Leading banker says no short term sight of cross-border estate laws

R. Douglas Dowie, NBD's general manager warns that as wealth increases over time, so too does the need for a comprehensive estate plan to ensure that assets go to the intended beneficiaries in a timely, orderly, and tax-efficient way: "This requirement takes on added significance when assets or beneficiaries are owned in countries outside UAE (region)."
Dowie will be speaking at the upcoming Dubai Strategy Forum, October 28-30 2002 in Dubai.

"The reason is simple," he says. "Different jurisdictions have different tax and succession laws applicable to estate assets, meaning that planned wealth may not go to those for which it was intended."

Not least, a bulk could find its way into the pockets of the tax man!

In the United States, for example, a non-US citizen living overseas, with a property portfolio, which can mean to include stocks, mutual funds and cash, at a value of $60,000 or more in America, may be liable for estate in heritance taxes of up to 55 per cent!

Dowie also brings the good news, that there is a variety of estate planning solutions to help manage the process but warns there is no 'one-size-fits-all' solution, especially for today's global investor.

"Where multiple jurisdictions are concerned, estate planning issues become complex.

"To protect the investor's interests, and those of family and planned beneficiaries, it is crucial to be aware that there are potential issues. The wise person will manage the future by seeking the appropriate advice and putting steps into action."
Staying with US-held assets, one common method of reducing exposure to American estate taxes is to establish an offshore company.

Other strategies are designed to meet estate and succession planning needs in different situations and jurisdictions. These approaches include the use of joint-ownership arrangements, in which jointly owned assets pass directly and immediately to the survivor(s) when one owner dies.

"Another approach involves international trusts," said Dowie. "Here, a trustee becomes the legal owner of the property, with the benefits of the property enjoyed by the chosen beneficiaries. In these situations it's vital to have an estate plan that takes into account all the jurisdictions involved."

Here he cites French succession law : "In France, the succession laws bestow considerable rights on the children in a family and can override the terms of a will if there is any conflict.

"A named beneficiary, such as a spouse, might consequently not receive the share of property bequeathed if any surviving children appeal."

So, are there signs of cross-border estate management and succession planning legislation on the horizon?

"Not in the medium-term," suggests Dowie.

In fact, the landscape may just get more complicated before it gets clearer.

As governments and public policies change in different countries, so too can the laws that govern estate assets :"If there is one rule you can count on, it's that the laws that apply to estates today are likely to change in some way during a lifetime," he said.

Turning to the US again, estate tax laws were amended as recently as 2001, with a plan in place to repeal estate taxes by 2010.

While much can change between now and 2010, whatever way they sway, any reforms would have a considerable impact on the estate plans of most individuals who hold US assets, again suggesting that estate planning is key.