FROM THE COVER
Nothing says “summer” like Claude Monet’s paintings of water lilies. Featured on our cover is “Nymphéas” (a type of water lily). One of the finest paintings in Monet’s water lily series, it sold June 17, 2007, at Sotheby’s “Impressionist & Modern Art” auction in London for £18.5 million (about U.S. $36.7 million). Painted circa 1904 in Monet’s garden at Giverny, France, “Nymphéas” first was bought from Michael Monet, the artist’s son, in the 1920s by a French collector and held by that collector’s family for 80 years. Not seen in public since 1936, the oil on canvas was bought over the phone by an anonymous bidder at this June’s auction.
BRIEFING
What Price Patents?
David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn., office of Cummings & Lockwood LLC, report on the buzz in the planning community over the patenting of tax strategies. The patent case Rowe settled. Then news came that an attorney filed an application to patent several strategies for transferring a business interest to a charitable remainder trust or charitable lead trust.
Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports:
• Lottery winnings—A federal district court in New Hampshire found in Estate of Freeman v. United States, that a decedent’s annuity stream from a winning lottery ticket must be valued using the Internal Revenue Code Section 7520 tables.
• Private Letter Ruling 200728018—The IRS approved a joint purchase personal residence trust (PRT) on an existing home.
• FLP assets includible in gross estate—In Estate v. Gore, the Tax Court found assets in a family limited partnership were includible under IRC Sections 2033, 2041 and 2036.
FEATURES
ESTATE PLANNING & TAXATION
Trust Remodeling
By Rashad Wareh
Even irrevocable trusts can be altered to suit current needs. But to make such changes, choose the most appropriate state decanting statute. Your choice should depend on the nature of the trustee’s discretionary authority and whether the beneficiaries of the new trust will include contingent beneficiaries of the original trust. So far, South Dakota’s new decanting statute, effective July 1, 2007, provides the most flexibility for trust remodeling.
Rashad Wareh is a partner at Kozusko Harris Vetter Wareh LLP in New York. He is a member of the Society of Trusts and Estates Practitioners (STEP).
How Big a Relief Is Roski?
By Jonathan J. Rikoon, Naftali T. Leshkowitz
and Liora Brener
In Roski v. Commissioner, the Tax Court told the Internal Revenue Service to stop automatically requiring a bond or lien of estates that had closely held businesses as their primary assets and were seeking to defer payment of estate taxes under IRC Section 6166. It’s not certain that the Service will comply. But even if the IRS does, it’s unclear how that would affect existing security arrangements in older estates that submitted to them forcibly under the now discredited IRS policy. And still there will be estates of which the IRS, even after consideration, will demand bonds or liens. The question then becomes, what should prudent executors do?
Jonathan J. Rikoon is partner and chair of the trusts and estates group at Debevoise & Plimpton LLP in New York. Naftali T. Leshkowitz is counsel and Liora Brener is an associate at the firm.
Pre-Mortem Probate
By Charles F. Gibbs and Brian Corrigan
Pre-mortem probate is not a new concept and it’s never been widely implemented. Indeed, five state courts around the country have resoundingly and convincingly rejected the idea that the validity of a person’s will can be determined before he dies. Yet, suddenly, the issue is hot in New York, as some courts there are conducting pre-mortem probate. The judges’ motivation seems to be a desire to protect incapacitated individuals from abuse. That’s commendable. But the practice tramples the due process rights of potential heirs. Worse, it can do more harm than good to the incapacitated, forcing them to spend on litigation over who’ll get their assets after they die. That money would be better spent on their comfort and care.
Charles F. Gibbs is a partner and Brian Corrigan an associate at Holland & Knight, LLP, in New York. Gibbs also is an adjunct professor at New York Law School and the University of Pennsylvania Law School.
INTERNATIONAL PLANNING
Des Américains en France
By G. Warren Whitaker and Jean-Marc Tirard
Americans move to France to live, buy homes there, even marry French people. The resulting tax and legal complications can be effrayant (frightening). Understand the special estate and income tax planning issues that confront these U.S. citizens and some of the techniques available to address those issues.
G. Warren Whitaker is a partner at Day Pitney LLP in New York. He is U.S. chair of the STEP and a member of the STEP World Wide Council.
Jean-Marc Tirard is a partner at Tirard Naudin in Paris. He is the author of several published works in French and English, including Corporate Taxation in EU Countries (Longman, 7th ed. 2006). Tirard is chairman of the STEP France and an Academician of the International Academy of Trust and Estate Law.
PRACTICE DEVELOPMENT
Jenkens & Gilchrist:
Another Shoe to Drop?
By David Adler
The government and Jenkens & Gilchrist reached an agreement that meant the now-defunct Jenkens was finally off the hook. But the same cannot necessarily be said for all its former partners. Prosecutors have not said they might indict anyone connected to that case. Yet the agreement contained a deferred prosecution provision that doesn’t protect Jenkens’ shareholders, partners or employees. Perhaps even more importantly, the DOJ’s and the IRS’ pursuit of Jenkens indicates the government’s new, and potentially lethal aggressiveness towards law firms and lawyers who provide opinion letters blessing questionable tax shelters. Attorneys have certainly been put on notice.
David Adler is a freelance journalist based in New York.
COMMITTEE REPORT
HIGH-NET-WORTH FAMILIES & FAMILY OFFICES
Wither the Family Office?
By Barbara R. Hauser
The family office market has become crowded and muddled. Author Barbara R. Hauser offers, and explains, four predictions on what to expect in that space in the next 10 years: (1) The number of family offices will explode. (2) Families will return to the traditional single-family office model, causing a decline in the commercial multi-family offices. (3) Single-family offices (SFOs) will forum shop across the globe. (4) SFOs will engage directly in cross-border alliances.
Barbara R. Hauser is the director of the Private Wealth Advisory of the Stanford Group (Suisse) A.G. in Zurich, Switzerland and advisory editor of the new edition of Trusts in Prime Jurisdictions (Globe Business Publishing Ltd., United Kingdom, 2007.)
Family Preservation,
A Philosophy
By James E. Hughes, Jr.
It’s not about tax law. It’s about the human spirit and community. In a just-published book, Family: The Compact Among Generations, a veteran advisor urges fellow practitioners to help clients dare to ask—and answer—the biggest questions. Herewith, an excerpt from that book.
James E. Hughes, Jr., is a retired lawyer based in Aspen, Colo., and author of Family Wealth—Keeping it in the Family (Bloomberg Press, New York, 2004) and Family: The Compact Among Generations (Bloomberg Press, New York, August 2007).
Junior Boards
By Lee Miller
The children of a founding family are likely to learn by watching their parents and discussing issues around the dinner table. But a “junior board” for the family foundation—a group of underaged members who handle some grant making and perhaps investing for a family foundation—is one of the best ways to prepare the next generations for managing the money they eventually will inherit and control.
Lee Miller is managing director of the Threshold Group in New York.
PERSPECTIVES
Estate Tax Reform?
By Patricia M. Soldano
One of the foremost advocates of estate tax reform assesses where Congress is on the issue, and what the considerations and possible scenarios will be.
Patricia M. Soldano is chief executive officer of Cymric Family Office Services in Costa Mesa, Calif., and the president of Policy and Taxation Group, which lobbies for the reform of the estate tax.
A Graceful Exit
By Herbert E. Nass
At the eleventh hour, actress and patron Kitty Carlisle Hart added a codicil to her will that was generous to a housekeeper and equalized gifts to her children.
Herbert E. Nass is managing partner at Herbert E. Nass & Associates in New York and author of Wills of the Rich & Famous: A Fascinating Glimpse at the Legacies of Celebrities (Gramercy Books, New York, 2000).