UPDATE ON INTERNATIONAL PLANNING ISSUES JERSEY
Planning for cross- border families with French connections
[ LINE-ALEXA GLOTIN ]
FRENCH SUCCESSION LAW applies to French residents
and French immovable property. If the deceased has two children, they get two thirds of his estate and his widow one third. A surviving spouse can opt to take a life interest in the whole estate. If there are no issue, the parents of the deceased can take an interest. The rapport (claw- back) prevents violation of the forced heirship rules. Non-French residents should make provision for their French property separately from their will. The EU succession regulations
will come into effect in France in August 2015, but will not affect the forced heirship rules. Trusts are recognised in France, but do not override the forced heirship rules. A person is resident in France if
he has foyer (principal residence) there, or has a professional activity there or has his centre of economic interests there. Income tax (with social contribution tax) quickly rises to 60%. Capital gains tax is 19% for EU residents, 33.5% for others – though there may be relief for Swiss, US or Hong Kong residents. Wealth tax is levied on net wealth, though new residents have a five- year exemption for their non-French assets. The threshold is €1.3m, and the rate 1.5%. Art and business assets are exempt. Inheritance and gift-tax on gifts between spouses is 45% above €1.805,000. There is an element of exemption
for transfer of a business to children. There are many tax treaties, but Switzerland has recently terminated its estate tax treaty. Trusts are generally regarded as
fraudulent tax evasion vehicles and have a wide range of exposures to tax and reporting requirements.
Ways to help your clients protect their wealth from future attacks
[ CHARLES GOTHARD ]
THIS TOPIC IS MORE RELEVANT THAN IT WAS IN 2007, when the speaker last addressed it. Regime changes,
threatened nationalisations and Russian businesses threatened by Mr Putin – these are modern dangers to family wealth. Abdulla wants to protect his assets from claims on his death made by his Muslim relatives. He may find his planning constrained by foreign matrimonial property law, by previously declared trusts, by existing claims,– e.g. arising from an early divorce or financially dependent persons, by lack of mental capacity or undue influence, or by the location of his assets. ‘Firewall provisions’ need to be considered, e.g. those in section 87 of the Cayman Islands Trusts Law, or similar provisions in the Bahamas, Bermuda, BVI, Cyprus, Guernsey, Hong Kong, Isle of Man or Jersey. Sometimes these protect only against claims arising from the status of the settlor. The ‘softness’ of the courts varies between jurisdictions. In the Rybolovlev case, the Swiss Court overrode the Cyprus firewall provisions. In the B Trust case, the Cayman Court strongly upheld firewall provisions, but in the Poon case, the Hong Kong Court held that the trust fund was a ”resource” of the settlor, in that the trustee was likely to comply with his wishes, the Court treating past conduct as indicative of present power.
The ‘softness’ of courts varies among jurisdictions.
In the TMSF case, the power of revocation was similarly regarded. Alongside the Charman divorce case, there was also a trust for children, which could not be attacked in the divorce proceedings. To protect a client against regime change, a bilateral
investment treaty can be useful – providing compensation for expropriation. Exxon successfully claimed compensation from the Venezuela government, and the Russian government was ordered to pay compensation for the acquisition of Yukos. In general, the adviser should be realistic and not attempt to achieve too much.
Some reflections on problem solving
[ RORY KERR ]
AN EARLY EXAMPLE OF a business structure
comprised a Curaçao holding company with a Dutch and an English subsidiary. The Curaçao profits were characterised as a royalty, thanks to the insight of a professionally qualified director. Similarly, a Dutch and a Liechtenstein company played an important role in disinvestment from South Africa, and in building a group of companies based outside South Africa, eventually acquiring a European business and a listing in Luxembourg, and later moving to NASDAQ. Employee benefit trusts were established for US-based managers. Later, the founders established charitable foundations. The younger generation appointed younger advisors.
The ITPA Green Book 2016
www.itpa.org
017
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