While some high-net-worth clients might prefer to be hands-off and leave issues like insurance and tax planning to professionals, recent revelations around champion figure skater Elvis Stojko shows the potential risks of being too uninvolved.
In the wake of the explosive Pandora Papers expose, which laid bare secret structures and arrangements used to shelter billions of dollars’ worth of assets owned by high-profile individuals from taxation, it was revealed that a life insurance policy Stojko had bought on his parents – potentially worth a $6.5-million payout upon their demise – ended up in a Caribbean trust account.
According to reporting by CBC News, none of the leaked records indicated Stojko did anything illegal, though he was unaware that the policy had been placed in a trust domiciled in Belize until the news outlet reached out and brought it to his attention.
In an email to CBC News, he said that he had left the details of his financial affairs in the hands of T.R. Anthony Malcolm, a Montreal-based lawyer and known tax haven specialist, in the early 2000s. At the time, Stojko was still despondent over his failure to win Olympic gold at the 1998 Winter Games due to injury.
“Dealing with all the past issues, failure and doubt as an athlete, my financial matters were not really at the forefront of my mind,” Stojko said, explaining his state of mind as he packed up, moved to Mexico, and entrusted the details of managing his small fortune to Malcolm. “[My wealth] was a point of pain for me since it was attached to my skating failure.”
Upon sifting through the millions of files uncovered in the Pandora Papers, CBC News found that in 2007, a year after Stojko retired from skating as an athlete, Malcolm set up a trust called the Quad Trust in Belize, where the life insurance policy was later moved.
Details of the life insurance policy were also changed. Instead of paying out the proceeds to a special fund run by Skate Canada to let athletes legally shelter their income, the policy would pay the money into the Quad Trust. While the trust’s founding documents initially named the Red Cross and the Salvation Army as the only eligible recipients of the insurance money or other assets in the trust, that was later changed so that it would go to Stojko and, in the event of his passing, two of his friends.
“I was not of a mind at that time to question [Malcolm’s] recommendation, nor was I involved in any decisions regarding the details,” Stojko told CBC News, adding that he did not know why the lawyer chose to set up the trust in Belize.
In an interview with the news outlet, David Duff, a professor of tax law at the University of British Columbia, said Belize was a country with “low or non-existent income taxes” at the time the Quad Trust was established.
“So it's a good place to park money and earn tax-free returns. It also, during the period that you're talking about, had confidentiality laws that prevented sharing of information,” Duff said.
Jonathan Garbutt, a lawyer based in Calgary who also has tax expertise, said the Quad Trust – which was wound down in 2012 upon Stojko’s instruction – would have shielded Stojko in case anyone from Canada wanted to try and get at his money.
“You are going to be able to protect your assets from Canadian family law, from litigation against you in Canada that may or may not be deserved, or may or may not be legitimate, people just trying to shake the money tree,” Garbutt told CBC News.