ON THE COVER
“Gather Ye Rosebuds While Ye May”—or maybe not. John William’s Waterhouse’s famous painting (part of the Sotheby’s “19th Century European Art Sale” held on April 18, 2007, in New York) was estimated to go for $1.75 million to $2.5 million, but reportedly didn’t make its reserve, which is usually about 75 percent of the minimum estimate. The piece is said to have sold after the auction for an undisclosed amount. When Christie’s first put the work up for auction in 2002, it didn’t elicit a single bid. That’s not unusual or even a reflection on a piece’s ultimate desirability, according to art historian Faith Pleasanton, a librarian at the Metropolitan Museum of Art.
Also in Sotheby’s April 18 auction, were:
• “The Happy Pair (A Royal Procession),” a childhood wedding painted by Arthur John Esley in 1894, which sold for $768,000.
• “God Speed,” a painting depicting chivalry, created by Edmund Blair Leighton around the turn of the 19th century; it fetched about $1.05 million.
Conrad Teitell’s Guide to Tax Benefits For Charitable Gifts
By Conrad Teitell
Now available to the public on the Trusts & Estates website, www.trustsandestates.com, is a guide to rules and regulations governing charitable giving, compiled by one of the foremost authorities in the nation. This resource will be updated periodically.Conrad Teitell is a principal in the law firm of Cummings & Lockwood in Stamford, Conn. He is an adjunct professor at the University of Miami School of Law, a nationally renowned lecturer and author of several books.
CHARITABLE GIVING SUPPLEMENT
In this issue, please find the 2007 Charitable Giving Supplement, a pullout section. Articles include:
• “Last Call,” by Stephen J. Small of Boston’s Law Offices of Stephen J. Small, Esq., P.C. The new conservation tax incentives are huge. Individuals and corporations need to act immediately. It’s almost too late.
• “The Coming Boom in Charitable Trusts,” by Barlow T. Mann and Robert F. Sharpe, Jr., of The Sharpe Group in Memphis, Tenn. They explain why they expect CRTs to make a vigorous comeback as growth in CLTs remains strong.
• “Donors Rule,” by Marion R. Fremont-Smith, an adjunct lecturer in public policy at Harvard University’s Kennedy School of Government in Cambridge, Mass. The law is changing to give benefactors more power over the gifts they make—and to ensure that those gifts remain useful.
Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports on:
• Proposed regs for Internal Revenue Code Section 2053; and
• FLP assets are included in a decedent’s estate under IRC Section 2036(a)(1) in the case of Estate of H.E. Erickson, T.C. Memo. 2007-107 (April 30, 2007).
David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn. office of Cummings & Lockwood LLC, report on Private Letter Ruling 200714025, which offers a welcome basis to argue that Health and Education Exclusion Trusts (HEETs) are not subject to the private foundation excise tax rules.
New Valuations Committee
Trusts & Estates announces the addition of a committee on valuations to its editorial advisory board. The members are:
• Radd L. Riebe (chair), a managing director in the Valuation & Financial Opinions Group at Stout Risius Ross, Inc. and head of the firm’s Cleveland office;
• Christine L. Baker, a Grand Rapids, Mich.-based principal in the Business Valuation and Litigation Support division of Rehmann Consulting, a member of The Rehmann Group;
• William H. Frazier, a senior managing director and owner of Howard Baker Elliott Inc., based in the firm’s Dallas office;
• Annika M. Reinemann, a managing director in the San Francisco office of Cogent Valuation; and
• Daniel R. Van Vleet, a Chicago-based managing director of Duff & Phelps.
ESTATE PLANNING & TAXATION
By Robert C. Pomeroy and Susan L. Abbott
Planners can save on taxes for their clients using deathbed planning techniques in states that have decoupled their estate taxes and, possibly, in other states where an estate/inheritance tax doesn't consider lifetime gifts. The strategies to consider include lifetime taxable gifts that do not incur a federal gift tax; the funding of a credit-shelter trust for the benefit of one’s spouse and issue; and the making of taxable gifts that incur a gift tax. The authors also consider steps to take while a client is in good health that, if he should later become ill, facilitate pursuing these strategies.
Robert C. Pomeroy is of counsel at Goodwin Procter LLP in Boston. He is a fellow of the American College of Trust and Estate Counsel (ACTEC) and was named in The Best Lawyers in America. He is a frequent lecturer at the University of Miami’s Heckerling Institute on Estate Planning.
Susan L. Abbott is an associate at Goodwin Procter LLP in Boston.
SPECIAL REPORT: INVESTMENTS
The Market at Mid-Year
By Michael E. Lewitt
The market is ignoring negative news and endorsing the view that economic growth will remain sufficiently robust to avoid any sustainable market downturn for the foreseeable future. But the major financial and legal trends affecting the market present a mixed picture—offering investors as many risks as opportunities in the months ahead. Some important trends include the booms in leveraged buyouts and collateralized loans; the collapse of the subprime mortgage market; the criminalizing of business practices; the stock options backdating scandal; and the government’s attempt to raise the bar for plaintiffs in securities lawsuits.
Michael E. Lewitt is president of Hegemony Capital Management, LLC, in Boca Raton, Fla.
By Elizabeth K. Miller
Retirement now has at least three different stages: the Liberation, Leisure and Legacy years. Because spending levels change dramatically during these post-career phases, advisors must create dynamic funding plans for five-to-10 years at a time and revisit these plans regularly—always keeping an eye on the long-term. In other words, “retirement planning” is no longer that. These days, advisors and their clients need to talk about “longevity planning” and “decumulation strategies.” Here’s how.
Elizabeth K. Miller is managing director of Trevor Stewart Burton & Jacobsen Inc. in New York and an advisor on Trusts & Estates’ investment committee.
Alternative Investments—The Fiduciaries’ Primer
By Douglas Moore
Some advisors are novices, others experts, in private equity, hedge funds and commercial real estate funds. Yet all involved in investing for wealthy clients—and that can mean lawyers, fiduciaries, investment committee members, accountants and the clients themselves—need to go beyond merely understanding what alternative investments are, their promises and pitfalls. Advisors of all stripes need to take a hard look at what using alternatives can mean in various legal structures and become well-versed in exactly how fiduciaries should handle these investments.
Douglas Moore is managing director and U.S. head of estate & charitable planning at Citi Trust in New York. He also is co-chair of Trusts & Estates’ estate planning & taxation committee.
New Customers for Alternative Investments
By Vincent C. Travagliato and Paul N. Stam
A recent ruling by the Securities and Exchange Commission has made it easier for smaller private foundations organized as not-for-profit corporations to access alternative investments. Previously, this privilege was available only to such foundations with more than $25 million in investments and to foundations organized as trusts. Now, donors can give seats on the board of small not-for-profit foundations to individuals who aren’t qualified purchasers.
Vincent C. Travagliato is a director at Morgan Stanley in New York.
Paul N. Stam is a director at Morgan Stanley in New York.
By Barbara R. Hauser
Trusts are proliferating, but advisors are focusing on the money and not on those who may inherit it. The outcomes of estate planning can be difficult for beneficiaries to accept, especially if it involves top-down planning, unwanted incentives and unwelcome surprises. But such strife can be avoided.
Barbara R. Hauser is an independent wealth advisor in New York, special counsel to Cadwalader, Wickersham & Taft in New York and London and advisory editor of the new edition of Trusts in Prime Jurisdictions, Globe Business Publishing Ltd., 2007.