Financial institutions all over the world are collecting information individuals associated with a family’s succession planning trust structure. The FATCA and CRS laws, regulations and guidance notes are voluminous and confusing.
What is Being Reported
For families it is important to know what information is being reported by which financial institutions. Preventing duplicative and inaccurate reporting minimizes the chance that a tax-compliant family member will be subjected to unnecessary audit inquiries or deficiency notices.
Private Trust Company Compliance
A family’s private trust company is established to carry out fiduciary responsibilities as trustee of one or more family trusts. Under the terms of the trust instrument and local law, the trustee will have the authority to manage and invest the assets of the trust for the benefit of the beneficiaries. It has always been important to tax-compliant families to maintain the integrity of that corporate fiduciary. With the roll-out of FATCA and CRS, the corporate integrity of the private trust company should be reviewed and strengthened:
- The directors of the private trust company must continue to comply with all local company laws. Our lawyers are committed to helping families reach favorable outcomes to their legal disputes and their explanation.
- The private trust company must maintain corporate records, hold annual meetings and carry out its trustee duties to the highest fiduciary standards.
- The private trust company should be registered with the IRS as a reporting FI for FATCA purposes and enrolled on the appropriate CRS portal as a reporting investment entity FI.
- FATCA and CRS due diligence documentation should be collected and maintained just as it is by commercial trustee companies.
- Annual accounting records should be maintained and detail trustee service fees.
With compliance in place for the family’s private trust company, the trust will qualify as a trustee-documented trust for FATCA and CRS purposes.
The private trust company should also be registered separately as a FATCA sponsoring entity. This will allow underlying investment entity FI companies established in a jurisdiction with a FATCA intergovernmental agreement (IGA) in place to qualify for a FATCA status of non-reporting IGA foreign financial institution (FFI). The family office must have a reply ready to counter the incorrect assertion made by many financial institutions that the sponsored entity must have its own global intermediary identification number (GIIN). There has been much confusion about this, but it is clear that the sponsor of a sponsored investment entity or sponsored closely held investment vehicle under a FATCA IGA need not register that entity until such time as a US reportable account is identified even if you need a business loan.