Above and Beyond: Channel your passion through a Special Interest Group

emma_yeatsAs you may be aware, STEP’s Special Interest Groups (SIGs) represent opportunities for practitioners to take an active role in a particular area of practice to drive change and share ideas with like-minded colleagues across jurisdictions. Given the continued interest from practitioners in becoming involved in STEP’s SIGS, I think it’s worth detailing why now is an opportune time to channel your enthusiasm in a meaningful and rewarding way.

We presently have six SIGs, each focussed on a different area of trust and estate practice:

Business Families

This SIG focusses on the unique challenges and considerations that come with advising clients running a family business. One of the specific challenges that this SIG concentrates on is the requirements of business families to not only navigate the standard trials of any business, but to do so within family structures that are made of multiple generations with differing aspirations.


The Charity SIG was established in London almost 15 years ago with a subsequent branch forming in Sydney as a means of facilitating the discussion of legal and accountancy issues relevant to the charity sector. Most recently this SIG has responded to the Charity Commission’s consultation: Extending the Charity Commission’s powers to tackle abuse in charities

Contentious Trusts and Estates

This SIG was born out of increasing instances of trustees becoming involved in hard-fought court proceedings. The group marshal expertise and promote best practices — including using alternative resolution avenues to court proceedings — in dealing with contentious trust and estate disputes. They also offer expertise to non-contentious practitioners to help them avoid pitfalls encountered in trust and estate litigation. Most recently Jeremy Posnansky QC of Farrer & Co explained the case of Prest v Petrodel Resources Ltd in a STEP webcast for the benefit of practitioners working in the field of contentious trusts.

Cross-Border Estates

Now in its tenth year, this SIG provides seminars on both tax and ‘civil’ topics surrounding such conflicts of law issues, touching on marriage, death, divorce and property law questions within cross border practice. This has been particularly relevant recently with the implementation of FATCA and its impacts on dozens of jurisdictions. Each year the Cross-Border Estates SIG also awards the Qualified Practitioner Student of the Year Prize to the author of the best essay on the topic of Cross-Border Estates.

Mental Capacity

While still relatively new, the Mental Capacity SIG has sparked the interest of many practitioners working with vulnerable clients and clients faced with a loss of capacity. This SIG seeks to address the law, influence policy and provide specialist guidance to incapacitated clients, their families and carers. This SIG has a dedicated annual conference to stay abreast of developments and is tied closely to STEP’s newly launched Advanced Certificate in Advising Vulnerable Clients.

Philanthropy Advisors

With family wealth passing to younger generations clients are continuing, and indeed expanding, the scope of their philanthropic giving. This SIG encourages best practice by lawyers, accountants and wealth managers to ensure that clients’ best intentions and legacies are backed up with the use of effective charity models.

Why join a SIG?

In addition to working in an area that interests them, SIG members also receive other benefits from their involvement including dedicated events and webcasts that count toward CPD progression; access to online resources; member discounts; and outstanding network opportunities, bringing together practitioners from around the world who shared a passion for a specific area of trust and estate work through events and networking.network

If you have an interest in one or more of the special areas of trust end estate practice covered by our SIGs, I strongly encourage you to become involved. Being a part of a SIG is an excellent way to collaboratively become best positioned to further policy development, industry expertise and your own ability to best help your clients. Membership in SIGs is currently free* and is open to practitioners who are not members of STEP.

More detailed updates on each SIG will be published on the STEP Blog in the coming weeks, so watch this space. In the meantime please feel free to contact me with your SIG questions.

 Emma Yeats is STEP’s Special Interest Group Executive

*With the exception of the UK Charities group

Thinking Time

martyn_gowarThe Managing Editor of the STEP Journal caught me out recently as I was trying to decide what I should write about for my next column, and I have to confess that a wet towel around the head was not doing me much good at 5.30 on a Friday evening. When does inspiration come, and how much of it is dependent on perspiration?

The upside of downtime

I was much influenced 30 years ago by a wonderful New York private client lawyer who I met at the end of a trip around the US, during which I had been reading a book about what was then a new phenomenon of lawyers working excessively long hours.

This book included the story of how one of two rivals for a partnership worked the first 24-hour day in the firm’s history, only to be outdone by the other, who worked the next week on a flight from New York to San Francisco and was able to record a 27-hour day.

Shell-shocked by these tales as I went to my friend’s major firm in New York, I asked him how he did it, mistakenly assuming that he did.

He put me at ease by saying that in fact he only worked from 9am to 6pm – or to 7pm if he was really worried about something – and then went to play the piano with his string quartet. (His middle name is Steinway, I should add.)

My friend pointed out that, when you are doing intellectually stretching work, as we do with tax and trust law, there is a limit to what you can achieve each day. Quantity is no substitute for quality of thought.

Despotic inbox

I am sure I have muttered about the tyranny of the inbox before, and, even as I type this, little messages keep popping up in the corner of my screen, tempting me to switch over to deal with them (after all, it will only take a minute, and then the problem will be gone!).too-many-emails

And then there are the interruptions of the phone, and people with queries – all of them important, all of them not to be ignored – and, before you know it, your train of thought has been derailed.

We all have to work out our own salvation. For some, it is discipline, and for others it is self-discipline. When something is both important and urgent, the discipline of the deadline solves the prioritisation problem, but, when something is important but not urgent, the self-disciplined will come up trumps. However, what is urgent but not important, let alone what is not urgent and not important, cannot be forever postponed.

Food for thought

Thinking time is a precious commodity, and I suggest we all need at least half an hour minimum a day – but at a time when we are not mentally tired. Of course, we are all different in terms of what works for us, and I claim to offer no answer, except to say that I try to focus on the reality that my clients want from me a properly considered response to their problem, built on an understanding of all the influences that affect their own lives. That requires time and concentration. Somewhere in the day, time has to be found for it.

*This article originally appeared in the STEP Journal

Martyn is a Partner at McDermott Will & Emery LLP and writes an opinion column for STEP Journal.

Trusts: how to comply with US FATCA rules

George HodgsonThrough the Finance Act 2013, the UK-US ‘Agreement to Improve International Tax Compliance and to Implement FATCA’ is now part of UK law. It is imperative that all UK trusts and trustees urgently consider their status — regardless of any known US connections.

The Foreign Account Tax Compliance Act (FATCA), part of the US Hiring Incentives to Restore Employment Act (2010), aims to combat tax evasion by US tax residents using foreign accounts. The US legislation requires financial institutions outside of the US to provide information about their US customers to the US Internal Revenue Services (IRS).

The era of FATCA is well and truly underway. At the time of writing, around 77,000 financial institutions worldwide have registered with the US authorities – with more expected in the coming months – with the first reporting period having begun in June 2014.

Over 30 jurisdictions, including the UK, have established bilateral agreements to comply with FATCA and almost 40 more have formed ‘agreements in substance’ with the US Department of the Treasury. These intergovernmental agreements (IGAs) allow financial institutions in partner jurisdictions to report the information of US account holders to their respective tax authorities for subsequent sharing with the IRS, in most cases with reciprocal reporting arrangements. Under the UK-US Model 1IGA, all UK trusts are considered as reportable entities subject to FATCA with the onus on trustees to register any trusts considered to be ‘financial institutions’ under FATCA.

If they have not done so already, UK trusts and trustees need to determine whether a trust should be classified as a financial institution under FATCA. They should also endeavour to ensure they are registered for a Global Intermediaries Identification Number (GIIN) no later than October this year. From 1 January 2015, financial institutions not registered with the IRS will be deemed non-compliant and subject to a 30 per cent withholding tax.keep-calm-and-fatca-on

Not only are FATCA and the UK-US IGA complex, but there has also been a mistaken perception that the legislation does not apply to all UK trusts and a misunderstanding of the actions practitioners need to take in order to comply. To clarify UK reporting obligations, STEP in partnership with the Law Society of England and Wales and the Institute of Chartered Accountants in England and Wales (ICAEW), published a guide outlining obligations under FATCA. The guide is based on current understanding of both US FATCA legislation and HM Revenue and Customs guidance on the UK-US IGA, last updated in February this year. Importantly, even if a financial institution does not need to register with the IRS, banks and fund managers it uses will request that the trustees confirm its FATCA status as part of their due diligence processes.

Entity classification under FATCA
Firstly, practitioners need to determine if a trust will be considered an entity under FATCA. A trust will be considered subject to reporting if it is:

  •  a Depository Institution accepting deposits in the course of banking;
  •  a Custodial Institution holding financial assets that make up more than 20 per cent of its gross income;
  •  an Investment Entity trading financial assets or otherwise investing, administering or managing funds on behalf of a client;
  •  a Specified Insurance Company issuing cash value insurance or annuity contracts, or;
  •  a Holding Company or Treasury Centre where holding stock of at least one financial institution is its primary activity.

If an entity is not classed as a financial institution under FATCA it must be classed as one of two types of Non-Foreign Financial Entity (NFFE). An active NFFE is engaged in a non-financial business whereas a passive NFFE is not engaged in a business and it will usually be required to identify its owners to the financial institution with which it has a relationship, particularly if it is owned by any US Persons.

FATCA registration and practitioners’ responsibilities
Overall responsibility for registering financial institutions is designated to a Reporting Person, who must carry out the following functions:
i) identify and record US persons;
ii) identify and record payments to or for those persons;
iii) report the relevant payments to the authorities.

It is up to the Reporting Person to ensure that engagement letters are sent to clients to clearly outline the scope of FATCA reporting compliance and what (if any) information must be registered. They should also make clear that the client will be responsible for communicating any changes in circumstances that may alter their FATCA status or if there are any changes in their US connections. Connections include the involvement of a US citizen or permanent resident; a person born in the US; a person transferring funds to US accounts; a US settlor or beneficiary; or a signing authority for a person with US address.

Given the intrinsic role client information plays in adhering to FATCA, it should be recorded carefully and kept up-to-date. Future changes in a client’s circumstances may have consequences for their FATCA status. I therefore strongly advise practitioners establish a process for periodic review. Accountants, for example, should incorporate FATCA-related checks into their yearly accounts preparation process. Clients should also be made aware of data protection issues as it may be necessary for them to share their client’s FATCA status and GIIN with other bodies and make appropriate reports to UK tax authorities as permitted under the Model 1 IGA.

New trusts and an exception to the rule
At the time of writing, it remains unclear as to the deadline for obtaining a GIIN and how trusts will be regulated under FATCA if they are created after the initial period of registration. In the interim, and taking into account the requirements of banks and other institutions to be able to operate accounts, it would be prudent to register any new trust as soon as is practicable.

One area to pay particular attention to is the role of executor; they are not regarded as entities under FATCA and will therefore be reported upon as usual. There is one exception, however, in that the accounts of deceased persons are not reportable accounts as long as the financial institution is able to produce a death certificate. Occasionally, executors become the trustees of a will trust and the point of transition between the two can be difficult to identify with precision. Practitioners will need to be prepared for such an eventuality and ensure that the appropriate steps are taken including appointing corporate trustees when necessary and updating client records accordingly.

*This article originally appeared in Accountancy Live

George Hodgson is STEP’s Deputy Chief Executive.  

STEP LATAM and North America News Digest wrap-up – June’s top stories

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It’s been a busy month in North America and the LATAM region as FATCA takes effect. Missed some of the developments during this crucial time? Welcome to the wrap-up of the top ten most popular stories in the STEP LATAM and North America online Digests throughout June. In case you missed them, here are the top STEP LATAM and North America News Digest stories most clicked by our readers.

FATCA: US expats left stranded in Mexico: As the first set of Foreign Account Tax Compliance Act (FATCA) compliance issues for banks worldwide is set to come into effect on July 1, 2014, Banamex USA have begun to send notices to all US citizens in Mexico alerting them that their accounts will be closed within 30 days.

IRS prepares more generous offshore amnesty for inadvertent non-compliers: The Internal Revenue Service has accepted that its voluntary offshore compliance programs have been too harsh on accidental non-compliers. It is about to offer residents and long-term expatriates with unreported offshore accounts a route to compliance without risking heavy penalties, provided their non-compliance was not deliberate.

Clintons using trusts to limit estate tax: Bill and Hillary Clinton are reportedly using financial planning strategies to help shield some of their assets from estate tax. According to Federal financial disclosures and local property records, they created residence trusts in 2010 and shifted ownership of their New York house into them in 2011.

FATCA hurts American expats, says Heritage Foundation: The United States Foreign Account Tax Compliance Act (FATCA) is hurting Americans living abroad, according to the Heritage Foundation. In a new report calling for reforms, the organization noted that FATCA is burdening Americans living overseas with “enormous financial and legal burdens” through increased compliance costs and denials of service from foreign banks that do not want to have to deal with the law. It added that the Act “granted the Internal Revenue Service (IRS) a new level of intrusiveness into the lives of Americans”.

White House announces legislation to capture beneficial ownership: The US administration has announced legislation forcing every company formed in any state to obtain a federal tax employee identification number, and allowing the Internal Revenue Service to collect information on its beneficial owners. If enacted it would be a ‘significant and helpful move to fight the illicit use of US shell companies,’ according to Jersey Finance.

Estate planners should not decline representation of their law partner’s family, says law firm: In Printz v Printz, the West Virginia Supreme Court of Appeals dealt with an undue influence accusation where one of the testators’ children was the long-time law partner of the drafter of the testators’ wills. According to law firm Bryan Cave, although preparing estate documents that benefit an estate planner’s law partners could result in estate litigation down the road, it should not be reason to decline the representation.

Born in the USA – Lawrence H Heller TEP: ‘My experience is that 99 per cent of US persons are tax-compliant. So I’d be interested to see statistics regarding what FATCA means in terms of increased revenue for the US Treasury,’ says Larry Heller TEP, attorney at Greenberg Traurig in Los Angeles and STEP Council member, in an interview for the STEP Journal.

New Brunswick judge voids will bequest to US white supremacist group: In a New Brunswick Court of Queen’s Bench ruling last week (McCorkill v Streed, Executor of the Estate of Harry Robert McCorkill), Justice William T Grant voided a will bequest gifting the testator’s entire estate to a US white supremacist group. The judge declared an intestacy after finding the National Alliance stands for principles and policies “that are both illegal and contrary to public policy in Canada.”

Changes to discretionary trust rules in British Columbia: Amendments to limit a spouse or common-law partner’s rights to certain trusts’ property in the event of a relationship breakdown were enacted into British Columbian law in late May 2014. This change may be good news for certain taxpayers who live in BC, including beneficiaries of a discretionary trust and parents who have set up a discretionary trust with their children as beneficiaries.

Senators plan comprehensive tax reform:  Senate Finance Committee Chairman Ron Wyden and Senator Orrin Hatch have agreed on a set of hearings this summer to spur movement toward comprehensive tax reform. In a joint statement, they said it is time to build momentum for tax reform by breaking the issue into smaller pieces. Their panel will hold hearings in June and July to build the foundation for a “modern, effective tax code.”

The STEP Industry News Digests provide a round-up of relevant industry news for trust and estate practitioners and other professionals in the wealth management sector. They provide brief summaries of topical news stories gathered from news providers internationally, providing a quick reference for busy practitioners to all the relevant news and issues. The News Digests also feature job listings from our recruitment site and list local STEP branch events and conferences. STEP’s digest services include twice weekly UK and Wealth Structuring (international) editions as well as a bi-weekly North America Digest focusing on the US, Canada and Mexico, and a Latin America Digest.

To subscribe to STEP’s digest services you will need to first register here: http://www.step.org/register

STEP News Digest wrap-up – June’s top stories


On the go and need to get up to speed? Welcome to the wrap-up of the top ten most popular stories in the STEP online Digests throughout June. In case you missed them, here are the top STEP News Digest stories most clicked by our readers.

New plan for splitting nil-rate bands across multiple trustsHMRC has amended its proposal to split an individual settlor’s inheritance tax nil-rate band (NRB) across all trusts he or she sets up. Its new idea is to give each settlor a settlement NRB as well as the personal NRB, and require them to declare how the extra NRB is to be allocated among all their trusts.

Lessons from Parry pension benefits decision: This month Squire Sanders’ Tax Bulletin examines the judicial guidance in Parry v HMRC on the tax consequences of failing to take pension benefits before death; the new rules on deduction of liabilities when calculating inheritance tax; HMRC’s current tactic of challenging claims for principal private residence relief on the criterion of ‘residence’ rather than ‘principal’; and its extraordinary approach to penalties in the Gardner case.

Treatment of trusts clarified: With the coming into force of the US Foreign Account Tax Compliance Act tomorrow (1 July), HM Revenue & Customs has explained how it will treat trusts that own assets managed by a financial institution. The clarification also applies to the new British regulations requiring the Crown Dependencies and Gibraltar to report client information to the UK.

Sheriff’s ‘bombshell’ decision renders most Scottish powers of attorney invalid: Scottish solicitors are being warned to review the wording of all continuing powers of attorneys they have prepared. Most such CPAs may be invalid because they are based on the standard template on the website of Scotland’s Office of the Public Guardian, which according to a recent decision of Glasgow Sheriff Court does not comply with the Adults with Incapacity Act.

Government plans to promote LPAs and will-making: The government is to hold a ‘life planning day’ next year to raise awareness of lasting powers of attorney and other life planning mechanisms including will-making and advance decisions. It wants the registering of LPAs to become a matter of course similar to taking out a life assurance policy.

The 15 foreign banks whose clients will be shut out of amnesty: A US law firm specialising in foreign bank account reporting issues names 15 overseas banks whose clients are especially at risk from the new amnesty rules. Taxpayers with unreported foreign accounts at these banks only have until 1 July to decide whether to participate in the offshore voluntary disclosure initiative.

Widow wins battle to bury Scottish soldier: A soldier who was killed three years ago is to be buried in a place chosen by his widow and not his mother, Forfar Sheriff Court has ruled.

Last-minute guidance on form-filling: On the eve of the coming into force of the US Foreign Account Tax Compliance Act, the US Internal Revenue Service has issued several long-awaited guidance documents to help foreign financial institutions and US clients complete the associated forms.

Protection for charities against known rogues: The new parliamentary session will see the enactment of a Protection of Charities Bill, to defend charities against ‘people who present a known risk’, and to help the Charity Commission take action against individuals and charities in cases of abuse.

Daughters challenge legacy to mother’s boyfriend: The daughters of the late Elizabeth Walker are challenging a will in which their mother left a significant share of her estate to a much younger cohabitant. Alison Walker and Jennifer Rowan allege that their mother lacked capacity because she had a brain tumour, which caused her death a few months after she executed the will.

The STEP Industry News Digests provide a round-up of relevant industry news for trust and estate practitioners and other professionals in the wealth management sector. They provide brief summaries of topical news stories gathered from news providers internationally, providing a quick reference for busy practitioners to all the relevant news and issues. The News Digests also feature job listings from our recruitment site and list local STEP branch events and conferences. STEP’s digest services include twice weekly UK and Wealth Structuring (international) editions as well as a bi-weekly North America Digest focusing on the US, Canada and Mexico, and a Latin America Digest.

To subscribe to STEP’s digest services you will need to first register here: http://www.step.org/register

How to win a STEP Private Client Award

George Hodgson

George Hodgson

The Judges’ Panels met last week to whittle down the entries for this year’s STEP Private Client Awards to a shortlist for final consideration. Given that we had a record number of entries (240) from a record number of jurisdictions (21), their task was not easy. Many entrants will, inevitably, be disappointed. For those that are disappointed, however, I have drafted some simple notes on how you can improve your chances of winning an Award next year.

  1.   Apply for the right Award

It was a constant surprise to the judges how many people seemed to be making submissions for the wrong category. One submission for Firm of the Year even began with the bold statement that ‘We are a leading (another category all together) firm…’.  Read the category criteria carefully, and if you think the judges might have difficulty understanding why you are applying for a particular category, help them by explaining your business better.

  1. Answer the questions

Probably the most common reason for submissions going by the wayside was that the judges felt that the questions and criterion laid down in the Awards application pack had not been answered. It is standard advice to every student sitting an exam to read the questions carefully and make sure you answer them. The same holds true for anyone drafting a submission for a Private Client Award. Even with the most upbeat story, simply cutting and pasting your latest PR pack will seldom impress the judges relative to an entry that gives clear responses to the questions asked.

  1. Give examples and evidence

Solid evidence and real examples demonstrating why you think your firm deserves an Award always go down well with the judges. To illustrate, most entrants in most categories claimed to be ‘client focused’, but some gave real-life examples of how they achieve this and what they have done to go that extra mile for their clients. They tend to attract the judges attention far more than simple assertions of client focus.

  1. Be consistent

The judges are both curious and cynical in equal measure. They will check what you say in your submission against what you say on your website and other sources of information. Glaring inconsistencies tend to result in applications receiving relatively short shrift.

  1. Use your 1,000 words

Brevity is a strength, but several submissions fell by the wayside because there was little clear detail on key issues and yet the submission was significantly below the 1,000-word maximum. Wasted opportunities?

  1. Remember we are choosing ‘Firm of the Year’

Your firm may well be successful and very good at what it does, but the Awards are intended to highlight those that have achieved particular success over the past year. General statements about your historic successes are therefore far less relevant than what you have actually achieved over the past 12 months.

From the above it is probably clear this year’s STEP Private Client Awards is proving very competitive. Submissions across the board were often of a very high standard. Congratulations, therefore, to those who have made it to the shortlist for final consideration, and commiserations to those who haven’t.

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George Hodgson is STEP’s Deputy Chief Executive.