A Legal Look at the Factors that Play a Role in International Wealth Management
Wealth Management and Tax Management: The Common Denominator
Although this article focuses on international wealth management, in reality, wealth management and tax management are two sides of the same coin, so this article will also include coverage of tax-related issues under the umbrella of wealth management.
Wealth management is a field populated by clients of various standings: from mature individuals with a net worth in the hundreds of millions to established couples with sizeable nest eggs to young people just starting out.
International Wealth Management 101
International wealth management is a field with perhaps a narrower client population—those individuals with high net worth and sophisticated, global business and investment interests.
This article will explore the nature of wealth management and international wealth management and what constitutes both.
Morgan Stanley, Urban Thier and Other law firms
International wealth management Morgan Stanley, Urban Thier Federer and other such law firms with wealth management concentrations offer services in trust and estate administration, trust and estate litigation, family owned businesses, tax-exempt organizations, and charitable giving.
These firms counsel clients on an array of concerns in the field of wealth management, including estate planning and asset protection strategies; college planning; insurance; minimizing taxation during wealth transfer (for both benefactors and beneficiaries); trust management; philanthropy; retirement planning; estate valuation and distribution; and settlement dispute resolution. They also counsel clients with family-owned or closely-held businesses on retaining control and managing business continuity.
Wealth management firms frequently provide investment services as well, including alternative investments, annuities, asset management, ETFs, equities, fixed income, mutual funds, and real estate.
Firms that excel in wealth management are able to maintain, maximize and transfer wealth at the same time as they capitalize on opportunities and mitigate complications. Typically, their clients include individuals, family groups, fiduciaries (trustees), and charitable organizations. They advise professional fiduciaries and counsel them in trust and estate administration. They also represent parties in fiduciary litigation.
Wealth Management and International Wealth Management
Wealth management lawyers work with a variety of clients, as mentioned above: families, individuals, trustees, and fiduciaries.
Typically, although not always, these clients are wealthy with a net worth in the hundreds of millions. They require advice on all aspects of estate planning, wills and trusts, tax planning, and estate litigation.
Domestic wealth management lawyers advise clients who live in the country and whose concerns are domestic in scope. International wealth management lawyers advise clients who have a business branch in another country, have invested wealth overseas, are seeking asylum, and other various matters.
What wealth management lawyers do
The work of wealth management lawyers involves multiple responsibilities.
They deal with offshore trusts and the implications of bringing those trusts onshore. (An onshore trust is typically a trust registered in Alaska, Delaware, or in one of about a dozen other states; an offshore trust is one registered outside the U.S., for example in the Cook Islands or on Nevis, which is a Caribbean island that constitutes half of the country of the Federation of Saint Kitts and Nevis.)
International (offshore) trusts are designed for preserving assets. They have their roots in the 1930’s when wealthy and targeted people fled oppressive European regimes. At that time, assets were being summarily confiscated to fund debt-bound governments and the war effort. People who established cross-border, offshore trusts were able to protect their assets for themselves or for their heirs. Most of those who did not take these measures lost everything.
Cross-border trusts became more commonly known as offshore trusts and then, in more recent years, as international trusts.
Wealth management lawyers may register trusts in domestic or foreign venues. Part of their responsibility load is to scrutinize the statutory and common law legal benefits of specific venues, weigh the pros and cons of registering trusts in those venues, take into account the client’s needs and goals, and then advise accordingly. A second responsibility of a wealth management lawyer is to advise families on their international estates. This necessitates giving sound legal advice regarding assets that cross jurisdictions and are spread over multiple jurisdictions. This moves intointernational asset management, international portfolio management,international financial planning, international private banking, and international investment banking.
A wealth management lawyer typically works closely with other professionals in his or her law firm (for example, an international financial advisor, or a corporate lawyer) to best meet the needs of the client.
Another area of responsibility of the wealth management lawyer is drafting wills, trusts, and estate documents, and representing trustees in litigation regarding their management of an estate. He or she will also liaise with private client lawyers and assist wealthy clients with their personal tax liabilities and solutions.
Overarching responsibilities of the wealth management lawyer include conducting legal research, meeting with clients, and implementing agreed-upon strategies in the context of a team.
Wealth Management and International Wealth Management Jobs
The job of a wealth management lawyer tends to be a combination of drafting, advising, researching, and meetings. A young lawyer in this field will typically experience more direct contact with clients than if he or she worked for a litigation department or a large corporation. The work of a young wealth management lawyer frequently involves face-to-face client meetings.
This area of law necessitates a substantial amount of research. The complex nature of the field, combined with the wide variety of client positions, needs, and objectives, makes the research creative, challenging and interesting. A private client lawyer in wealth management needs to be able to handle multiple matters at the same time. While this increases the difficulty of the job, it also adds to the variety. Every client situation is unique and as such brings an element of freshness to every case. Boredom and tedium are not generally a problem for the wealth management lawyer.
Wealth management jobs typically entail large amounts of time spent with numbers as they relate to tax work. It helps if a wealth management lawyer enjoys working with numbers—not necessarily in math-based adding and subtracting tasks, but in conceptual, analytical work. A legal firm’s corporate tax team will usually take on the tax work of the case, especially as it is integrated with corporate law elements, leaving the conceptual aspects to the wealth management lawyer.
Current Issues in Wealth Management
More and more, wealthy families are spread across multiple countries and jurisdictions, both in terms of their assets and their family members. International wealth management lawyers must stay abreast of other countries’ laws. It helps for lawyers to be culturally sensitive, develop cross-cultural communication skills, and be able to recognize and set aside ethnocentric positions and language. Laws are always changing. Wealth transfer tax laws are perpetually revised (including gift tax, estate tax, and generation-skipping tax). Wealth management lawyers must stay on top of revisions, amendments, and changes because these can hugely impact clients’ financial planning. Will, trusts, and estate documents must be flexible and contain enough language to adapt to whatever regulations are in force at the time. Wealth Management Concerns
1. Estate Planning
Tax considerations are a key component of estate planning. Individuals with a high net worth must plan carefully for the distribution of their assets so that tax implications—both domestic and international—are minimized and benefits to family members or other beneficiaries are maximized. Competent wealth management lawyers are able to offer sophisticated advice that addresses tax concerns and facilitates the transition of assets in ways that most effectively meet clients’ needs and objectives.
2. Trust and Estate Administration
Excellence in administration—that is, in the crafting and implementing of customized plans for wealthy individuals and families—is absolutely crucial in trust and estate planning. The particular provisions of the plans, the domestic and international implications of those provisions, estate tax laws, and income tax laws all impact the administration of a trust and estate, necessitating laser-focused attention and the most sophisticated of planning on the part of the wealth management lawyer.
3. Trust and Estate Litigation
Unfortunately, the administration of an estate or trust and the distribution of their assets is not always a smooth, conflict-free process. Controversies can arise between family members and sometimes litigation cannot be avoided. The competent wealth management lawyer is able to navigate the way to a successful and amicable resolution, exhibiting sensitivity to family members as well as the ability to stay true to the benefactor’s wishes and objectives.
4. Tax-Exempt Organizations
Organizations that fall into the tax-exempt classification range from private non-operating foundations to public charities to hospital and university endowments to corporate and community foundations, among others. As tax-exempt entities, these organizations must adhere to a strict and complex set of state and federal laws and regulations. Failure to comply fully can have dire and permanent consequences: substantial penalties imposed on the individuals who lead the organizations and even loss of the organization’s tax-exempt status. The skilled wealth management lawyer possesses a thorough knowledge of all aspects of these organizations’ governance, including formation, administration, development, planned giving, tax compliance, and litigation.
5. Charitable Giving
Wealth management lawyers assist their clients in crafting a strategic approach to their philanthropy, thus ensuring that their charitable goals are met with intention and integrity. They educate their clients on charitable options to take into consideration, including pledges and grant agreements. The grant agreement is a way to guarantee certainty in the use of donated funds.
A wealth management lawyer will make a client aware of possible pitfalls related to attaching requests or restrictions to donations (the charity can reject the gift) and the implications of requesting naming rights to a donation (the client will be associated with the political and social views/affiliations of the charity).
Typical wealth management fees
Typical fees for most wealth management firms are around one percent per year. Fees for additional services can range from .12 percent to two percent.
Tax Law As It Relates to Wealth Management
Tax attorneys work closely with wealth management lawyers, and while the latter handle multiple areas of concentration related to wealth management, the tax attorney deals with law that covers a range of activities under the tax umbrella, from transactional support and structuring to tax planning and controversy.
Tax attorneys frequently work hand in hand with corporate lawyers. In doing thus, they ensure that business transactions are tax efficient. When it comes to wealth management, tax attorneys seek to have an in-depth understanding of clients’ business structures and their needs and overall objectives. A skilled tax attorney will have a thorough knowledge of all pertinent domestic and international tax law and tax law implications.
Tax controversy includes issues such as tax-based litigation, IRS examinations, and tax shelter investigations. Transfer pricing falls under tax controversy.
What tax lawyers do
In the context of wealth management, tax lawyers will advise clients regarding the tax implications of their transactions. This requires a thorough analysis of cases and regulation plus an understanding of tax laws across jurisdictions and international borders.
Tax lawyers scrutinize pending transactions and the tax implications of those transactions. Based on their findings they guide clients in negotiating terms of the transactions. They also work closely with wealth management lawyers and other non-tax lawyers to facilitate the smoothest possible transaction schedule.
Tax attorneys draft agreements and tax disclosures, particularly in regards to mergers & acquisitions and joint ventures. They also negotiate with the IRS, answer IRS queries, and draft briefs and memoranda in tax controversy cases.
The tax lawyer’s job
Wealth management lawyers and tax lawyers alike share the imperative of staying current with changes in law and the economy. In a legal landscape that is always in flux, a young tax lawyer who stays current will build invaluable experience and expertise.
An established tax lawyer who stays current can become an expert and a leader in the field. He or she can produce innovative solutions to previously unsolved tax problems and thereby introduce an instrument that will become accepted by and established in the market.
Junior tax lawyers must be adept at reading case law and regulation. They will spend substantial portions of time in this activity, followed by rationalizing and summarizing their findings.
Tax attorneys frequently work closely with corporate lawyers (and both work closely with wealth management lawyers) to thoroughly understand all the issues that surround a transaction, tax and otherwise. With this in-depth understanding as a foundation, the skilled tax attorney is able to craft a comprehensive, intelligent tax-efficient structure for the transaction.
Tax lawyers are well-served by the possession of excellent interpersonal and cross-cultural communication skills. They must be able to explain technical information in a clear and concise way to individuals that are not familiar with tax law. In cases of tax controversy that necessitate conversations with the IRS, it behooves the tax attorney to speak forthrightly and succinctly.
They will often—especially in international wealth management cases—be called on to work with international clients, and in these cases, cultural awareness and the ability to put aside ethnocentric positions and language is extremely helpful.
Domestically in the U.S., comprehensive tax reform is a live debate over which Congress remains divided.
Internationally, cooperation has increased in regards to tax havens and information exchange.Around eighty countries have signed the Foreign Account Tax Compliance Act agreements with the IRS. This has facilitated more open communication between the IRS and international firms.
Offshore account holders are now able to protect themselves against penalty action due to a voluntary disclosure program affected by the IRS. Through this program, account holders may now remediate tax failure issues before they become punishable.
Cyber security is an important current issue. March 2015 saw an IRS-sponsored security summit grappling with the issue of cyber crime. Out of those meetings came more comprehensive and extensive data requirements for validating tax returns.Advice from tax and wealth management lawyers
- To give the best client advice possible, thoroughly understand everything possible about a transaction.
- Tax lawyers deal more with concepts than with addition and subtraction. A person does not have to be a math expert to be a tax lawyer.
- Be diligent about keeping up with developments, even though it is demanding and can feel impossible. In so doing, you can create an expert out of yourself in focused areas.
- Students should take as many tax courses as possible. Students that graduate with a broad background in tax courses, including corporate tax, will find themselves positioned well for many legal fields.
- A comprehensive and broad academic course load puts a student in good stead for working for a legal firm with a wide range of services from corporate law to litigation.
- The world has become completely global with wealth spreading across all borders. Young lawyers with language skills and an open, international outlook will be well positioned for life and work in a global law firm.
- An analytical mind is extremely helpful for a person considering the legal field as a career. Also beneficial is an innate curiosity about different areas of law.
- Wealth management law often plays out in long-term relationships between client and attorney. This can be a benefit of this area of law practice. However, it can also be challenging to deal with family relationships, especially if animosity arises among family members over the course of time. Navigating this and other dynamics comes with the territory of being a wealth management lawyer. Good people skills, as well as a sense of one’s own personal boundaries, is helpful.
- Individuals going into wealth management law must be prepared to interact with clients who may have little to no background in tax and estate law concepts. This requires an ability to explain the concepts clearly and simply. This is different from other areas of law, for example, corporate law, where a corporate law attorney most often deals with other attorneys or business people who are at least somewhat familiar with that area of law.
Association of International Wealth Management (AIWM)
The Association of International Wealth Management is an international professional organization for wealth managers, portfolio managers, investment advisors, asset managers, and trust and estate practitioners around the world. It is a non-profit association “established to encourage, promote and strengthen global education in the private banking industry and to set a globally recognized standard for the qualification of private banking professionals.” (Quote taken from AIWM website:aiwm.org.)
Founded in 2007 by AZEK—the training center of the Swiss Financial Analysts Association—the AIWM was created to meet the need and demand for high caliber products and client service in the wealth management sector. It was also established in response to the realities of the increasingly globalized financial market, and in maneuvering through its complex landscape.
The AIWM is based in Switzerland, with its main office in Zurich. It awards the Certified International Wealth Manager Diploma.
Urban Thier’s Contribution to Your Wealth Management Needs
As the above makes clear, International Wealth Management is a very broad area drawing upon many different legal and non-legal professionals to meet the unique needs of each client.
Urban Thier has assisted many clients in formulating a wealth management plan to meet their unique needs, from simply wills to complex trusts and other wealth and succession planning and testamentary documents.
Additionally, when needed, Urban Thier has pursued litigation on behalf of clients in United States and European Courts to enforce their legal rights.
This assistance includes helping bereaved heirs, often during their most vulnerable time, to properly evaluate their legal rights and to ensure that they are receiving what they are legally entitled to under the law and the testamentary wishes of a family member or other decedent.