Last year, Jocelyn Zimmer took over as CEO of Zimmer Bros. Jewelers — the first female president in the now fifth-generation family business in New York state. She talked with Crain Currency about the challenges she faces and the vision she has for the jeweler’s future, including its support for initiatives that support people in diamond communities around the world.
What does it feel like to take over a family business?
Taking over my family’s business has been an incredible and, at times, daunting experience.
I am the first female president of Zimmer Bros. Jewelers. It is an honor to be the first woman put into an executive leadership position within the company and, further, to work within a historically male-dominated industry. I grew up watching my mother and grandmother be the muses for these elegant stores and brands that their partners designed, but no woman ever had a direct hand in it. I feel that in my new role, I am recognizing all the Zimmer women who came before me and carrying on their legacy.
I also represent the fifth generation of this family business, an outstanding feat considering less than 3% of all family businesses survive past a third generation. It is a privilege to have the opportunity to lead our 130-year-old business toward a bright future.
What prompted you to want to join the family business?
For me, a large part of joining the family business involves the business itself, the jewelry industry.
I began working at Zimmer Bros. Jewelers’ store in Poughkeepsie, New York, around the age of 12. From an early age, I was attracted to the stories that brought people into our store — engagements, wedding anniversaries, among other milestones. I realized that I had an opportunity to contribute meaningfully to people’s lives and to be a part of countless love stories, and I was drawn into the heart of the business.
I also find it incredibly fulfilling to carry on the work of generations that came before me. I watched my grandfather, Leonard Zimmer, and my father, Michael Gordon, foster growth within the company for several decades, and I look forward to contributing my ideas and expertise to the business and the communities that it impacts, both locally and globally.
What do you hope to accomplish through the partnership with Diamonds Do Good?
The conversation around diamonds typically focuses on cut, clarity, carats and color. Diamonds Do Good introduces a fifth "C" — community — which represents all aspects of a diamond’s journey, from mine to market, and the lives that these diamonds touch. For the last 130 years, Zimmer Bros. Jewelers has been contributing to the overall well-being of our community in Dutchess County, New York. The partnership with Diamonds Do Good will enable us, and our customers, to contribute to programs that benefit natural-diamond communities. This includes socioeconomic and infrastructure development, conservation and wildlife protection, increased access to education and health care, and more.
Any advice for next-generation family members who are thinking of joining the family business?
If you have mutual respect between family members, I think it is a wonderful opportunity, and I would highly encourage the next generation of workers to join their family business. For me, it has been an honor to continue my family’s legacy.
How global families should transfer assets to their U.S. members
By CHRIS OPIE AND SHELLY MEEROVITCH
With careful planning, the U.S. members of global families can benefit from significant tax savings when inheriting assets or receiving gifts from abroad. By taking a long-term approach and using trusts, the non-U.S. members can meaningfully reduce the tax burden of their U.S. family members and help maximize family wealth.
Unlike U.S. citizens and domiciliaries (“U.S. persons”), who are subject to hefty U.S. transfer taxes on their worldwide assets, nondomiciliaries (“non-U.S. persons”) are only subject to U.S. transfer taxes on assets that are considered to be located in the U.S. or have a U.S. “situs.” Such assets include U.S. real estate along with tangible property and business assets that are physically in the U.S. or generate income from U.S. sources. As such, they are subject to U.S. taxation laws, regardless of the owner's citizenship or residency status.
What’s more, while it’s customary to categorize individuals as Americans or foreigners in everyday conversation, here we must be more precise. When it comes to applying U.S. transfer taxes, we make a distinction between U.S. and non-U.S. persons to account for those who may not be U.S. citizens, yet still can be considered domiciliaries who are subject to U.S. transfer taxes on their worldwide assets.
With the current rate of transfer taxes at a hefty 40%, the disparate application of U.S. transfer taxes can give rise to unique planning opportunities for global families whose members include both. This means that global families can avail themselves of strategies to minimize their U.S. tax exposure. However, navigating the nuances of the tax system and applicable local laws requires careful planning and the specialized expertise of tax and legal advisers with deep knowledge in this complex domain.
Wealth transfers into the U.S.
In the United States, transfer taxes are almost exclusively imposed upon the person transferring the property, such as the donor of a gift or the estate of a deceased person, rather than the recipient. Therefore, if the transferor is not a U.S. person — and the transferred property does not have U.S. situs — U.S. transfer taxes do not apply, even if the recipient is an American. However, if a U.S. person receives non-U.S. property, it becomes subject to U.S. transfer taxes if the recipient wishes to give or bequeath the property in the future.
By focusing solely on the fact that receiving such a gift does not trigger U.S. taxes, many advisers overlook a valuable planning opportunity. Instead of giving the gift or bequest directly to a U.S. citizen, a foreign donor can make the gift to a trust for the benefit of the U.S. person. This approach ensures that the trust will never be subject to U.S. transfer taxes — including generation skipping transfer (GST) tax, which is an additional tax applied to transfers made to individuals who are more than one generation below that of the donor (i.e., grandchildren or more remote descendants). Moreover, using a trust could also shield the gifted property from state income taxes while offering protection from the recipient’s potential creditors, in certain circumstances.
Exploring transfer options
To explore this compelling opportunity, let’s take the example of Alex and Yasmin, a mixed-citizenship couple currently residing in New York, a high-income tax state. As you may remember from our previous efforts helping the couple navigate the tax asymmetry in their mixed-citizenship marriage, Alex is a U.S. citizen and the primary wealth owner. Now we’ve further learned that the pair own a successful business and have amassed sufficient wealth to live comfortably.
Having built a full life in New York, Yasmin has also decided to take on U.S. citizenship, in addition to the citizenship of her birth country. Yasmin’s father, who is not a U.S. person, resides in Dubai and wishes to gift Yasmin $5 million. While Yasmin does not foresee needing the funds immediately, she would prefer to maintain ready access to them. Additionally, Yasmin’s father has indicated that there will be more property that he plans to leave to her when he passes.
If her father transfers the funds directly to Yasmin, she must report having received the gift but would not otherwise need to pay any taxes in connection with it. However, once in Yasmin’s name, the gifted funds become subject to U.S. taxes because she is a U.S. person. That means income generated by the gift would be subject to federal, New York state and local income taxes. Moreover, if Yasmin decides to give some of the funds to her children, the gift would be subject to U.S. gift tax. And if she wants to give the funds to her grandchildren, it would also be subject to the GST tax. If Yasmin doesn’t spend the funds and passes away still owning them, they will be included in her U.S. estate and subject to estate taxes.
Yasmin’s father has another option: He could create a trust for Yasmin’s benefit in a state that doesn’t impose income taxes on the trust’s income and transfer the funds to the trust instead. Doing so would avoid exposing the gift to many of the taxes discussed earlier.
First, while the funds are in the trust, the gift could grow without being subject to state and local income taxes.
Second, distributions from the trust to Yasmin’s children and grandchildren would be free of the U.S. transfer taxes that would otherwise apply if Yasmin made the transfers herself.
What’s more, using a trust would provide an added benefit of protecting the funds from the creditors of the trust’s beneficiaries.
Finally, Yasmin’s father could direct in his will that bequests to Yasmin be made to this trust rather than to her directly. Thus — whether for lifetime gifts or as a bequest — using a trust could result in meaningful tax savings and additional protection compared to making a direct gift to a U.S. person.
Practical considerations
When setting up a trust that is designed to be exempt from U.S. transfer taxes, it is important to keep in mind several practical considerations. Among others, these include who can fund the trust and with what type of property, as well as the reporting required to ensure compliance with tax authorities.
For the trust to be exempt from U.S. transfer taxes, its funding should not be subject to U.S. transfer taxes.
To accomplish this:
- The grantor of the trust should not be a U.S. person, and;
- The property funding the trust should not have U.S. situs, such as U.S. real estate or tangible property and business assets in the U.S. Notably, the stock of U.S. corporations has U.S. situs for estate tax purposes but not gift tax purposes.
If a gift is meant to be given only after the non-U.S. person’s death, it may be simpler to have a U.S. trust ready to receive the bequest rather than having the non-U.S. person create the trust under the terms of their foreign will. To do this, a trust could be created during the non-U.S. person’s life and funded only nominally. Then, the non-U.S. person could include a provision in their foreign will leaving the non-U.S. property to the trust.
Since the trust would be exempt from U.S. transfer taxes, drafting it as a dynastic trust that can span multiple generations will maximize the potential for tax savings. To this end, the trust should be set up in a jurisdiction with a long perpetuities period, and distributions to beneficiaries should not be mandated.
The receipt of a gift or bequest from a non-U.S. person or foreign estate must be reported on Form 3520, if the aggregate amount received exceeds $100,000 during the taxable year. Form 3520 must be filed with the recipient’s income tax return.
While this plan may be efficient from a U.S. tax perspective, it is important to coordinate with the tax and legal advisers in the country where the gift or bequest will originate to ensure that no adverse tax consequences will result.
Global expertise makes a difference
For global families with members who are both U.S. persons and non-U.S. persons, intergenerational wealth transfer can present a planning opportunity when wealth outside the U.S. is being transferred by non-U.S. persons to U.S. persons. The fact that transfer taxes don’t apply to some family members can create a valuable window for those with forethought. With timely planning, families can save a significant amount of money on taxes.
However, to do this, families need to navigate the nuances of both the U.S. transfer tax system and applicable local laws. It is vital for families to engage tax and legal advisers with deep domain expertise in this complex arena. Together, U.S. and local advisers can help create a plan that will minimize U.S. transfer tax exposure while ensuring that the family’s overall financial goals are met.