Truly Inspired Investing & More on Ways to Reduce Tax


This message was recently sent to me and is being passed on as it says all that can be said about inspired Investing. The subject: is "I Wish You Enough."

"Recently I overheard a father and daughter in their last moments together. They had announced her departure and standing near the security gate, they hugged and he said, "I love you. I wish you enough." She said, "Daddy, our life together has been more than enough. Your love is all I ever needed. I wish you enough, too, Daddy." They kissed and she left.

He walked over toward the window where I was seated. Standing there I could see he wanted and needed to cry. I tried not to intrude on his privacy, but he welcomed me in by asking, "Did you ever say good-bye to someone knowing it would be forever?" "Yes, I have," I replied. Saying that brought back memories I had of expressing my love and appreciation for all my Dad had done for me. Recognizing that his days were limited, I took the time to tell him face to face how much he meant to me. So I knew what this man was experiencing.

"Forgive me for asking, but why is this a forever good-bye?" I asked. "I am old and she lives much too far away. I have challenges ahead and the reality is, the next trip back would be for my funeral, " he said. "When you were saying good-bye I heard you say, 'I wish you enough." May I ask what that means?" He began to smile. "That's a wish that has been handed down from other generations. My parents used to say it to everyone." He paused for a moment and looking up as if trying to remember it in detail, he smiled even more. "When we said 'I wish you enough,' we were wanting the other person to have a life filled with just enough good things to sustain them," he continued and then turning toward me he shared the following as if he were reciting it from memory.

"I wish you enough sun to keep your attitude bright. I wish you enough rain to appreciate the sun more. I wish you enough happiness to keep your spirit alive. I wish you enough pain so that the smallest joys in life appear much bigger. I wish you enough gain to satisfy your wanting. I wish you enough loss to appreciate all that you possess. I wish enough "Hello's" to get you through the final "Good-bye."

What more can be said about a truly wise investor, but to have enough and Merri and I hope until next message that your investing is inspired so it brings you enough!

Please send this message onto your friends or have them email list@garyascott.com to join my mailing list for other inspired messages.

More on Trusts

Last week's inspired investing message included a tip on using overseas trusts. This brought comments from other tax attorneys you will want to know.

Richard Duke wrote: "Gary Read the information below regarding capital gains of a foreign nongrantor trust. This comes from the St. Thomas University School of Law (Miami) Offshore and International Tax & E-Commerce Journal that is currently being published. When a U.S. person dies, the trust become a nongrantor trust; and if a foreign trust, then a foreign nongrantor trust. Please see the clear law about capital gains regarding foreign nongrantor trusts. Capital gains are included in the distributable net income of a foreign nongrantor trust, irrespective of whether capital gains are allocated to income or to corpus under the trust instrument or the governing law and irrespective of whether currently distributed. Thus, U.S. beneficiaries of a foreign trust (foreign grantor or foreign nongrantor) are taxed at such time as distributions are made. And, distributions of accumulated income (undistributed income which includes accumulated capital gains) are subject to the rules regarding taxation on accumulated distributions [throw-back rules] (interest and penalties on distributions of accumulated income).

Also, the foreign trust assets will be excluded from estate and generation-skipping transfer taxation (to the beneficiaries of the deceased settlor) only if the trusts are Exempt Trusts. (Exempt trusts: a current $1 million exemption is available–$2 million for the spouses.) Assets in a foreign testamentary trust not subject to the election to apply the exemption against GST taxes will be subject to both estate taxation and GST taxation.

The tax issues with respect to foreign testamentary trusts are very complicated (but caught when the tax returns are filed for U.S. beneficiaries receiving distributions–very serious consequences). Capital gains are taxable, so long as they are distributed in the year in which earned from the foreign nongrantor trust, to the beneficiaries. Capital gains, however, are treated as undistributed net income if accumulated; and, when the accumulated capital gains are distributed to U.S. beneficiaries, the distributions are taxed as ordinary income, not capital gains, and are subject to the throw-back rule (penalties and interest on distributions of accumulated income from a foreign nongrantor trust).

There are limitations on the amount that can be excluded from death and generation-skipping transfer taxation –currently $1 million or $2 million for a husband and wife. Any assets above these amounts will be subject to estate and generation-skipping transfer taxes when the children, for example, die.

Investors must beware of simple statements about complex tax issues that must be reported by the beneficiaries when receiving distributions may be misleading to the untrained public. International tax provisions are the most complex in the entire Internal Revenue Code.

Richard

Richard Duke is one of the most thorough and competent tax attorneys I know and will speak with me at Jyske Bank's upcoming seminar in Copenhagen.

Another reader wrote:

"Why testimentary trusts only? These trusts only come into life on the death of the settlor. Why not create foreign intervivos trusts and place the assets there during the life of the individual?You would get the same benefits, only earlier. Incidentally, I am an estate planning attorney."

eClub advisor Joe Cox will cover this and other types of asset protection trusts at the upcoming London investment & business seminar where I will speak this July.

Until next message may your investing be inspired!

Gary


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