Newspaper article International New York Times

A Rivalry to Protect the Wealth of the 1% ; State Governments Tweak Their Laws and Cut Fees to Better Compete for Trusts

Newspaper article International New York Times

A Rivalry to Protect the Wealth of the 1% ; State Governments Tweak Their Laws and Cut Fees to Better Compete for Trusts

Article excerpt

In Nevada, competition with Delaware and other asset-friendly states keeps battalions of money caretakers busy.

Steven J. Oshins, a Nevada lawyer who specializes in estate planning, has never met the wealthy software entrepreneur Dan Kloiber, but he is nonetheless intensely interested in Mr. Kloiber's contentious divorce.

"I have had a Google news alert on that for a couple years," Mr. Oshins said as he discussed the case from his office in a squat pink office complex about a 20-minute drive from the Las Vegas Strip. What animates Mr. Oshins is not the juicy marital feud, but the legal arcana governing a trust in Delaware where the Kloiber family parked assets worth hundreds of million of dollars, sheltered from estate taxes.

Mr. Oshins, with a gleeful grin spreading across his face, relished the thought of the no-longer-beloved Mrs. Kloiber busting through the trust and exposing a potential chink in the formidable trust protections of Delaware -- which just happens to fiercely compete with Nevada for the lucrative business of shielding assets owned by the superrich.

Although most out-of-town visitors are drawn to the city's roulette wheels and slot machines, Mr. Oshins and a battalion of tax lawyers, accountants, advisers, trust administrators and bankers cater to an elite clientele that insists on a much more reliable way to build a fortune.

With their backing, Nevada has stoked an aggressive rivalry among a smattering of states to babysit the wealth of the nation's top 1 percent, pressing public officials to pass laws, streamline regulations, lower fees and better service.

Yet even as more and more states seek ways to help the richest Americans protect their wealth from creditors, divorcing spouses and children, as well as some federal and state tax collectors, critics worry that the effort to attract the lucrative trust business is turning into a competitive game of giveaway.

"There is no doubt that many, many jurisdictions are committed to being at the bottom," said Edward McCaffrey, a professor at the University of Southern California Gould School of Law. "I think the real question now is: 'Where is the bottom?"'

The federal government leaves it to each state to draw up its own trust laws, and several have tried to go as far as they can without inciting accusations that they are abetting tax evasion or hiding assets from legitimate creditors and tax collectors, he said. But in pushing the envelope, they can also run into challenges from courts in other states, including the Kloibers' home of Kentucky, that have different statutes governing trusts.

The clear leaders are Nevada, Delaware, South Dakota and Alaska, but other states have also joined the asset-protection frenzy. New Hampshire, Wyoming, Tennessee and Ohio all hope to dip a spoon in the trillion-dollar-plus pot of cream that had traditionally been preserved in offshore tax havens like the Cayman Islands.

Over the last decade, for example, New Hampshire has passed nearly a dozen laws affecting trusts that expanded their life spans, lowered taxes and made it easier to transfer assets. In 2013, the state created a special trust court subdivision to handle the complex litigation; last year, an overhaul of state banking laws simplified regulations.

Still, Nevada "is definitely the most aggressive in my experience in terms of asset protection," Mr. McCaffrey said.

Starting with the absence of any state income tax and resilient secrecy protections, Nevada has added a passel of laws and regulations intended to lure trust business. Individuals who establish so-called irrevocable trusts have more flexibility to transfer assets to a new trust with more favorable terms. …

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