STEP Orange County Conference 2019 Session Highlights

Summarizing STEP Orange County 2019, February 4 – 5

Over 225 attendees and 22 exhibiting companies came together at the Fashion Island Hotel in Newport Beach, CA for the Orange County Chapter of STEP’s 8th Annual Institute On Tax, Estate Planning, and the World Economy on February 4-5, 2019.

After a very disappointing Super Bowl on Sunday, the conference kicked off on Monday morning in rainy Southern California. Discussions covered the changes in tax law, including Opportunity Zone Funds, domestic asset protection, and international issues.

Despite the problems in Washington, D.C., the U.S. is still being viewed as an attractive bastion for foreign families given its stability, attractive investment climate, and other benefits.

STEP OC 2019 Monday Morning Sessions Recap

Trust Law and Tax Differences Between the U.S. and Foreign Countries

After the welcoming remarks, Read Moore of McDermott Will & Emery began with a discussion on taxation of trusts with foreign implications. Moore mentioned the differences between trust laws between the U.S. and foreign countries and the challenges these differences could pose.

In such cases, the legal environment should be carefully analyzed including the tax situation of both countries in order to recommend the right structure for each client.

What’s Changed in Life Insurance and ILIT Trusts

Colleen Barney, a partner at Albrecht & Barney discussed life insurance and ILIT trusts and noted that her practice had gone from 100 ILIT trusts a year before the 2017 tax law change to just 10 a year.

She highlighted that the Crummey notices are actually not required by case law, the only part that is required is the ability of the beneficiary to be able to withdraw the funds within a reasonable time, whether they are actually aware of it or not.

She also discussed items that can be made to make ILITs more flexible, such as trust protector features.

Charitable Planning Under the Tax Cuts and Jobs Act

Lawrence P. Katzenstein, a partner at Thompson Coburn, covered charitable planning under the Tax Cuts and Jobs Act. He discussed strategies, such as the bunching of deductions, to breach the new standard deduction in some years.

Katzenstein also went over the new section 4943(g) (the Paul Newman rule) and how foundations are no longer required to dispose of companies under certain circumstances.

When to Use the Unified Credit

Andrew M. Katzenstein, a partner at Proskauer, highlighted how the unified credit will ultimately come down from the current $11.2m in 2025 or earlier, depending on how the politics will play out in the early 2020s.

Katzenstein recommends that clients start using it now before it is gone. He also discussed Qualified Opportunity Zone Funds and the importance of clients carefully analyzing the underlying investments over the tax benefits, which can be worthless in a bad investment scenario. It’s suggested to carefully analyze the income tax benefit vs. estate taxes.

Strategies to Resolve Conflict Within Families

The Honorable James P. Gray (Ret.), a mediator for ADR Services, talked over lunch about how minimizing surprises and overcommunicating within families can resolve many conflicts before they arise.

Families can use strategies such as family meetings and neutral accountants pre-death to reduce family conflicts at a very difficult time for everyone.

Afternoon STEP OC Sessions Recap

Strategies for High Net-Worth Mexican Families

Enrique Hernandez-Pulido, a partner at Procopio, discussed high net-worth Mexican families and the complexities surrounding their situations with first, second, and third generations being a mix of citizenships between U.S. and Mexico.

Hernandez-Pulido covered the surrounding tax and estate planning strategies, including the fact that Mexico has no inheritance tax for Mexican residents, but 25% tax if a Mexican resident inherits from a U.S. trust. This could put a lot of pressure on advisors to make sure they stay updated on family movements and employ the right strategies.

The new post-election climate, Common Reporting Standards (CRS), privacy needs, and potential new inheritance tax keep wealthy families in Mexico interested in US structures.

A Creditor’s View on Asset Protection Trusts

Jay D. Adkisson, a partner at Riser Adkisson, capped off the first day with a creditor’s view on asset protection trusts and his approach to pursuing them.

Adkisson’s approach can include private investigators, finding debtor’s pressure points, and pursuing fraudulent conveyance as a strategy.

STEP OC 2019 Monday Morning Sessions Recap

Life Insurance as a Portfolio Stabilization Tool

Leigh Harter, Managing Director at NFP Insurance Solutions started Tuesday morning off with a discussion on life insurance as a portfolio stabilization tool.

Harter spoke with Paul S. Lee, Global Fiduciary Strategist at Northern Trust, about Qualified Small Business Stock (QSBS) strategies for business owners.

The History of FACTA and the New OECD Initiative

Joseph A. Field, Senior Counsel at Pillsbury, discussed the history of FATCA and how it gave rise to CRS, and the 3,200 bilateral agreements the 110 nations have put in place.

Field explained that the U.S. is not a signatory and is leading to capital being moved from across the world to the U.S. Additionally, CRS is not balancing privacy vs. transparency but has almost reached Orwellian proportions.

Field also discussed the new OECD initiative that would criminalize advising clients avoiding CRS and its chilling impact on advisors. He highlighted the attractiveness of the U.S., given our stability (despite the political climate in D.C.), the world’s largest investment market, the school system, inexpensive real estate vs. Europe and Asia, a favorable tax system for foreigners, and how to structure around some of the pitfalls.

He ended his chat with a question: If advisors need to police their clients, shouldn’t they have a gun and a badge?

How Families Transfer Both Wealth and Values Through Generations

Justin Miller, National Wealth Strategist at BNY Mellon talked about how successful families (think Rothchilds) vs. unsuccessful (think Vanderbilts) transfer not only wealth but values to next generations.

Most families are adept at transferring financial capital but struggle with non-financial capital (think family values) which leads to significant loss of financial capital by the third generation.

Strategies such as having a team of advisors that work together, good investment advice, smart tax planning, and most importantly a focus on family governance and giving, lead to family harmony and success for future generations.

Selecting the Best Jurisdiction for Domestic Asset Protection Trusts

Steven J. Oshins, a partner at Oshins & Associates, discussed selecting the best jurisdiction for Domestic Asset Protection Trusts, and how they work for the 17 states that have enacted DAPT statutes, but not for the other 33 states.

A hybrid structure with third-party beneficiaries is superior in many cases and Oshins discussed how they can be structured to still provide flexibility for grantors and their families.

Oshins also talked about how after 20+ years of DAPTs, there still isn’t a case that has pierced the trust in a non-fraudulent situation, and how DAPTs are leading to quick settlements, which is preferable to long litigation for most clients.

Wrapping Up STEP OC 2019

The conference wrapped up with Robert Keebler, a partner at Keebler & Associates, discussing the Impact of the IRC Section 199A Deduction on Estate Planning.

Overall, the two-day conference was well-attended, informative, and successful and the content of each presentation was very well received by the attendees.

For additional details from the 2019 STEP OC Conference or to learn more about the benefits of Nevada’s trust structures, contact us today.

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