Financial institutions' obligations, client permissions, and legal consequences related to KYC and KYB information requests, including fraud, false statements, identity theft, money laundering, and tax evasion. Understand the critical provisions and penalties under relevant laws.
Financial institutions have the ability to ask for KYC and KYB information from clients at any time as part of the financial institution’s Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) obligations and policies.
A common misunderstanding is that financial institutions need to ask the client’s permission or seek the agreement of the client to request the information, and that the financial institution is required to justify its ongoing and additional information demands. This is not so. Continuing and additional information demands may stem from ongoing reviews as part of the financial institution’s ongoing CDD and AML audits/examinations or arise from EDD triggered by unusual or suspicious transactional activity, changes to the entities structures, ownership, or control, or negative news or information that comes to the attention of the financial institution. Financial institutions do not need to ask the client’s permission or seek the agreement of the client to request information, and financial institutions are not required to justify their ongoing additional information demands.
Some believe they can object to CDD or EDD requests or intentionally hide, withhold, or misrepresent KYC/KYB information. Such actions, especially if done intentionally, can violate several laws. Here are some of the most relevant ones:
Bank Fraud: In many jurisdictions, including the United States, intentionally deceiving a bank, credit union, or trust company to gain monetary benefits constitutes fraud. Bank Fraud is usually a felony punishable by fines and imprisonment.
False Statements: Under United States federal law, knowingly making false statements to federally insured banks, credit unions, and broker-dealers may be a crime.
Identity Fraud or Identity Theft: If a person hides information about their identity or uses someone else’s identity without their permission, it’s considered identity fraud or theft. This may include using a web of shell companies, trusts, fictitious entities, or strawmen to conduct financial transactions in the name of another for one’s benefit.
Money Laundering: A person hiding information may be part of a money laundering scheme if it is in furtherance of a conspiracy or facilitation to disguise the origins of money or for tax evasion.
For example, 18 USC §1956 is a United States federal law that pertains to money laundering. Money laundering refers to the process of making illegally-gained proceeds appear legal. Here’s an analysis of the critical provisions of the law:
Financial transactions: This section of the code makes it illegal to conduct or attempt to intentionally conduct a financial transaction involving proceeds from specified unlawful activities to promote the carrying on of specified criminal activity or to engage in tax evasion or tax fraud by actions intended to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986 as amended.
International and interstate commerce: The law also applies to transactions involving the movement of funds by wire, or other means that either cross state lines or national borders.
“Knowing” nature of the transaction: A critical aspect of the law is that the person involved in the transaction must know that the property involved represents the proceeds of some form of unlawful activity.
Penalties: Violations of 18 USC §1956 can result in severe penalties, including fines of up to $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for up to twenty (20) years, or both.
Conspiracy: This law also makes it a crime to conspire to commit any of the offenses defined in this section.
This law is one of the main tools used by federal prosecutors in the United States to combat organized crime, drug trafficking, tax evasion, and financial fraud, because it allows them to prosecute the illegal activities that generate large sums of money and the subsequent efforts to conceal these activities.
Tax Evasion: Hiding income or assets or conducting transfer payment(s) through a shell company(ies) to evade taxes can also be a criminal offense.
Know Your Customer (KYC) Violations: Financial institutions must implement KYC procedures to prevent identity theft, financial fraud, money laundering, and terrorist financing. If a customer provides false or misleading information or intentionally omits essential information, they could be implicated in a KYC violation, resulting in penalties, account closure, and various potential legal consequences.
Please note that the preceding are only general explanations. The actual laws are detailed and nuanced, and their application can vary depending on the case’s specifics.
Also, it’s worth noting that even if a person’s actions don’t amount to a criminal offense, they could still face account closures, negative news, and civil penalties, such as lawsuits or fines, for providing false information to a bank. It’s always best to be entirely truthful and transparent when dealing with financial institutions and seek the advice of competent legal professionals.
Delve into the critical legislation criminalizing financial transactions involving proceeds from illegal activities and its intersection with tax laws. Learn about penalties, sentencing, legal procedures, and constitutional considerations.
In the context of federal legislation in the United States, 18 U.S.C. § 1956, often referred to as the Money Laundering Control Act, constitutes a critical piece of legislation pertaining to the laundering of monetary instruments [1][2]. Given its intersection with tax laws, particularly sections 7201 and 7206 of the Internal Revenue Code of 1986, it offers a comprehensive legal framework to combat the menace of money laundering and associated tax evasion. This article delves into an in-depth consideration of these provisions and their interplay [2][3]. This following discussion aims to provide a comprehensive overview of the law, its various elements, and the penalties involved.
18 U.S.C. § 1956 et seq. primarily criminalizes financial transactions that involve proceeds from specified unlawful activities. Essentially, this implies that if a person, with knowledge that a property involved in a financial transaction represents the proceeds of some form of illegal activity, conducts or attempts to conduct such a financial transaction, he or she would be violating this law. Accordingly, United States prosecutors frequently use 18 U.S.C. § 1956 accompanied with linked allegations of mail or wire fraud, tax fraud, tax evasion and bank fraud.
The law is applicable to scenarios where the individual conducts a financial transaction with the intent to either promote the carrying on of specified unlawful activities or to engage in conduct constituting a violation of certain sections of the Internal Revenue Code of 1986 [1][2].
Furthermore, it is applicable in instances where the individual knowingly designs the transaction, in whole or part, to either conceal or disguise the nature, location, source, ownership, or control of the proceeds of specified unlawful activity, or to avoid a transaction reporting requirement under state or federal law. 18 U.S.C. § 1956 makes it unlawful for anyone knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, to conduct or attempt to conduct such a financial transaction [2]. Two main intentions are identified under this law. The first pertains to the promotion of the carrying on of specified unlawful activity. The second deals with the intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986, effectively bridging the gap between money laundering and tax laws.
Section 7201 of the Internal Revenue Code deals with tax evasion, where an individual willfully attempts to evade or defeat any tax imposed by the federal laws [3]. The potential defenses for tax evasion can be insurmountable evidence of the taxpayer's ignorance of a due tax liability or an honest belief that the taxpayer was not violating any of the provisions of the tax laws.
On the other hand, section 7206 pertains to 'tax perjury' and covers fraudulent activities such as making false statements on a tax return or providing fraudulent information [3]. The critical element of this violation is the intent to defraud, where the accused knowingly provides incorrect information.
18 U.S.C. § 1956 effectively incorporates violations of tax laws as a predicate offense for money laundering. If an individual knowingly engages in a financial transaction involving proceeds obtained from violations of sections 7201 or 7206 of the Internal Revenue Code, they may be found guilty of money laundering under 18 U.S.C. § 1956. This intersection provides a robust mechanism for law enforcement agencies to combat tax evasion schemes that employ sophisticated money laundering techniques.
The legislation also addresses situations where an individual transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or vice versa. This is subject to the condition that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity.
In essence, the law not only contributes significantly to the fight against organized crime, drug trafficking, tax evasion and other financial fraud but also serves as a deterrent to entities that might be tempted to engage in such illegal activities. It facilitates the prosecution of illegal activities that generate large sums of money and the subsequent attempts to conceal these activities.
In conclusion, 18 U.S. Code § 1956 is a pivotal piece of legislation that serves to discourage and penalize money laundering activities. The law is comprehensive and detailed, embodying a series of nuanced interpretations and applications that significantly contribute to its efficacy as a tool against financial crime.
Violations of 18 U.S.C. § 1956 carry severe penalties, including a fine of not more than $500,000 or twice the value of the property involved in the transaction, imprisonment for not more than twenty years, or both[2]. Sentencing for tax crimes is guided by the U.S. Sentencing Guidelines. The base offense level generally corresponds to the amount of tax loss, which equals the amount of taxes evaded by the taxpayer, excluding penalties or interest for the period in question [3].
Prosecuting tax and money laundering offenses involves intricate procedures, often entailing comprehensive investigations by the Internal Revenue Service (IRS) and other law enforcement agencies. Important constitutional considerations are at play, especially those surrounding self-incrimination, due process, and the statute of limitations for violations. In addition, section 371 of Title 18 of the U.S. Code, dealing with criminal conspiracy, often comes into play in cases involving large-scale tax fraud and money laundering.
In essence, the provisions of 18 U.S.C. § 1956, in combination with sections 7201 and 7206 of the Internal Revenue Code of 1986, form a robust legal framework for curbing money laundering and tax evasion. These laws underscore the seriousness of these offenses and their impact on society at large. By integrating tax violations into the ambit of money laundering, these provisions provide a comprehensive approach to combatting financial crime, deterring potential offenders, and maintaining economic integrity.
Discover the IRS definition of "engaged in trade or business within the United States" and its implications for individuals and businesses. Learn about exceptions, personal services, partnerships, and more. Understand your tax obligations effectively.
The Internal Revenue Service (IRS) plays a crucial role in determining tax obligations and regulations within the United States. For individuals and businesses operating in the country, it is essential to understand how the IRS defines "doing business" in the United States. This article aims to provide a comprehensive explanation of the IRS definition and its implications.
According to the IRS, the term "engaged in trade or business within the United States" is outlined in Part I (Section 861 and following) and Part II (Section 871 and following) of the Internal Revenue Code (IRC). The IRS considers certain activities as falling within this definition, unless otherwise specified [1].
The IRS provides exceptions to the definition of "engaged in trade or business within the United States." These exceptions exclude specific activities described in paragraphs (c) and (d) of the IRS regulations [1]. However, it is important to note that the performance of personal services within the United States at any time within the taxable year is generally considered as being engaged in trade or business within the country [1].
The IRS has specific rules regarding the performance of personal services for foreign employers. For a nonresident alien individual, foreign partnership, or foreign corporation that is not engaged in trade or business within the United States during the taxable year, the performance of personal services in the United States does not constitute being engaged in trade or business within the country [1].
Similarly, an individual who is a citizen or resident of the United States or a domestic partnership or corporation maintaining an office or place of business in a foreign country or U.S. possession can perform personal services in the United States for a total of 90 days or less during the taxable year. As long as their compensation for such services does not exceed a gross amount of $3,000, they are not considered engaged in trade or business within the United States [1].
To determine whether an individual or entity is engaged in a trade or business within the United States, the nature of their activities plays a significant role. The IRS considers the regularity of activities, transactions, production of income, and ongoing efforts to further the interests of the business [2].
Nonimmigrants temporarily present in the United States on "F," "J," "M," or "Q" visas are considered engaged in a trade or business within the country. The taxable part of any U.S. source scholarship or fellowship grant received by nonimmigrants in these visa categories is treated as effectively connected with a trade or business in the United States [3].
Members of partnerships engaged in trade or business within the United States at any time during the tax year are considered engaged in trade or business within the country [3].
When a foreign person engages in a trade or business in the United States, the income from sources within the United States connected with that trade or business is considered Effectively Connected Income (ECI). This applies regardless of any connection between the income and the trade or business conducted in the United States during the tax year [3].
Understanding the IRS definition of doing business in the United States is essential for individuals and businesses to comply with tax regulations. The IRS considers various factors such as the nature of activities, exceptions for specific situations, and the concept of effectively connected income (ECI). By familiarizing themselves with these guidelines, taxpayers can navigate their tax obligations effectively and ensure compliance with the IRS regulations.
A comprehensive guide to KYC and AML requirements for banks, investment firms, insurance companies, money services businesses, and other financial entities. Learn about customer identification, due diligence, beneficial ownership, and ongoing monitoring.
Regulatory bodies, such as financial supervisory authorities, set guidelines and enforce compliance with these requirements to maintain the integrity of the financial system. Accordingly, financial institutions are required by federal and international law to conduct "know your client" (KYC) and “anti-money laundering” (AML) monitoring. Such financial institutions include banks, investment firms, insurance companies, money services businesses, private and commercial lenders and other entities involved in financial transactions.
KYC and AML regulations aim to prevent money laundering, terrorist financing, and other illicit activities by ensuring that financial institutions have a comprehensive understanding of their clients' identities, ownership, transfer payments, business activities, and sources and uses of funds.
The following provides general classification types of financial institutions that must conduct ongoing KYC and AML monitoring, which includes random and trigger-based information requirements for additional information:
Banks: This includes retail banks, commercial banks, and investment banks. Banks have a significant role in the financial system and handle various types of transactions, making them vulnerable to money laundering and terrorist financing risks.
Investment Firms: Securities brokers, asset management companies, and other investment firms are subject to KYC and AML requirements. These firms handle transactions related to securities trading, investment advisory services, and fund management, which can be susceptible to illicit activities.
Insurance Companies: Insurance providers, including life insurance and general insurance companies, are also obligated to conduct KYC and AML monitoring. Insurance policies can be misused for money laundering purposes, and insurance companies need to verify the identities of policyholders and assess the legitimacy of transactions.
Money Services Businesses (MSBs): MSBs encompass a range of entities such as money transfer services, currency exchange providers, prepaid card issuers, and check cashing businesses. Due to the nature of their services, MSBs are susceptible to being exploited for money laundering or terrorist financing, necessitating robust KYC and AML procedures.
Virtual Asset Service Providers (VASPs): With the rise of digital assets, VASPs, including platforms for asset exchanges and storage services, are increasingly subject to KYC and AML regulations. These entities facilitate the exchange, storage, and transfer of virtual assets, which can be attractive for illicit purposes.
In the global financial landscape, combating money laundering, tax fraud and terrorist financing has become a top priority for regulatory bodies and financial institutions alike. To ensure the integrity of the financial system and prevent illicit activities, various types of financial institutions are required to implement robust KYC and AML measures. This article will provide a detailed list of the types of financial institutions that must conduct KYC and AML data collection and monitoring.
Commercial and Private Money Lenders, and Loan Companies: Lenders, including but not limited to litigation finance companies, are obligated to conduct KYC and AML monitoring. Lending arrangements are often used as part of tax fraud and can be misused for money laundering purposes, and lenders need to verify the identities of loan recipients and assess the legitimacy of transactions.
Trust Companies and Trust Administrators: Trusts are often used to hide the true beneficial ownership and control of accounts. As these firms handle transactions which can be susceptible to illicit activities, trust companies and trust administrators are subject to KYC and AML requirements.
The following provides a more detailed list of examples of the types of firms that are required to comply with KYC and AML requirements:
Banks
Insurance Companies
Brokerage and Custodian Firms
Money Services Businesses (MSBs)
Commercial and Private Money Lenders, and Loan Companies
Securities Dealers
Mutual Funds
Trust and Fiduciary Service Providers
ForEx, Cross Border Accounts, and Anonymous Account Providers
Wealth Management Firms
Payment Service Providers
Financial institutions, are required to comply with KYC and AML regulations to mitigate the risk of money laundering and terrorist financing. The specific requirements may vary by jurisdiction, but they generally include:
CIPs verify the identity of customers through reliable and independent documents, data, or information, and involve the collection of information such as name, address, date of birth, and identification numbers.
CDD is utilized to assess the risk profile of customers based on factors such as their nature of business, location, and transaction history.
In certain cases, CDD may also involve conducting enhanced due diligence for high-risk customers, including politically exposed persons (PEPs) and those involved in high-value transactions.
Beneficial Ownership Identification involves identifying and verifying the beneficial owners of legal entity customers and gathering information on individuals who own or control the customer and assessing their risk profile.
Financial institutions are required to perform continuous monitoring of customer transactions and activities to detect any suspicious or unusual behavior. The following are the key factors that may prompt a US financial institution to request additional KYC information:
Regulatory Compliance: Financial institutions must comply with regulatory frameworks such as the Bank Secrecy Act (BSA) and the USA PATRIOT Act. These regulations require institutions to establish and maintain effective KYC programs to verify the identity of their customers and assess their risk profile. Additional KYC information may be requested to meet regulatory obligations and ensure compliance [1].
Risk-Based Approach: Financial institutions are expected to adopt a risk-based approach to KYC. This means that they must assess the risk associated with each customer and adjust their due diligence measures accordingly. If a customer is considered high risk based on factors such as their country of origin, business activities, or transaction patterns, the institution may request additional KYC information to gain a better understanding of the customer's profile and detect any potential red flags [1].
Changes in Customer Profile: Financial institutions need to keep customer information up to date. Financial Institutions should develop policies to review and confirm the customer information is current. Also, if the financial institution becomes aware, or has reason to believe, of potential changes in a customer's profile, such as changes in ownership, business activities, or transaction patterns, the institution may request additional KYC information to ensure the accuracy and completeness of customer records [3].
Transaction Monitoring: Financial institutions have an obligation to monitor customer transactions for material changes in transactional activity or suspicious activities and to report any suspicious transactions to the appropriate authorities. If a customer's transactions trigger alerts or raise suspicions, the institution may request additional KYC information to further investigate the nature and purpose of the transactions [1].
Compliance with FATCA: The Foreign Account Tax Compliance Act (FATCA) is a US law that requires foreign financial institutions to report information about financial accounts held by US taxpayers or entities with substantial US ownership interests. Financial institutions subject to FATCA may request additional KYC information to comply with these reporting obligations [2].
It's important to note that the specific triggers for requesting additional KYC information may vary based on the institution's internal policies, risk assessment processes, and regulatory requirements. Financial institutions must exercise discretion and judgment in determining when additional KYC information is necessary to ensure compliance and mitigate risk.
The importance of KYC and AML measures cannot be overstated in today's financial landscape. Various types of financial institutions, including lending companies, are required to verify a client’s identity (including but not limited to all Underlying Beneficial Owners and Control Person) as a crucial part of preventing money laundering and terrorist financing. By implementing robust KYC procedures, collecting relevant customer data, and conducting thorough AML monitoring, these institutions fulfill their mandated duty to contribute to the global efforts in maintaining the integrity and security of the financial system.
It's important to note that the lists provided in this article are not exhaustive. Financial institutions should always stay up to date with the latest regulations and guidance issued by the relevant authorities to ensure compliance.
Qualified Settlement Funds (QSF) – Listicle of 12 Things to Know. Learn about their purpose, benefits, eligibility, tax implications, QSF administration, etc.
Qualified Settlement Funds (QSF) – Listicle of 12 Things to Know:
FOR IMMEDIATE RELEASE
[7/8/24] Joe Sharpe, ETPC President, explained, “QSFs are powerful financial tools to streamline and manage settlements, especially in complex cases. They provide tax benefits, flexibility, and efficient administration for all parties involved. With platforms like QSF 360™, creating and managing a QSF is quick, easy, and fully compliant. From establishing a QSF to understanding the roles of administrators, tax implications, and investment options, our comprehensive listicle covers all you need to know about these financial mechanisms.”
Learn the advantages of QSFs over other settlement structures, QSF regulatory oversight, and best practices for effective management. Make the most of your settlements with QSFs and ensure a smooth, compliant, and beneficial process.
Eastern Point Trust Company invites legal professionals, plaintiffs, and all interested parties to explore more and discover the transformative potential of QSFs in post-settlement dispute resolution. To read the complete listicle and learn more about the advantages of QSFs, visit https://www.easternpointtrust.com/articles/qualified-settlement-funds-listicle-of-12-things-to-know.
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The co-designer of the Plaintiff Recovery Trust, Lawrence Eisenberg, a tax attorney and founder of Forward Giving, Inc., a 501(c)(3) charity, publishes in Tax Notes an article addressing the double taxation of settlements.
The co-designer of the Plaintiff Recovery Trust, Lawrence Eisenberg, a tax attorney and founder of Forward Giving, Inc., a 501(c)(3) charity, publishes in Tax Notes an article addressing the double taxation of settlements.
[7/16/2024] — In a thought-provoking article published in Tax Notes* Lawrence J. Eisenberg, an experienced tax attorney, describes the perplexing issues affecting individual plaintiffs in litigation recoveries and considers how those issues can be addressed, including by using a charitably-based trust-based solution. The article “The Individual Plaintiff Tax Trap — A Conundrum and a Solution” delves into the intricacies of the taxation of litigation recoveries and addresses methods to mitigate the adverse tax consequences some individual plaintiffs face.
Background
Eisenberg’s article highlights the strange and often inconsistent tax treatment of individual plaintiff litigation recoveries under the Internal Revenue Code. Despite the Supreme Court’s 2005 decision in “Commissioner v. Banks”, which held that plaintiffs must report the entire recovery as taxable income—including the portion payable to attorneys—many plaintiffs (and their attorneys and advisors) remain unaware of the potential tax pitfalls when such recoveries do not fall under tax-free categories, e.g., damages for physical injuries.
The Individual Plaintiff Tax Trap
The crux of the issue lies in the deductibility of attorney’s fees. Some recoveries are tax-free, so attorney fee deductibility is not relevant, or allow for an above-the-line deduction of these fees. Other recoveries can result a “double tax”, because in those situations, the attorney fee portion of the recovery is taxable, but the attorney fee itself is not deductible. This leads to significantly diminished net recoveries. Eisenberg’s article includes a detailed example demonstrating how a plaintiff’s net recovery can be less than 10% of the total amount, with the government and attorneys each receiving several times more than the plaintiff!
A Trust-Based Solution
To address this inequity, Eisenberg proposes that a plaintiff affected by the double tax create a Plaintiff Recovery Trust (PRT). A PRT allows plaintiffs to transfer their litigation claims to a specially designed split-interest charitable trust. By doing so, the litigation claim becomes an asset of the trust, and any recovery is received by the trust, which then pays the net recovery to the trust beneficiaries, including the plaintiff. The PRT uses ordinary trust law principles and aims to achieve fairer tax treatment by separating the ownership of the litigation claim from the individual plaintiff.
Key Benefits of the Plaintiff Recovery Trust
- Equitable Tax Treatment: By treating the litigation claim as a trust asset, a Plaintiff Recovery Trust results in the plaintiff not being taxed on the portion of the recovery paid to their attorneys.
- Structured recovery: The PRT trust structure allows for a more organized and potentially tax-efficient distribution of recoveries. (It also permits the use of structured settlements as part of the solution.)
- Charitable Component: The PRT includes a charitable beneficiary, adding a philanthropic dimension to the solution.
Conclusion
Eisenberg’s article is a call to action for tax professionals and litigation attorneys to recognize and address the unfair tax treatment many individual plaintiffs face. The PRT trust-based solution offers a way to alleviate the financial burden imposed by current tax law, so that plaintiffs retain a fair share of their recoveries.
See the full article on the taxation of settlement proceeds.
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Eastern Point Trust Company is pleased to announce the release of a new guide designed to address the challenging intricacies of post-settlement litigation disputes.
Eastern Point Trust Company Unveils Comprehensive Guide on Navigating Post-Settlement Disputes and Complexities with Qualified Settlement Funds
[5/17/2024] — Eastern Point Trust Company is pleased to announce the release of a new guide designed to address the challenging intricacies of post-settlement litigation disputes. The guide focuses on utilizing Qualified Settlement Funds (QSFs), also known as 468B trusts, as a streamlined solution for efficient settlement fund management and dispute resolution.
It is not uncommon for secondary disputes to arise following a litigation settlement or court award. These disputes can range from family disagreements over their "fair share" to lawyers disputing fee splits, plaintiffs contesting attorney fees, and third-party lien holders emerging to stake claims against the litigation proceeds. Such complexities often hinder the settlement process and prolong the resolution.
Eastern Point Trust Company's newly released guide provides detailed insights into how QSFs can be employed to manage these disputes effectively. By offering a structured approach to fund management and tax compliance and providing the necessary time for informed decision-making, QSFs present a viable solution to post-settlement challenges.
Sam Kott, Vice President of Eastern Point Trust Company, emphasized the significance of the guide, stating, "This guide explores the advantages of QSFs, specifically their ability to address complex issues such as post-settlement disputes, secondary litigation, and lien resolution. The guide also provides direction on navigating post-settlement challenges and highlights the benefits of QSFs in achieving the best possible outcomes for all parties involved."
The guide delves into the various advantages of utilizing QSFs, including:
Eastern Point Trust Company invites legal professionals, plaintiffs, and all interested parties to explore the guide and discover the transformative potential of QSFs in post-settlement dispute resolution. To read the complete guide and learn more about the advantages of QSFs, visit here.
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Eastern Point is proud to announce the release of its latest publication, Unveiling the Complex World of Taxable and Tax-Free Settlements.
Eastern Point is proud to announce the release of its latest publication, Unveiling the Complex World of Taxable and Tax-Free Settlements.
FOR IMMEDIATE RELEASE
[5/17/2024] — Eastern Point is proud to announce the release of its latest publication, Unveiling the Complex World of Taxable and Tax-Free Settlements. This comprehensive guide delves into the intricate workings of taxable and non-taxable settlements, offering invaluable insights into compensatory damages, punitive damages, and the tax treatment of various settlement types.
Ms. Rachel McCrocklin, Eastern Point’s Chief Trust Officer, commented, “The guide provides a detailed understanding of the pivotal role of IRS Section 104 and the taxability of various settlement types. Our goal is to equip readers with the knowledge to make informed decisions and minimize potential tax liabilities.”
The guide explores strategic methods to minimize tax obligations on settlements, including leveraging structured settlement annuities, Plaintiff Recovery Trusts, and proper allocation in settlement agreements. It is an essential resource for individuals and businesses navigating the complex landscape of settlement taxation.
Arm yourself with knowledge, make informed decisions, and minimize potential tax liabilities with Eastern Point's newest guide.
For more information on Unveiling the Complex World of Taxable and Tax-Free Settlements, please visit https://www.easternpointtrust.com/articles/unveiling-tax-free-settlements-what-you-need-to-know or contact 855-222-7513.
CTRO
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A new comprehensive guide has emerged catering to those seeking to conduct private placements. This guide outlines the pivotal role of escrow accounts in private placements, providing a secure, regulated structure that safeguards investor assets and boosts investor confidence.
A new comprehensive guide has emerged catering to those seeking to conduct private placements. This guide outlines the pivotal role of escrow accounts in private placements, providing a secure, regulated structure that safeguards investor assets and boosts investor confidence.
FOR IMMEDIATE RELEASE
[5/2/2024] — A new comprehensive guide has emerged catering to those seeking to conduct private placements. This guide outlines the pivotal role of escrow accounts in private placements, providing a secure, regulated structure that safeguards investor assets and boosts investor confidence.
It reviews the advantages of choosing a trust company over a traditional bank account for escrow services, emphasizing active independent oversight that enhances transaction security and integrity.
Ned Armand, CEO, noted, “The guide also highlights the critical role of an escrow agent in managing funds prudently, ensuring a smooth progression of transactions under the regulatory frameworks.” Offerors of private equity and Reg D, Reg A, Reg A+, Reg CF, and Reg S offerings are encouraged to explore this guide, available on Eastern Point Trust Company.
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In today's dynamic business landscape, where environmental liabilities pose significant challenges, the Qualified Settlement Fund (QSF) emerges as a beacon of efficiency and reliability.
In today's dynamic business landscape, where environmental liabilities pose significant challenges, the Qualified Settlement Fund (QSF) emerges as a beacon of efficiency and reliability. Contrasting against traditional Environmental Remediation Trusts (ERT), Eastern Point’s QSF offers unparalleled advantages, revolutionizing the approach towards environmental liability management.
FOR IMMEDIATE RELEASE
[2/27/2024] — In today's dynamic business landscape, where environmental liabilities pose significant challenges, the Qualified Settlement Fund (QSF) emerges as a beacon of efficiency and reliability. Contrasting against traditional Environmental Remediation Trusts (ERT), Eastern Point’s QSF offers unparalleled advantages, revolutionizing the approach towards environmental liability management.
The Qualified Settlement Fund stands as a testament to expediency, with the capability to be established and funded within a mere business day, a stark contrast to the lengthy processes associated with ERTs. By swiftly assuming environmental liabilities from present and future claims under CERCLA, state, and local law, QSF ensures immediate action and resolution.
One of the most compelling aspects of QSF is its affordability, with establishment costs as low as $500. This cost-effectiveness, coupled with the tax advantages it provides over ERTs, makes QSF an attractive proposition for businesses seeking prudent financial solutions.
Flexibility is another hallmark of QSF, allowing for single-year or multi-year funding without any maximum duration constraints, ensuring adaptability to diverse business needs. Furthermore, the ability to hold real estate expands the horizons of asset management within the fund.
The benefits extend to tax optimization, with QSF accelerating the transferor's tax deduction for funds transferred to the current tax year, thereby enhancing financial planning and efficiency. Moreover, by shifting liability and associated funding transfers irrevocably to the QSF, businesses can streamline their balance sheets, mitigating risks and enhancing transparency.
In addition to these financial advantages, QSF facilitates seamless settlement agreements to capitate and resolve environmental liabilities, assuring regulators and interested parties of the irrevocable availability of funds for amelioration.
The transition to QSF not only eliminates future administrative burdens but also entrusts the fund's administration to a dedicated trustee, relieving businesses of operational complexities and enhancing focus on core activities.
In conclusion, the Qualified Settlement Fund stands as a beacon of innovation in environmental liability management, offering unmatched advantages over traditional Environmental Remediation Trusts. Its expediency, affordability, flexibility, and tax optimization capabilities redefine the landscape, empowering businesses to navigate environmental challenges with confidence and efficiency.
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Eastern Point Trust Company (“EPTC”) announced that it entered into a sponsorship with the National Forest Foundation (“NFF”) to provide grant funding in support of NFF’s mission to restore and enhance our National Forests and Grasslands.
Eastern Point Trust Company Announces Sponsorship Grants to National Forest Foundation
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[10/13/2022] — Eastern Point Trust Company (“EPTC”) announced that it entered into a sponsorship with the National Forest Foundation (“NFF”) to provide grant funding in support of NFF’s mission to restore and enhance our National Forests and Grasslands.
Working on behalf of the American public, the NFF leads forest conservation efforts and promotes responsible recreation. Its mission is founded on the belief that these lands, and all they provide, are an American treasure and vital to our communities’ health.
Rachel McCrocklin, Eastern Point’s Chief Client Officer, stated, “Eastern Point welcomes the opportunity to partner with the National Forest Foundation in support of its mission to improve and protect our national lands. A portion of Eastern Point’s revenue is dedicated to funding priority reforestation and enhanced wildlife habitat by supporting the National Forest Foundation’s 50 million for Forrest campaign.”
About Eastern Point Trust CompanyWith over three decades of trustee and trust administration experience, Eastern Point is a world leader in trust innovation that provides fiduciary services to individuals, courts, and institutional clients.
Eastern Point has the benefit of practical experience and industry-leading technology, providing services to over 6,000 trusts with more than 20,000 users across the U.S. and internationally.
About The National Forest FoundationThe National Forest Foundation is the leading organization inspiring personal and meaningful connections to our National Forests, the centerpiece of America’s public lands.
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Eastern Point Trust Company (“EPTC”) announced recent successes of the Plaintiff Recovery Trust (“PRT”) solution in solving the Plaintiff Double Tax, which is the unfair result of 2017 legislation that can cut plaintiff recoveries in half.
Eastern Point Trust provides services across the U.S. and internationally.
FOR IMMEDIATE RELEASE
[11/21/2022] — Eastern Point Trust Company (“EPTC”) announced recent successes of the Plaintiff Recovery Trust (“PRT”) solution in solving the Plaintiff Double Tax, which is the unfair result of 2017 legislation that can cut plaintiff recoveries in half.
Glen Armand, Eastern Point’s CEO, expressed, “Eastern Point’s gratitude for the testimonials of Mirena Umizaj, Joseph Di Gangi, Rebekah Reedy Miller, Susan Gleason, Jennifer White, Andy Rubenstein, and Zane Aubert. By utilizing the PRT, you are the catalyst for saving plaintiffs over $30 million of federal and state taxation.”
Mr. Armand also announced Joseph Tombs as Director of Plaintiff Recovery Trusts (PRT). Mr. Armand also noted, “The contributions of Lawrence Eisenberg and Jeremy Babener for partnering on our newest settlement solution.”
Settlement and financial planners and CPAs can learn and access resources on Eastern Point’s PRT Planner Page here: https://www.easternpointtrust.com/plaintiff-recovery-trust-for-planners
About Eastern Point Trust Company
Eastern Point is a world leader in trust innovation that provides fiduciary services to individuals, courts, and institutional clients across the U.S. and internationally.
With over three decades of trustee and trust administration experience, Eastern Point provides the benefits of practical experience, industry-leading technology, and innovation. Eastern Point Trust provides services across the U.S. and internationally.
About The Plaintiff Recovery Trust
The Plaintiff Recovery Trust is the proven solution to increase the amount plaintiffs keep in taxable cases. Without it, plaintiffs are taxed on the settlement proceeds paid to their lawyers. https://www.easternpointtrust.com/plaintiff-recovery-trust
PRESS Contact
www.EasternPointTrust.com
[email protected]
Phone: 855-222-7513
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Qualified Settlement Funds (QSFs) are powerful financial tools to administer settlements, especially in complex matters. Parties involved in disputes contemplated under 1.46B-1 et seq. can effectively manage and benefit from Qualified Settlement Funds’ tax and financial advantages.
Qualified Settlement Funds (QSFs), a 468B trust, are valuable and crucial in managing litigation settlements efficiently and effectively. "QSF", which stands for "Qualified Settlement Fund", is a fund established as a trust or account established to hold settlement proceeds from litigation. According to the definition under Treasury Regulations, it is an escrow account, trust, or fund established according to an order of or approved by a government authority to resolve or satisfy claims.
This comprehensive infographic guide explains the essential aspects of Qualified Settlement Funds:
The guide provides valuable insights, tips, and rules of thumb for legal professionals, claimants, and other stakeholders about how a QSF account benefits the settlement process. A QSF offers many advantages, including immediate tax deduction for defendants, tax deferral for claimants, and efficient management of settlement proceeds. QSFs are commonly used in class action lawsuits, mass tort litigation, and cases with multiple claimants, but can also provide benefits in single claimant cases.
Setting up a QSF involves petitioning a government authority and appointing a QSF Administrator to oversee the fund. The QSF Administrator, often a platform like QSF 360, is responsible for obtaining an EIN, handling tax reporting, overseeing QSF administration, and making distributions to claimants. Online QSF portals streamline the Qualified Settlement Fund administration process.
Partnering with an experienced QSF Administrator is essential. Services like QSF 360 from specialize in QSFs for both large and small cases and can help ensure compliance with IRC § 1.468B-1 and other regulations.
In summary, Qualified Settlement Funds are a powerful tool for managing settlement proceeds. With proper planning and administration, QSFs provide significant tax benefits, enable efficient distribution of litigation proceeds, and help bring litigation closure. Understanding what is QSF and how to leverage QSFs is invaluable for any legal professional involved in today's settlements.
Eastern Point Trust Company se complace en ofrecer a los clientes de habla hispana un número gratuito exclusivo, así como acceso a un equipo de servicios al cliente compuesto por personal hispanohablante nativo profesional y de alto nivel.
Para obtener más información, comuníquese con el equipo al (855) 412-5100, esperamos trabajar con usted.
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