From the editor - Nicholas Dale introduces STEP Journal May 2013 issue

01 May 2013 Nicholas Dale

From the editor - Nicholas Dale introduces STEP Journal May 2013 issue

Nicholas Dale considers the Rubik agreement, FATCA and the need for clear, concise and up-to-date mental capacity legislation.

Former Swiss economics minister Pascal Couchepin was famously quoted as saying that Swiss banking secrecy is not negotiable. He made this comment at a meeting with business leaders in Spain in April 2002. Couchepin could not have imagined how radically the landscape would change in the ensuing ten years.

As a result of that change, Swiss banks are working at full speed to adapt to the new business model. One example is the implementation of the ‘Rubik’ agreement between the UK and Switzerland, which affects individuals who are resident in England and Wales and who hold bank accounts in Switzerland. The thrust of the agreement is to ensure proper tax compliance, for both the past and the future. Of particular interest to the trust industry is the fact that the agreement does not apply to ‘true irrevocable discretionary trusts’. This clarification was the result of an intervention by the Swiss Association of Trust Companies, an organisation set up in 2007 as a STEP initiative.

Close on the heels of Rubik, Switzerland and the US signed an intergovernmental agreement on 14 February that should help Swiss financial institutions by simplifying the implementation of the Foreign Account Tax Compliance Act (FATCA). There is a helpful article on this subject on page 53 of this Journal. Simplification or not, implementation will still be a huge administrative challenge.

At the end of February, the Swiss Federal Council launched two consultations, one on combating money laundering and the other on enhancing due diligence requirements in the area of taxation. The first involves implementation of 2012’s revised recommendations of the Financial Action Task Force, to which Switzerland actively contributed. The second consultation is part of the Federal Council’s own financial centre strategy, an important part of which is to prevent the acceptance of untaxed assets.

Turning to the focus of this Journal, statistics generally show that Alzheimer’s and related conditions affecting mental capacity are on the increase. The likelihood that trust and estate practitioners will be confronted with mental capacity issues on the part of their clients is relatively high, so the inclusion of this topic in the STEP Journal is particularly welcome. The articles show that the law in the jurisdictions covered is largely fragmented, out of date and inconsistent. For example, Mary Condell writes that the current approach to capacity in Ireland is based on legislation dating back to 1871 and that while draft legislation does exist, its implementation is eagerly awaited. Tim Farmer’s thoughts on the quality of professional mental capacity assessments is of particular interest, as is his description of how the two-stage test functions. Richard Frimston considers cross-border incapacity and bemoans the fact that England and Wales still has not ratified Hague Convention XXXV of 13 January 2000 on the International Protection of Adults even though several states, including Switzerland, have done so. Meanwhile, Alex Elphinston considers disability and incapacity from a UK tax perspective and concludes that the various reliefs available have not only been introduced in a piecemeal manner but are complex and not complementary.

Until recently, the law in Switzerland on the subject of mental capacity and guardianship had been governed by the Guardianship Law of 1912. As of 1 January

2013, a new law, by the name of the Adult and Child Protection Law, is in force. The new law is designed to take into account modern circumstances and attitudes, longer life expectancy and medical advances. Flexibility seems to be the key, avoiding the need, in certain circumstances, for the involvement of the adult protection authority. For example, a person of sound mind can now appoint a trustworthy person in advance to manage that person’s financial affairs should they become mentally incapacitated (an advance directive). In addition, an individual can make decisions relating to their future medical care.

This issue of the STEP Journal covers a lot of ground, with its regional focus on Switzerland and Liechtenstein and the jurisdictional updates on mental capacity legislation. I trust you will agree with me that the articles are as relevant as they are interesting.


Nicholas Dale

CPD Reflective Learning