When giving advice to Brazilian clients, the most well known structure used by wealth planners is a directed trust and holding company. This method serves two main functions, succession planning and tax efficiency. Now that MP 627 has been proposed, the focus seems to be how best to protect the tax effective attributes derived from the holding company.

Will restating the directed trust so that it becomes discretionary in nature resolve the issue? It may but there’s only one small problem, Brazilians hate the word “DISCRETIONARY”.

Nonetheless, tax planners have dodged the proverbial bullet once again as the change is currently on hold and has so far excluded “Natural Persons”. However, when should we begin to consider the action plan? How long will it take for the Brazilian Cabinet to discern and agree best practices?