A summary of articles appearing in the December 2007 issue of Trusts and Estates magazines.


The Dow Jones went on a roller coaster ride in November because of market jitters over the subprime mortgage crisis. But art collectors were bullish at Christie’s “Impressionist and Modern Art Evening Sale,” held on Nov. 6, 2007, in New York. The auction brought in more than $395 million. According to Christie’s, the winning bid, placed anonymously by a private collector over the phone, was $33.6 million for Henri Matisse’s “L’Odalisque Harmonie Bleue” (1937), featured on our cover. “L’Odalisque” not only exceeded its $15 million to $20 million pre-auction estimate, but also set a world auction record for the artist.

Other paintings featured in this issue are:

  • p. 46—Pablo Picasso’s “Femme accroupie au costume turc (Jacqueline),” painted in 1955, which sold for about $30.84 million;
  • p. 50—Paul Cézanne’s “Portrait de Vallier,” painted sometime between 1904 and 1906, which sold for about $17.40 million; and
  • p. 59—Amedeo Modigliani’s “Portrait du sculpteur Oscar Miestchaninoff,” painted in 1916, which also sold for about $30.84 million.


Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports:

  • 2008 inflation adjustments have been released;
  • the Internal Revenue Service has announced that it will decide on a case-by-case basis whether security is needed when estates choose to pay estate tax in installments; and
  • Two U.S. senators have introduced a bill to prohibit tax patents.
Tangled Web
David T. Leibell and Daniel L. Daniels, partners at Wiggin and Dana LLP, in Stamford, Conn., report on Private Letter Ruling 200734023, which shows how self-dealing rules apply in a situation involving the liquidation of partnerships in which a private foundation held an interest. It also highlights the scary prospect of indirect self-dealing when business assets are transferred to a private foundation.



Don’t Touch That!
By Amy K. Kanyuk

Estate-planning clients are growing ever more conscious of creditors. Clients not only want to protect their assets while they’re alive, but also want to protect the wealth they leave to their spouse and children—against creditors, spendthrift tendencies, and bad marriages. Leaving assets in trust may provide some protection, with variations based on jurisdiction. Here’s a guide.

Amy K. Kanyuk is a partner at McDonald & Kanyuk, PPC and an adjunct professor at Franklin Pierce Law Center in Concord, N.H.

Fund Managers’ Transfer Tax Risks
By David Jacobson

Private equity fund managers often own an interest in their funds, and such assets seem like they’d be ideal for wealth transfer planning. But they also pose significant risks, perhaps the most formidable problem coming under Internal Revenue Code Section 2701. Other risks can stem from the fund’s management fee arrangement, the vesting of carried interests, and challenges to valuations. Be warned.

David Jacobson is director of UBS Private Wealth Management in New York and a frequent lecturer on estate-planning issues. He is a member of the New York and Florida bars as well as a member of the New York City Bar Association’s Gift and Estate Tax Committee.


Transferring the Intangible
By Claire Gaudiani

Estate planners can easily adapt the basic tools and vocabulary of their practices to the challenge of planning for intangibles. It’s not necessary to acquire new credentials in psychology or religious studies to provide guidance on a topic of enormous importance to clients—indeed, to all of us. First, adopt a more expansive definition of client “assets.” A solely material view of assets constrains deliberations, limiting the planner’s role and the help planners can offer. Don’t just be a specialist in left elbows; treat the whole patient. Help clients give birth to future generations. Here are some ideas.

Claire Gaudiani is a clinical professor at the George Heyman, Jr. Center for Philanthropy and Fundraising at New York University’s School of Continuing and Professional Studies. She is also author of The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism, Times Books, Henry Holt and Company, LLC, New York, 2003.



Discounts Before The Deal Is Done
By Radd L. Riebe

Your client has surprised you with a signed deal to sell his company. Is it too late to engage in effective transfer planning? The answer is, “no.” Of course, your client could have derived more benefits had he spoken with you before hiring an investment banker to find buyers for his company, or at least before he’d signed a letter of intent to sell. Even so, there remain opportunities for meaningful transfer planning. Until the deal is done, there are several discounts that affect the fair market value of shares of stock in a company that has agreed to be sold at a stated price.

Radd L. Riebe is the managing director of Valuation and Financial Opinions for Stout Risius Ross, Inc. in Cleveland. He also is chair of the newly formed Trusts & Estates’ valuations committee.

Valuation Assurance Clauses
By William H. Frazier

The Internal Revenue Service, Tax Court and Congress all have shown a deep distrust of discounts for family limited partnerships. Author William H. Frazier proposes a way to reassure them all and bolster taxpayers’ arguments for discounts: what he calls a “valuation assurance clause.”

William H. Frazier is managing director of Howard Frazier Barker Elliot, Inc. in Dallas, and a member of Trusts & Estates’ valuations committee. He is treasurer of the business valuation committee of the American Society of Appraisers as well as a member of the ASA’s government relations committee.

What’s an S Corp Really Worth?
By Daniel R. Van Vleet

Although many valuation experts are well-aware of “tax-affecting,” it’s not something estate planners tend to think of when helping their clients create pass-through entities. But they should. Learn some of the key factors in valuing an S corporation and consider models that prevent your client’s S corporation from being overvalued.

Daniel R. Van Vleet is managing director of Duff & Phelps, LLC, in Chicago. He’s also a member of Trusts & Estates’ valuations committee and a member of the ASA’s board of governors and its business valuation committee.

Litman Audacity
By Espen Robak

We recently had a perfect example of a major controversy in the valuation profession: Litman v. United States, a public securities appraisal case in which all parties relied on completely different published studies to justify their marketability discounts. In Litman, the taxpayers scored a big win, when the Federal Court of Claims favored their expert’s approach and came up with a whopping illiquidity discount of up to 50 percent. Bottom line: such huge illiquidity discounts may be rare, but the side taking the most analytical approach could come out way ahead.

Espen Robak is president of Pluris Valuation Advisors LLC in New York.



Rich People’s Toys
By Alexander A. Bove, Jr.

According to reviewer Alexander A. Bove, Jr., Robert Frank’s book Richistan gives us a superficial and not particularly helpful glimpse into the world of the rich, with too much focus on mega-yachts and other expensive toys. Too bad Frank didn’t pay attention to what Bove thinks is really interesting about the rich.

Alexander A. Bove, Jr., is a partner in Bove & Langa in Boston and a member of Trusts & Estates’ estate planning and taxation committee. He is a fellow of the American College of Trust and Estate Counsel, and an academician of The International Academy of Estate and Trust Law.


Books of Note

Trusts & Estates’ distinguished advisory board members also are the authors of books for the profession—and beyond. Here’s a list of their offerings.

TAGS: Research
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