Geography matters to Eric Berger and Michael Guild, financial advisors with the Gramercy Wealth Management Group at UBS in New York – perhaps more than it does to most of their industry peers.
“About half of our business is multijurisdictional,” says Berger, who specializes in global financing planning and serves an underserved but growing category of clients – specifically high net worth U.S. individuals who have significant financial interests abroad.
“There are not a ton of teams like ours out there that handle this type of business. But the irony is many clients are becoming more global,” says Berger. Along with Guild, Berger developed ties to western Europeans when he worked at Credit Suisse and helped coordinate cross-Atlantic responses to the post-2008 fallout for that financial institution.
Recently for Berger, Guild and other financial advisors who have clients with assets in Europe, an opportunity has opened to offer their clients an even more nuanced estate-planning strategy.
For clients who have assets located in European Union member countries, financial advisors may now help them choose between the countries where they were born and those where they reside to determine which laws govern distribution of their assets to heirs.
Although the new EU rule that makes such a choice possible became effective in 2015, most U.S.-based financial advisors, trusts and estates lawyers and clients are only slowly gaining recognition of its usefulness. The availability of such options has added significance for clients with assets in countries like Germany, France, and Italy, which have rigid, culturally-intertwined rules about what individuals are required to leave their children and spouses.
The new rule, referred to as either European Succession Regulation or Brussels IV, potentially does away with the application of succession laws in each EU member state. An example of the rule's consequences: U.S. citizens who own Paris real estate may now elect to have U.S. rather than French law apply to their estates, which would allow them to bequeath it to someone or an entity other than their spouses and children. Such a scenario would have been impossible if their asset disposition was governed by only French law, as had been true prior to the EU instituting the new rule.
The new rule hasn’t overhauled all global planning strategies, but rather presents the potential of new planning avenues to explore, UBS’s Berger says. “This regulation is being taken into consideration,” he says.
UBS’s Guild emphasizes that despite the new EU rule, financial planning for individuals who have global assets remains complex. “We deal with high-net worth families, so it’s not possible to circumvent entirely the challenges of their inherently complex, multijurisdictional lives,” Guild says.
Both Guild and Berger emphasize that the relative newness of the EU rule — and specifically how it will apply in specific cases — prevents certainty about how any individual scenario will ultimately play out. Further, real property as an asset class may be treated differently than other assets under global financial planning scenarios.
The two UBS advisors are not the only ones unwilling to tag the new rule as a panacea. Trust and estates lawyers agree its ultimate value for clients with cross-border assets remains unknown.
“We are still trying to figure this out,” says Cynthia Brittain, a partner at the law firm Katten Muchin Rosenman, who works with financial advisors’ clients with cross-border assets.
Brittain recommends that advisors help their clients with EU connections — whether due to their birthplace, where they have resided, or asset ownership — review estate plans, keeping the new regulation in mind.
But the new EU rule definitely has made some financial advisors with clients who have assets overseas eager to explore the previously unavailable possibilities.
“I think it’s a huge opportunity,” Mariano Henin says about the new EU rule. A financial advisor at New York-based Andrew Garrett, Inc., an RIA with more than $80 million in assets under management, Henin regularly confronts cross-border issues arising in wealth planning and has been stumped.
“There have been no clear-cut answers about what clients in these circumstances should be doing,” Henin says. When it comes to managing questions in multiple jurisdictions, even trust and estates lawyers have often left his clients high and dry, Henin says.
“I don’t feel that I have found lawyers who are knowledgeable. They will tell you yes, but when you tell them which countries, they don’t have the answers,” Henin says.
“It’s very hard for the lawyers to look into the math in terms of taxes and regulations,” Henin says. “But, at the end of the day, Europeans usually find workarounds,” he says.
Trust and estates lawyer Brittain recommends financial advisors talk to folks like herself and try to stay abreast of countries’ changing rules governing disposition of assets. Those who have clients with assets in the Middle East, for instance, should note that there has been some “softening” of the inheritance rules there, she says.
Under certain interpretations, Sharia law bars clients from bequeathing a discretionary amount of assets to their daughters. But recently her clients with Egyptian assets have won approval to work around those rules by putting their assets under ownership in another country, Brittain says.
“It’s kind of a work in progress,” she concedes.