On The Cover
Happy birthday, U.S.A.! The American bald eagle is the symbol and national bird of the United States, and what better way to celebrate Independence Day than to feature Andy Warhol’s “Bald Eagle.” This silk screenprint is part of a portfolio commissioned by environmental activists Ronald and Frayda Feldman who asked Warhol to create a series depicting endangered species. In 1983, Warhol produced color screenprints portraying 10 different animals from around the world, including the African elephant and the giant panda.
On June 13, 2008, “Bald Eagle,” measuring 37.9 inches by 37.9 inches, was sold by Mallet Japan for US $31,793 at its Modern and Contemporary Art Sale in Tokyo. But we have more than just American independence to celebrate this summer: Last year, the American bald eagle was removed from the threatened and endangered species list. Decades ago, the bald eagle was in danger of extinction. Today, it flourishes across the United States.
(Cover Image: © 2008 Andy Warhol Foundation for the Visual Arts / ARS, New York and Courtesy of Ronald Feldman Fine Arts, New York / www.feldmangallery.com)
Also featured in this issue:
• p. 48—Yayoi Kusama’s 1996 “Flowers,” which sold for US $14,026 at Mallet Japan’s June 13 auction.
Patricia M. Soldano, president and CEO of the Costa Mesa, Calif.-based Cymric Family Office Services, describes how the two parties’ presumed nominees for President differ on estate tax reform. But, Soldano says, whoever wins, Republican John McCain or Democrat Barack Obama, is going to have to do something.
David A. Handler, partner, and Alison E. Lothes, associate, in the Chicago office of Kirkland & Ellis LLP, report on:
•Holman—the recent Tax Court decision on family limited partnerships in which the court ignored commonly used restrictions on transfers of partnership interests for gift tax valuation purposes under Internal Revenue Code Section 2703.
• Private Letter Ruling 200822001—deciding that contribution of land with a residence and a retained right to lease property does not prevent the trust from qualifying as a QPRT.
• PLR 200822003—finding that payments made pursuant to a split-dollar agreement are neither gifts nor cause insurance to be includible in the grantor’s estate.
• Proposed revisions to Treasury Regulations Section 301.7477-1—guidance provided on procedures for petitions regarding gift tax disputes.
Irina S. Shea, a New York-based trusts and estates lawyer specializing in mediation, reviews and recommends Michele Moore’s The Time is Now: Choose Your Trustee Wisely.
20/ And Please Note
Author Barry Nelson adds a caveat to his article “Florida Surprise” that appeared in our May issue.
22/ Making Arbitration Truly Mandatory
By Michael P. Bruyere
& Meghan D. Marino Courts are generally unwilling to enforce arbitration clauses in trust agreements, because beneficiaries haven’t agreed to the clauses’ inclusion in these documents. And if arbitration is not mandatory, odds are it’s not going to be effective. Enter the Florida legislature, which boldly took the first step and passed legislation that secures for its citizens the benefits offered by mandatory arbitration of trust disputes. Learn why incorporating a mandatory alternative dispute resolution provision is the way to go, and why other state legislatures should follow Florida’s lead.
Michael P. Bruyere is a partner and Meghan D. Marino is an associate in Atlanta’s Locke Lord Bissell & Liddell LLP.
26/ It’s Going to Get Worse
By Michael E. Lewitt
The first half of this year was a fiscal disaster: Wall Street suffered colossal losses from subprime mortgages and leveraged loans; oil soared well over $100 per barrel; and the U.S. dollar plummeted against the Euro. The next six months? Even grimmer. Author Michael E. Lewitt predicts that things will get worse, bemoans the lack of adult supervision on Wall St., and shares where he thinks the investment opportunities lie in this market.
Michael E. Lewitt is president of Hegemony Capital Management, Inc. in Boca Raton, Fla.
32/ Client’s Cashing Out?
By Edward J. Finley II & Anton Pil
Perhaps your client just sold his business, or maybe an expensive piece of art. What should he do with all of the cash? Given the black cloud surrounding the economy lately, he’s likely to be confused, afraid and simply dump it in the bank. Big mistake. Here’s how to rescue the situation and put his money to work for him.
Edward J. Finley II and Anton Pil are managing directors at JP Morgan Private Bank in New York.
36/ Fleece the Fleeing
By Jay Rubinstein, Erik Wallace, Kurt Rademacher & Chris McLemore
Advisors to expatriates, be advised! On June 17, 2008, President Bush signed into law the Heroes Earning Assistance and Relief Tax (HEART) Act—that, despite its acronym, has little sympathy for those who leave the United States. If an expat has a net worth of more than $2 million, an average net U.S. income tax liability of more than $139,000 for the five years before expatriation, or fails to certify that he complied with federal tax obligations the five years before expatriation, there’s a new tax regime that may apply. Basically, the feds are saying: You may walk away from the United States, but you can never really leave.
Jay Rubinstein is a principal in the New Haven office of Withers Bergman LLP. Erik Wallace is a principal in Withers LLP’s London office. Kurt Rademacher is a partner at Withers Hong Kong office. Chris McLemore is an associate in Withers LLP’s London office.
Estate Planning & Taxation
41/ Practitioners Weigh In On 2 Percent Floor Debate
By Kevin Matz
The Internal Revenue Service is on the verge of issuing final regulations addressing the raging debate about whether trusts and estates can deduct certain expenses, without regard to the 2 percent of adjusted gross income floor, and whether fiduciary fees and commissions must be unbundled. Stakes are high: For banks and trustees, it could mean reorganizing how they do business. For trusts and estates and their beneficiaries, it could mean a substantial tax hit. More than 17 professional organizations and commentators weighed in. Most respondents were on the same wavelength. But the American College of Trust and Estate Counsel’s seeming endorsement of unbundling was surprising.
Kevin Matz is an associate with the Private Clients Group in the New York City office of White & Case LLP.
44/ Section 2053 Proposed Regs
By Ann B. Burns
Last year, the Department of Treasury issued proposed regulations to clarify that post-death events are to be considered in valuing deductions under Internal Revenue Code Section 2053. Final regs expected the end of this year will most likely be substantially similar. Too bad, says author Ann B. Burns. The proposed regs ignore the need for finality in estate settlement, place onerous burdens on executors, and set the stage for litigation. Burns is not alone: ACTEC and the American Bar Association Section of Real Property, Probate and Trust Law share her concerns. But, unless Treasury has a change of heart, practitioners must be ready to comply with the rules outlined in the proposed regs.
Ann B. Burns is a partner in the Minneapolis office of Gray Plant Mooty Mooty & Bennett, P.A.
52/ Gift Tax Nightmares
By Lorelei Tolson
The days are long-gone when preparing a gift tax return was simple. Today, these returns are fraught with the potential to make devastating errors for clients. Author Lorelei Tolson has cleaned up the mess for countless tax preparers and estate planners who made mistakes through improperly prepared returns or poorly planned gifts. Tolson shares five of the most common errors and advises you how to avoid—or at least mitigate—the effects of a gift tax blunder.
Lorelei Tolson is a director of the Oxford Financial Group in Indianapolis.
63/ You Already May Be An Asset Protection Lawyer
By Barry A. Nelson
Take a short quiz, and see how much asset protection planning you already do for your clients. You may be surprised. And it’s not such a bad thing: Remember, it’s your ethical obligation to insulate your client’s assets within the limits of the law from potential liability.
Barry A. Nelson is a shareholder in North Miami Beach, Fla.’s Nelson & Nelson, P.A.