New EU rules give UK families more freedom over legacies

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The EU Succession Regulation comes into force today, giving much more freedom to families as to how they pass on assets they own in the EU in their wills.

This could be particularly important for UK families with holiday homes in the EU or for those with parents and grandparents living in the EU.

George Hodgson, Deputy CEO of STEP, the professional body for specialists in family inheritance and related areas commented: “Many European countries have so-called ‘forced heirship’ rules, where the law lays down precisely how someone’s assets have to be passed on within the family after death. Until now, for example, a UK family with a holiday home in France had very limited options as to how that could be passed on through the family. The new regulations change that, and should be a prompt to everyone with EU assets to review their inheritance plans”.

Mr Hodgson cautioned that the new rules are complex, but even though the UK itself has opted out of the Succession Regulation, they still give potentially valuable new rights to those with property or other assets in the EU. Given the complexity, however, it would be wise to seek specialist advice as to how to change any inheritance plans.

The EU Succession Regulation comes into force today, Monday 17 August. It has the potential to affect the estates of any individuals with any connection to any EU Member State in which the Succession Regulation has direct application.

The UK has opted out of the EU Succession Regulation, but British owners of holiday homes in EU member states such as France should update their wills and draw up French ones to avoid the country’s forced heirship rules.

Details on the new regulation can be found at http://ec.europa.eu/justice/civil/family-matters/successions/index_en.htm and an example of how the new rules might work is attached.

An example:

Clare is a British citizen who is resident in England but has a French holiday home she uses a few weeks each year. French forced heirship rules would oblige her to leave her holiday home to her husband and children, with clear rules as to how it would be divided. She would like instead to leave it to her brother, since it was bought with money from their grandparents.

Until today, the law governing who receives the French house on Clare’s death was generally French law. But as of 17 August 2015, this need no longer be the case.

The new regulations say that someone can generally choose the law applicable to their inheritance. This can either be the law applying where the deceased had their ‘habitual residence’ at the time of death, or the law of the state of nationality at the time of making the choice, or at the time of death.

As a British citizen, therefore,  Clare can now opt to have her French holiday home treated under English law and leave it to her brother.

George Hodgson is STEP Deputy Chief Executive

STEP LatAm News Digest wrap-up – July’s top stories

Argentinian-flag-behind-courtArgentina topped our most read stories from the region last month, with changes to trust law and a succession ruling of most interest. In case you missed them, here are the top five:

Regulation of Argentine trusts under the new Civil and Commercial Code: On August 1, 2015, a new civil and commercial code (the ‘new Code’, Law No. 26.994) will become effective in Argentina which introduces new regulations in connection with trusts in Argentina. The new Code amends existing Argentinian trust law (Law No. 24,441, the “Trust Law”).

Argentine court hands down succession ruling; rules on applicable law: When deciding on the succession of Cesar Joaquin Porto (Porto, Cesar Joaquin s/Sucesion Ab Intestato) on May 10, 2015, Chamber H of the National Civil Appellate Court (hereinafter, the ‘Appellate Court’) ruled that if the assets of a deceased person were located in different countries, the succession regime applicable where those assets are located should be applied (i.e., the applicable succession law is that of the country where property is situated).

Chile: Tax authority issues circulars on tax evasion as part of reform: Chile’s tax authority (Sp: Servicio de Impuestos Internos, SII) has issued a number of circulars on tax evasion which will apply from September 30, 2015 – this is partly to implement the government’s tax reform. These include circular 51 (on the obligation of financial institutions to share information with the SII and other governmental authorities) and circular 55 (on the validity of the rules to combat tax evasion).

Executives of Panamanian Corporation and Aviation Company Arrested in Multi-Million-Dollar Money Laundering Sting: Michael J. Dodd, also known as ‘Michael Stanley,’  Kenneth Ardell Landgaard, and James Robert Shipman, Jr. were arrested today on charges that they conspired to launder over two million dollars of proceeds from what they thought to be a penny stock fraud scheme. The money was, in fact, provided to the defendants by an undercover law enforcement agent who posed as a criminal stock promoter as part of a sting operation.

Brazilian tax policy likely to increase taxes on financial institutions and high net worth individuals: Recent tax policy trends in Brazil are likely to increase taxes on financial institutions, dividends and high net worth individuals. First, a tax on the profits of firms in the financial sector is due to increase by a third, from 15% to 20%. This increase is scheduled to go into effect on 1 September 2015, and will likely affect the financial industry significantly. Second, high net worth individuals are also likely to be subject to higher taxes on their wealth. Specifically, there are discussions in the Brazilian Congress around targeting dividends, as well as proposals for a federal wealth tax.

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: www.step.org/register.

Follow @STEPSociety for regular updates.

STEP US News Digest wrap-up – July’s top stories

paying-taxes---one-pays-anotherPresidential candidate, Senator Bernie Sanders’ bid to increase estate taxes for the wealthiest proved of particular interest to our US readers. The top five news items for July follow, in case you missed them:

US presidential candidate proposes increasing taxes on wealthiest: Presidential candidate, Senator Bernie Sanders of Vermont, introduced on June 25 the Responsible Estate Tax Act which proposes increasing estate taxes for the wealthiest Americans. Currently, the first USD5.4 million of an individual’s estate (almost the first USD11 million of a married couple’s estate) are exempt from the tax. The Bill, which aims to reduce “skyrocketing income and wealth inequality” recommends that the first USD3.5 million of an individual’s estate (the first USD7 million of a married couple’s estate) should be exempt from estate tax.

B.C. Supreme Court cures will that did not comply with legal requirements: In Re Yaremkewich Estate, the Supreme Court of British Columbia held that the testamentary documents the deceased left constituted a valid will under the Wills, Estates and Succession Act 2009 even though they did not comply “with the formal execution requirements” of the Act.

Court renders first decision on provincial residency of a trust: In Discovery Trust v Minister of National Revenue (2015 NLTD(G)86), a trust tax return was reassessed following a finding by an auditor that emigrating the trust to Alberta was abusive. In 2008, the Discovery Trust filed returns as if it was resident in Alberta (as opposed to Newfoundland) and thereby saved CAD9 million approximately in tax.

Presidential candidate to sue US government over foreign bank account reporting rules: Senator of Kentucky and Presidential candidate Rand Paul is to sue the Internal Revenue Service in pursuance of a court declaration that its Foreign Bank Account Reporting (FBAR) regime and the Foreign Account Tax Compliance Act (FATCA) are unconstitutional.

BC Supreme Court declares will invalid after son “failed to show” it was duly executed: In the case of Harshenin v Khadikin (2015 BCSC 1213) the Supreme Court of British Columbia held a will invalid because the defendant had failed to prove that it was “duly executed in compliance with the requisite statutory formalities” and therefore revoked a grant of probate issued to the defendant with regard to his late father’s estate.

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: www.step.org/register.

Follow @STEPSociety for regular updates.

STEP International News Digest wrap-up – July’s top stories

Rope-and-anchorA focus on non-doms and offshore proved especially interesting for readers of our STEP International News Digests for July 2015. In case you missed them, here are the top ten worldwide industry items.

Non-doms’ UK property to be drawn into inheritance tax net: The British government’s summer Budget announced yesterday includes two momentous measures affecting non-domiciled residents from April 2017. The first is an end to the indefinite nature of non-dom status. At the moment, a qualifying non-domiciled resident can elect for the remittance basis of taxation, under which they do not pay tax on income and assets kept offshore.

Jersey fiduciary acquitted of failing to report ‘suspicious’ transaction: Jersey’s Royal Court has acquitted a director of trust and company service provider STM Fiduciaire of charges related to suspicious transaction reports, in the first criminal prosecution of its kind.

Appleby to sell fiduciary business: Offshore legal, fiduciary and administration service provider Appleby has announced ‘the management buyout of its fiduciary business (AFB) for an undisclosed sum, backed by private equity firm Bridgepoint’. AFB provides trust and corporate services (TCS) administering over 10,000 structures for almost 6,000 clients from nine locations.

Cyprus hopes to tempt foreign investors with sweeping tax reforms: Cyprus has announced a series of tax reforms to attract foreign investment. The most revolutionary is the introduction of the new concept of domicile. Foreign individuals classed as tax-resident under the usual day-counting basis can qualify as non-domiciled if they meet certain criteria to be set out in as yet unpublished draft legislation. Non-doms’ income from dividends will be exempted from the 17 per cent special defence contribution, thus capping the effective dividend tax rate at 12.5 per cent.

UK expected to renew pressure on British Overseas Territories over ownership registers: The UK government is expected to resume its pressure on British Overseas Territories to set up registers of company beneficial ownership, at the Joint Ministerial Council meeting in London later this year. Cayman Islands premier Alden McLaughlin made the announcement at a meeting of Overseas Territories (OTs) leaders in Bermuda last week. Although there has been a brief respite in the pressure from London since the UK general election, the matter has not gone away, he said.

UK ‘successful’ in attracting wealthy migrants since 2000: The UK has been far more successful at attracting high-net-worth migrants than any other country in the past 14 years, according to a report from the consultancy New World Wealth. There was a net inflow of 125,000 high-net-worth individuals (HNWIs) into the UK in the 2000-2014 period, the report found. The country’s main attraction is, of course, London, with its language advantage, international nature, ease of travel to EU countries, lack of restrictions on moving money and buying property, and high-quality education system.

European Succession Regulation – Selling French probate property from 17th August 2015: The European Succession Regulation will start to take full effect from 17 August 2015. After this date, French properties being sold by deceased estates will need to be handled with great care. British nationals who die resident in England with French property will, in most cases, have their French estate dealt with under English law. This means that the notaire selling the probate property has to do so under English law.

Facebook lets users appoint ‘heir’ to manage account when they die: Facebook users in the UK can now hand over administration of their profile to a friend or family member after their death.

Tackling offshore evasion: The UK government announced four consultations as part of its publication Tackling Evasion and Avoidance. These take forward HMRC’s strategy for tackling offshore evasion, No Safe Havens. An update on this strategy was published in April 2014.

Indian Revenue sets conditions of Black Money Act amnesty: The Indian federal government has set out exactly how the Black Money Act and its associated disclosure opportunity will work.

 

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: www.step.org/register.

Follow @STEPSociety for regular updates.

STEP UK News Digest wrap-up – July’s top stories

Chancellor_of_the_Exchequer_George_Osborne_(6128163568)

The UK Budget delivered by Chancellor George Osborne MP on 8 July provided a focus for many of the stories of most interest to our readers. In case you missed them, here are the top ten most viewed items.

Non-doms’ UK property to be drawn into inheritance tax net: The British government’s summer Budget includes two momentous measures affecting non-domiciled residents from April 2017. The first is an end to the indefinite nature of non-dom status. At the moment, a qualifying non-domiciled resident can elect for the remittance basis of taxation, under which they do not pay tax on income and assets kept offshore. After a certain length of time as resident they must pay an annual remittance basis charge (from GBP30,000 to GBP90,000) but they retain the offshore tax exemption. The only exception to this is inheritance tax (IHT), to which they become liable after 17 years of UK residence.

Jersey fiduciary acquitted of failing to report ‘suspicious’ transaction: Jersey’s Royal Court has acquitted a director of trust and company service provider STM Fiduciaire of charges related to suspicious transaction reports, in the first criminal prosecution of its kind. Michelle Jardine was the Money Laundering Reporting Officer at STM in May and June 2011, when the offences were alleged to have taken place. She was accused of failing to report a suspicious transaction where funds were remitted by an unknown third party to a politically exposed person (PEP) in a high-risk jurisdiction.

Appleby to sell fiduciary business: Offshore legal, fiduciary and administration service provider Appleby has announced ‘the management buyout of its fiduciary business (AFB) for an undisclosed sum, backed by private equity firm Bridgepoint’.

Scrutiny of IHT-driven deeds of variation begins: The government has launched a consultation on the use of deeds of variation (DoV) for tax purposes, to ensure that they are not being abused. The consultation was promised by Chancellor George Osborne in the Budget immediately preceding the May general election.

More IHT planning brought under DOTAS rules: HM Revenue & Customs is proposing to strengthen the ‘hallmarks’ it uses to identify inheritance tax (IHT) planning arrangements that must be notified by promoters and users under the Disclosure of Tax Avoidance Schemes (DOTAS) regime.

Small business owners to pay higher dividend taxes: From April 2016 the dividend tax rate will be increased to 7.5 per cent for basic-rate taxpayers, 32.5 per cent for higher-rate taxpayers and 38.1 per cent for additional-rate taxpayers. The measure, included in the summer Budget statement, will change the economics of operating a small business as a limited company.

Finance Bill 2015 Explanatory Notes: HM Treasury’s explanatory notes relate to the Finance Bill 2015 as introduced into Parliament on 14 July 2015. They have been prepared jointly by the HM Revenue & Customs and HM Treasury in order to assist the reader in understanding the Bill. They do not form part of the Bill and have not been endorsed by Parliament.

Summer Finance Bill: The Summer Budget provided the Chancellor with the opportunity to indicate a direction of travel for taxation over the five year life of the present Parliament. This includes reform in a number of areas with a Business Tax Road Map and over 30 consultations promised. EY.

Summer Finance Bill 2015: A collection of supporting documents for Summer Finance Bill 2015 from Gov.uk. The Finance Bill is the vehicle for renewing annual taxes, delivering new tax proposals and maintaining administration of the tax system. Finance Bill 2015 supporting documents.

Guidance for accountants: Guidance from the Legal Ombudsman provides ICAEW Chartered Accountancy firms, that have become authorised providers of probate services, under the provisions of the Legal Services Act 2007, with an overview of the Legal Ombudsman scheme.

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. STEP’s news digest services include twice weekly UK and 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: www.step.org/register

STEP Private Client Awards Winners Chosen!

george_hodgson2The Panel of Judges met yesterday to decide the winners of this year’s STEP Private Client Awards.

Yesterday’s meeting was the culmination of a process that began in April when nominations closed and expert panels started sifting through well over 200 entries from 17 different jurisdictions to produce a shortlist of finalists in each category. At yesterday’s meeting we looked in detail at the shortlists and identified the winners.

After a meeting lasting several hours many of the judges expressed themselves exhausted, but impressed at the depth and detail of the discussion that had gone into the judging process. Several of the categories under consideration were very hard fought, with submissions that split the judges’ opinions in terms of who should win – a situation that was only resolved after much discussion. The net result was that in spite of very able chairing from Paul Stibbard TEP, the Chair of the Judging Panel, the meeting actually went on rather longer than originally planned.

Congratulations are due to all those under consideration yesterday – just making the shortlist is a notable achievement given how stiff the competition is in many categories. Particular plaudits are nevertheless due to the 16 winners chosen yesterday to be announced at the awards ceremony on 8 September.

To those not winning an award and wondering what the secret of success is, yesterday’s discussion demonstrated yet again that the key item the judges consider is the quality of the submission. It needs to be focussed on the criteria laid out and go beyond bland statements about ‘client focus’ or ‘professionalism’ and offer hard evidence of progress and achievement over the past year. Our judges are all very experienced industry professionals and rightly therefore set high standards. STEP thanks them for their efforts yesterday and we look forward to a great night at the sell-out awards ceremony at the Park Plaza Westminster Bridge Hotel, London on 8 September.

George Hodgson is STEP Deputy Chief Executive