Estate Planning

Whether it is a simple reorganisation of assets, inheritance plan solution or the creation and setting up of capital protection solutions and legal structures such as trusts, international holding companies, private foundations, revenue generation planning, life assurance contracts, private investment companies,or investment funds, we are able to help.

Organized by country, products and services, Bancoii can work with your usual advisors,offering solutions for:

Succession and inheritance,
Choosing a jurisdiction and also a legal form for the assets
Structuring of land and buildings
Changing / moving your tax residence
Utilisation / maximisation of intellectual property
Protection of your assets
Revenue maximisation (salary, stock options, benefits in kind….)
Charitable donations
The custody of financial participations.

a) Estate planning and taxes
Estate planning, for most clients, may consist, together with wealth protection and preservation, is the process of naming the beneficiaries of your estate(wealth) in case of die, and managing the tax consequences of passing your wealth, your estate, to those beneficiaries.

To administer your estate, you may wish to establish a will or trust Otherwise, you will die in testate, which requires that your estate go through probate. Probate is a relatively expensive and time-consuming process that requires a sentence to distribute your estate.

In the event you are impaired from a disease or accident, you may wish to arrange for key financial decisions to be made on your behalf. In such cases, you can establish a living will, power of attorney agreement or revocable living trust.

Please, take in account that the information appearing in this site should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.

b) Estate planning strategies

A Living Trust

For some people, a living trust, sometimes called a will substitute, can be more effective than a will. One of its advantages is that your assets move to your heirs without having to go through probate - the process by which a Court or Judge examines your will and declares it valid. That's a big advantage in countries where probate can drag on for months. And if you own property in several countries, multiple probate proceedings may be required to settle your estate in absence of a living trust. Moreover, a living trust is private, while probate is a public process – an advantage if you don't want people to know who got what.

But to make Living Trust effective, all your assets – including your house- must be transferred into the trust. Furthermore, unless you use them together with other tax strategies, you may pay some taxes.

Durable power of attorney

A durable power of attorney has staying power in the event of a disability, while a regular power of attorney has not.

c) Passing your estate to heirs

There are some ways to give a home to your child, depending of your country of residence. Here are some:

Sale a home for a Bargain Price

If you sell a home to a relative for less than fair market value (FMV), some Tax authorities will treat the deal as making a gift equal to the difference between FMV and the sale price. Your child's tax basis on the home will be also lower of the FMV, which increases the likelihood that he will owe income tax on a later sale. So, it is better to discuss the issue with an adviser.

Sale with financing from the seller

This is when you consider making an installment sale for full market value (FMV).This can meet your primary objective of transferring the home to your child in a way he or she can afford - probably with better tax consequences.

The deal may be that you sell the property to your son or daughter for a relatively small down-payment and carry a note for the balance of the purchase price. Let's say the house is worth $600,000 and your child can afford to pay $120,000 down. So you take back a note for $480,000. Make sure it's a written note. Also, it definitely helps your case if the child has the wherewithal to make the monthly payments.

You should charge at least a reasonable rate on the loan. As long as you go through the legal process of securing the note with the house, your child can deduct the interest payments to you if he/she use a company. Just make sure your child actually makes all the payments on the note. If you simply forgive some of the payments, the tax authorities may recast the entire arrangement as a bargain sale or a gift.

You will however owe income tax on your interest income from the note. But remember, your child will get an equal mortgage interest deduction, and the whole idea was to help the kid out.

A few years after the sale, your child may be able to refinance and pay off the note. If so, your generosity comes to an end with no further tax implications. However, if there's still a balance due when you die, your child will be treated as receiving a bequest if the note is forgiven at that point.

Qualified Personal Residence Trusts

In order to make a tax-efficient gift of your home while still living there,you can use a qualified personal residence trust (or QPRT). With this trust,you may get the residence out of your taxable estate without moving out - even though you have not made a full market value (FMV) sale to your child. But there are heavy risks involved.
This strategy would require you to put your home into an irrevocable trust for several years, while you continue to live in it. Through a complex calculation based on interest rates, the length of the trust and your age, the tax authorities may value your right to live in the house at, say, half of the price of the full FMV.

For the purposes of his taxable estate, that knocks the value of your house down to half the price, regardless of how much the house appreciates in the meantime.When the trust is up after the stipulated number of years, if you choose to continue living there, you can pay your son/daughter rent, further reducing the size of your taxable estate.

Of course, there is a tax catch to this kind of trust: You have to outlive it.If you die before the term of the trust expires, the full date-of-death value of the house is included in your taxable estate and your heirs receive no estate tax benefit.

Other way to live in your home

One strategy is to make a seller-financed full market value sale to your child using one of the tax strategies available in your country, and then rent the property back at the market rate.

The rental payments to your child could finance at least part of the cost of buying the home. The payments would be non deductible to you and taxable income to your child. But he or she could claim rental property depreciation write-offs, opening up the possibility of non cash deductible losses each year.

In some countries, the best tax strategy is selling the home for FMV, pay market-level rent afterwards and use the house as your principal residence. If you sell for less or pay below-market rent, some tax provisions may include the full date-of-death value of the home in your taxable estate, since they may consider you to still own the home since you never completely gave up "possession and enjoyment" of the property. Also, paying below-market rent may preclude any deductible rental losses for your child.

Plan for Incapacity
Avoiding Probate With Your Estate Plan
Charitable Giving
Wealth Transfer