Diego – Recap of the Gathering

Gathering 5

Last month Alliance Trust presented at the Southern California Institute’s annual “Gathering” of elite advisors from around the country in San Diego.  The topics of the two-day seminar included a panel debating the best family trust jurisdictions, and various methods and strategies to minimize and reduce estate, state and federal income taxes.  Advisors discussed asset protection trusts and other Nevada trust options, with case studies on how they work in practice.  As a Nevada Trust Company, Alliance Trust added insight and expertise on these topics from the perspective of a trustee.  Nevada is considered to have the best trust laws in the country, providing families valuable asset protection, flexibility for planning options and tax minimization for generations.  for more information on Nevada Trusts, please call Greg Crawford at Alliance Trust in Reno at 775-297-4684.

Why Sand Hill Road Uses Nevada Trust Strategies

sand hill road sign

Alliance Trust Company of Nevada spends significant time in Silicon Valley.  Our clients range from early stage Angel investors, the founders of many fast-growing technology firms, and the partners of some of the most prestigious venture capital firms in the world.  Why are so many people connected with Sand Hill Road using Nevada Trust strategies?  In a word: Flexibility.

Nevada offers exclusive options within its trust and estate laws, and you don’t have to be a Nevada resident to establish and benefit from a Nevada Trust for generations to come.

Simply put, Nevada offers flexibility around common asset protection, tax-minimization, and dynasty provisions that have many around the country recommending Nevada as the best state in the country for trusts.  Even Business Week magazine recently took notice, putting Reno on the cover for its trust and estates activity.

Interested in learning more?  Call Greg Crawford, President of Alliance Trust in Reno at 775-297-4684.

Bloomberg Businessweek Highlights Reno for Trust Benefits

Business Week Cover

The cover story of this week’s Bloomberg Businessweek Magazine highlights the successful effort of the State of Nevada, Reno in particular, in attracting assets from affluent international families.

The attraction to Northern Nevada includes:

-Nevada’s favorable trust and estate laws

-Experienced attorneys in Reno

-Excellent CPAs and trust companies in Reno

-The overall stability of the US legal system

Privacy and tax concerns also impact the decision to move assets from Europe to Reno.  The United States, as well as the money centers of Europe, recognize Nevada as the best jurisdiction for trusts.  The growth of the Nevada Trust industry since 1999 has been nothing short of remarkable.  A Bloomberg video report and radio report (begins at the 1:34 minute mark) are also available.

Alliance Trust Company of Nevada is proud to be a key player in Reno’s trust industry development since 2005.  For information on how Dynasty Trusts, self-settled trusts, and Nevada’s excellent corporate laws may help you achieve your family’s goals, please call Greg Crawford, President of Alliance Trust Company in Reno at 775-297-4684.

Alliance Trust Proud to Participate in Prestigious UCLA Law Panel

UCLA STEP Asset Protection

Gregory E. Crawford, TEP, President of Alliance Trust Company of Nevada recently participated in a 90-minute discussion panel covering the topics of asset protection planning and the impact of the Uniform Voidable Transfer Act (UVTA).  The panel was moderated by Professor Jerry Hesch (ACTEC Fellow), and included nationally-recognized attorneys Jeffery M. Verdon and John R. Garland, as well as Neal Rubin, Managing Director, International Custody & Asset Protection Solutions of City National Rochdale.  Nevada was highlighted by the panel as one of the best jurisdictions in the United States and world for estate planning.  The UCLA Law School STEP Conference is in its fifth year and attracts hundreds of trust and estate professionals from around the world to Newport Beach, CA each January.  For more information, please review the conference details or call Greg Crawford in Reno at 775-297-4684.

Hilary Clinton calls for Higher Estate Taxes

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Despite government assurances that the recent estate tax regulations were “permanent,” nothing is really forever or permanent in Washington DC.  Democratic front-runner Hilary Clinton has recently proposed on the campaign trail a higher effective estate tax rate, lowering the estate tax exemption amount by more than $2 million per person, and increasing the marginal tax rate on taxable estates from 40 to 45%.  It is estimated that this will double the annual number of households subject to the tax, raising $400 to $500 billion over the next decade.  Nevada trust strategies can be an excellent estate tax “freezing” technique to reduce or eliminate estate tax.  Please call Greg Crawford, President of Alliance Trust Company in Reno at 775-297-4684.

Children Facing Challenges and Your Estate Plan – You Have Options

estate-planning

For a family dealing with children with handicaps or other challenges, the journey does end when the child turns age 18.  Many parents and families worry about how their adult children will fare after the parents pass away.  Fortunately,  a well crafted family estate plan can provide solutions to these problems.  Children with medical difficulties and handicaps may need a special needs trust to preserve eligibility for government aid and other programs that could be jeopardized by a sudden influx of wealth. For children dealing with substance abuse, a special purpose trust could be the answer.  In some cases, a family may consider disinheriting a child to prevent an inheritance from furthering a destructive lifestyle.  While this is an option, special legal care is needed to ensure that money does not fall into the wrong hands and situation.  Nevada is considered the best state in the country for estate planning, and may offer options and flexibility for your family’s estate plan that your home state does not.  And you do not need to be a resident of Nevada to establish and benefit from a Nevada trust.  Contact Philip Brown at Alliance Trust in Reno at 775-297-4277 to learn more about the advantages of a Nevada Trust.

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