Tag: Donald Trump

23 Sep

Inheritance Tax as a Political Issue

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

Our blog has previously covered the issue of inheritance tax.

As a reminder, inheritance tax is charged on estates of a certain value or greater on a percentage basis.  Smaller estates (different amounts depending on the jurisdiction) may be exempt, with the applicable tax charged on the portion of the estate exceeding the exemption limit.  Inheritance tax does not apply to Canadian estates or their beneficiaries.  While we see individuals go to great lengths to avoid the payment of Estate Administration Taxes payable on assets administered under a probated will in Ontario and other provinces, the rate (at approximately 1.5% in Ontario) is significantly lower than what we see in jurisdictions where estates are subject to inheritance tax (up to 55% in Japan).

In particular, we have covered a number of developments in U.S. inheritance tax, which saw some fluctuations during Donald Trump’s presidency.  Trump had proposed the elimination of inheritance taxes all together.  More recently, President Joe Biden’s government has been considering a number of measures to increase the taxation of large estates: the reduction of the estate tax exemption to $3.5 million (from $11.7 million), increasing inheritance tax rates from 40% to 65%, and/or increasing taxes on capital gains in respect of inherited assets.  News reports suggest that there has been resistance to the proposed increased tax burden to estates as the proposed increased capital gains tax makes its way through congress.  However, the measures proposed by President Biden could generate an additional $213 billion to $400 billion over the next ten years.

Having just seen another federal election in Canada, it is interesting to follow along with how inheritance tax has been used as an important part of political agendas in other jurisdictions.  It will be interesting to see if inheritance tax or other taxes applied to estates become part of political platforms locally in coming years, as we continue to approach the greatest ever transition of wealth from one generation to the next.

Thanks for reading,

Nick Esterbauer

 

Other blog entries that may be of interest:

28 Oct

Presidential Powers of Attorney: A Capital Idea

Ian Hull In the News, Wills Tags: , , , , , , 0 Comments

Whenever the President transmits to the President pro tempore of the Senate and the Speaker of the House of Representatives his written declaration that he is unable to discharge the powers and duties of his office, and until he transmits to them a written declaration to the contrary, such powers and duties shall be discharged by the Vice President as Acting President.

USCS Const. Amend. 25, S. 3

In December of 1963, as America mourned the assignation of John F. Kennedy, Birch Bayh , the young United States Senator from Terre Haute, Indiana, introduced an amendment to the Constitution aimed at curing its dangerously vague language on vice-presidential succession and presidential disability. One of the many contingencies it aimed to address was, what happens if the President is unable to discharge the powers and duties of his office?

With the recent hospitalization of the current President after his diagnosis of Covid-19, much of the water cooler buzz, the nightly news, and social media was atwitter with questions surrounding the 25th and whether it would be evoked.

Such declarations are rare, but not uncommon. Presidents Reagan and George H.W. Bush each transferred power using 25 during pre-planned surgeries. But while we do not know, as of yet, if the White House counsel drafted language affording the transfer of power to the Vice-President (albeit temporarily) were the President’s health to take a turn, it did get us thinking that such a document could be akin to the most important Power of Attorney in the world.

In Ontario, the subject of a living will often comes up in similar circumstances. But the term “living will” is not used in any formal way. We have written about living wills here in the past. A more common term is advance directive: a document that clearly outlines your treatment and personal care wishes.

But whether you call it a living will or advance directive, they are not the same as a Power of Attorney (POA): a legal document in which you name a specific person to make decisions on your behalf. While an advance directive can form part of your POA for personal care, so your attorney is aware of your wishes, it does not carry the same weight with the court.

The Ministry of the Attorney General for Ontario outlines the various types of Powers of Attorney in this handy guide and our colleague Jim Jacuta, discussed some differences in this post from 2019.

Finally, while we may not know whether the president executed a document under the 25th Amendment or if one was even drafted, it is a good reminder that even if our own illness or temporary absence does not pose a national security risk, outlining our wishes about care is always a capital idea.

Thanks for reading.

Ian Hull and Daniel Enright

23 Jul

Discovering Blue Zones

Doreen So General Interest, Health / Medical, In the News, Uncategorized Tags: , , , , 0 Comments

 

 

 

 

 

 

 

 

 

 

I learned about Blue Zones recently through Zac Efron’s new Netflix travel show, Down to Earth with Zac Efron.  Episode 4 brings Zac and the audience to Sardinia where Zac meets with Dr. Giovanni Pes, nutritionist and medical statistician, and Dr. Valter Longo, bio-gerontologist, to discuss their research on the centenarians who live there.  Blue Zones are regions of the world where people live much longer on average than everywhere else.  This concept was coined by Dan Buettner and there are five Blue Zones in the world:

  • Sardinia, Italy
  • Okinawa, Japan
  • Loma Linda, California (side note: California is also home to some of the world’s oldest-known living trees)
  • Nicoya Peninsula, Costa Rica
  • Icaria, Greece

According to Wikipedia, these Blue Zones have the highest rates of centenarians (i.e. people age 100 or above), and the people who live there suffer a fraction of the common diseases that ails the rest of the world and they enjoy more years of good health.

During the episode, Zac also visits a local woman who was born on April 15, 1920.  She was 98 years old when the episode was filmed.  Her husband had lived to 103 years old before his passing.  According to Dr. Longo, it is extremely rare to have a couple with such longevity.  Thereafter, ­­Liliana was asked to do a cognitive test that one-third of centenarians or people with dementia will have trouble with, but Liliana does this with flying colours by accurately drawing the numbers on a clock and overlapping shapes on camera.

Liliana’s test was administered in her native language.  In North America, the Montreal Cognitive Assessment (also known as the MOCA) is commonly administered to seniors as a screening tool for cognitive impairment like dementia.  The MOCA is in the news recently as a result of Donald Trump’s interview with Chris Wallace on Fox News Sunday.  Trump didn’t actually identify the exact cognitive test involved but he was proud to have “aced” the test.

Thanks for reading!

Doreen So

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

Hull & Hull LLP 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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