Trusts & Estates, the journal of wealth management, is the how-to manual for advisors to high-net-worth individuals, families, and foundations. Published since 1904, Trusts & Estates publishes the works of the top practitioners in estate planning, trusts, insurance and other wealth-management disciplines. Readers include estate-planning and probate lawyers, trust bankers and officers, accountants, investment and insurance advisors, financial planners and key decision-makers at non-profit institutions, foundations, government agencies and educational institutions. These readers-who have an average of 20 years in the business-serve about 11 million clients, and influence more than $40 trillion in assets.
ON THE COVER
In recognition of President’s Day, Feb. 19, which honors the birthdays of George Washington and Abraham Lincoln—as well as all men who’ve served as president of the United States, we present Norman Rockwell’s oil “Lincoln the Railsplitter.” The painting, created in 1965 and measuring 84.5 inches by 44.5 inches, sold to a U.S. museum for $1.808 million at Christie’s “Important American Paintings, Drawings and Sculpture” auction, held on Nov. 30, 2006, in New York. The work depicts Lincoln both as an outdoorsman and an intellectual.
Another portrait sold at that auction is featured in this issue:
- John Singer Sargent’s “Mildred Carter” (1908) is an oil painting of the daughter of John Ridgely Carter, an American diplomat who served as U.S. Minister at Bucharest. The work sold for $3.936 million.
LETTER TO THE EDITOR
December 2006 Article
Steven J. Oshins and Richard A. Oshins object to a recent article on beneficiary-controlled trusts.
Christopher R. Hoyt, professor of law at the University of Missouri-Kansas City Law School, and Bruce D. Steiner, attorney in the New York office of Kleinberg, Kaplan, Wolff & Cohen, P.C., report on Notice 2007-5, guidance issued by the Internal Revenue Service on the Pension Protection Act of 2006 as it pertains to:
- charitable payments on individual retirement accounts; and
- nonspousal direct rollovers
Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports on:
- a change to the rule on unrelated business taxable income for charitable remainder trusts; and
- Glass v. Commissioner, in which a deduction was allowed for conservation easements.
New U.S.-French Treaty Protocols
Carolyn DeVore of Pullman & Comley, LLC, in Westport, Conn., reports that the United States and France have ratified their protocols on Dec. 21, 2006 affecting tax-deductible contributions to retirement plans. The result affects U.S. citizens working in France.
ESTATE PLANNING & TAXATIONBasis Boosting
By Deborah V. Dunn and Lucy K. Park
For years, practitioners have employed the estate-planning strategy known as “sale to a grantor trust.” Yet there’s still substantial uncertainty and debate about one critical aspect: the detrimental income tax consequences that can result when a grantor dies—thus terminating grantor trust status—before the note issued by his grantor trust to him has been fully discharged. The authors believe that an incomplete gift can be used to decrease or eliminate the risk that income tax will be triggered when grantor trust status ends. They call this “basis boosting.”
Deborah V. Dunn is a partner and Lucy K. Park is an associate in the Chicago office of Kirkland & Ellis LLP.
Civil Unions in New Jersey
By Stephen J. Hyland
Estate planning for New Jersey’s more than 22,000 same-sex couples has undergone several seismic changes for the better since 2004. The latest is the result of the state legislature’s adoption of a civil unions bill—which purports to provide treatment equal to that of similarly situated married couples. Still, the lack of recognition of civil unions by the federal government and most states, including those bordering New Jersey, continues to make estate planning for same-sex couples significantly more difficult—and expensive—than for comparable opposite-gender married couples, at least for the near future. A guide to planning for New Jersey’s same-sex couples today.
Stephen J. Hyland has his own practices, the Law Offices of Stephen J. Hyland, with offices in Westmont, N.J., and Princeton, N.J. and specializes in estate planning for same-sex couples and unmarried cohabitants. He is the author of the book, New Jersey Domestic Partners: A Legal Guide (Riverview Press 2005), currently being updated, and has a blog on civil unions and domestic partnership, www.civilunions.com
It's a New Era for U.S./U.K. Planning
By Paul Knox
It’s been two decades since the United Kingdom changed its inheritance rules this dramatically and many clients will be affected: British citizens living in the United States; U.S. individuals who are long-term residents of the United Kingdom; and U.S. clients who own assets in the United Kingdom. Author Paul Knox provides a detailed look at exactly what the new rules do—and when.
Paul Knox is the head of U.K. Wealth Advisory, JPMorgan Private Bank in London.
SPECIAL REPORT: FIDUCIARY PROFESSIONS
The Preferred Method
By Lance S. Hall
The courts have finally declared a winner in the long battle over which method to use when discounting the value of shares in a private business for their lack of marketability. And the winner is “the restricted stock comparative analysis.” Author Lance S. Hall explains why this method won, points out its continuing flaws, and urges all advisors to insist that appraisers comply with the courts’ preference and use it now.
Lance S. Hall is managing director of FMV Opinions, Inc., in New York.
Restricted Securities and Illiquidity Discounts
By Espen Robak
Tax cases offering guidance on the valuation of restricted securities are few and far between. But the Tax Court’s reasoning in Gimbel is a good starting point for reviewing the evidence and theory on restricted securities and illiquidity discounts. The court assumed the challenge of deciding the proper illiquidity discount, not just for a very large block of stock held by an affiliate estate, but also in a situation in which there was a possible repurchase of the restricted shares.
Espen Robak is president of Pluris Valuation Advisors LLC, in New York
Face the Fear
By Glenn A. Ayres and Michael J. Jones
While family business owners worry about losing control of the enterprise they built, advisors worry about losing their grip on succession planning. But advisors have to admit when they, and even their firms, are not best-suited to quarterback the multidisciplinary team that often is needed to successfully transition a private business to the next generation. Businesses intended to remain family-held after the death of the founder need planning that goes far beyond the orderly and tax-efficient transfer of ownership interests. A guide to the dilemma that all the parties face.
Glenn A. Ayres is a partner at Doud Hausner & Associates, Inc., in San Diego.
Michael J. Jones is a partner at Thompson Jones LLP, in Monterey, Calif. He also is the chair of the Trusts & Estates retirement benefits committee.
Field Notes of A Family Business Consultant
By Judith Stern Peck
From inside the offices of an expert who helps families face the emotional challenge of passing financial stewardship from one generation to the next, a case study that shows how to prepare for family meetings in which the transition is discussed.
Judith Stern Peck is director of the Money, Values and Family Life Project at the Ackerman Institute for the Family in New York.
By Herbert E. Nass
Despite Robert F. Kennedy’s distinguished career as a lawyer and attorney general of the United States, his will had an ironic flaw, which came to light after his untimely death.
Herbert E. Nass is a partner at Herbert E. Nass & Associates in New York.