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STEP 2017, Estate planning challenges

April 8, 2017

STEP conference in Mauritius, international estate planning, the new deal!




As STEP member, I was one of the lucky participants of the international conference organised by STEP Mauritius branch at the Hilton Hotel, Flic en Flac. Nice venue, brilliant and smart speakers, insightful thematics and a clear status report: trust and estate practitioners are at the crossroad of international economic trends. In a nutshell: more transparency, more complexity, new opportunities. Clients, corporate or private investors, need for clear, sustainable, compliant and secured strategies. 


Get set, ready, go. Arm’s length, transfer pricing, profit shift, hybrid fiscal mismatch, reform of deemed foreign tax credit, all of these are not new. We are simply at the turning point of international financial services. Here we are, professional multidisciplinary approach for advisers shall replace “on-the-shelf” structuring and offshore tax planning. Investors, individual or institutional, are ready. Dear colleagues TEP, are we ready?


Priority, enhance a safer global financial services background. At the end of the day, all the pressure put by non governmental bodies, relayed by regional or local revenue authorities are addressing the same problem: maintain international economic stability and ensure global social responsibility. Absolute priority: stop money laundering financing terrorism and illegal trades (drugs, arms).


Well-fare, well being. The bad image of international and offshore financial services (IFCs, OFCs) is clearly associated to offshore. To go directly to the point: fiscal treatment of international transactions, in a word tax. Tax is not only the main government policy instrument to control and monitor exchanges, but also the main source of income to balance macro economic figures and country budget. More of that, tax is the democratic welfare instrument that allows citizens to have proper health infrastructure, road, education, etc. in a word: well being of citizens of the world.


Social responsibility. It’s obvious that aggressive estate & zero tax planning or strategies, tax treaty shopping structuration, was harmful. These practices will be banned in the coming years thanks to the guidance of international bodies such as OECD. “No tax paid” is not an option, neither for government, corporate nor individuals. Not only because it’s damaging for the global economy and at the end, for us all, but more because it is now a social responsibility accepted by all communities to pay tax where you earn money.


Estate planners indirectly impacted. BEPS, CRS, FATCA, ITA, DTAA, IPA, are the instruments, actions plans and tools allowing authorities to control and monitor global finance or international trades. Trust & estate professionals are indirectly impacted and have to integrate systematically a clear explanation concerning the impact of these instruments in their international estate planning. As I mentioned above, these best practices are not new and most of them are already addressed, with limited impact on clients. 


Estate strategy, enhanced value added. By the way, estate planners using international financial services centres (IFC) or offshore financial centres (OFC) in their estate strategies will have to think twice before setting up companies. This will result in loads of prior research work, up to date laws, rules, and guidelines analysis in a constantly moving context. When designing international trust and estate strategies, research work is just a more important part of the advisory methodology. The challenge for practitioners will be to include this value added in their proposals and finally, invoice it…


Sharper and smarter, clear ideas and clearly explained. A lot of instruments and tools are available for international estate managers: trust, foundation, tax resident companies, non tax resident companies, in the common law jurisdictions - maybe technically tricky in civil law jurisdictions - and multiple type of companies in the civil law jurisdiction like “sociétés civiles” dedicated to real estate or to investment, holding companies, “mére-fille” structuring.


Socrates was right: know yourself… and your client! For sure, if a resident of a country wants to settle a company in another country - I exclude non-compliant countries - he will have to ensure that his personal documentation and the one of his company are accurate, proper and up to date! Know your client documentation, proof of fund, registration documents, register of shareholders, and proof of address, etc. and why not in a near future “certificate of morality”, “extrait de casier judiciaire”… personal cryptogram such as individual or company blockchain?


Is this the end of offshore financial centres (OFC)? Definitively, the big question for OFCs is now how to move from offshore financial centres only (OFC) to international financial centres (IFC). This mean leveraging all aspects of the industry sector locally: government bodies, public institutions, financial and non-financial institutions, skills and competences, demographic strategy and high calibre attraction… Rome was not built in a day. Lucky we are, we have 2 days! The deadline is behind the door.


Citizen of the world, what are your needs and expectations? Truly, understanding cultural dimensions, proposing fiscal schemes and incentives or simply addressing the financial (fiscal) aspects of trust and estate planning in the strategy we design for our demanding clients, is not sufficient at all. We have to really think about the manner we will tackle with today’s international challenges and “citizen of the world” new class of citizenship. Stake for estate planners: social responsibility, sustainable growth, collaborative economy, and transparency of information or inclusive development, green or blue economy. How we address these essentials preoccupations? Manage elderly, retirement, manage education and health costs, international carriers and job pracity, cross border successions, are some examples.


Humanism and common sense. These are the inner quality for advisors and pillars of estate strategy. For sure, trust and estate planning is becoming more and more involving for practitioners and it is clear that complexity leads to the need for clarity. Estate strategies will be the articulation between various qualified and experienced professionals or experts: barrister, chartered accountants, chartered tax advisors, information and technology specialists, risk managers, notaries, art experts, natural resources scientists… A robot can calculate the benefits of your retirement plan at the end you carrier, but will not necessarily be able to manage how to protect elderly in a cross border large family succession plan… 


New world new profile. So, question is: what do we propose to the next generation? Mother and father retired in a home in France, 3 generations estate all over the world accumulated during their carrier in the family business, petrol industry, daughter with 2 kids grabbing the opportunities of tech industry in Orange County and the young brother involved in social activities in Africa during his final year, medicine study. That’s the background… international insurance plan, international education plan, and health plan all over the world at affordable rates?


New world new values. At a country level, the question would be, how to position the Island on the capital route, not only by proposing easy and traditional recipes like fiscal incentives. I have stated earlier that this is no longer an option. How do we attract, magnetize a maximum of the international value added chain for corporate, or what shall we do to ensure efficient and stable capital 'oasis' for family offices and international investors, global entrepreneurs. What do we, as estate practitioners, really propose as innovative solutions? Eco-friendly structuration? Socially responsible holding? Collaborative investment? Crowd funding? International trade and e-commerce? Blockchain? Internet-of-things? Artificial intelligence, biotechnology…and Estate planning…  


What shall we, as estate practitioners, propose to accompany and advise clients in this new world? Let’s discuss this issue at the 2019 STEP conference in Mauritius…


Nicolas Kerambrun

Contact us: rfi@lex1717.com





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