Archive for William Richards

Managing Eurocurrency Risk and Offshore Financial Centers

Introduction

The global financial system has inherent risk in financial instruments associated with financial assets. Market risk is a measure of risk that the market value of a financial instrument will decline over time due to a result in changes in exchange or interest rates. (1) It involves understanding the aspect of risk that determines there is a risk that price will fluctuate in one or more components of a financial transaction.

It is the risk of price fluctuation of property purchased, funds borrowed, or currency that is utilized. The fact that changes in exchange or interest rates has such an impact upon market risk necessitates a fundamental understanding of the term exchange rates and Read More

Written by | Posted in International

Credit Risk – Offshore Financial Centers – Settlement Systems

Introduction

An all important credit risk for purposes of evaluating Offshore Financial Centers is the risk that an intermediary party to a transaction poses with respect to transactions of counter-parties. Offshore Tax Havens provide extraordinary tax regimes and reduced or negligible regulation costs. They are a conduit necessity of international corporate structure in the global economy. But the risks associated with different legal systems and a non-regulatory environment must be part of the evaluation of an Offshore Center. The intention of this writing is to provide an awareness of settlement systems of financial institutions servicing a particular Offshore Financial Center. Understanding the risk inherent in these processes better enables the risk to be managed. Management results Read More

Written by | Posted in International

United States Foreign Corporations and Ownership Structure

Introduction

The crux of understanding the Subpart F taxation provisions is the distinction between a foreign corporation and a controlled foreign corporation. (1) The distinction relies upon the percentages of ownership of a foreign corporation and the definitional designation of who is regarded as a United States shareholder. (2)

It is the combination of a foreign corporate entity being characterized by statutory definition as a controlled foreign corporation and the shareholder or shareholders being United States shareholders. Those two elements result in a foreign corporation being subject to Subpart F Income treatment. Section 951 requires United States shareholders of a Read More

Written by | Posted in Corporate • International

Credit Risk and Currency Control and Offshore Financial Centers

Introduction

It is essential in dealing with Offshore Financial Centers to develop a method identifying the various relationships created and the underlying risk associated with each part of a financial transaction. Analysts in the process of evaluating risks often divide them into three basic categories: legal risk, market risk, and credit risk. Political and sovereign risks can contribute to such unexpected results by virtue of Sovereign Immunity concepts, the Act of State Doctrine, and exchange controls.

Credit Risk

Credit risk includes the risk that a counter-party will not perform to contract as a result of Read More

Written by | Posted in International

Offshore Financial Centers and Legal Risk of Arbitration Agreements

Introduction –

Offshore Financial Centers are an integral part of our global economy. The international community has often not understood their function. It has had an unfounded apprehension of their participation in the erosion of the developed economies tax base.

The global competitive marketplace has emphasized the craving for cost reduction and Offshore Financial Centers have attempted to accommodate this appetite through deregulated business environment and attractive tax regimes. The world’s Offshore Financial Centers and Tax Havens have tailored their legislation to suit all of these marketplace demands. Read More

Written by | Posted in Corporate • International

Non-Statutory Asset Protection Trusts

Introduction

In the United States, there has been a malpractice crisis for the medical profession for a number of years. It has at its roots the American Trial Lawyers who advocate a position that the medical profession is not adequately regulated for physicians whose practice causes harm to their clients. Its associations vigorously contend that victims of malpractice by physicians are inadequately compensated from injury and demand that no limits can be imposed as to the amounts mandated by the jury. The insurance underwriters of medical professionals assert that large verdicts have caused them to raise premiums where they depart from economic reality. When a physician factors in the cost of insurance in terms of doing business, the risk-reward analysis in specific Read More

Written by | Posted in Estate Planning Tax

Non-Statutory Asset Protection Trusts – Part I

Introduction

In the United States, there has been a malpractice crisis for the medical profession for a number of years. It has at its roots the American Trial Lawyers who advocate a position that the medical profession is not adequately regulated for physicians whose practice causes harm to their clients. Its associations vigorously contend that victims of malpractice by physicians are inadequately compensated from injury and demand that no limits can be imposed as to the amounts mandated by the jury. The insurance underwriters of medical professionals assert that large verdicts have caused them to raise premiums where they depart from economic reality. Read More

Written by | Posted in Estate Planning Tax

Estate Planning, Foreign Trusts, and Section 679

Estate Planning Purposes

A stand alone purpose for the use of a foreign trust would be as part of an estate plan. Unlike the taxation treatment of a Settor upon transfer of property to a foreign trust as required by Section 679 of the Code, (1) a Foreign Trust is exempt from the provisions. A transfer of assets by a United States decedent by virtue of the provisions of his or her testamentary disposition, Last Will and Testament or a Living Trust that is the receptacle of a Last Will and Testament (a pour-over Will) is except from this tax treatment. (2)

To illustrate the use of such a foreign trust, the following hypothetical can be a guide to understand its use: Read More

Written by | Posted in Estate Planning Tax

Foreign Trusts – Legal Risks – Act of State Doctrine

Introduction –

The use of Foreign Trusts in financial planning can provide significant benefits to a client. As was discussed in Foreign Trusts and Legal Risks, (1) particularly important benefits can be derived utilizing Offshore Financial Centers whose laws are crafted to facilitate shelter from potential judgments and penal revenue assessments. But these benefits that can be so beneficial to a client also must be scrutinized for financial risks, be it credit, legal, or market risks. The ability to assert legal jurisdiction upon a Foreign Trust and the fiduciary (2) formulate an aspect of legal risk that is a part of that analysis. That legal risk embraces the implications of enforcement jurisdiction and the concept of the doctrine of comity among sovereign nations. Coupled with enforcement jurisdictional notions of one sovereign that Read More

Written by | Posted in Estate Planning Tax • International

Trustee of Foreign Trust And Enforcement Jurisdiction

Introduction

Enforcement jurisdiction principles can be of great significance to a foreign trust. As was set forth in a previous writing, (TaxConnections, Foreign Trusts and Legal Risks, December 24, 2013) some of the most sought benefits are dependent upon their ability to maintain their status in accordance with the laws of the sovereign. This writing will focus upon the foreign trustee that is essential to this demarcation.

Third party judgment creditors and revenue judgments of foreign governments utilize enforcement procedures that function from enforcement jurisdiction. Enforcement jurisdiction is a sovereign’s power to induce or compel or to punish noncompliance with its laws or Read More

Written by | Posted in Estate Planning Tax • International

Foreign Trusts and Legal Risks

TaxConnections Blogger Virginia La Torre Jeker writes about offshre trusts
Introduction –

The purpose of this section is to provide a cursory view of foreign trusts and financial planning, the emphasis of which is asset protection from judgments. The basic taxation regime of a foreign trust can be reviewed in a previous writing, Income Taxation of Foreign Trusts and Beneficiaries, TaxConnections, November 25, 2013.

The focus here is the treatment by the United States taxing authority upon a foreign trust pertaining to the tax consequences subsequent to transfer. The points of relevance are the income tax treatment to the Settlor, beneficiary, and trust and the consequential use of the Read More

Written by | Posted in Estate Planning Tax • United States

Legal Risks of Offshore Financial Centers

TaxConnections Blogger Posts
Generally

Offshore Financial Centers and Financial Havens require an appreciation of the transactional risks accompanying their benefits. Even the simplest transactions give rise to complex legal relationships and draw upon a number of legal disciplines.

It is essential in dealing with this aspect of using Offshore Financial Centers to develop a method identifying the various relationships created and the underlying risk associated with each part of the financial transaction. To accomplish this, a technique can be used in evaluating transactions to determine the means that can be employed to reduce or eliminate each risk. The identification of risks can be crucial because it also serves to broaden Read More

Written by | Posted in Corporate • International
« Older Entries   Recent Entries »