The Rise of the International Trust

With considerable acuity, Carlyn S. McCaffrey and Elyse G.Kirschner explore the maze created by the new Code and treasury regulation provisions. In addition to affording a fascinating roadmap through the maze, their article, Learning to Live with the New Foreign Nongrantor Trust Rules, demonstrates the difficulty of addressing legislatively the multitude of trust arrangements that can be devised in the struggle between grantors worldwide and the U.S. tax authorities. The article also exposes the inevitable generation of unintended consequences, including new loopholes, that are a product of such legislation. In a second tax article, Respect for Form as Substance in U.S. Taxation of International Trusts, Donald D. Kozusko and Stephen K. Vetter address the regulatory conundrum posed by enforcing hard-and-fast rules in the international trust context. They argue that, in the case of transfer taxation and trust income taxation, substance has often taken a back seat to form. Indeed, form is substance. This reality effects the choices that are routinely made between the utilization of one form of ownership over another. The Code very clearly details different tax consequences, depending on the choice of form made. In the case of international trusts, under the new tax regime, the jury is still out as to whether form will be submerged by broad doctrines of economic substance and step transactions, or whether form will still prove to be the substance of the law, more generally characterizing the U.S. taxation regime relating to foreign trusts. Ironically, as Kozusko and Vetter point out, the misplaced rigor of the Code\u27s entity attribution rules may actually subvert the substantive goals served by formalism. The last topic explored in this issue of the Journal is asset protection, especially in conjunction with the international trust. There are articles by leading proponents, including Gideon Rothschild, Daniel S. Rubin, and Jonathan G. Blattmachr, as well as by a leading critic, Eric Henzy, who successfully challenged an asset protection structure in the recent decision of In re Brooks. In addition, the transcript of a spirited Round table discussion reveals the views of Barry S. Engel, one of the originators of asset protection strategies in response to the tort liability crisis. As part of this Roundtable and in a separate article, David Aronofsky elucidates the efforts of Montana to become a bank secrecy center. Properly understood, the asset protection debate is about the use by a high net worth individual of the international trust in an offshore jurisdiction to counterbalance the risk of unbridled tort liability in the United States. A particularly striking aspect of the Symposium\u27s exploration of this issue is its consideration of the efforts of Alaska and several other jurisdictions within the United States to attract some of the capital administered offshore. An Alaskan asset protection trust seeks to afford the protections of an international trust but without the dangers perceived in placing capital in exotic jurisdictions offshore. However, the viability of the effort by Alaska and several other states may be hampered by certain constitutional constraints, most notably the Full Faith and Credit clause as applied within the United States. A Vanderbilt student and member of the Journal, Amy Lynn Wagenfeld, addresses and critiques this development

International Legal Dimensions of Art and Cultural Property

The market for art and cultural property is international.\u27 Demand is intense and not particularly local in terms of consumer preference. Supply responds to this intense international demand. Like most anything else, art finds its way to whomever is prepared to pay for it. Regulation affects how it arrives at its ultimate destination, but generally does not prevent it from getting there... The symposium\u27s contributors have sought to address the complex legal and policy issues raised by an explosive global market in art and cultural property. These articles will prove invaluable in the shaping of the international legal response to the clash of interests identified by the symposium\u27s keynote speaker, Professor Erik Jayme

The Role of Legal Doctrine in the Decline of the Islamic Waqf: A Comparison with the Trust

The starting point of this article is that the same impulses present in societies with Western legal systems to manage family wealth over time have been present in Islamic societies as well. But unlike other legal regimes regulating such impulses, waqf law has been largely unresponsive, especially in light of changing typologies of wealth and socio-economic conditions. A number of factors explain the failure of legal doctrine to respond. The first of these is the religious or divine grounding of waqf law, making it difficult for the law to evolve in a responsive and uncontroversial manner, one that does not represent a threat to the fundamental structure of Islamic law itself. Second, the related social norms observed by constituents of Islamic societies have deterred individuals from aggressively planning in ways that contradict divine precepts of the law. Furthermore, these norms have fostered an ethos of not taking seriously alternatives to the rules of inheritance. A third consideration has been the statutory response to the problem. Legislative reforms in countries with sizeable Muslim populations have differed strikingly from the legislative reforms with respect to trusts. Trust legislation has progressively eliminated many of the significant impediments to its more efficient, worldwide use. Legislation addressing the waqf has tended more to its overregulation or outright prohibition, sometimes accompanied by expropriation of property currently held in existing waqfs

Roundtable Discussion

Welcome to the Roundtable panel discussion. Each of the speakers is going to open with a few minutes statement. And then we\u27re going to pose some questions to open discussion, so it will take people through the whole asset protection route from beginning to end, hopefully. And then, any questions you may have we believe we\u27ll have sufficient time to ask those questions and have them answered. You may get very different views. And then we\u27ve just decided that the jury will decide whether asset protection trusts are a good thing or a bad thing. Okay. So pay attention

The Nonfiduciary Trust

This article identifies and details the emergence in an increasing number of states of a new trust law that rejects the fundamental tenets of traditional trust law. This alternative concept of the trust liberates the trustee from any meaningful accountability to the beneficiary, the very core concept of traditional trust law. In short, these states are enabling the creation of what might be described as a nonfiduciary trust