Tag: Donald Trump

09 Oct

Attempts to Minimize Inheritance Tax

Nick Esterbauer Estate & Trust, Estate Planning, In the News Tags: , , , , , , 0 Comments

Previous entries in our blog have covered inheritance taxes in the United States and other jurisdictions and President Trump’s proposed elimination of the tax altogether.  Recent news coverage has zeroed in on how the family of the American president has allegedly evaded over half a billion dollars in tax liabilities that should have been paid on the transfer of significant family wealth.

Certain exceptions apply, but inheritance tax (more frequently referred to as “death tax” by President Trump himself) of 40% typically applies to assets of American estates beyond an initial value of $11.18 million.  This means that estates up to this size are exempt from inheritance taxes, while the wealthy engage in complex planning strategies to minimize tax liabilities triggered by death (some of which mirror those used by Canadians in an effort to avoid payment of estate administration taxes on assets administered under a probated will).

Despite Trump’s previous statements that he has independently earned his fortune without reliance on prior family wealth, The New York Times reports that he and his siblings together received over $1 billion from their parents’ estates and that $550 million (55% under the old inheritance tax regime) ought to have been paid in taxes.  However, in 1999-2004, during which years the estates of Fred and Mary Trump were administered, a rate of closer to 5% was paid in taxes.  Whether the tax-minimizing methods used by the Trump family were legitimate or questionable remains unclear:

The line between legal tax avoidance and illegal tax evasion is often murky, and it is constantly being stretched by inventive tax lawyers. There is no shortage of clever tax avoidance tricks that have been blessed by either the courts or the I.R.S. itself. The richest Americans almost never pay anything close to full freight. But tax experts briefed on The Times’s findings said the Trumps appeared to have done more than exploit legal loopholes.

Sometimes, the line between legitimate tax-minimizing planning strategies and outright tax evasion can appear thin.  It is important to avoid improper strategies that put the assets of an estate and their intended distribution at risk, and which may ultimately serve only to complicate and delay the administration of the estate.

Thank you for reading.

Nick Esterbauer

16 Feb

The Donald J. Trust

Noah Weisberg Beneficiary Designations, Executors and Trustees, In the News, Trustees Tags: , , , , , , 0 Comments

The media cannot get enough of President Donald Trump.  Regardless of whether you turn on the television, or pick up a newspaper, there seem to be endless articles about the policies and the decisions he has made.  As this is an estates blog, I thought it would be interesting to discuss the recent commentary regarding the Donald J. Trump Revocable Trust (the “Trust”).

Before his election, the then President-elect Donald Trump was questioned as to whether he intended to place his assets in a blind trust.

What is a blind trust? In order to answer this, I refer to a prior Hull & Hull blog which states that, “a blind trust can be thought of as an individual relinquishing control over their assets, and providing them to a trustee to manage them on their behalf. The trustee has complete discretion over how to invest the individual’s assets, with the beneficiary being provided with no information regarding how the investments are being held, and the beneficiary having no say in how the funds are managed. As the beneficiary has no idea what their funds are invested in, the theory is that they would not be inclined to enact government policy which would favour their own investments, and that they would be able to avoid a conflict of interest”.

Documents recently made available to the public provide insight into the terms of the Trust.  For instance, the assets of the Trust include liquid assets (from the sale of investments), as well as his physical and intellectual properties.  The Trustees of the Trust are the President’s eldest son, Donald Trump Jr., and Allen Weisselberg, the Trump Organisation’s chief financial officer.  Apparently, the President has the ability to revoke the trustees’ authority (I presume by saying, ‘you’re fired’) at any time. Moreover, according to the New York Times, the President will continue to receive reports on any profits/losses.

Of course, there are two views as to whether these Trust terms constitute a blind trust.  While some pundits suggest that the Trust satisfactorily distances the President from his assets, others suggest that the President has not gone far enough to absolve himself of potential conflicts of interest and is therefore not a blind trust.

Find this topic interesting?  Please consider these related Hull & Hull LLP Blogs & Podcasts:

Noah Weisberg

26 Jan

The American Fiduciary Rule

Nick Esterbauer In the News, Trustees Tags: , , , , , , 0 Comments

Beginning April 10, 2017, the United States Department of Labour will implement what is being referred to as the “Fiduciary Rule“.  The Fiduciary Rule will require American investment advisors to satisfy a higher standard of care when providing investment recommendations, putting clients’ interests above their own and providing complete disclosure with respect to fees and potential conflicts of interest.

The standard of fiduciary, premised on a role of trust and the duty to act in utmost good faith, is applied to guardians of property and the person, attorneys of property and personal care for incapable grantors, estate trustees, and other types of trustees.  While commentary regarding the Fiduciary Rule recognizes that investment advisors should be (and often are) already guided by the best interests of investor clients, some who earn commission on the sale of certain products may be in a position of conflict.  The Fiduciary Rule will prevent advisors from making certain recommendations if they are not in the client’s best interests.  The new standard of care required of American investment advisors may to some extent fall short of that applied in respect of other traditional fiduciaries, and is subject to a number of exceptions.

Absent the implementation of the Fiduciary Rule or equivalent requirements in other jurisdictions, investment advisors are not typically treated as fiduciaries.  Contracts may specifically state that advisors are not acting in a fiduciary role and that they do not absorb risk on their clients’ behalf related to investment advice that is followed.  Typically, if something goes wrong and an investor wishes to pursue a claim against his or her advisor, the onus is on the investor to prove the fiduciary nature of the relationship.  If the investor is able to prove that a fiduciary obligation existed (factors include the length of the relationship, the sophistication of the client, and the demonstrated reliance on the advice of the advisor), the advisor must then show that he or she has discharged the duty in good faith and with full disclosure.

Although the Fiduciary Rule is scheduled to come into effect on April 10 of this year, it is anticipated that the new Trump administration may delay the applicability of the Fiduciary Rule for the time being.  Although there have been discussions with respect to raising the standard of care of investment advisors in Canada, where extensive regulations already apply, an equivalent to the U.S. Fiduciary Rule has not yet been introduced.

Thank you for reading.

Nick Esterbauer

 

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08 Dec

What About Trump and Estates?

Noah Weisberg Estate Planning, General Interest, In the News Tags: , , , , , , , , , , , 0 Comments

With his election victory in the not too distant past, President-elect Donald Trump is receiving extensive coverage in the media.  Although the issues following him vary widely, as we at Hull & Hull LLP are estates lawyers, our focus is on the effect the President-elect is having in the estates community.

US Estate Tax

As previously blogged by Hull & Hull LLP, the President-elect is considering abolishing estate tax in the United States altogether.  This is a departure from the current US model which sees married couples exempt for the first $10.9 million in their estate, with any surplus amount being taxed at 40%.  In relation to this current model, recent polls suggest that in 2015 only 10,800 estate returns were filed with about half of those being taxable.

No date has been set for the anticipated repeal.tbqgv72e0b

Capital Gains

As well, the President-elect seeks to change capital gains owing at death such that if capital gains are held until death and valued under $10 million, they will not be taxed.  Apparently, the rationale is to support small businesses and family farms.

As a result of this change, it is predicted that beneficiaries of large estates will be able to avoid paying capital gains on the inherited asset if they do not sell what they inherit.  They can wait to pay the tax when there is an opportune time to do so.  Otherwise, those beneficiaries who are in ready need of money, will have to sell the asset, thereby triggering the tax owing.

So What?

As a result of the changes to estates and capital gains tax, pundits predict the dawn of dynastic wealth (i.e. monetary inheritance that is passed on to generations that didn’t earn it) in the United States of America.

Now, given what we have learned about the President-elect’s platform regarding estate tax and capital gains tax, consider meeting with a professional advisor to ensure your estate plan is up to date.

Find this topic interesting?  Please also consider these related Hull & Hull LLP Blogs:

Noah Weisberg

18 Nov

Estate Issues for Americans to Consider Before Moving North

Nick Esterbauer Estate Planning, General Interest, In the News Tags: , , , , , , , , , 0 Comments

Just over a week ago, the Canadian Immigration and Citizenship website crashed following the conclusion of the U.S. presidential election.  After hearing about this, I started to wonder, how difficult would it really be for Americans who are dissatisfied with the outcome of the recent election to flee to Canada?

Aside from entering the country on a student or work visa, certain individuals wishing to immigrate to Canada may apply for Express Entry as a skilled worker, caregiver, or a refugee.  Americans with family in Canada may also be able to apply directly for immigration to a province through the Provincial Nominee Program.

Issues with cross boarder estate assets
“If new Canadian residents own assets cross-border, it may result in difficulty in administering property during incapacity and/or following death.”

Individuals qualifying for immigration to Canada who may be considering doing so should not neglect cross-border tax and estate planning issues that may result from their relocation before proceeding with such a move.

When moving from one jurisdiction to another, it is important that one takes extra steps to ensure that elements of existing incapacity and/or estate plans will be recognized in his or her new home.

If new Canadian residents own assets cross-border, it may result in difficulty in administering property during incapacity and/or following death.  It is important that fiduciaries are chosen appropriately, so as to facilitate their access to assets in the relevant jurisdiction, without triggering cross-border tax issues and issues of inaccessibility.  Depending on the jurisdiction, taxes may be payable with respect to foreign assets based on citizenship, residence, location of the individual or his or her assets, domicile, or any combination of these factors.

It is also important to remember that simply immigrating to Canada may not exempt U.S. citizens from the payment of American inheritance tax.  As my colleague, Noah Weisberg, blogged last month, President Elect Trump has vowed to abolish inheritance tax altogether.  However, Mr. Trump has proposed to replace current U.S. inheritance tax with what is being referred to as a capital gains tax that applies to assets of certain estates valued at $10 million or greater.  At this point in time, it remains unclear which of the policies upon which the incumbent president’s campaign was based will ultimately be implemented.

Have a great weekend.

Nick Esterbauer

11 Nov

Blind Trusts – Who Controls Donald Trump’s Assets While President?

Stuart Clark In the News Tags: , , , , , , , 0 Comments

Donald Trump is president-elect of the United States of America. While the political ramifications of the surprise result of this week’s election are not yet known, there is little doubt that, as it relates to Donald Trump personally at least, his world is about to change. Donald Trump prides himself on being a successful businessman, controlling, amongst other things, a vast hotel empire that bears his name. But who controls such assets on Mr. Trump’s behalf while he is president?

Trump to place assets into blind trust
“At its most simple, a blind trust can be thought of as an individual relinquishing control over their assets, and providing them to a trustee to manage on their behalf.”

In the days following Justin Trudeau’s selection of his first cabinet in November 2015, I wrote a blog about the requirement that all of such cabinet members would need to place their investments into a blind trust.  At its most simple, a blind trust can be thought of as an individual relinquishing control over their assets, and providing them to a trustee to manage on their behalf. The trustee has complete discretion over how to invest the individual’s assets, with the beneficiary being provided with no information regarding how the investments are being held, and the beneficiary having no say in how the funds are managed. As the beneficiary has no idea what their funds are invested in, the theory is that they would not be inclined to enact government policy which would favour their own investments, and they would be able to avoid a conflict of interest.

CNBC is reporting that Mr. Trump will be placing his business interests into a blind trust while president, handing over control to his three children. CNBC has noted that Mr. Trump’s circumstance is not typical to those of other politicians who place their assets in blind trusts, noting that Mr. Trump likely knows his own investments intimately as a result of their bearing his name, such that, even in a blind trust, he would likely be able to identify them. NPR has previously reported about such difficulties, noting that it would likely be impossible for Mr. Trump to place his most valuable asset, being his own “Trump” name and brand, into a blind trust.

Thank you for reading.

Stuart Clark

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