October 2009 TOC


9/ Tax Law Update

By David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, report on:

  • Keller v. United States—A Texas district court ruled in favor of a decedent’s estate, holding that the estate was entitled to a refund based on the value of family limited partnership (FLP) interests owned by trusts that were includible in the estate.

In Keller v. United States, No. V-02-62 (S.D. Texas Aug. 20, 2009), the U.S. District Court for the Southern District of Texas ruled in favor of the taxpayer, holding that the estate of Maude O'Connor Williams...


Estate Planning & Taxation

11/ Adopted Kids and Old Money
By Jennifer Locke & Lauren E. Gustafson

Massachusetts is just the most recent state to wrestle with the nettlesome issue of when, and to what extent, adopted descendants should be permitted to inherit through class gifts included in testamentary instruments. Current state laws are far from consistent and often unclear. Talk with clients not only about their adopted children, but also about how they’d feel about their descendents’ adopted children inheriting.

Jennifer Locke is counsel to Goodwin Procter LLP in Boston.

Lauren E. Gustafson is an attorney in Boston.

19/ Gimme Credit Shelter Trusts
By David L. Weinreb & Gregory D. Singer

Don’t make the mistake of forgoing the estate tax savings of a credit shelter trust—you could end up with an even greater tax burden. And that holds true even if the trust is funded with an IRA. Authors David L. Weinreb and Gregory D. Singer give you the pros and cons of various distribution options when an account owner dies. They also ran different options through 10,000 future market environments and determined which had the greatest probability of success and transferred the most wealth...

David L. Weinreb is a director in the Wealth Management Group at Bernstein Global Wealth Management in New York.

Gregory D. Singer is director of research in the Wealth Management Group at Bernstein Global Wealth Management in New York

Retirement Benefits

24/ Disclaimers vs. ERISA
By Natalie B. Choate

Early this year, the U.S. Supreme Court issued an opinion confirming its longstanding policy that qualified retirement plans (QRPs) must be administered in accordance with plan documents. But estate planners still must be cautious with disclaimers in the context of a QRP—and not assume that plan administrators of a client’s QRP will honor them. Here’s a road map...

Natalie B. Choate is of counsel with Nutter McClennen & Fish in Boston.



28/ The Holy Grail of a Valid DLOM
By Hans P. Schroeder

How about a discount that is based on quantitative, empirical market data; is simple to use; and so far, gives sensible results? Sound good? Take a look at how author Hans P. Schroeder estimated a discount for lack of marketability (DLOM), by identifying six independent variables in his analysis and using the discounted market value as the dependent variable. His conclusion: although some variables may not seem statistically significant, they do have a substantial effect on the DLOM...

Hans P. Schroeder is the founder, president and a valuation analyst at BEAR, Inc., which is based in Chico, Calif.

37/ The Matched Pairs Approach
By Maretno Agus Harjoto& John K. Paglia

The Internal Revenue Service and the federal courts have consistently opposed significantly large DLOMs for private firms and interests in them. But here’s a study that supports the argument that entity-level DLOMs can average as high as 68 percent to 70 percent when private and public firms with similar characteristics are compared. Don’t be shocked at the size of the discount—the facts speak for themselves...

Maretno Agus Harjoto is an assistant professor of finance at Pepperdine University in Malibu, Calif.

John K. Paglia is an associate professor of finance at Pepperdine University in Malibu, Calif. He is also a managing director at PCG Business Valuations in Camirillo, Calif.

42/ Hedge Fund Discounts
By Brian W. Formento, David C. Jacobson & Espen Robak

Attention all hedge fund investors: before the market fully recovers, you may want to act fast to take advantage of potentially heightened valuation discounts. Those discounts may be historically large because of your hedge fund investment’s unprecedented illiquidity. This could be the silver lining to the loss you probably sustained in this tumultuous economy. The deflated hedge fund value is ripe for transferring wealth to heirs and minimizing estate taxes...

Brian W. Formento is a portfolio strategy specialist at UBS Private Wealth Management in New York.

David C. Jacobson is an attorney in New York.

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

47/ Conservation Easements Primer
By Richard W. Gilmore

Does your client want to do his part to preserve and sustain the environment? Does the client need tax relief? Would he be amenable to continue using his property, even if it meant sharing a part with the public? If you have a client who may answer “yes” to some or all of these questions, he should consider creating a conservation easement. These planning vehicles are used to preserve farms, estates and open spaces, as well as commercial industries. The bonus: many conservancy groups have strong balance sheets and ready cash making them not only eager, but able buyers...

Richard W. Gilmore is the owner of Asset & Risk Assessment International based in Charlton, Mass.


Estate Planning & Taxation

52/ Disregarded But Not Forgotten
By Karen Yates

This past August, the Tax Court came down with an en banc decision that gave great insight into its thinking on an important topic: whether interests in a single-member entity are entitled to valuation discounts. On its face, Pierre v. Commissioner is a 10-to-six taxpayer victory. But with so many judges’ opinions comprising this one decision, one wonders what the consequences could be if Pierre is upheld on appeal...

Karen Yates is a partner in Withers Bergman LLP and is based in the firm’s Greenwich and New Haven, Conn. offices.

TAGS: Research
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