Today’s PFTCs bear little resemblance to ‘private trust companies’ of the 1990s, the gestation era for the PFTC. The modern US PFTC also differs markedly from a third form of ‘private trust company’: its ‘offshore’ single family private trust company (OFTC). Limited federal taxation of foreign trusts and privacy protections as good as or better than those found in traditional offshore jurisdictions have led some commentators to call the United States the ‘new offshore’ jurisdiction for trusts.
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Most family offices that serve U.S. families are well aware that special planning considerations can arise when a U.S. citizen family member marries a noncitizen. Should the client’s estate plan be revised to incorporate a qualified domestic trust (QDOT) to ensure that assets passing to the surviving noncitizen spouse qualify for federal estate tax marital deduction?
In early April 2016 files leaked from a large Panama-based law firm (known as the ‘Panama Papers’) brought to the attention of many the ways in which offshore companies and structures can be used to obscure the identity of beneficial owners, some of whom have used such entities to avoid paying tax in their country of tax residence.
Even though a trust may be established under the laws of a US state and have a US trust company serving as trustee (hereinafter a ‘US-based trust’), this does not mean that it is a US domestic trust for income tax purposes. If non-US persons make substantial decisions for the trust, the US-based trust will be classified as a foreign trust under US tax law. Regardless of whether the US-based trust is foreign or domestic, if it has accounts with financial institutions, it must provide certification of its status for Foreign Account Tax Compliance Act (FATCA) purposes.
Private trust companies are not a new phenomenon. Rather, over the past 25 years, they have increased dramatically in number, with hundreds of major, family-controlled trust institutions now operating in the United States. This article addresses why the number of private trust companies has been growing; describes a typical private trust company (PTC) organizational structure; and discusses certain legal and practical considerations that a family exploring a PTC should address.
In 2015 charitable giving rose to $373 billion in the United States, driven by an almost $10 billion increase in gifts from individuals which represent over 70% of total giving. This year individual giving in the U.S. is poised for even greater growth, thanks to several contributing factors, including a solid economy and robust stock market performance, the extension of the IRA Charitable Rollover provision and the continuing value of itemized charitable tax deductions. Regardless of the election results, there are four reasons why 2016 is shaping up to be a great year to give.
IRS regulations’ restricting taxpayer’s ability to structure leveraged partnerships were drafted with the intent to eliminate leveraged partnerships through the use of what the IRS perceived as abuses of the debt allocation rules. As of January 3, 2017, when a taxpayer contributes property to a partnership, the Temporary Regulations treat all partnership liabilities (with limited exceptions) as non-recourse, even if the taxpayer is personally liable on some or all of the debt.
Given the uncertainty after the 2016 presidential election, it is critical to implement the best strategies to minimize taxes come April 15, 2017 (and beyond). While it is unclear which tax reforms will be pursued and what order, there are considerations and informational points—broken down by tax areas in a summary of planned changes—that will provide some education relevant to higher-income taxpayers.
Private family trust companies have increased in popularity in recent years, and several states have adopted statutes specific to them. This compiled information compares state trust law requirements for Virtual Representation, Nonjudicial Settlement Agreements and Nonjudicial Modification Agreements in selected states that have PFTC statutes, including Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming.
A much anticipated and, perhaps, over-hyped news conference rolling out the Trump Administration’s tax reform plan generated very little “new news.” Treasury Secretary Steven Mnuchin and National Economic Director Gary Cohn presented an outline of a plan that is very similar to the talking points the President promoted on the campaign trail. Perhaps the most interesting tidbit of information from the 23-minute briefing was a change in the Administration’s proposal for the treatment of itemized deductions for individual taxpayers.