In the world of fine wines, innovation often comes from a deep respect for tradition. Yet, Travis Braithwaite, a Canadian-South African winemaker, is pushing boundaries with Pangaea, a multicontinent wine crafted with legendary consultant Michel Rolland. As the world’s first superpremium, five-nation Bordeaux blend, Pangaea reflects Braithwaite’s bold vision: To create wines of the world that have never existed before. Braithwaite spoke with Crain Currency about his inspiration for Pangaea, his passion for blending varieties that traditionally don’t mix, and his ambition to redefine what’s possible in the wine industry.
When you conceived the idea for Pangaea, you were about to embark on a path that few winemakers had dared to take. What was that journey like for you?
It has been a journey of curiosity. I was curious to find out what would happen if the five grape varieties in a traditional Bordeaux blend were all allowed to reach optimal ripeness — each in its ideal terroir and climate, each on its own timing, each with the careful tending and knowledge of its local viticulturist and winemaking team. What kind of a blend would result from taking such focused care of each variety over an entire vintage in both the Northern and Southern hemispheres, in the old world and the new?
It is still a journey of curiosity because every year, the blend changes according to the natural variations of vintage in five distinct places. I did not set out to make the “best” Bordeaux blend in the world. I set out to make something truly interesting that would inspire this sense of curiosity among other wine enthusiasts as well.
How did the concept for Pangaea come together?
The concept first occurred to me when I was working in consulting. My clients included a wide range of wine companies, both in South Africa and at the frontiers of winemaking, such as in China.
I knew from the start that to bring the “world wine” concept to life properly, I would need a great blender to join me in sourcing and blending each vintage and to give the idea additional gravitas and credibility. Michel Rolland is an absolute master of blending. I knew I wanted to work with him.
This took some time, though. Once I worked up the courage to call him and finally got him on the phone to explain my idea, he kindly but warily laid out his advice and his concerns. He told me to work out a few things and come back to him in a year. So I did. A year later, I called him again. At that point, he invited to me to visit him in Argentina. I got on a plane the next day. Since that meeting onward — and for more than a decade — we have been bringing the concept together with each vintage. We released the first vintage, 2015, in 2022; it is now sold out. The 2016 vintage is currently on the market. The 2017 vintage will release in a few months.
How do you see Pangaea fitting into an international wine collection?
I see Pangaea in the cellars of collectors who are both knowledgeable and curious. It appeals to people who love to tell a great story. On one hand, we source fruit from some of the world’s most renowned terroirs. World-class viticulturists and winemakers make up our global team. Of course, fine-wine lovers appreciate these qualities.
On the other hand, we are making a wine that is not immediately recognizable to practiced palates. Pangaea requires time to decant. It evolves dramatically over hours and even days. I usually double-decant it. I jokingly advise keeping a glass on your bedside table to see how it evolves overnight. Pangaea is for the international wine collection that holds some surprises among the icons.
What’s next for you?
I am working on some similarly ambitious projects at the moment. I also make a range of South African wines under the V Collection label.
Future-proofing your estate plan for global mobility
By SHELLY MEEROVITCH and CHRIS OPIE
As global mobility becomes increasingly common, more U.S. families are expanding to include members who permanently live outside the country. However, while most U.S. citizens who move abroad are mindful of how relocation affects their income taxes, fewer consider the impact of their new foreign resident status on their role as heirs — particularly as beneficiaries of trusts created under their U.S.-based parents’ or grandparents’ wills.
Similarly, U.S.-based family members often overlook the foreign tax status of their intended beneficiaries when crafting their own estate plans centered on U.S. laws. Yet failing to do so can lead to unintended and sometimes adverse consequences to the foreign-resident beneficiaries, especially when trusts are involved.
Global families, local complications
Trusts are a cornerstone of U.S. estate planning, yet they can lead to unforeseen complications due to the varying legal treatments of trusts in foreign jurisdictions. Issues may arise from the inadvertent conversion of a U.S. trust into a foreign trust, the dual taxation of trust distributions by both the U.S. and the beneficiary’s country of residence, and diverse tax and local reporting requirements that differ from jurisdiction to jurisdiction.
To highlight some key considerations when drafting estate planning documents for structures that may ultimately benefit individuals living outside the U.S., let’s revisit the story of Alex and Yasmin. Recall from our previous efforts that we helped this U.S. citizen couple navigate the tax asymmetry in their mixed-citizenship marriage, plan the inheritance of wealth from Yasmin’s father and weigh the implications of relocating abroad.
The pair, who currently live in New York, had sold a successful business, amassing sufficient wealth to retire comfortably. While they toyed with retiring in Spain, they never followed through. Additionally, Yasmin’s father — who was not a U.S. citizen and had passed away — created and funded a trust for Yasmin’s benefit with $15 million, with the remainder passing to her three children upon Yasmin’s death.
Meanwhile, all of Alex and Yasmin’s now-grown children live abroad. Their eldest daughter, Leila, became a Spanish citizen, gave up her U.S. citizenship and now lives in Spain with her Spanish citizen husband and their two children. Rafael, their middle son, settled in the UK, where he obtained UK citizenship after marrying his UK citizen wife and having a son. The couple’s youngest daughter, Zara, recently moved to France for her job but expects to return to the U.S. within three years.
When Alex and Yasmin revisited their estate plan, their U.S. trust and estate attorney suggested that they each create an irrevocable trust to take advantage of the generous lifetime exclusion available at least until the end of 2025. With a total net worth exceeding $35 million and a modest lifestyle, Alex and Yasmin felt comfortable following the recommendation.
The plan involves Yasmin's creating and funding a fully discretionary trust for Alex’s benefit (“Alex’s trust”). Since Yasmin is already a beneficiary of the $15 million trust her father established (“Father’s trust”), Alex will create and fund a fully discretionary trust that will benefit Yasmin and their children (“Yasmin’s trust”). Both trusts will be treated as grantor trusts for U.S. income tax purposes, until either Alex or Yasmin passes away first. Upon the death of each spouse, Alex’s trust and Yasmin’s trust, respectively, will be divided among their three children. Each child’s share will remain in trust until they turn 40, at which point the child’s trust will be distributed to them. Until then, income and principal distributions are completely discretionary. Finally, each child is named as a trustee of their respective trust and must name a disinterested co-trustee if discretionary distributions are to be made to the child.
What may appear at first blush as a standard U.S. estate plan — designed to maximize Alex and Yasmin’s lifetime exemptions while treating their children equally — can quickly devolve into a family mess. Unfortunately, the family faces unintended adverse tax consequences that ultimately result in disparate treatment of the children. How did their best-laid plans go awry?
Unclear legal treatment of U.S. trusts in foreign jurisdictions
Spain and France operate under civil law systems, where trusts — being common law constructs — are not explicitly addressed in their tax legislation. This creates a gray area for Yasmin’s trust, which is fully discretionary and includes Leila, a Spanish resident taxpayer; and Zara, a French tax resident, among its four current beneficiaries. It remains unclear whether Spain or France will try to assert that Leila and Zara, respectively, own a portion of the trust assets, even if neither will receive any distributions from the trust during Yasmin’s lifetime.
Foreign taxation of U.S. trusts
Even in jurisdictions where trusts are legally recognized, differing taxation rules can lead to unintended consequences. Take the UK, for example. A sole UK trustee may render a non-UK trust subject to UK income taxes. This means that when Rafael becomes the trustee of his trust, the UK will tax the trust’s income, regardless of whether Rafael receives any distributions. At the same time, the U.S. will continue to tax the trust, giving rise to potential double taxation.
As for Leila, her interest in Yasmin’s trust could expose Leila to income taxes and even wealth taxes in Spain, regardless of whether she receives any distributions from the trust — and despite her father's being taxed on that trust in the U.S. Moreover, when Leila’s own trust is created upon the passing of either her father or mother, she is likely to be deemed the owner of the entire trust’s assets for Spanish tax purposes, since she will be the sole beneficiary, and its grantor will no longer be living.
In Zara’s case, her beneficial interest in both Yasmin’s trust and the Father’s trust could trigger significant and onerous French reporting obligations for both trusts. This holds true even if Zara is only one of four fully discretionary beneficiaries and regardless of whether she receives any distributions.
Unintended conversion into a foreign trust
When a non-U.S. taxpayer has the power to make or veto a substantial decision regarding a U.S. trust, the trust automatically converts into a foreign trust. This reclassification is treated as a gain realization event for U.S. tax purposes, potentially resulting in income tax liability even if no gain is realized. Since Leila gave up her U.S. citizenship, she is now a non-U.S. taxpayer. Consequently, her trust will automatically transition from a U.S. trust into a foreign trust the moment she assumes the role of trustee.
The first line of defense
How can Alex and Yasmin avoid some of these potential pitfalls? Below is a list of considerations that can help a U.S. couple with foreign-resident beneficiaries steer clear of unintended consequences:
Collaborate with an estate planner who has experience navigating foreign concerns.
Have relevant local advisers review the plan before execution to prevent unpleasant surprises.
To avoid inadvertent conversion of a U.S. trust into a foreign trust:
- Be vigilant about who currently has, or may have in the future, the authority to make or veto substantial decisions regarding the trust.
- Include an overriding provision in the trust that ensures that only U.S. taxpayers can control material trust decisions.
To help address situations where beneficiaries are taxed on gains that they cannot access, consider allowing the trustee to allocate capital gains to income, or make distributions of income and principal wholly discretionary.
- For maximum flexibility, explore a best-interests provision that enables a trustee to delay mandatory distributions if doing so would benefit the foreign-resident beneficiary.
- To minimize double taxation, factor in the limitations of benefit provisions in applicable income tax treaties, ensuring that taxes paid by the trust or the grantor are creditable in the beneficiary’s home jurisdiction and vice versa.
- Consider creating or authorizing a trustee to create subtrusts for beneficiaries living in jurisdictions with onerous reporting requirements and/or tax obligations, even when no distributions are made.
Flexibility: The key to effective estate planning across borders
Navigating the complexities of U.S. estate planning for families with foreign-resident beneficiaries is undeniably challenging. Understanding the applicable rules and preserving maximum flexibility are crucial to addressing unintended consequences and adapting to future changes. Proactive planning and thoughtful coordination with both U.S. and local counsel can significantly improve the effectiveness of an estate plan. By maintaining flexibility in trust provisions, distribution strategies, trust duration and fiduciary roles, families can better safeguard their financial future and ensure equitable treatment for all beneficiaries, regardless of their country of residence.
Related Reads:
> What U.S. citizens should consider before moving abroad | Crain Currency
> How global families should transfer assets to their U.S. members | Crain Currency
> Navigating tax asymmetry in mixed citizenship marriages | Crain Currency