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Strategies, tools and tips for more effective asset protection.
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    (Bloomberg) -- For years, the biggest nations have tried to to outsmart tax dodgers and reclaim trillions of dollars stashed in off-shore accounts. Many of them are tired of waiting and now just want to make peace and bring some of the money back home.

    From Indonesia to Turkey and India to Argentina, several of the world’s 20 biggest economies are offering amnesties or incentives for citizens and companies to repatriate funds, some legal, others not. While U.S. presidential candidate Donald Trump wants a holiday tax rate to bring back some of the more than $2 trillion in income that companies have stockpiled overseas, Australia wants a tax to prevent profit flight.

    Some politicians are driven by a public backlash to perceived unfairness in global taxation as highlighted by the Panama Papers, others by the prospect of tighter tax rules agreed under the auspices of the G-20 group of nations. What all of them have in common is a need to bolster public coffers. Results so far have been mixed, with plans getting initial traction in Argentina and less so in places like Brazil.

    "You’re smack in the middle of one of the greatest problems of international relations -- the need for the state to get some control over what it thinks is its tax base," said Jorge Braga de Macedo, former Portuguese finance minister and fellow at the Ontario-based Centre for International Governance Innovation. In light of G-20 members’ pledges to cooperate on tax evasion, there is "of course a degree of cynicism, but in the end it’s just national interest."

    On paper, the potential gains for public coffers are huge. In developing countries alone $638 billion in profits were shifted to tax havens in 2014, amounting to $172 billion in foregone revenue, according to an Oxfam study. Australia, which is struggling to maintain its AAA credit rating, lost about A$19 billion ($14.6 billion) of company profits to offshore tax havens in 2014 costing taxpayers up to $5 billion, according to Oxfam.

    In response, Australian Prime Minister Malcolm Turnbull’s government is introducing a “Diverted Profits Tax” of 40 percent on multinationals shifting profits out of Australia. The tax will apply to companies with global revenue over A$1 billion and become effective July 1, 2017.

    In the U.S., which has yet to emerge from 14 years of consecutive budget deficits, Trump proposes to impose a 10 percent repatriation tax. Currently, companies pay a top tax rate of 35 percent and can defer taxes on their offshore income until they decide to bring the earnings back to the U.S.

    Stiglitz Critique

    Days before Trump’s proposal, Nobel economist Joseph Stiglitz said that U.S. tax law allowing Apple Inc. to hold a large amount of cash abroad is “obviously deficient” and called the company’s attribution of significant earnings to a comparatively small overseas unit a “fraud.” Apple has firmly denied using any tax gimmicks, telling an EU tax panel in March that it had paid all of its taxes due in Ireland.

    The Panama Papers data leak earlier this year fueled wide-spread anger at wealthy individuals and companies skirting the taxman, and prompted politicians to take action, said Macedo. "It was a wake-up call for states to do something. Transparency is key, otherwise only the fools pay taxes."

    In Turkey a proposal to allow tax-free repatriation of money is providing individuals "the last exit before the bridge," said Finance Minister Naci Agbal in reference to the planned G-20 crackdown. “All countries are now passing regulations to bring back money held by their own nationals before 2018,” Agbal said in an interview last month.

    G-20 Deals

    G-20 and the Organization for Economic Co-operation and Development have brokered several deals under which signatory countries agree to the automatic exchange of individuals’ financial transactions and to tackle " gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations." The agreements go into effect in 2017 and 2018. G-20 leaders meeting in Hangzhou, China Sept. 4-5, are expected to reaffirm the accords.

    One reason why governments are offering incentives to repatriate funds at the same time they are preparing to crack down on evasion is because tax collection is more costly than getting voluntary compliance, said Linda Pfatteicher, a partner at Squire Patton Boggs LLP in San Francisco.

    "It’s cheaper to raise revenue if people are voluntarily complying," said Pfatteicher, adding that raising taxes from corporations may be harder than from individuals.

    The success of getting multinationals to repatriate profits will depend to a large extent on the deal they’re offered, said Gary Hufbauer, a former U.S. Treasury official and fellow at the Peterson Institute for International Economics. "Companies don’t tend to bring money back to the U.S. if the repatriation tax is more than about 3 percent or 4 percent," Hufbauer said.

    The latest attempts to tap individuals’ wealth held abroad are showing mixed results. In Brazil doubts over legal guarantees on amnesty and deadlines to file have damped interest in repatriation. Indonesia recorded about 3.7 trillion rupiah ($280 million) declared in the first two weeks of an amnesty that runs until March 2017. It aims to recover 560 trillion rupiah. Many people ignored a similar program in 2008.

    In Argentina a tax amnesty involving bond purchases is off to a good start and attractive terms could lead Argentines to declare $100 billion to $150 billion, experts say.

    Whether global coordination to squeeze tax havens and close loop holes will make much difference is equally uncertain, said Guntram Wolff, director at the Bruegel economics think tank in Brussels.

    "G-20 coordination is loose at best," Wolff said. "It’s not like there are strong inter-governmental instruments that can be used, where Chinese, European, Brazilian and Turkish authorities totally see eye to eye."

    --With assistance from Randall Woods. To contact the reporters on this story: Raymond Colitt in Brasilia at ;Michael Heath in Sydney at To contact the editors responsible for this story: Vivianne Rodrigues at ;Malcolm Scott at Robert Jameson

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    David Swenson is an icon in the investment world. His Yale “endowment model” is widely considered to be the gold standard by which all others are measured. While effective for tax-exempt entities like endowments and charitable foundations, this model becomes less compelling for the high net worth investor. Preston McSwain wrote an insightful article for in August 2015 titled “Are Hedge Funds Prudent for Taxable Investors?” His main thesis: Hedge funds (which account for a significant percentage of Swenson’s endowment model) are a tax-inefficient asset that do not really belong in the portfolio of taxable investors.

    As a result of their active trading and mark-to-market accounting, hedge funds typically generate ordinary income tax—which can top out above 50 percent in New York City and California. For example, a California resident (in the top tax bracket) who invests in a hedge fund with an attractive 8 percent rate of return (net of fees) only retains 4 percent after taxes—a tax drag of 400 basis points. While many complain about the hedge fund industry’s 2 and 20 fee schedule, it is paltry in comparison to the negative effects taxes have on performance.

    Asset Location

    One possible solution: Strategic asset location, which can maximize the after-tax return of an investment portfolio by placing tax-inefficient assets in tax-advantaged vehicles. In its simplest form, an investor can use a 401(k) or IRA account to house tax-inefficient assets (i.e., high-yield bonds). By deferring taxes and letting gains compound, overall performance will be improved. This option works well for registered securities, but unregistered securities like hedge funds are not often compatible with 401(k)s or IRAs.

    To solve this problem, accredited and qualified investors turn to customized private placement vehicles. One such option, private placement life insurance (PPLI), uses the chassis of a variable universal life policy and restructures it to perform more like an investment account. By reducing upfront loading fees and eliminating surrender charges, PPLI provides purchasers with a tax-preferred location to house unregistered investments like hedge funds and credit funds. This hybrid insurance/investment product is a valuable tool for high net worth investors interested in long-term wealth accumulation as well as wealth transfer.

    If we go back to the earlier example where an 8 percent return only netted 4 percent after taxes, the investor could return close to 7 percent by using a properly structured PPLI strategy and assuming the insurance charges over the life of the investment averaged approximately 1 percent per year. That is a notable 3 percent differential. By employing an asset location strategy within their portfolio, investors have the ability to improve long-term performance.


    This article is written for educational purposes and is not to be considered as a solicitation for any product.

    Jason Chalmers is a director at Cohn Financial Group, a private placement life insurance distributor. 

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    The latest blow in the fight for international financial transparency fell Thursday, as a new cache of leaked offshore corporate documents, this time from the Bahamas, was made public.

    The International Consortium of Investigative Journalists, alongside German newspaper Süddeutsche Zeitung and other media partners—the same group that broke the Panama Papers scandal earlier this year—just released documents containing information about 175,000 Bahamian companies registered between 1990 and 2016. The documents are collected in a free, searchable online database alongside the Panama Papers leaks in what is quickly becoming one of the largest public databases of information on offshore entities ever collated.

    This round of leaks is somewhat less thrilling than those from Mossack Fonseca’s operations in Panama (although their name does come up) because the data uncovered is largely corporate registries, which contain only the basic components of offshore companies—name, date of creation, addresses in the Bahamas and, occasionally, the names of company directors. Indeed, much this information is available in person in Nassau, the Bahamas’ capital. But, those records are largely less complete than those in the leak and searching them incurs a $10 fee per company, which is a strong disincentive when dealing with large-scale inquiries.

    Just because the information is a bit more basic than earlier leaks doesn’t mean it’s less enlightening. The simple details available reveal previously unknown, or at least underreported, links between offshore companies and prime ministers, cabinet officials, princes and, everyone’s favorite, convicted felons. The most notable name involved this time around is former EU commissioner Neelie Kroes. Additionally, and likely more importantly for authorities looking for leads as to any wrongdoing, the documents also include the names of 539 registered agents (including Mossack Fonseca) who act as corporate intermediaries between the Bahamian authorities and potential offshore customers.

    “Corporate registries are incredibly important,” said Debra LaPrevotte, a former U.S. Federal Bureau of Investigation special agent, when asked for comment by ICIJ. “Offshore companies are often used as intermediaries to facilitate money laundering and, frequently, the companies are only used to open bank accounts; thus the corporate registry documents, which might identify the beneficial owners, are part of the evidence.”

    While it’s important to note that there’s nothing inherently illegal about being involved with an offshore company, and that most are legitimate businesses or have legitimate business reasons for existing, they are still commonly used vehicles for obfuscating financial shenanigans. And, at the very least, public officials should disclose their interests in any offshore companies in the interest of transparency and mitigating conflicts of interest.

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    Whether it's making a decision on where to spend retirement or finding how far a buck will go in one city compared to another, the financial impact of relocating is an important consideration for any client looking for a change of scenery.

    To help determine which cities are the best—and the worst—for protecting your client’s finances, WalletHub has ranked the 150 largest U.S. cities for “WalletFitness,” using five dimensions: credit standing, responsible spending, savings, risk exposure and earning power. Within each dimension, several characteristics were considered, weighted and scored out of 20. Wallethub then summed the five dimensional scores to calculate a total score and tabulate a ranking. Also included in the gallery are the rankings cities earned for individual dimensions. 

    For more on the methodology, click here.

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    UHNW families may benefit from a greater understanding of a recently available opportunity to create more for family and charity.

    Wealthy families can now transfer wealth to children and grandchildren at a transfer tax discount of up to 50 percent, while receiving up to a 50 percent current charitable income tax deduction—all while avoiding tax on the subsequent sale of appreciated assets 

    For many years charitable planned giving has been a favored way to avoid capital gains taxes on the sale of appreciated assets, as well as to transfer assets to family while giving income to charity. However, until recently there were limited opportunities to transfer significant wealth to younger generations while capturing meaningful current charitable income tax deductions.

    Beginning in 1969, individuals could contribute highly appreciated assets to a charitable remainder unitrust (that he/she created) under Internal Revenue Code Section 664, have the trust sell the assets without recognition of gain, and receive an income for life, all while enjoying a current charitable income tax deduction for the remainder interest that would eventually go to charity. 

    At the same time, a charity could establish pooled income funds (PIFs) that could also accept contributions from donors who would then receive an interest in a pool (like a mutual fund) that would pay any interest earned for life. It was generally an option for donors who wanted money to go to charity at death, but needed some income during life. It was most attractive to smaller donors for whom a CRT would not be economical, but it did not pay out any part of realized capital gains. Also, the income could not continue to younger generations, but that provision was not important to less affluent people.

    Two important developments have opened significant new planning opportunities, enabling UHNW families to fuse their desires for multi-generation wealth transfer with their desires to expand their charitable visions. First, in 2004 Treasury issued revised regulations permitting a charity to create a new PIF trust that could distribute as income a portion of post-contribution long term capital gain (LTCG) under a power to adjust vested in the trustee, so long as such a power is included in the trust document. This would make it a “total return” PIF (TRPIF) able to distribute significantly more over time than was the case with existing PIFs. Existing PIFs could not be amended to do so.

    In addition, because such a TRPIF does not have the same 10 percent charitable remainder restriction as required of all CRTs after July 1997, the donor can have income interests that continue to benefit future generations before the remainder ultimately goes to charity. This freedom provides an incredible new opportunity for UHNW families—one that has only recently become a possibility as a handful of community foundations have begun to create TRPIFs that also permit multi-generation donor agreements. When designed to emphasize increasing income for future generations there is one other unique benefit of this technique.

    Under current law, any realized long-term capital gain not distributed as current income under the trustee’s power to do so  is considered permanently set aside for the charity, and as such is not taxed to the trust or its income beneficiaries. This realized gain, when reinvested, enables the income to grow significantly over the decades, compounding tax-free to benefit future generations. 

    This is a complicated statutory plan with both income tax deductions and gift tax implications. UHNW families and their advisors may benefit from a greater understanding of this recently available opportunity to create more for family and for the charities that are important to them.

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    Forget Trump, J. David Wagner focused on companies too small for most analysts to acknowledge.

    By Matthew Winkler

    (Bloomberg View) --The No. 1 U.S. stock picker of 2016 paid scant professional attention to the biggest event of the year, the presidential campaign that led to the election of Donald Trump. He focused instead on finding small companies with enough underappreciated strengths to prosper no matter who's in the White House or managing economic and interest-rate policy.

    He is J. David Wagner, vice president at Baltimore-based T. Rowe Price Group and manager of the T. Rowe Price Small-Cap Value Fund. It returned 30 percent, more than double the Standard & Poor's 500 Index and better than the Russell 2000 Index or the S&P Midcap 400 Index. Among the 156 U.S. non-indexed mutual funds with assets greater than $5 billion -- making them accessible to institutions and individuals alike -- Wagner's fund was No. 1, according to data compiled by Bloomberg.

    Even in a good year for shares of small and mid-size companies, Wagner's fund stands out. Of the 44 funds investing only in small or mid-cap stocks, his was the best of 13 that beat a strongly performing benchmark.

    Wagner's winning strategy depended on identifying companies too small for most analysts to acknowledge. Yet his fund avoided the price swings of competitors with a similar approach, giving it a volatility rating 10 percent lower than the average of its peers.

    For the second consecutive year, the top stock picker is a practitioner of the valuation model introduced in the 1930s by Columbia University professors Benjamin Graham and David Dodd. The model considers earnings, dividends, cash flow and book value in pursuit of companies trading at less than their net worth. The 2015 winner, the Fidelity Select Retailing Portfolio, returned 19 percent that year among the 563 actively-managed equity mutual funds with a minimum of $1 billion and at least 80 percent invested in the U.S. It easily beat its peers and vanquished the S&P 500's 2.2 percent advance last year. The same fund trailed the S&P 500 this year, however, returning 6 percent and demonstrating that one year's winning strategy can be another year's mediocre one.

    Some of Wagner's largest gains were in health-care stocks, which enriched his investors despite representing the most underweighted industry in the fund at 6.2 percent compared to the 14 percent benchmark for similar funds. While the benchmark lost 6 percent, T. Rowe's health-care shares returned 22 percent, outperforming the benchmark by 28 percentage points, according to Bloomberg data. Among the winners: Lantheus Holdings Inc., the North Billerica, Massachusetts-based developer and manufacturer of diagnostic medical imaging agents with a market capitalization of only $305 million, appreciated 146 percent; WellCare Health Plans Inc., the Tampa, Florida-based managed care company, rose 76 percent; Lionville, Pennsylvania-based West Pharmaceutical Services Inc., which climbed 42 percent, and Allen, Texas-based Atrion Corp., the maker of medical products and diagnostic equipment, gained 33 percent.

    Since the Affordable Care Act took broad effect in 2013, American health-care companies outperformed every U.S. industry through July, 2016. "Health care has been on a fantastic tear since the ACA was passed, so it's been tougher and tougher for us to find stocks that look undervalued or cheap," Wagner said in an interview earlier this month. While health-care stocks don't look particularly cheap relative to those of financial or energy companies, T. Rowe increased its holding of Lantheus because "investors aren't focused on it and they don't demand a lot of attention from Wall Street analysts."

    Similarly, he said, "Wellcare is a Medicare/Medicaid payer just benefiting from the surging growth surrounding the adoption of Medicaid and expansion of Medicare and Medicaid programs in various states." The company is "a beneficiary of the explosion of enrollment associated with the Affordable Care Act." He was referring to the people signed up for health insurance for 2017 on the federal exchanges created by the 2010 law; the Department of Health and Human Services estimates 13.8 million people will have signed up nationwide by early next year.

    Wagner, who has a B.A. in economics from the College of William & Mary and an M.B.A. from the University of Virginia, turned 42 in February and spent all but one of his 17 working years as an investment analyst at T. Rowe Price. He credits his success to "a large team of analysts we have to pick small companies that we think are undervalued, and we can own them a long time." He said his fund puts a "heavy emphasis on long-term ownership and high quality companies" and the purchase of shares "when they look really cheap."

    The T. Rowe Price Small Cap fund was most prescient in its holding of financial companies, the largest percentage of the fund at 26 percent and more than 8 percent greater than the industry benchmark. Wagner's team let its weighting in financial shares increase from 25 percent in the third quarter before the small-cap financial stock index rose 10 percent during the past two months. Regional banks and community banks, including Home BancShares Inc, Proassurance Corp. and East West Bancorp Inc., are the fund's largest holdings. Since the financial crisis of 2008, banks contended with a combination of credit stress, increased capital requirements, regulatory oversight, a slow-growing economy and low interest rates.

    "You put all that together and it's a formula for very cheap stocks, very out of favor, a lot of negative sentiment and then a period of very poor performance," Wagner said. "And if you look over the last decade that ended in February this year, I would wager to say banks have been one of the worst-performing groups. So we just found a lot of cheap stocks and we've been steadily adding them."

    While the past two months, when the S&P 500 gained 6 percent, were a boon to the performance of Wagner's fund, he says he wasn't thinking about the presidential election. "We're not in the prediction business, particularly around politics and even around markets; we don't have much of a view," he said. "If you were to describe the market since the election as a Trump rally, I think it's a little bit of a misnomer. Just the fact the election is over is a big driver. So even if Hillary had won, I wager to say the market probably would have risen."

    As for his biggest bet on the financial industry, Wagner says it's not unusual to benefit from unforeseen events like Trump's victory. "It's not uncommon for us to get paid in unexpected times in unexpected ways," he said. "You own something that you keep with the idea that over time it will be re-rated, but you don't know what the catalyst will be. I'm looking smart, but I can tell you it didn't feel smart eight months ago. It felt pretty crummy."

    (With assistance from Shin Pei)

    This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.



    Matthew A. Winkler is a Bloomberg View columnist. He is the editor-in-chief emeritus of Bloomberg News.

    To contact the author of this story: Matthew Winkler at To contact the editor responsible for this story: Jonathan Landman at

    For more columns from Bloomberg View, visit

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    Ensure that discussions and financial transactions are as secure and confidential as possible.

    As our personal information becomes more intermingled and easier for complete strangers to access, many clients, particularly celebrities and high net worth individuals, are seeking solutions to secure their privacy.

    During their panel Wednesday at the Heckerling Institute on Estate Planning, John F. Bergner, R. Kris Coleman and Mark Lanterman discussed some techniques planners can employ to ensure that the various discussions and financial transactions that they perform for and with their clients are as secure and confidential as possible. While the bulk of their presentation was somewhat technical and beyond the scope of this article, they presented eight compelling privacy issues (plus one of our own) that advisors may encounter.

    1. There Is a Basic Right to Privacy. Clients don’t need an independent reason to want to ensure their own privacy. Although the U.S. Constitution does not expressly grant a right to privacy, it is implied in the Bill of Rights and has been recognized by the Supreme Court. That being said, the line between an individual's right to privacy and the public's right to access certain information is often fairly vague. Each client presents a unique puzzle in this regard, so advisors must be prepared to apply their independent judgments.
    2. The Importance of Privacy Planning Will Increase as Technology Continues to Evolve. Our world has become increasingly connected and intermingled in the past several decades as a result of technology, and those links are only likely to increase in the coming years. With technology's inevitable continuing march into everyone’s lives, more clients will inevitably look for solutions to protect themselves and their information. Though the basic right to privacy mentioned above may become increasingly difficult to ensure, advisors should keep abreast with changes in the law and technology so that they can offer clients the most cutting-edge protections available.
    3. Absolute Privacy Is Difficult To Achieve. In today’s interconnected world, absolute privacy is basically a pipe dream. Unless a client completely removes themselves from civilized life, they will leave some digital footprint behind. This challenge is particularly acute for high-profile and/or high net worth individuals. Advisors should alert their clients to this reality and temper expectations where possible, since while many measures will serve to deter the general public—which is really all that most clients want—there is almost always someone out there who can access their information with enough effort.
    4. Proactive Planning Is Best to Avoid Disclosure of Confidential Information. Once the cat is out of the bag, it’s effectively impossible to get it back in. So, by its very nature, privacy planning must be proactive in order to be effective. This responsibility actually begins with the clients. If they are or have been careless with whom they share their confidential information, then even the most comprehensive privacy plan will be in vain.
    5. Every Strategy Has a Practical Impact. Though it may seem obvious, the fact that enacting an effective privacy plan may interfere with some aspects of a client’s life or business is often overlooked. Advisors should be up front about these potential issues and make sure that clients understand them before putting a plan in place. For instance, the panel offered the example of owning real estate through a trust or business entity. While doing so can shield the owner’s identity and other personal details, it also may increase transaction costs and create unique administrative problems. Clients need to understand and accept any such potential trade-offs, otherwise they will (rightly) likely hold their advisors responsible.
    6. Privacy Planning Requires a Cross-Disciplinary Approach. Much like wealth management as a whole, privacy planning is a collaborative science. One advisor can not sufficiently meet a client’s needs in this area. Depending on what exactly the client is involved in, they may require any number of specialized lawyers, accountants, financial planners and other advisors to adequately protect themselves. Advisors must be comfortable with this reality and be willing to engage in the team-based approach that’s required. Instead of getting territorial and looking petty, just think of it as a way to expand your network and add value for future clients.
    7. State and Local Laws Are Often Determinative. Where your client resides can make a huge difference. Much of the legal minutiae involved in ensuring client confidentiality is based in state law, so where your client resides can dictate the feasibility (or lack thereof) of certain strategies. Once again, if you aren’t familiar with the laws of the state in which your client resides, it’s best to bring in an outside expert.
    8. Strive to Elevate Ethical Duties Into Best Practices. Advisors have an ethical duty, either overt or implied, to maintain their clients’ confidence. Advisors should strive to transform this duty from a simple baseline for acting professionally to the level of best practice by incorporating precepts of privacy and security in their everyday work with all clients, regardless of whether it’s specifically requested.
    9. Expand Your Business in the New World Order. Republicans have been threatening to repeal the estate tax for the better part of two decades. With President Trump soon to be sworn in, it’s likely this promise will finally be acted on (at least as likely as anything can be when Trump is involved). For many estate planners looking to expand their reach beyond the usual tax planning, brushing up on the precepts of privacy planning could offer a useful alternative to add value for clients who may no longer need tax services.

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    Ten ways to plan strategically in the medium term so the business stays in the family for the long-term.

    PWC recently rolled out the 8th edition of their biannual Family Business Survey. One of the major themes of the study was a shocking inattention among family business to planning for the future, both strategically and in terms of succession. In fact, only 52 percent of the firms who plan to change hands in the next 5 years anticipate keeping the business in the family, a marked drop from previous editions of the study. For businesses that do want to keep things in the family, the study offers 10 steps to planning strategically over the medium term so that the business stays in the family for the long term.

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    Antiquities, works with ties to World War II and the Holocaust, and American Indian artifacts all merit special attention.

    Investing in art is about more than flipping works for a quick profit, especially today when the risks are dramatized in one scandal after another. Buying a beautiful painting, unique antiquity, or culturally significant object can yield personal, aesthetic and financial returns.

    But the art market—with its price volatility, lack of regulation, high levels of secrecy, and need for reliable expertise—exposes buyers to a number of risks. Some are well-known; for example, nobody wants to acquire a fake or forgery, and we have recently seen dozens of investors lose millions on artwork that turned out to be worthless forgeries. Other risks are less clear. So, how can investors avoid the pitfalls when looking to expand their collections?

    The No. 1 rule is to be careful: Do your due diligence. Whatever the problem, developing an object’s provenance or history of ownership and possession is at the heart of any solution. Due diligence means asking questions that probe the seller for information and documents—we want to stress the importance of documents—and conducting independent research into the history of a piece. The art market has long thrived on self-serving pronouncements of self-appointed experts and, as a result, has been able to trade poorly documented objects with dubious pasts.

    The No. 2 rule: if something about the seller, the work or the transaction seems suspicious, walk away.

    Three categories of objects—antiquities, works with ties to World War II and Holocaust, and American Indian artifacts—merit special attention. 


    Authenticity is of paramount importance when collecting antiquities, as is the provenience (or “find spot”) of an object and date of export from the source country. While no approach guarantees that you are looking at a legally acquired antiquity, particularly in an era where much of the world seems embroiled in armed conflict, these safeguards can help: 

    • Document the ownership history, particularly if the object comes from a collection formed after 1970.1 Investigating the exhibition and publication history of the object, may help establish provenance.
    • Acquire antiquities only from reputable sellers; an antiquity offered for sale by a dealer specializing in Old Master paintings raises a red flag. Steer clear of unknown dealers and online sales.
    • Many source countries have asserted ownership over all antiquities and permit the export of antiquities only with express governmental authority. Some countries have agreements with the U.S. to limit trade of certain types of antiquities. Check import and export documents to ascertain whether the artifact left the source country and entered the U.S. legally. Make sure the seller’s paperwork satisfies those requirements. Establishing the date of export can be critical to see what laws apply.
    • Beware of objects that likely came from conflict zones such as Syria and Iraq.

    World War II Era Works

    Collectors of pre-1933 artworks, such as impressionist and modern works of European origin, should be acutely aware of gaps in provenance. Before and during World War II, the Nazi government systematically confiscated millions of artworks and cultural objects, and purchased others at below-market prices through coercion or duress. Other objects were simply casualties of wartime, lost without subsequent restitution or believed to be destroyed. Pieces that changed hands in Europe between 1933 and 1945, or have no recorded ownership history during that time, are highly suspect. To minimize your risk: 

    • Investigate any sales in Europe between 1933 and 1945 to ensure that they were legitimate transactions and not transfers under duress.
    • Check international databases for looted art (e.g., Art Loss Register;; Lost Art Database; Central Registry of Information of Looted Cultural Property) as well as databases sponsored by relevant countries.
    • Search for the work’s subject matter, title, and artist’s name when checking databases. Attributions and titles often change (sometimes even size measurements change due to theft and reframing), and subject matter searches may prove more effective.
    • Check the back and underside of the panel, canvas or pedestal (without the frame for paintings) for marks that may help establish provenance.

    Risk is present even if buyers follow all these safeguards; under U.S. law, a thief cannot transfer a title. Purchasing a work in good faith does not protect against a legitimate claim by a Holocaust victim’s heirs.

    American Indian Artifacts

    Because European contact with American Indian tribes began centuries ago, tracing tribal objects can be exceedingly difficult. American Indian artifacts were often forcibly removed, used as bargaining chips, sold by individuals who were not authorized by their tribe to sell (or given as gifts not intended to be further traded), making it challenging to know when it is legal to buy, sell, or own them. The best option is to contact a tribal representative to determine whether the tribe objects should be sold or exhibited. Remember to: 

    • Avoid human remains, funerary goods, sacred and ceremonial objects and other cultural items that can be culturally sensitive and may run afoul of U.S. laws (i.e., Native American Graves Protection and Repatriation Act; Archaeological Resources Protection Act).
    • Check that tribal objects were legally acquired, and do not belong to the federal government or a tribal government.
    • Be wary of buying small, easily movable artifacts, which are more likely to have been illegally obtained.
    • Ensure that the artifact, whether old or new, features no animal parts from endangered or protected species (e.g., eagle feathers or ivory).
    • Contact a museum with repositories of tribal artifacts if you are unsure which tribe created or used the object.

    End Note
    1 UNESCO’s Convention on the Means of Prohibiting and Preventing the Illicit Import, Export and Transfer of Ownership of Cultural Property was adopted in 1970, and American museums hesitate to acquire antiquities whose history cannot be documented back to that date.


    Tom Kline and Eden Burgess are both partners at Cultural Heritage Partners, PLLC.

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    A little preparation is necessary before the big day.

    Clients (or the children of clients) who have a baby on the way usually have so much to worry about that any financial advice you offer them during this exciting-but-stressful time may initially be viewed as yet another thing that needs to be done. But, your words of wisdom could help them through the rough first months of parenthood, plus plan for the future and protect their financial security from the worst possible events. Here are some issues they should address, preferably well before the due date.

    Name the baby “Bill”?

    According the 2015 USDA report Expenditures on Children by Families, parents spend about $12,600 annually during the first two years of the child’s life. Parents can estimate what their bills might be in the first year (and beyond) by visiting the BabyCenter’s calculator at

    The results will hopefully alert prospective parents to the affect the birth will have on their pocketbooks, prodding them to be more mindful of where their money is going. If they need help that’s more sophisticated than the “pencil, paper and calculator” method, direct them to a site like or

    Run the financial plan

    Once the parents have a handle on their spending, you can put the numbers into a long-range financial plan that will either calm their nerves over the impending birth (and life change) or scare them into a healthy state of hyper-frugality. As part of the planning process, you can help them weigh out some important issues, such as how to prioritize saving money versus paying off debt and balancing saving for college and retirement.

    Work or home?

    Perhaps an even more urgent dilemma is one faced by many new parents: if one or both of them should cut back on work, or leave the workforce completely, to stay home to care for the child. You can run two different scenarios to show them the current and future costs and benefits of continuing to work, versus staying home. If you have any personal experience in this matter, or know of older clients who dealt with this question way back when, you could share those stories (anonymously) with the young parents, along with any subsequent regrets or relief they experienced.

    Covering the cost of childcare

    If neither of the parents are going to say home, make sure they know how much daycare might set them back. The organization Child Care Aware says that, nationally, the average annual cost of daycare for an infant is close to $1,000 per month and can be twice that amount for certain metro areas. In-home care may cost twice those amounts, but the time saved and consistency of care may be worth it to parents who can afford it. The organization’s site ( has a wealth of resources for parents seeking care for their children, including information on providers, financial assistance and the different types of care available.

    An uncomfortable conversation

    The financial plan will likely also reveal that the expecting parents don’t have enough life insurance (assuming they have any at all). The amount of coverage they require will vary depending on their situations. But between the cost of raising the child, paying for college, retiring debts, and potential lost wages, don’t be surprised if they need anywhere from a half million to a million dollars. Don’t forget to insure the life of a stay-at-home parent as well. In the event of a tragedy, the benefit could allow a working parent to either quit to care for the children or hire outside help to replace some of the responsibilities previously shouldered by the stay-at-home parent.

    Young parents usually can’t afford cash value policies with those benefit amounts. But they can probably cover the cost of term life insurance that lasts as long as the parents expect to support the child (say, to age 25 or so). Although many workers can purchase life insurance via their employers, that coverage may be more expensive and less customizable than what they could purchase on their own, especially if they are in good health. 

    Legal matters

    Speaking of uncomfortable topics, don’t be surprised if the young parents haven’t done any estate planning. A recent survey conducted on behalf of found that only 36 percent of respondents with children under age 18 had completed any of the appropriate documents.

    A will is the most basic first step, but parents may want to also establish a trust to control the aforementioned life insurance proceeds and any other assets until their children are responsible enough to properly manage that money. Once the parents have decided who is going to be in charge of or inheriting their assets, they have another, tougher decision: who will care for their kids if the mom and dad aren’t around. Help the parents reach a conclusion by reminding them that the decision can be changed in the future, and that it’s better for them (and their children) if they decide now while they are alive and well, rather than have the choice made by the courts after the parents are gone.

    After they have chosen and formally named the guardians, getting the remaining necessary documents (such as powers of attorney and health care directives) in place will seem like a piece of cake. You can help them find an estate planner by familiarizing yourself with various estate planning attorneys in your area and, perhaps, develop a mutually beneficial referral relationship in the process. If you don’t know where to start, visit to search for attorneys by specialty and geographic location.

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    What’s happened since the enactment of the first DAPT.

    This year marks the 20th anniversary of the first domestic asset protection trust (DAPT) legislation—in Alaska. Since that time, 17 states have enacted such legislation. Notwithstanding these tailwinds, we haven’t had any favorable case law to provide the much sought-after certainty that clients seek. Not to be lost in all this is the ever-increasing emphasis that asset protection has garnered in the last decade—both positive and negative. Some critics believe that asset protection is either morally or legally a “race to the bottom.” At the other end of the spectrum, many states that haven’t enacted self-settled trust legislation have seen fit to enact other laws that provide enhanced protection from creditors. These include tenancy-by-entirety trusts, inter vivos qualified terminable interest property protections and statutes protecting inherited individual retirement accounts. Recently, New Hampshire became the first state to provide for non-charitable foundations, which are similar to those vehicles in use in civil law jurisdictions to provide confidentiality and protection from creditors. 

    ACTEC Symposium

    Another notable development during this period was the formation of asset protection committees by both the American College of Trust and Estate Counsel (ACTEC) and the Real Property, Trust and Estate Law Section of the American Bar Association, demonstrating that this is an area warranting attention. Recently, in recognition of the 20-year anniversary of the first DAPT laws, ACTEC held a symposium, where I presented. This program covered three key developments in the area—DAPT legislation and developments therein, the use of non-self-settled trusts and other strategies for asset protection and the recent adoption of the Uniform Voidable Transactions Act (UVTA).  

    The ACTEC symposium included presentations on state and federal exemptions, planning with limited liability entities and planning with non-self-settled trusts. This latter topic deserves more attention from planners as it appears that often, the knee-jerk reaction for many clients seeking asset protection is to suggest a foreign or domestic self-settled trust. These structures may not work for most clients who reside in non-DAPT states, however, because courts in those states haven’t yet ruled on their validity. Thus, I believe that clients should use these structures more sparingly, and planners should first consider all the other tools in their toolbox, in particular, those that won’t offend the public policy in their home states. 

    These other strategies may be most appropriate for married clients when one spouse may be more vulnerable to creditor claims. For example, property can be transferred to the less vulnerable spouse, either outright or, more preferably, in trust. A planner can incorporate flexibility into the trust so that in the event of divorce or the grantor’s spouse’s death, the grantor can be added as a beneficiary through the exercise of a power of appointment or a third party’s power to add the grantor. Alternatively, if the grantor gets remarried, a “floating spouse” provision could define “spouse” as the person to whom the grantor is married from time to time, thus providing access to the trust income or corpus indirectly. Other means of providing for the grantor spouse include providing for loans to the grantor and reimbursement for income taxes.

    Tax-Saving Strategies

    Incorporating tax-saving strategies, such as sales to grantor trusts or similar estate freeze techniques, into the planning would also demonstrate a purpose other than asset protection, which distinction may become more important with the passage of the UVTA, already enacted by 15 states. Although many commentators view the UVTA as not significantly modifying the law on fraudulent transfers, the Comments thereto have engendered much debate, particularly from the estate- planning bar. Foremost of these is the concern that Comment 8 to Section 4 suggests that a transfer to a DAPT by a resident of a non-DAPT state is a fraudulent transfer per se. As a result of lobbying efforts, some of the adopting states have omitted the Comments from the legislative history. It remains to be seen how the courts will interpret these in the future. Suffice it to say that demonstrating that a transfer has a purpose other than asset protection may, if challenged, provide the debtor with a sustainable defense. 

    Early Implementation Needed

    Given these developments, it becomes imperative that asset protection planning be implemented early on in the estate-planning process. All too often, clients seek counsel only after a claim has arisen, at which point it becomes too late to engage in effective (and ethical) planning. Planners need to do a better job educating clients on the need to protect assets from possible divorce and/or creditors and informing clients of the available options. This should include multi-generational planning, where applicable. That is, the planner needs to review what, if any, inheritance the client expects and how to protect it from possible future claims, as well as advising the client how best to make gifts or bequests to his heirs. In the overwhelming majority of situations reviewed, most dispositive instruments provide for outright distributions on attainment of certain ages and/or mandatory income or withdrawal rights. Even when retaining the assets in trust may not provide any tax benefit, leaving them outright may constitute malpractice if the beneficiary were to lose it all because the attorney failed to inform the client of the other benefits of trusts. 

    A recent divorce case in Connecticut demonstrates the importance of the foregoing. In Ferri v. Powell-Ferri,1 the husband was a discretionary beneficiary of a trust settled by his father. He had an absolute power to withdraw 25 percent of the corpus at any time after attaining age 35, increasing to 100 percent after age 47. The trustee, without the husband’s knowledge or consent, decanted the trust (which was governed by Massachusetts law) to eliminate the withdrawal power. The Connecticut appeals court, in reversing the lower courts, rejected the wife’s argument that the trust was reachable because it was, in effect, self-settled and thus includible as a marital asset. (Connecticut is one of a minority of states that subject gifted and inherited property to equitable distribution.) The court further held that the decanting was a valid exercise of the trustee’s discretion and the trust was therefore no longer available to the husband. Though some have criticized this decision as an outlier, it does demonstrate the need to avoid giving beneficiaries too much control, whether it be in the form of trustee, protector or granting withdrawal powers. This decision also demonstrates the efficacy of decanting a trust that may have “bad” strings attached. 

    Bright Future

    Notwithstanding some setbacks over these 20 years, the future for asset protection is bright as more states will likely join in enacting DAPT statutes and, with that,  there will likely be some favorable court decisions. With the prospects of estate tax repeal on the horizon and thus a reduced emphasis in estate planning for tax purposes, planners who proactively engage their clients in the asset protection dialogue will be providing them with a value proposition clients will be willing to pay for.     


    1. Ferri v. Powell-Ferri, SC 19432 (Sup. Ct. Conn. 2017).

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    Many advisors are unfamiliar with how to plan for collectibles. Here are 10 pitfalls to watch out for.

    Despite the fact that a vast amount of wealth is held in the form of art and collectible assets, most legal, financial and tax advisors fail to counsel their clients on appropriate planning techniques for their collections both during life and at death. Some advisors are simply unfamiliar with how to plan for collectibles and may not even ask their clients whether they have collections that might require special planning or protection. Clients rarely volunteer information about their tangible personal property unless specifically asked.

    Here are 10 common mistakes made when planning for art and other collectible assets and how to avoid them.


    This gallery was adapted from the authors’ original article in the March 2018 issue of Trusts & Estates.

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    Patricia Angus and Paulina Mejia weighed in on the state of estate planning.

    Advisors around the country are working hard to get up to speed on the Tax Cuts and Jobs Act as they field questions from family business clients. Everyone wants to know how it impacts their families and what they should do now. On March 27, these questions were front and center in a different venue and with an audience of students, alumni and family business principals and advisors. Trusts and Estates teamed up with Columbia Business School’s Family Business Program for a lively panel:  “Changing Times in Family Business Estate Planning: What You Need to Know Now.” The evening included interactive dialogue and ended with a networking reception.    

    Susan Lipp, Trusts & Estates editor in chief, served as moderator, facilitating the conversation between Trusts & Estates’ editorial advisory board members Patricia Angus, a family enterprise consultant and founding co-director of the Family Business Program at Columbia Business School and Paulina Mejia, regional managing director and trust counsel of Fiduciary Trust Company International.

    Susan kicked off the event with a personal story of her experiences at the venerable family business, Loehmann’s, which she frequented with her mother as a young girl. The story set the context for a discussion of how and why family businesses face estate planning today. Several themes emerged:

    Planning Is Process

    One key theme to emerge from the panel is that planning is a process, not an event. The earlier the family starts dealing with issues like ownership, succession, governance, education of the younger generations and communication of family values, the better. Families need to meet regularly and make sure that they all understand the roles and responsibilities that are already in place for them and what to expect in the future. Families also need to work with their advisors to get structures in place to organize their operations and minimize taxes and liability.  

    Changes in the Past Decade

    The panel acknowledged that estate planning has become more collaborative across generations. The patriarchs/matriarchs are communicating with the younger generations and getting their input.

    At the same time, the structures that are used to set up the business have become more complex, which may overwhelm certain family members. For example, families need to decide whether to set up the business as a limited liability company, a partnership or perhaps an C corporation, and how and when to use trusts as part of the equation. More businesses are now held in trusts or other holding structures than ever before. So, family members need to be educated on fiduciary responsibilities. 

    Effect of New Tax Law

    With the higher exemptions in place thanks to the the Act, fewer families may be subject to estate tax, so there’s been an increased focus on income tax planning. The Act doubled the individual estate, gift and generation-skipping transfer tax exemptions to $11.18 million. Also, the new law will have a big impact on businesses, including family businesses, by reducing the corporate income tax rate from a top rate of 35 percent to a flat 21 percent, while also eliminating the corporate alternative minimum tax. The Act also effectively decreases the tax rate on certain income received though pass-through businesses, such as partnerships, LLCs, and S corporations. Businesses with foreign holdings may be subject to increased taxation and controlled foreign corporations will require special attention. 

    The Bottom Line

    There are so many moving parts when it comes to planning for and managing a successful family business. Things can get complex fast, so families must pay special attention if they want to succeed. It’s important that they get advice that’s coordinated among a multi-disciplinary team, including attorneys, accountants, investment advisors and family business consultants. The idea of “parallel planning” can really work. Families should focus on the business, philanthropy, familial relationships and communication at the same time as the estate plan.