June 2009 TOC

Table of contents for June 2009 issue of Trusts and Estates

On the Cover

Another sign of our harsh economic times: Although a famous painting by Picasso had never been up for auction before and its sale was much heralded, his "La fille de l‘artiste á deux ans et demi avec un bâteau" (The daughter of the artist at two-and-a-half years with a boat) failed to sell for the expected $24 million at Sotheby’s "Impressionist and Modern Art" evening sale in New York on May 5, 2009. In fact, this painting of Picasso’s daughter Maya failed to sell at all. Bidding fell short of the reserve price of $12.5 million, according to Sotheby’s Vice President Tobias Meyer.

Art auction sales have weakened dramatically in recent months amid the global financial crisis. Indeed, Sotheby’s said 29 of the 36 artworks on offer at the usually popular impressionist and modern art sale went for a total of $61 million, well below their $119 million estimate.

But the auction wasn’t all bad news. An auction record was set for the Polish Art Deco painter Tamara de Lempicka, when her "Portrait de Marjorie Ferry" sold for almost $5 million. We also like her "Portrait de Mademoiselle Poum Rachou," which is on the cover of this year’s Charitable Giving Supplement. That portrait also sold at the auction—for almost $3 million.


9/ Tax Law Update

David A. Handler, partner, and Alison E. Lothes, associate in the Chicago office of Kirkland & Ellis LLP, report on:

  • Proposed regulation NPRM REG-119532-08 — The Internal Revenue Service provides a method for determining the portion of a trust that’s includible in a deceased grantor’s gross estate if the grantor held a graduated retained interest in the trust.
  • Regulations that revise mortality tables — Using data most recently available from the U.S. census, the IRS issued regs that affect how to value annuities, interests for life or term of years, remainder interests and reversionary interests.


Estate Planning & Taxation

10/ Tax on a Phantom Tax
By Joseph C. Mahon

The New Jersey Tax Court has stunned members in the estate-planning community, revealing the aggressive position state tax authorities may take to increase revenues from decoupled state estate taxes. Although Estate of Stevenson presented unusual facts, practitioners around the country should pause and revise tax clauses in clients’ wills under decoupled estate tax systems—it’s the best way to avoid the mess created by Stevenson. Author Joseph C. Mahon offers sample tax clause language to help.

Joseph C. Mahon is a partner in the Princeton, N.J., office of Cooper Levenson.

17/ Nice Booby Prize
By Michael J. Jones

When, if ever, might trusts that are includible in the estate of a decedent avoid income in respect of decedent (IRD) and receive fresh basis? Your knee-jerk answer may be "IRD is still IRD when held in trust." But look beyond the surface, and explore how IRD may not be IRD when held in trust.

Michael J. Jones is a partner in Monterey, Calif.’s Thompson Jones LLP. He also chairs the Trusts & Estates retirement benefits committee.

21/ Play Ball!
By Kevin Matz

Ahh! To be young, rich and on top of the game. Sounds like heaven. But heaven may be closer for some superstars than they realize. That’s where estate planners can help. Those who represent professional athletes need to convince young sports stars to plan so that their families would be financially secure even if the athletes become disabled or worse. Pros also present unusual estate-planning concerns such as intense needs for asset preservation, protection and domicile considerations. Planning for an athlete? Here’s your rulebook.

Kevin Matz is a managing partner of Adams & Matz LLP in New York.

28/ Use Spousal Agreements For Asset Protection
By Alexander A. Bove, Jr. & Melissa Langa

A post-nuptial agreement should be an integral part of most couples’ asset protection plan. That includes even the couples who’ll never divorce. Why? Because there are no adverse tax consequences to the post-nuptial agreement and related transfers, and the benefits far outweigh the risks. So, although there are currently no cases exactly on point to support this recommendation, there are cases holding that valid post-nuptial agreements may be effective to protect assets from creditors of a transferor spouse. You decide.

Alexander A. Bove, Jr. is a shareholder in the Boston law firm of Bove & Langa P.C.

Melissa Langa is a shareholder in the Boston law firm of Bove & Langa P.C.


32/ The Beauty of SCINsurance
By Angelo F. Tiesi

What if a client’s health is declining or poor, and acquiring life insurance is impossible or cost prohibitive? No worries. With interest rates reaching historical lows, self-canceling installment notes (SCINs) have become attractive estate-planning tools and viable alternatives to life insurance as a way to fund a client’s estate tax liability. Consider what author Angelo F. Tiesi calls "SCINsurance"—using a note that contains a clause saying that if the client dies before the note is paid in full, unpaid amounts are canceled and no further payments are due. The cancellation feature of the SCIN "acts" like term life insurance on a client’s life. In effect, the client’s estate tax liability with respect to the note is "insured" by the SCIN premium.

Angelo F. Tiesi is a partner in Kirkland & Ellis in Chicago.


37/ Fast Track Your IRS Dispute
By Daniel R. Van Vleet & Lawrence B. Gibbs

There’s a little known way to resolve tax matters in a quick and efficient manner: the IRS’ Fast Track Settlement (FTS) dispute resolution program. Although not without risks, the outcome of the FTS process can be favorable from a cost, timing and risk standpoint. Authors Daniel R. Van Vleet and Lawrence B. Gibbs speak from experience; they’ve handled cases in this forum and say they’ve enjoyed excellent results for taxpayers.

Daniel R. Van Vleet is a managing director in the Valuations & Financial Opinions Practice at Stout Risius Ross, Inc., in Chicago.

Lawrence B. Gibbs is a member of Miller Chevalier in Washington. He is also a former commissioner of the IRS.


41/ Build America Bonds
By Matthew Brady

There’s a new category of taxable municipal bonds—Build America Bonds (BABs)—designed to facilitate the financing of state capital expenditures and operations. Investors should consider BABs and evaluate their tax benefits, bond yields and credit quality. Given recent market conditions, in which yields on municipal bonds have been higher than normal, BABs may present an attractive opportunity for clients.

Matthew Brady is a managing director at Barclays Wealth in San Francisco.


Review of Reviews

44/ The Busy Practitioner’s Guide To Student-Edited Law Journals

Back by popular demand, we once again have charged our experts with letting us know which law review articles are useful, and which ones you need only thumb through, if at all. We’ve selected 10 student-edited articles that were published in law journals in the second half 2008. Their topics range from estate planning for same-sex couples, to the future of trust investment law under the Uniform Trust Code—and lots more in between.


High-Net-Worth Family

52/ Financial Loss Syndrome
By Lee S. Hausner, Douglas K. Freeman & Victoria Collins

Even a client who remains fabulously wealthy after a huge financial hit, may suffer a catastrophic emotional crisis. Here are 12 ways for your client to cope with what our authors call "financial loss syndrome."

Lee S. Hausner is a principal in First Foundation, Inc, in Irvine, Calif.

Douglas K. Freeman is a principal in First Foundation, Inc, in Irvine, Calif.

Victoria Collins is a principal in First Foundation, Inc, in Irvine, Calif.

TAGS: Research
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