Hello. I am an associate practicing in a law firm (some Jewish partners and some not). As part of clients’ estate planning, we often set up trusts (irrevocable) for our clients and transfer assets to trust by sale. The trust does not pay cash for the sale, instead, the trust executes a note in exchange of the sale. The note must incorporate interest because of relevant tax considerations for regulations established by the IRS. My question is whether this is a problem as far as ribbis is concerned, and if a problem, can it be solved simply by saying that the interest should be paid pursuant to the standard heter iska in the Sefer Bris Yehuda or is something more substantial required? Thanks,
It is hard for me to give a full answer to your question as I don’t know what is written in the trust and what interests are being paid. However in general in order for a heter iska to work in has to be written and legally binding to the trust or contract in order for it to work. As a lawyer, you know that in a contract, what isn’t written doesn’t exist. A heter iska is a set of conditions that will govern the contract, therefore it must be written. Aside from this, the parties involved have to understand what is happening when making a heter iska. The two sides are entering a business partnership, and whatever was unlit now called interest, will now be considered, the profit of one of the sides. There is however an extremely small chance that some money may be lost, however, due to all the clauses written in the heter iska, this isn’t a realistic concern. (This is why all the banks in Israel, credit card companies, and many other major companies in Israel have a company-wide heter iska.)
It might be very helpful for you to talk to someone in person about getting a company-wide heter iska, that might be good for all the contracts of your law firm. Although I am not sure this can be done, there is an organization that can advise you on this, and also assist you with whatever is needed to get this done. Their number in the U.S.A. is 1-718-938-5218. They will be more than happy to assist you with any ribbis related issues, including setting up whatever heter iskas are needed.