Table of Contents. About the Author... vii Table of Chapters...xi Preface... xxv. xiii

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1 Table of Contents About the Author... vii Table of Chapters...xi Preface... xxv Chapter 1 Conflict of Laws 1:1 Introduction :2 Identifying the Issues :3 Domicile :3.1 Definitions [A] Domicile of Origin [B] Domicile by Operation of Law [C] Domicile of Choice [D] Domicile and Residence: The Same and Different :3.2 Domicile and Death Taxes :3.3 Domicile and Treaty Arrangements :3.4 Double Domicile for Tax Purposes [A] Dorrance [B] Worcester County [C] Texas v. Florida [D] California v. Texas [E] Adjudication of Domicile [F] Double Domicile Tax Treaties :4 Judicial Jurisdiction Original Probate of a Will :4.1 N.Y. Surrogate s Act :5 Choice of Law :5.1 Characterization and Interpretation of Terms :5.2 Nature of Property Interests New York Property Definitions :5.3 Classification Precedent to Choice of Law :5.4 Choice of Law Approaches :5.5 Renvoi [A] Rejection of Renvoi [B] Single-Reference Renvoi [C] Double-Reference Renvoi :5.6 Choice of Law Rules Wills (Lawrence, Rel. #19, 11/16) xiii

2 INTERNATIONAL TAX & ESTATE PLANNING [A] Validity, Testamentary Capacity, and Revocation [B] Interpretation and Construction of a Testamentary Instrument [C] Intrinsic or Substantive Validity of Testamentary Provisions :5.7 New York Case Law [A] Inter Vivos Transfers [B] Rights of Spouse [C] Policy Unclear [D] In re Renard :5.8 Impact of Public Policy :5.9 Rights of Spouse Upheld :5.10 Impact of Treaties : Convention on Succession :5.12 Choice of Law Rules Testamentary and Inter Vivos Trusts and Powers of Appointment :6 Conclusion Chapter 2 Federal Estate and Gift Taxation of U.S. Citizens Living Outside the United States and Resident Aliens 2:1 Introduction :2 Citizenship :2.1 Loss of Citizenship :3 Residence :3.1 Effect of Residence and Nonresidence for Federal Income Tax Purposes [A] Definition of a Resident Alien Individual [B] Since the Deficit Reduction Act of Residency Starting Date and Residency Termination Date :3.2 Effect of Residence and Nonresidence for Federal Estate and Gift Tax Purposes :4 Estate Taxation of Resident Aliens :4.1 Computation of Tax :4.2 Gross Estate and Value :4.3 Section :4.4 Section :4.5 Section [A] Value of Reversionary Interest [B] Overlap Between Sections 2036 and :4.6 Section :4.7 Overlap Between Sections 2038 and xiv

3 Table of Contents 2:4.8 Section [A] Date of Creation [B] Exceptions to Includibility in Estate [C] Release and Disclaimer [D] Lapse of Power :4.9 Section :4.10 Other Code Provisions [A] Section [B] Section [C] Summary :5 Deductions and Credits :5.1 Deductions :5.2 Credits [A] Applicable Exclusion Amount [B] Gift Tax Credit [C] Credit for Tax on Prior Transfers [D] Credit for Foreign Death Taxes :6 Gift Taxation of U.S. Citizens and Resident Aliens :6.1 Joint Tenancies with Right of Survivorship :6.2 Computation of Gift Tax :6.3 Annual Exclusion :6.4 Charitable Deductions :6.5 Marital Deduction :7 Generation-Skipping Transfer Tax :8 Conclusion Chapter 3 Federal Estate and Gift Taxation of Nonresident Aliens 3:1 Introduction :2 Gross Estate and Situs Rules :2.1 Real Property :2.2 Tangible Personal Property :2.3 Shares of Stock of a Corporation :2.4 Debt Obligations [A] Bank Deposits [B] Foreign Branch Deposits [C] Portfolio Interest Debt Instruments [D] Debt Instruments of U.S. Corporations Having Active Foreign Business Income [E] Other Considerations :2.5 Life Insurance and Miscellaneous Intangible Personal Property :2.6 Partnership and Limited Liability Company Interests (Lawrence, Rel. #19, 11/16) xv

4 INTERNATIONAL TAX & ESTATE PLANNING 3:2.7 Trust Interests :2.8 Patents, Trademarks, Copyrights, and Contractual Rights :2.9 Business Interests :2.10 Revocable Transfers and Transfers Within Three Years of Death [A] Transfer of U.S. Real Property to Foreign Corporation [B] Foreign Corporation Exception and Swan :2.11 Brokerage, Banking, and Fiduciary Relationships :2.12 Summary :3 Estate Tax Deductions and Credits for the Nonresident Alien :3.1 Deductions [A] Deduction for State Death Taxes [B] Deduction for Funeral and Administration Expenses, Claims Against the Estate, Indebtedness, and Taxes [C] Charitable Deductions [D] Marital Deductions :3.2 Credits [A] The Applicable Exemption Amount [B] Credit for Tax on Prior Transfers [C] Credit for Other Taxes :4 Rates of Tax :5 Basis of Property Transferred by Gift or Death :6 Gift Tax :7 Generation-Skipping Transfer Tax :8 Expatriation to Avoid Federal Taxes :8.1 Introduction :8.2 U.S. Taxation of Individuals Who Expatriated After June 3, 2004 and Before June 17, [A] Estate Taxation [B] Gift Taxation [C] Objective Standards for Imposition of Alternative Tax Regime :8.3 U.S. Taxation of Individuals Expatriating on or After June 17, [A] Covered Expatriate [B] Mark-to-Market Regime [C] Gifts and Bequests from Covered Expatriates :8.4 Treaties :8.5 Conclusion :9 The Model Estate and Gift Tax Treaty :9.1 Article :9.2 Article xvi

5 Table of Contents 3:9.3 Article :9.4 Article :9.5 Article :9.6 Article :9.7 Article :9.8 Article :9.9 Article :9.10 Article :9.11 Article :9.12 Article :9.13 Article :9.14 Article :9.15 Article :10 Forms :11 Federal Tax Liens Chapter 4 Jointly Held and Community Property 4:1 Introduction :2 Common Law Joint Property :2.1 Introduction :2.2 Basic Aspects of Common Law Tenancies [A] Joint Tenancy with Right of Survivorship [B] Tenancy in Common [C] Tenancy by the Entirety [D] The Joint Bank Account :2.3 Dower and Curtesy, Elective Shares, Homestead Exemption, and Family Allowances [A] Dower and Curtesy [B] Homestead Exemption [C] Family Allowance :3 Community Property :3.1 Introduction :3.2 The Nature of a Given Asset :3.3 Management Rights :3.4 Creditors Rights :3.5 Rights of Spouses at Dissolution of the Marriage :3.6 The Tracing Concept and Presumptions :4 Transboundary Recognition of Community and Jointly Held Property Interests :4.1 Introduction :4.2 Recognition of Community Property Interests in Common Law Jurisdictions (Lawrence, Rel. #19, 11/16) xvii

6 INTERNATIONAL TAX & ESTATE PLANNING [A] [B] [C] [D] Recognition of Community Property Rights Where Property Remains in a Community Property Jurisdiction After a Change in Marital Domicile to a Common Law State Personal Property Taken into a Common Law State When the Marital Domicile Is Changed Community Property Exchanged for Other Property Transfer of Community Property to Common Law State While the Married Couple Remains Domiciled in the Foreign Jurisdiction [E] Summary :4.3 Federal Estate and Gift Taxation of Joint and Community Property Interests :4.4 Federal Estate Taxation of Joint Property :4.5 Disclaimer of Joint Interests :4.6 Simultaneous Death Considerations :4.7 Federal Gift Tax Considerations :4.8 Joint Accounts :4.9 Federal Estate Taxation of Community Property [A] Includibility in Gross Estate [B] Identification of Property Interests [C] Conversion Effect of Interspousal Agreements [D] Gifts in Contemplation of Death and Incomplete Transfers [D][1] Gifts in Contemplation of Death Section [D][2] Incomplete Transfers [D][2][a] Retained Life Estate Section [D][2][b] Transfers That Take Effect at Death Section [D][2][c] Revocable Transfers Section [D][2][d] Annuities Section [D][2][e] Joint Interests Section [D][2][f] Powers of Appointment Section [D][2][g] Life Insurance Proceeds Section [D][3] Deductions [D][4] Gift Tax Consequences :5 Planning for the Migrant Couple :6 Conclusion xviii

7 Table of Contents Chapter 5 Sovereign Risks, Expropriation, and the Act of State Doctrine 5:1 Introduction :2 General Principles of International Law :2.1 Customary International Law or an International Standard of Justice :2.2 Expropriation of Property [A] Property Expropriated by Another Sovereign in the United States [B] Expropriation of Property Located in the [C] United States by the United States Expropriated Property Located Within the Territorial Jurisdiction of the Host Sovereign [D] Indirect or Constructive Expropriation :2.3 Repudiating or Breaching a Contract :2.4 Injury to an Alien s Interest in a Domestic Corporation :3 Bases of Sovereign Jurisdiction :3.1 Territorial Jurisdiction and the Act of State Doctrine [A] The Basis for the Act of State Doctrine in the United States [B] Exceptions to the Doctrine [B][1] Recognition [B][2] The Bernstein Exception [B][3] Hickenlooper Amendment [B][4] Second Circuit Decisions [B][5] Foreign Sovereign Immunities Act [B][6] Helms-Burton Act [B][7] The USA PATRIOT Act and Its Impact on International Banking :3.2 Nationality, Jurisdiction, and Capacity to Sue :3.3 Summary :4 Protective Devices :4.1 Introduction :4.2 Corporate Flee Devices [A] Option [B] Assignment [C] Transfer of the Corporate Domicile [D] Merger [E] Liquidation [F] Redeemable Shares [G] Power of Attorney :4.3 Flee Devices in Tax-Haven Sovereigns [A] Conclusion (Lawrence, Rel. #19, 11/16) xix

8 INTERNATIONAL TAX & ESTATE PLANNING Chapter 6 Trusts 6:1 History :1.1 Historical Importance of Uses :1.2 Reasons for Popularity of Uses :1.3 The Statute of Uses :2 General Considerations :2.1 Types of Property :2.2 Terms of Trust :2.3 Trustee s Duties and Powers :2.4 The Role of the Trust Protector or Protective Committee [A] The Role of the Protector or Protective Committee [B] The Nature of the Trust Protector s or Protective Committee s Position and His, Her, or Its Interaction with the Trustee [C] Who Should Be Appointed As Trust Protector or Members of the Protective Committee? :2.5 Operation of a Trust :2.6 Utilization of Trusts [A] Jurisdiction [A][1] Classification As Trust [A][2] Maintenance of Control [A][3] Court Acceptance of Jurisdiction [B] Trusts Compared to Liechtenstein Stiftungs and Anstalts :3 Foreign Trusts (Non-U.S. Trusts) :3.1 Drafting Approach :3.2 Discretion to Trustee :3.3 Advantages and Problems of Foreign Trusts [A] Avoidance of Law of Domicile [B] Free Disposition Versus Public Policy [C] Elective Rights Statutes [D] Retention of Control [E] Steps to Take [F] Fraudulent Intent [G] Revocable Inter Vivos Trust [H] Defective Grantor Trusts [H][1] Grantor Trusts Under Sections [H][2] Special Rules for Foreign Grantor Trusts Created by U.S. Persons :3.4 Provisions of Foreign Trust Agreements [A] Preamble [B] Definitional Section [C] Dispositive Provisions xx

9 [D] Governing Law [E] Flee Clause or Cuban Clause [F] Resignation and Appointment of a Successor Trustee [G] Trustee s Accounting [H] Fiduciary Compensation [I] Revocability or Irrevocability of the Trust [J] Payments to Minors [K] Notices [L] Payment of Estate Taxes of the Settlor and the Like [M] Waiver of Bond [N] Instructions re Investments and General Powers [O] Exoneration Clause [P] Indemnification Clause [Q] Disclosure Provision :4 Characteristics of Foreign Trusts :4.1 U.S. Federal Income Taxation of Foreign Situs Trusts [A] Grantor Trusts [A][1] Sections [A][2] Nonresident Alien Grantor [B] Grantor Trusts (Section 679) [B][1] Application of Section [C] Nongrantor Foreign Trusts (and Foreign Estates) [C][1] Taxation of Nongrantor Foreign Trust (or Estate) Not Engaged in a U.S. Trade or Business [C][2] [C][3] Capital Gains Taxation of a Nongrantor Foreign Trust (or Estate) and the Presence of a Foreign Trust (or Estate) in the United States Taxation of a Nongrantor Foreign Trust (or Estate) Engaged in a U.S. Trade or Business [C][4] Fixed Place of Business in United States [C][5] Asset-Use Test and Business-Activities Test [C][6] Property Taxed [C][7] Table of Contents Taxation of U.S. Beneficiaries of Nongrantor Foreign Trusts (or Estates) :5 The Tax on Transfers to Foreign Trusts and Estates :6 Use of Corporations in Conjunction with Foreign Trusts and U.S. Taxation :6.1 U.S. Corporations: Direct Federal Income Taxation (Lawrence, Rel. #19, 11/16) xxi

10 INTERNATIONAL TAX & ESTATE PLANNING 6:6.2 Foreign Corporations: Direct U.S. Federal Income Taxation :6.3 Repatriation of U.S. Earnings: Direct Federal Income Taxation [A] U.S. Corporations [B] Foreign Corporations :6.4 Capital Gains: Direct Federal Income Taxation :6.5 Anti-Deferral Provisions: Indirect U.S. Federal Income Taxation [A] Foreign Personal Holding Companies [B] Personal Holding Companies [C] Controlled Foreign Corporations: Characteristics [C][1] Foreign Personal Holding Company Income [C][2] Foreign Base Company Sales Income [C][3] Foreign Base Company Services Income [C][4] Foreign Base Company Oil-Related Income [C][5] Exceptions to Foreign Base Company Income [D] Controlled Foreign Corporation: Investments in U.S. Property [D][1] Gain from Certain Sales or Exchanges of Stock in Certain Foreign Corporations [D][2] Interrelationships with Grantor Trust Rules :6.6 Foreign Investment Company :6.7 Passive Foreign Investment Companies :6.8 Issues Regarding Foreign Trusts That Own the Stock of a Foreign Corporation :6.9 Filing Requirements and Penalties [A] Forms 3520 and 3520A [B] FIRPTA Returns [C] Other Returns [D] Criminal Penalties [E] Failure to Pay Tax Delinquency Penalty [F] Negligence Penalty [G] Interest :7 Repatriation or Decantation of Foreign Situs Trusts and Resultant Tax Considerations :7.1 Resignation of Foreign Trustee and Appointment of U.S. Trustee [A] Tax Treatment of Distributions :7.2 Termination of Trust and Creation of New Trust by Beneficiaries :7.3 Decanting :7.4 Miscellaneous Tax Considerations :8 Continuing Uses for Foreign Trusts xxii

11 Table of Contents 6:8.1 Trusts Created by Foreign Persons :8.2 Trusts Created by U.S. Citizens or Residents [A] Foreign Trust Forms Foreign Corporation [B] Foreign Trust for Life Insurance [C] Special Uses of a Foreign Trust Chapter 7 Wills, Administration, and the Revenue Law Doctrine 7:1 Introduction :2 Intestate Distribution :3 Disposition of Property by Will :3.1 Formal and Intrinsic Validity of a Will and Effect and Interpretation of Its Provisions [A] Formal Validity [B] Intrinsic Validity [C] Effect [D] Interpretation :3.2 Multiple Wills :4 Considerations Governing the Provisions of Wills of Persons with Multinational Interests :4.1 Preamble :4.2 Payments of Debts and Funeral and Administration Expenses :4.3 Definitional Section :4.4 Tangible Personal Property :4.5 Real Property :4.6 Specific Legacies :4.7 Marital Deduction Property :4.8 Charitable Deductions :4.9 Powers of Appointment :4.10 Residuary Estate :4.11 Payment of Death Taxes :4.12 Minority Clause :4.13 Designation of Fiduciaries :4.14 Fiduciary s Authority and Power :4.15 Waiver of Bond or Surety :4.16 Resignation of a Fiduciary :4.17 Provisions for the Exoneration and Indemnification of the Fiduciary :4.18 Fiduciary Accountings :4.19 Jurisdiction Designation :4.20 Change of Situs :4.21 Simultaneous Death Clause (Lawrence, Rel. #19, 11/16) xxiii

12 INTERNATIONAL TAX & ESTATE PLANNING 7:5 Will Substitutes :5.1 Premarital Agreements :5.2 Bearer Shares :6 Some Administration Problems :6.1 Decedent s Remains :6.2 Probate of the Will :6.3 Release of the Assets :6.4 Problems with Ownership of Foreign Assets :6.5 Authentication :7 Effect Given Foreign Revenue Laws in the United States :7.1 Revenue Law Doctrine :7.2 Currency Regulation More Complicated :7.3 Lack of Jurisdiction and the Revenue Law Doctrine :7.4 Effect of Treaties :7.5 Summary Table of Authorities...T-1 Index... I-1 xxiv

TABLE OF CONTENTS. Simple will with residue pouring over to inter vivos trust

TABLE OF CONTENTS. Simple will with residue pouring over to inter vivos trust TABLE OF CONTENTS Preface Form I Form II Form III Form IIIA Form IV Form V Form VI Form VII Form VIII Form IX Form IXA Form X Form XI Form XII Form XIII Form XIV Form XV Form XVI Form XVII Form XVIII Form