These are the kind of earth-rattling headlines we read last year: “IRS Reaches Agreement with Visa and MasterCard on Information Disclosure;” “Future of EU Savings Directive in Doubt;” “Developing Countries Seek to Stem Erosion of Tax Base;” “U.S. Enacts Stiff Measures to Fight International Terrorism and Money Laundering;” “Tax Havens Give in to OECD on Exchange of Information.”

The international estate planning landscape has experienced tectonic movements in the last several years — and 2003 proved no exception. Change is expectable, but typically constant. In the past few years its velocity has been accelerating, and we can expect it to pick up even more steam in 2004 as markets increasingly converge and our clients become more international.

Already, few U.S. estate planners have practices without at least one of their U.S. clients living abroad or married to a non-citizen. Practically every estate or financial planner in Latin America and Asia works with a family that has at least one U.S. beneficiary. Wealthy individuals are moving to the United States; this was especially true for Latin Americans in 2003. Such migration creates many challenges for banks and investment professionals seeking to match clients with the right products. As the meaning of “offshore” changes for most wealthy people around the world, estate planning for only one jurisdiction is fast becoming a thing of the past. Instead of a specialization on the margin of the estate planning community, international estate planning is becoming a mainstay.

That's why all estate planners, even those who consider themselves “domestic-only,” should stay informed of these trends expected to escalate in 2004:

  • Increasing Financial Disclosure — Pressure for the international exchange of tax information seems to be flagging. This year should prove to be a turning point.

    At the start of 2003, there seemed to be hope for global disclosure. The United States and the Organisation for Economic Cooperation and Development (OECD), a Paris-based group of 30 nations, succeeded in persuading traditional tax havens to modify their internal regimes and enter into some information exchange agreements. Then came the setbacks. The United States proved unwilling to force its financial institutions to provide disclosure of all account owners' identities and the Swiss rebuffed pressure to require similar disclosure for depositors from the European Community. The American and Swiss resistance enraged the jurisdictions that had already acquiesced. Watch carefully in 2004 to see how this tug-of-war plays out — it will determine how much and how soon clients' tax information will be shared with governments around the globe.

  • Shifting from Evasion to Optimization — Because of the global push for financial disclosure as well as the increase in individual countries' internal fiscal transparency (as they try to stem erosion of their tax bases), wealthy individuals across Europe and Latin America are re-examining how they structure their financial investments. This exercise is particularly pressing for the many families that are becoming increasingly global and need to access their wealth in a tax-efficient manner wherever they are. The result: Many are beginning to understand “offshore” to mean access to global markets, currency and country diversification and personal privacy. They are willing to pay for tax-efficient structures and investments, rather than merely rely on bank secrecy and simple structures. This year will see the world's leading advisors develop increasingly sophisticated solutions as they compete to dominant wealth management for the world's richest clients.

  • Accessing Sophisticated Solutions — Many of the wealth planning tools that affluent families consider today once were primarily the province of large multinational companies. Some examples include: hybrid personal holding entities, tax elections that take advantage of different tax treatment in different jurisdictions, opportunistic use of tax treaties, private placement insurance products and private annuities. Clearly advisors to these families need to understand more than just the local tax and legal issues, as the integration of legal and tax issues in every jurisdiction becomes paramount. Once devised, these elegant solutions must be administered. For some, family offices — either self-run or outsourced — are becoming important to coordinate management. Other families are demanding financial service providers who can administer these solutions and work with legal and tax advisors to maintain the efficacy of the arrangements.

Collectors' Spotlight

“Remontoire” skeletonized clock, 25 cm by 20 cm, made of macassar wood, gold and black onyx, circa 2000, by Vacheron & Constantin sold October 2003 by Antiquorum for $50,038.