’WPCø  t\ą/ ®ņŁQØŹOØÓ.¤ć%9éž\Š” B<µ&š#3šOĄT ĢŪRUOR“F‰JģŪ~¶xŚa¹X”KĶAÉvz£oJ­šRŲĮp/|>c¹>5ēšĢx”›µ `lpż(Ēü›ŹUšŸĮö˜Ćscv_ļ·hÆŁE|~[ŠoYžńy9K«nPķ²Ü9:c™>V(łÖHĄAZÜM®›Ó6*^XnpčøĖ½³- l½h…r÷ĘC„KŗEGå:AĪžĪ©%<ąćŅĒ›i…eöķ`{$O\ŠW²ąÓ*-H…*ü§č„h'XÓņˆ%•„jĢõ kīx5QÖ$øšü±bKK ēĄ›él«„;‰’wŽÖĀOA3£¢3¾ĀaÖ|@]©é÷‰ + e“PL[…PpiŠõ“eœF{ ƒjķķb”Y?ÜĖŪ&%‘Z\śūŁ¢iü =tJŗÉ• ųp,§)Ī/3$ ¶dWT@3²°ƒGõ2cQšĒķD#½FäKji]qÄ«£šl”be…Š/ņuög„“ļó¼dͦHŖvןxDķ³”eö"~z\ B]5ģķī9+)>į“ūāwdæN7ęoÆdžÅqd`U>4’r 0n 0<r 06® 06äU,*U(JDŽ 0šž#Į8UNł %G MM (Q Ny ^ { w‡ 4‹ Ÿ m” ō\  `‹&Times New Roman' INTRODUCTION Rob King0Rob King .   <’’:Default ParaŌ€ōōōŌŌ€XXXŌ<’’:Footnote Ref6’’4Hyperlink0’’.Strongņ ņó ó%ä2¼A`‹Arial³˜kIA`‹2WP TypographicSymbols#|x(r¹#$””Ō..ŌŌ  ŌŌ  ŌÓ  ÓŌ€ XļŲXX XŌŌ€XļŲXX XļŲԘ\\750-FPS2\RLP01ČĢČĢĢČČĢ0(ÖĆ9 Z‹6Times New Roman Regular Xģ”’( cmŠ(ź:i¢Ų+004’U‹’ĄĄĄŻ ƒ ¹#!ŻŌ..ŌŌ  ŌŌ  ŌÓ  ÓŌ€ XļŲXX XŌŌ€XļŲXX XļŲŌŻ  ŻŌ_ŌŃ  ŃÓ   ÓÓ  ÓŌ€ōĪņXXļŲŌŌ€ōĮņņōĪŌņ ņINTRODUCTIONŠ ° ŠĢó óAs€we€did€in€January€of€1997,€1998€and€1999,€and€again€with€the€permission€of€the€University€of€MiamiŠ .~ ŠSchool€of€Law€Center€for€Continuing€Legal€Education,€we€will€be€posting€to€this€list€throughout€the€comingŠ ķ= Šweek€highlights€of€the€proceedings€of€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ ¬ü Šis€being€held€January€10„14,€2000€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.€Š k» ŠĢOur€ņ ņon„site€local€reportersó ó€there€in€Miami€will€include:Š é 9 ŠĢTheodore€B.€Atlass€Esq.€of€Denver,€Colorado€„€tatlass@atlass.com€Š g ·  ŠStephan€R.€Leimberg€Esq.€of€Bryn€Mawr,€PA€„€leimberg@home.com€Š & v  ŠAlan€F.€Rothschild€Jr.€Esq.€of€Columbus,€GA€„€ar@hatcherstubbs.com€Š å 5  ŠBruce€Stone€Esq.€of€Miami,€FL€„€Brucestone@aol.comŠ ¤ ō  ŠRobert€B.€Wolf€Esq.€of€Pittsburgh,€PA€„€Wolf50@aol.comŠ c³  ŠĢ=================Š į1  ŠĢThis€year€a€complete€listing€of€the€proceedings€and€speakers€is€available€on€the€Institute's€Web€site.€€TheŠ _Æ  ŠURL€for€that€site€isŠ n  ŠĢņņŌ’Ōhttp://vega.law.miami.edu/heckerlingóóŌ’Ō.Š œģ ŠĢFor€those€of€you€without€access€to€the€Web,€here€are€the€core€parts€of€the€schedule:Š j ŠĢņ ņScope€of€Instituteó óŠ ˜č ŠĢThe€"Miami€Institute"€is€widely€recognized€as€the€premier€estate€planning€program€in€the€country.€It€isŠ f Šdesigned€for€sophisticated€attorneys,€trust€officers,€accountants,€insurance€and€financial€planners€who,Š Õ% Šthrough€years€of€experience€and€practice,€are€familiar€with€the€principles€of€estate€planning.€Its€faculty€isŠ ”ä Šdrawn€from€the€nation's€leading€estate€planning€experts,€and€the€papers€they€produce€are€consideredŠ S£ Šauthoritative€on€their€subjects.Š b ŠĢThe€Institute€offers€something€of€interest€to€every€member€of€the€estate€planning€team.€This€year'sŠ ą  Šprogram€features€a€new€Case€Study€series€that€will€illustrate€and€provide€practical€guidance€on€how€toŠ OŸ! Šimplement€sophisticated€estate€planning€techniques.€Also€new€this€year€is€the€recent€developments€panelŠ ^" Šon€Monday€afternoon€featuring€three€of€the€nation's€foremost€estate€planning€experts,€who€will€guide€youŠ Ķ# Šthrough€the€year's€developments€on€the€tax€front.€The€same€distinguished€panel€of€experts€will€beŠ ŒÜ$ Šavailable€to€answer€your€questions€the€next€morning€during€the€first€of€two€question€and€answer€sessions.Š K ›% ŠIn€addition,€this€year's€Institute€includes€our€popular€Fundamentals€Program,€which€begins€with€an€optionalŠ  !Z& Špre„conference€session€on€planning€and€drafting€for€life€insurance.€The€other€two€fundamentals€sessionsŠ É!' Šwill€be€offered€during€our€regular€programming€schedule,€and€will€cover€tax„related€drafting€and€theŠ ˆ"Ų( Šmathematics€of€estate€planning.€The€remainder€of€the€program€features€a€wide€variety€of€lectures,Š G#—) Šworkshops,€and€panel€discussions€on€topics€of€timely€interest€to€estate€planning€professionals.Š $V* ŠĢBecause€of€the€scope€and€quality€of€its€program,€the€Institute€has€grown€to€be€the€largest€such€gatheringŠ „%Ō , Šof€estate€planning€professionals€in€the€country.€Over€the€past€several€years€attendance€at€the€Institute€hasŠ C&“!- Šrisen€dramatically,€with€a€record€number€of€over€2,200€estate€planning€professionals€from€around€theŠ 'R". Šnation€in€attendance€at€last€year's€program.€This€concentration€of€estate€planning€talent€has€led€theŠ Į'#/ ŠInstitute€to€have€some€of€the€better€characteristics€of€a€national€convention€of€estate€planners.€AttendeesŠ €(Š#0 Šhave€the€opportunity€to€exchange€ideas,€to€network,€and€to€review€the€latest€in€technology€and€servicesŠ ?)$1 Šmade€available€to€estate€planners€by€more€than€80€book€and€software€publishers,€auction€houses,€trustŠ ž)N%2 Šcompanies,€and€other€service€providers€exhibiting€at€the€Institute.Š ½* &3 ŠĢĢņ ņInstitute€Director€and€Advisory€Committeeó óŠ ś,J(6 ŠTina€Hestrom€Portuondo,€Esq.,€Institute€DirectorŠ ¹- )7 ŠUniversity€of€Miami€School€of€LawŠ ° ŠCoral€Gables,€FloridaŠ oæ ŠĢRichard€B.€Covey,€Esq.,€Committee€ChairŠ ķ= ŠCarter,€Ledyard€&€MilburnŠ ¬ü ŠNew€York,€New€YorkŠ k» ŠĢByrle€M.€Abbin,€CPAŠ é 9 ŠArthur€Andersen€LLPŠ Ø ų ŠWashington,€D.C.Š g ·  ŠĢSteve€R.€Akers,€Esq.Š å 5  ŠErnst€&€Young€LLPŠ ¤ ō  ŠDallas,€TexasŠ c³  ŠĢProfessor€Mark€AscherŠ į1  ŠUniversity€of€Arizona€College€of€LawŠ  š  ŠTucson,€ArizonaŠ _Æ  ŠĢNorman€J.€Benford,€Esq.Š Ż- ŠGreenberg€Traurig,€P.A.Š œģ ŠMiami,€FloridaŠ [« ŠĢAlan€D.€Bonapart,€Esq.Š Ł) ŠBancroft€&€McAlister,€P.C.Š ˜č ŠSan€Francisco,€CaliforniaŠ W§ ŠĢLawrence€Brody,€Esq.Š Õ% ŠBryan€Cave€LLPŠ ”ä ŠSt.€Louis,€MissouriŠ S£ ŠĢJ.€Donald€Cairns,€Esq.Š Ń! ŠSpieth,€Bell,€McCurdy€&€Newell,€L.P.A.Š ą  ŠCleveland,€OhioŠ OŸ! ŠĢS.€Stacy€Eastland,€Esq.Š Ķ# ŠBaker€&€Botts,€L.L.P.Š ŒÜ$ ŠHouston,€TexasŠ K ›% ŠĢProfessor€John€T.€GaubatzŠ É!' ŠUniversity€of€Miami€School€of€LawŠ ˆ"Ų( ŠCoral€Gables,€FloridaŠ G#—) ŠĢJoseph€G.€Gorman,€Jr.,€Esq.Š Å$ + ŠSheppard,€Mullin,€Richter€&€Hampton€LLPŠ „%Ō , ŠLos€Angeles,€CaliforniaŠ C&“!- ŠĢMax€Gutierrez,€Jr.,€Esq.Š Į'#/ ŠBrobeck,€Phleger€&€HarrisonŠ €(Š#0 ŠSan€Francisco,€CaliforniaŠ ?)$1 ŠĢMarcia€Chadwick€Holt,€Esq.Š ½* &3 ŠDavis,€Graham€&€Stubbs€LLPŠ |+Ģ&4 ŠDenver,€ColoradoŠ ;,‹'5 ŠĢFrederick€R.€Keydel,€Esq.Š ¹- )7 ŠJoslyn€Keydel€&€WallaceŠ ° ŠDetroit,€MichiganŠ oæ ŠĢCarlyn€S.€McCaffrey,€Esq.Š ķ= ŠWeil,€Gotshal€&€Manges€LLPŠ ¬ü ŠNew€York,€New€YorkŠ k» ŠĢJerry€J.€McCoy,€Esq.Š é 9 ŠWashington,€D.C.Š Ø ų ŠĢJudith€W.€McCue,€Esq.Š & v  ŠMcDermott,€Will€&€EmeryŠ å 5  ŠChicago,€IllinoisŠ ¤ ō  ŠĢMalcolm€A.€Moore,€Esq.Š "r  ŠDavis€Wright€Tremaine€LLPŠ į1  ŠSeattle,€WashingtonŠ  š  ŠĢProfessor€Jeffrey€N.€PennellŠ n  ŠEmory€University€School€of€LawŠ Ż- ŠAtlanta,€GeorgiaŠ œģ ŠĢLloyd€Leva€Plaine,€Esq.Š j ŠSutherland,€Asbill€&€Brennan€LLPŠ Ł) ŠWashington,€D.C.Š ˜č ŠĢSusan€Porter,€Esq.Š f ŠUnited€States€Trust€CompanyŠ Õ% ŠNew€York,€New€YorkŠ ”ä ŠĢJohn€R.€Price,€Esq.Š b ŠPerkins€Coie€LLPŠ Ń! ŠSeattle,€WashingtonŠ ą  ŠĢEdward€S.€Schlesinger,€Esq.Š ^" ŠLaw€Offices€of€Edward€S.€Schlesinger,€P.C.Š Ķ# ŠNew€York,€New€YorkŠ ŒÜ$ ŠĢPam€H.€Schneider,€Esq.Š  !Z& ŠDrinker,€Biddle€&€ReathŠ É!' ŠPhiladelphia,€PennsylvaniaŠ ˆ"Ų( ŠĢBruce€Stone,€Esq.Š $V* ŠHolland€&€KnightŠ Å$ + ŠMiami,€FloridaŠ „%Ō , ŠĢHoward€M.€Zaritsky,€Esq.Š 'R". ŠRapidan,€VirginiaŠ Į'#/ ŠĢEmeritus€MembersŠ ?)$1 ŠĢBernard€Barnett,€CPAŠ ½* &3 ŠBDO€Seidman,€LLPŠ |+Ģ&4 ŠNew€York,€New€YorkŠ ;,‹'5 ŠĢWilliam€P.€Cantwell,€Esq.Š ¹- )7 ŠDriggs,€IdahoŠ ° ŠĢDave€L.€Cornfeld,€Esq.Š .~ ŠHusch€&€EppenbergerŠ ķ= ŠLLC;€St.€Louis,€MissouriŠ ¬ü ŠĢFred€J.€Dopheide,€Esq.,€CLU,€ChFCŠ * z ŠAmerican€Society€of€CLU€and€ChFCŠ é 9 ŠBryn€Mawr,€PennsylvaniaŠ Ø ų ŠĢņ ņInstitute€Facultyó óŠ & v  ŠĢByrle€M.€Abbin,€CPAŠ ¤ ō  ŠArthur€Andersen€LLPŠ c³  ŠWashington,€D.C.Š "r  ŠĢSteve€R.€Akers,€Esq.Š  š  ŠErnst€&€Young€LLPŠ _Æ  ŠDallas,€TexasŠ n  ŠĢDonna€Barwick,€Esq.,€CFPŠ œģ ŠThe€Arden€GroupŠ [« ŠAtlanta,€GeorgiaŠ j ŠĢDennis€I.€Belcher,€Esq.Š ˜č ŠMcGuire,€Woods,€Battle€&€Boothe,€LLPŠ W§ ŠRichmond,€VirginiaŠ f ŠĢJonathan€G.€Blattmachr,€Esq.Š ”ä ŠMilbank,€Tweed,€Hadley€&€McCloy€LLPŠ S£ ŠNew€York,€New€YorkŠ b ŠĢAlan€D.€Bonapart,€Esq.Š ą  ŠBancroft€&€McAlister,€P.C.Š OŸ! ŠSan€Francisco,€CaliforniaŠ ^" ŠĢLawrence€Brody,€Esq.Š ŒÜ$ ŠBryan€Cave€LLPŠ K ›% ŠSt.€Louis,€MissouriŠ  !Z& ŠĢNatalie€B.€Choate,€Esq.Š ˆ"Ų( ŠBingham€Dana€LLPŠ G#—) ŠBoston,€MassachusettsŠ $V* ŠĢĢDave€L.€Cornfeld,€Esq.Š C&“!- ŠHusch€&€Eppenberger,€LLCŠ 'R". ŠSt.€Louis,€MissouriŠ Į'#/ ŠĢRichard€B.€Covey,€Esq.Š ?)$1 ŠCarter,€Ledyard€&€MilburnŠ ž)N%2 ŠNew€York,€New€YorkŠ ½* &3 ŠĢSamuel€DiPiazza,€Jr.,€CPAŠ ;,‹'5 ŠPricewaterhouseCoopers€LLPŠ ś,J(6 ŠNew€York,€New€YorkŠ ¹- )7 ŠDouglas€W.€Duncan,€Esq.Š ° ŠLefkoff,€Duncan,€Grimes€&€Miller,€P.C.Š oæ ŠAtlanta,€GeorgiaŠ .~ ŠĢS.€Stacy€Eastland,€Esq.Š ¬ü ŠBaker€&€Botts,€L.L.P.Š k» ŠHouston,€TexasŠ * z ŠĢJon€J.€Gallo,€Esq.Š Ø ų ŠGreenberg€Glusker€FieldsŠ g ·  ŠClaman€&€Machtinger€LLPŠ & v  ŠLos€Angeles,€CaliforniaŠ å 5  ŠĢJonathan€E.€Gopman,€Esq.Š c³  ŠGreenberg€Traurig,€P.A.Š "r  ŠMiami,€FloridaŠ į1  ŠĢBruce€A.€GuiotŠ _Æ  ŠPNC€AdvisorsŠ n  ŠPittsburgh,€PennsylvaniaŠ Ż- ŠĢJerome€M.€Hesch,€Esq.Š [« ŠGreenberg€Traurig,€P.A.Š j ŠMiami,€FloridaŠ Ł) ŠĢDonald€O.€Jansen,€Esq.Š W§ ŠFulbright€&€Jaworski€L.L.P.Š f ŠHouston,€TexasŠ Õ% ŠĢLawrence€P.€Katzenstein,€Esq.Š S£ ŠThompson€Coburn,€LLPŠ b ŠSt.€Louis,€MissouriŠ Ń! ŠĢJudge€David€LaroŠ OŸ! ŠU.S.€Tax€CourtŠ ^" ŠWashington,€D.C.Š Ķ# ŠĢStephan€R.€Leimberg,€Esq.Š K ›% ŠLeimberg€&€LeClair,€Inc.Š  !Z& ŠBryn€Mawr,€PennsylvaniaŠ É!' ŠĢDaniel€H.€Markstein,€III,€Esq.Š G#—) ŠMaynard,€Cooper€&€Gale,€P.C.Š $V* ŠBirmingham,€AlabamaŠ Å$ + ŠĢJerry€J.€McCoy,€Esq.Š C&“!- ŠWashington,€D.C.Š 'R". ŠĢHoward€M.€McCue€III,€Esq.Š €(Š#0 ŠMayer,€Brown€&€PlattŠ ?)$1 ŠChicago,€IllinoisŠ ž)N%2 ŠĢLouis€A.€Mezzullo,€Esq.Š |+Ģ&4 ŠMezzullo€&€McCandlishŠ ;,‹'5 ŠRichmond,€VirginiaŠ ś,J(6 ŠŠ ¹- )7 ŠMalcolm€A.€Moore,€Esq.Š ° ŠDavis€Wright€Tremaine€LLPŠ oæ ŠSeattle,€WashingtonŠ .~ ŠĢM.€Read€Moore,€Esq.Š ¬ü ŠMcDermott,€Will€&€EmeryŠ k» ŠChicago,€IllinoisŠ * z ŠĢJames€W.€Narron,€Esq.Š Ø ų ŠNarron,€O'Hale€and€Whittington,€P.A.Š g ·  ŠSmithfield,€North€CarolinaŠ & v  ŠĢMaria€E.€Nez,€Esq.Š ¤ ō  ŠBaker€&€McKenzieŠ c³  ŠSan€Diego,€CaliforniaŠ "r  ŠĢJohn€W.€Porter,€Esq.Š  š  ŠBaker€&€Botts,€L.L.P.Š _Æ  ŠHouston,€TexasŠ n  ŠĢSusan€Porter,€Esq.Š œģ ŠUnited€States€Trust€Company€of€New€YorkŠ [« ŠNew€York,€New€YorkŠ j ŠĢProfessor€David€PowellŠ ˜č ŠThe€Florida€State€UniversityŠ W§ ŠTallahassee,€FloridaŠ f ŠĢRichard€B.€Robinson,€Esq.Š ”ä ŠLentz,€Evans€and€King€P.C.Š S£ ŠDenver,€ColoradoŠ b ŠĢBruce€S.€Ross,€Esq.Š ą  ŠRoss,€Sacks€&€Glazier€LLPŠ OŸ! ŠLos€Angeles,€CaliforniaŠ ^" ŠĢEdward€S.€Schlesinger,€Esq.Š ŒÜ$ ŠNew€York,€New€YorkŠ K ›% ŠĢSherwin€P.€Simmons,€Esq.Š É!' ŠSteel€Hector€&€Davis€LLPŠ ˆ"Ų( ŠMiami,€FloridaŠ G#—) ŠĢGeorgiana€J.€Slade,€Esq.Š Å$ + ŠMilbank,€Tweed,€Hadley€&€McCloy€LLPŠ „%Ō , ŠNew€York,€New€YorkŠ C&“!- ŠĢSusan€K.€Smith,€Esq.Š Į'#/ ŠOlsen„Smith,€Ltd.Š €(Š#0 ŠPhoenix,€ArizonaŠ ?)$1 ŠĢRobert€B.€Wolf,€Esq.Š ½* &3 ŠTener,€Van€Kirk,€Wolf€&€Moore,€P.C.Š |+Ģ&4 ŠPittsburgh,€PennsylvaniaŠ ;,‹'5 ŠĢņ ņPROGRAM€SCHEDULE:ó óŠ ¹- )7 ŠSunday,€January€9Š ° ŠĢ12:00€€6:00€p.m.Š .~ ŠRegistrationŠ ķ= ŠĢMonday,€January€10Š k» ŠĢ8:00€a.m.€€2:00€p.m.Š é 9 ŠRegistrationŠ Ø ų ŠĢ8:00€a.m.€€9:00€a.m.Š & v  ŠComplimentary€Continental€BreakfastŠ å 5  ŠĢ9:00€a.m.€€10:30€a.m.€€andŠ c³  Š10:45€a.m.€„€12:15€p.m.Š "r  ŠOptional€Pre„Conference€Fundamentals€ProgramŠ į1  ŠThe€Fundamentals€of€Using€Life€Insurance€in€Estate€Planning,€IncludingŠ  š  ŠPlanning€and€Drafting€Irrevocable€Insurance€Trusts.€Lawrence€BrodyŠ _Æ  ŠDonald€O.€JansenŠ n  ŠĢ10:30€a.m.€€10:45€a.m.Š œģ ŠBreakŠ [« ŠĢ2:00€„€2:10€p.m.Š Ł) ŠIntroductory€RemarksŠ ˜č ŠTina€Hestrom€Portuondo,€Esq.Š W§ ŠDirector€Ō€ō qņņōĮŌCŌ€ōĮņņō qŌ€Philip€E.€Heckerling€InstituteŠ f ŠĢ2:10€€3:30€p.m.Š —ē ŠRecent€Developments€in€Estate,€Gift€andŠ V¦ ŠIncome€Taxation€„€1999€„€Part€OneŠ e ŠRichard€B.€Covey,€Esq.Š Ō$ ŠS.€Stacy€EastlandŠ “ć  ŠMalcolm€A.€MooreŠ R¢! ŠĢ3:30€€3:45€p.m.Š Š # ŠBreakŠ ß$ ŠĢ3:45€€5:15€p.m.Š  !]& ŠRecent€Developments€in€Estate,€Gift€andŠ Ģ!' ŠIncome€Taxation€„€1999€„€Part€TwoŠ ‹"Ū( ŠĢ6:00€€7:00€p.m.Š  $Y* ŠComplimentary€Reception€for€RegistrantsŠ Č$ + ŠĢTuesday,€January€11Š F&–!- ŠĢ8:00€€9:00€a.m.Š Ä'#/ ŠComplimentary€Continental€BreakfastŠ ƒ(Ó#0 ŠĢĢ9:00€€10:30€a.m.Š Ą*&3 ŠQuestion€&€Answer€IŠ +Ļ&4 ŠRichard€B.€Covey,€Esq.Š >,Ž'5 ŠDave€L.€CornfeldŠ ż,M(6 ŠS.€Stacy€EastlandŠ ¼- )7 ŠMalcolm€A.€MooreŠ ° ŠĢ10:30€€10:45€a.m.Š .~ ŠBreakŠ ķ= ŠĢ10:45€€11:30€a.m.Š k» ŠWhen€IRD€Meets€ERISA:€Making€Retirement€BenefitsŠ * z ŠPayable€to€TrustsŠ é 9 ŠNatalie€B.€ChoateŠ Ø ų ŠĢ11:30€a.m.€€12:15€p.m.Š & v  ŠLife€Insurance€Potpourri€€No€Employer?Š å 5  ŠTry€Family€Split€Dollar€€Other€Recent€DevelopmentsŠ ¤ ō  ŠDonald€O.€JansenŠ c³  ŠĢ12:15€€2:00€p.m.Š į1  ŠLunch€BreakŠ  š  ŠĢ2:00€€2:45€p.m.Š n  ŠRemembering€the€Grandchildren€€Leverage,Š Ż- ŠDiscount€and€Freeze€PerpetuallyŠ œģ ŠGeorgiana€J.€SladeŠ [« ŠĢ2:45€€3:30€p.m.Š Ł) ŠGuiding€(Controlling?)€the€Children€and€Grandchildren:Š ˜č ŠPlanning€and€Drafting€to€Influence€BehaviorŠ W§ ŠHoward€M.€McCue€IIIŠ f ŠĢ3:30€€3:45€p.m.Š ”ä ŠBreakŠ S£ ŠĢ3:45€€4:30€p.m.Š Ń! ŠTaking€the€"Foreign"€Out€of€Foreign€Trusts€€RecognizingŠ ą  ŠThem€and€Advising€U.S.€Clients€with€Connections€to€ThemŠ OŸ! ŠMaria€E.€NezŠ ^" ŠĢ4:30€€5:15€p.m.Š ŒÜ$ ŠPicking€Up€the€Pieces€When€Law€and€Ethics€CollideŠ K ›% ŠBruce€S.€RossŠ  !Z& ŠĢWednesday,€January€12Š ˆ"Ų( ŠĢ8:00€€9:00€a.m.Š $V* ŠComplimentary€Continental€BreakfastŠ Å$ + ŠĢ9:00€€9:45€a.m.Š C&“!- ŠTo€Be€or€Not€To€Be:€An€LLC,€LP,€LLP,€S€or€a€CŠ 'R". ŠLouis€A.€MezzulloŠ Į'#/ ŠĢ9:45€€10:30€a.m.Š ?)$1 ŠMaking€Sure€Your€Transfer€Tax€Planning€Doesn't€CreateŠ ž)N%2 ŠIncome€Tax€Nightmares€When€You€Sell€the€Family€BusinessŠ ½* &3 ŠRichard€B.€RobinsonŠ |+Ģ&4 ŠĢ10:30€€10:45€a.m.Š ś,J(6 ŠBreakŠ ¹- )7 Š10:45€€11:30€a.m.Š ° ŠFractionalized€Equity€Valuation€Planning:€An€EgyptianŠ oæ ŠMortician's€Techniques€for€Preserving€(Mummifying)Š .~ ŠPost„Mortem€Valuation€DiscountsŠ ķ= ŠSusan€K.€SmithŠ ¬ü ŠĢ11:30€a.m.€€12:15€p.m.Š * z ŠAfter€the€Fact,€But€It's€Still€Not€Too€Late€€An€Overview€of€Post„MortemŠ é 9 ŠTax€Planning€StrategiesŠ Ø ų ŠSteve€R.€AkersŠ g ·  ŠĢ12:15€€2:00€p.m.Š å 5  ŠLunch€BreakŠ ¤ ō  ŠĢ2:00€€5:15€p.m.Š "r  ŠFundamentals€Program€€Millennium€Schminium:Š į1  ŠIs€Your€Tax€Drafting€Y2K€Compliant?Š  š  Š(Runs€concurrently€with€the€Special€Sessions)Š _Æ  ŠM.€Read€MooreŠ n  ŠDavid€PowellŠ Ż- ŠĢ2:00€€3:30€p.m.Š [« ŠSpecial€Sessions€IŠ j ŠĢI„A€€CASE€STUDY€€Retirement€Benefits€Payable€to€TrustsŠ ˜č ŠNatalie€B.€ChoateŠ W§ ŠĢI„B€€Hot€Transfer€Tax€Valuation€IssuesŠ Õ% ŠSusan€K.€SmithŠ ”ä ŠJudge€David€LaroŠ S£ ŠJohn€W.€PorterŠ b ŠĢI„C€€The€Total€Return€Trust€Revolution:€An€IntroductionŠ ą  ŠRobert€B.€WolfŠ OŸ! ŠStephan€R.€LeimbergŠ ^" ŠSusan€PorterŠ Ķ# ŠĢI„D€€GSTT:€Lifetime€TransfersŠ K ›% ŠGeorgiana€J.€SladeŠ  !Z& ŠĢI„E€€Foreign€TrustsŠ ˆ"Ų( ŠMaria€E.€NezŠ G#—) ŠĢ3:30€€3:45€p.m.Š Å$ + ŠBreakŠ „%Ō , ŠĢ3:45€€5:15€p.m.Š 'R". ŠSpecial€Sessions€IIŠ Į'#/ ŠĢII„A€€CASE€STUDY€€Total€Return€Trusts:Š ?)$1 ŠTechniques€and€ApplicationsŠ ž)N%2 ŠRobert€B.€WolfŠ ½* &3 ŠBruce€A.€GuiotŠ |+Ģ&4 ŠĢII„B€€Charitable€Planning€Update€@€Y2KŠ ś,J(6 ŠJerry€J.€McCoyŠ ¹- )7 ŠII„C€€When€Law€and€Ethics€CollideŠ ° ŠBruce€S.€RossŠ oæ ŠĢII„D€€Post„Mortem€Tax€PlanningŠ ķ= ŠSteve€R.€AkersŠ ¬ü ŠĢII„E€€Choice€of€EntityŠ * z ŠLouis€A.€MezzulloŠ é 9 ŠĢThursday,€January€13Š g ·  ŠĢ8:00€€9:00€a.m.Š å 5  ŠComplimentary€Continental€BreakfastŠ ¤ ō  ŠĢ9:00€€9:45€a.m.Š "r  ŠGiving€Well€is€the€Best€Revenge:Š į1  ŠPlanning€Opportunities€with€Stock€OptionsŠ  š  ŠDaniel€H.€Markstein,€IIIŠ _Æ  ŠĢ9:45€€10:30€a.mŠ Ż- ŠNo€More€"Gravy€Train":€1997€Law€Revisions€DramaticallyŠ œģ ŠAffect€the€Economics€of€CRTs€€Only€Those€With€TrueŠ [« ŠCharitable€Motivation€Should€Create€ThemŠ j ŠByrle€M.€AbbinŠ Ł) ŠĢ10:30€€10:45€a.m.Š W§ ŠBreakŠ f ŠĢ10:45€€11:30€a.m.Š ”ä ŠNon„Charitable€Inter€Vivos€Gifts€€A€Plan€for€Tax€ReliefŠ S£ ŠJames€W.€NarronŠ b ŠĢ11:30€a.m.€€12:15€p.m.Š ą  ŠBeyond€the€Basic€Freeze:€Further€Uses€ofŠ OŸ! ŠDeferred€Payment€Sales€and€Avoiding€the€MeltdownŠ ^" ŠJerome€M.€HeschŠ Ķ# ŠĢĢ12:15€€2:00€p.m.Š  !Z& ŠLunch€BreakŠ É!' ŠĢ2:00€€3:30€p.m.€andŠ G#—) Š3:45€€5:15€p.m.Š $V* ŠFundamentals€Program€€Numbers€Matter:Š Å$ + Š(Runs€concurrently€with€the€Special€Sessions)Š „%Ō , ŠLawrence€P.€KatzensteinŠ C&“!- ŠĢ2:00€€3:30€p.mŠ Į'#/ ŠSpecial€Sessions€IIIŠ €(Š#0 ŠĢIII„A€€CASE€STUDY€€Putting€It€All€Together:Š ž)N%2 ŠA€Potpourri€of€Potential€PlansŠ ½* &3 ŠJon€J.€GalloŠ |+Ģ&4 ŠĢIII„B€€Hot€Transfer€Tax€Valuation€IssuesŠ ś,J(6 Š(Repeat€of€Session€I„B)Š ¹- )7 ŠSusan€K.€SmithŠ ° ŠJudge€David€LaroŠ oæ ŠJohn€W.€PorterŠ .~ ŠĢIII„C€€Ethical€Issues€and€Developments€in€Multidisciplinary€PracticeŠ ¬ü ŠDonna€BarwickŠ k» ŠDennis€I.€BelcherŠ * z ŠSamuel€A.€DiPiazza,€Jr.Š é 9 ŠDouglas€W.€DuncanŠ Ø ų ŠSherwin€P.€SimmonsŠ g ·  ŠĢIII„D€€Planning€and€Drafting€to€Influence€BehaviorŠ å 5  ŠHoward€M.€McCue€IIIŠ ¤ ō  ŠĢIII„E€€Planning€Opportunities€with€Stock€OptionsŠ "r  ŠDaniel€H.€Markstein,€IIIŠ į1  ŠĢ3:30€€3:45€p.m.Š _Æ  ŠBreakŠ n  ŠĢ3:45€€5:15€p.m.Š œģ ŠSpecial€Sessions€IVŠ [« ŠĢIV„A€€CASE€STUDY€€Putting€It€All€Together:Š Ł) ŠA€Potpourri€of€Potential€Plans€(Continued)Š ˜č ŠJon€J.€GalloŠ W§ ŠĢIV„B€€CRTs€and€CLTsŠ Õ% ŠByrle€M.€AbbinŠ ”ä ŠJonathan€GopmanŠ S£ ŠĢIV„C€€Non„Charitable€Inter€Vivos€GiftsŠ Ń! ŠJames€W.€NarronŠ ą  ŠĢIV„D€€Sale€of€the€Family€BusinessŠ ^" ŠRichard€B.€RobinsonŠ Ķ# ŠĢIV„E€€Deferred€Payment€SalesŠ K ›% ŠJerome€M.€HeschŠ  !Z& ŠĢFriday,€January€14Š ˆ"Ų( ŠĢ8:00€€9:00€a.m.€Complimentary€Continental€BreakfastŠ $V* ŠĢ9:00€€9:45€a.m.Š „%Ō , ŠComing€Soon€to€Your€State:€Community€PropertyŠ C&“!- ŠM.€Read€MooreŠ 'R". ŠĢ9:45€€10:30€a.m.Š €(Š#0 ŠA€Significant€Challenge:€Estate€Planning€for€IndividualsŠ ?)$1 ŠWorth€$3€Million€or€LessŠ ž)N%2 ŠJonathan€G.€BlattmachrŠ ½* &3 ŠĢ10:30€€10:45€a.m.Š ;,‹'5 ŠBreakŠ ś,J(6 ŠŠ ¹- )7 Š10:45€a.m.€€12:15€p.m.Š ° ŠQuestion€&€Answer€IIŠ oæ ŠAlan€D.€BonapartŠ .~ ŠLouis€A.€MezzulloŠ ķ= ŠSusan€PorterŠ ¬ü ŠEdward€S.€SchlesingerŠ k» ŠĢņ ņGeneral€Informationó óŠ é 9 ŠĢInquiries/Registration:Š g ·  ŠPhilip€E.€Heckerling€Institute€on€Estate€PlanningŠ & v  ŠUniversity€of€Miami€School€of€LawŠ å 5  ŠCenter€for€Continuing€Legal€EducationŠ ¤ ō  ŠP.O.€Box€248087Š c³  ŠCoral€Gables,€FL€33124„0201Š "r  ŠTelephone:€305„284„4762€/€FAX:€305„284„6752Š į1  Š===========================================Š  š  ŠHeadquarters€Hotel€„€Fontainbleau€Hilton,€Miami€Beach,€FLŠ _Æ  ŠTelephone€(305)€538„2000,€FAX€(305)€674„4607.Š n  Š===========================================Š Ż- ŠĢņ ņREPORT€#1ó óŠ [« ŠĢSubject:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#1€Š Ł) ŠDate:€Sun,€9€Jan€2000€15:05:18€„0700Š ˜č ŠFrom:€"Joseph€G.€Hodges€Jr."€Š W§ ŠReply„To:€The€Estate€Planner's€and€Administrator's€ListŠ f Š€To:€ABA„PTL@HOME.EASE.LSOFT.COMŠ Õ% ŠĢThe€following€is€Report€#1€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€events€andŠ S£ Špresentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ b Šis€being€held€January€10„14,€2000€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š Ń! ŠĢFirst,ņ ņ€Institute€Director,€Tina€Portuondoó ó€reports€that€the€Institute€did€not€suffer€any€Y2K€glitches€either,Š OŸ! Šalthough€they€did€schedule€it€a€week€later€than€usual€this€year€just€to€be€safe€given€that€so€€many€of€theŠ ^" Šparticipants€were€going€to€be€flying€into€Miami€to€attend€the€Institute.€€Š Ķ# ŠĢThis€Report€covers€the€ņ ņSoftware€and€some€of€the€other€Vendorsó ó€who€are€exhibiting€at€the€Institute.Š K ›% ŠĢņ ņThe€software€vendor€list€this€year€includes€(in€alpha€order):ó ó€Š É!' ŠAdvanced€Logic€Systems,€Inc.€[DAE€for€W&T€and€Probate]Š ˆ"Ų( ŠBNA€Software/Tax€Management€[ETP,€ITP,€etc.]Š G#—) ŠBrentmark€Software€Inc.€[CFP,€RIA,€etc.]Š $V* ŠCCH€Inc.€[ViewPlan's€Vista,€etc.]Š Å$ + ŠCrescendo€Planned€Gifts€Software€[Pro€and€Lite]Š „%Ō , ŠEidelman€Associates€[DAE€for€W&T]Š C&“!- ŠEvaluation€Services€Inc.[On„line€Valuations]Š 'R". ŠEVP€Systems€Inc.€[On„line€Valuations]Š Į'#/ ŠFinancial€Data€Services€Inc.€[On„line€Valuations]Š €(Š#0 ŠInsMark€Inc.€[EP€Systems]Š ?)$1 ŠThe€Lackner€Group€Inc.€[6„in1€FAS]Š ž)N%2 ŠLawgic€Publishing€Company€[CA€and€FL€W&T€Systems]Š ½* &3 ŠLexite€Development€[ZCalc]Š |+Ģ&4 ŠMatthew€Bender/Lexis€Publishing€[HotDocs,€etc.]Š ;,‹'5 ŠOcaso€SoftwareŠ ś,J(6 ŠPenD'Calc€Corporation€[Retirement,€IRA]Š ¹- )7 ŠProBATE€Software€[FAS,€EP]Š ° ŠProDoc,€Inc.€[EP,€EA,€W&T]Š oæ ŠRIA€Group€[WTP,€EP,€etc.]Š .~ ŠSchumacher€Publishing€[RLTs€and€Web€Sites]Š ķ= ŠSunGard€Trust€Systems€[W&T]Š ¬ü ŠThe€Technology€Group€[Wealth€Transfer€Planning]Š k» ŠU.S.€Trust€Company€of€New€York€[EPlan,€etc.]Š * z ŠWest€Group€[IEP,€DWTA,€etc.]Š é 9 ŠZane€&€Associates€Inc.€[FAS]Š Ø ų ŠĢThe€ņ ņinitial€rumorsó ó€afloat€along€vendor€row€and€elsewhere€included€theŠ & v  Šfollowing:Š å 5  ŠĢ(1)€32bit€and€Windows€95/98€are€really€in€this€year.Š c³  ŠĢ(2)€All€DOS€versions€are€already€dead€or€are€soon€to€die.Š į1  ŠĢ(3)€From€ņ ņIRA€and€The€Technology€Group:ó ó€€Effective€as€of€1/1/00,€The€Technology€Group€reacquired€fullŠ _Æ  Šresponsibility€for€the€further€developing,€supporting€and€sales€of€Jonathan€Blattmachr's€ņ ņWealth€TransferŠ n  ŠPlanning€(WTP)ó ó€software€W&T€DAE€system.€€Update€Disk€2.2A€was€released€in€late€December€of€1999,Š Ż- Šand€you€can€take€a€"sneak€peak"€at€Version€2.3€at€the€Institute.€According€to€their€12/22/99€letter€to€allŠ œģ Štheir€subscribers,€The€Technology€Group€has€"very€ambitious€plans€for€WTP,"€which€include€(a)€improvedŠ [« Šcustomer€and€product€support,€(b)€an€on„line€version€of€their€word€processing€program,€SmartWords,€thatŠ j Šwill€launch€on€1/10/00€[will€they€ever€abandon€SmartWords€and€go€with€Word€and€WordPerfect€likeŠ Ł) Ševeryone€else?],€(c)€continued€support€for€RIA's€On€Point€and€Estate€Planning€Systems€through€the€RIAŠ ˜č ŠGroup,€and€(d)€opening€of€a€new€Web€site€for€support€of€WTP.€€For€further€information,€contactŠ W§ ŠņņŌ’Ōhttp://www.RIAhome.comóóŌ’Ō€or€TTG€c/o€Pres.€Kenneth€Frank€at€klc@tgrp.com€[TTG€hasn't€seen€fit€yet€to€tellŠ f Šus€what€the€URL€is€for€their€new€Web€site].Š Õ% ŠĢ(4)€From€ņ ņFinancial€Data€Service,€Inc.ó ó:€€Your€ņ ņWallace€Pricing€EZ€Link€Online€Systemó ó€"MUST"€beŠ S£ Šupdated€effective€1/1/00€in€order€for€your€online€communications€to€work€properly€[could€this€be€due€to€aŠ b ŠY2K€glitch?€„€they€didn't€say].€€This€can€be€done€by€going€to€their€Web€site€at€ņņŌ’Ōhttp://www.financialdata.comóóŌ’ŌŠ Ń! Šand€downloading€and€installing€the€file€"UPDATED€FDSCD,"€or€by€calling€them€at€(800)€762„5468€andŠ ą  Šasking€VP€Garth€Phillips€to€send€you€a€diskette,€or€e„mailing€them€at€financialdata@financialdata.com.Š OŸ! ŠĢĢ(5)€ņ ņInterActive€Professional€Softwareó ó,€the€makers€of€ņ ņFastDraftó ó€and€the€new€ņ ņBank€One's€One€SourceŠ ŒÜ$ Šfor€Wills€and€Trustsó ó€DAE€system,€reported€on€12/20/99€that€some€of€their€early€Bank€One€CD's€wereŠ K ›% Šexpiring€sooner€than€they€should€be€[they€didn't€say€if€the€problem€date€was€1/1/00].€€To€correct€thisŠ  !Z& Šproblem,€the€have€issued€new€CD's,€but€users€of€this€new€DAE€system€are€cautioned€to€keep€their€old€CDŠ É!' Šjewel€case€because€it€has€the€required€passwords€for€the€individual€state„specific€systems€that€can€beŠ ˆ"Ų( Špurchased€separately€pasted€on€the€back.€€For€further€information,€contact€IAPS€atŠ G#—) ŠņņŌ’Ōhttp://www.fastdraft.comóóŌ’Ō.€€Sadly,€neither€FastDraft€not€the€Bank€One's€One€Source€system€are€beingŠ $V* Šexhibited€at€Heckerling€this€year,€but€attorney€Doug€Duncan€of€Atlanta,€who€first€developed€FastDraftŠ Å$ + Šmany€years€ago,€is€a€speaker€at€the€Institute€this€year€on€MDP€Ethics.Š „%Ō , ŠĢ(6)€ņ ņProBATE€Softwareó ó€reports€(12/99)€that€they€have€issued€a€new€consolidated€User's€Guide€for€all€theirŠ 'R". Šfine€products,€including€their€FAS€suite,€and€a€holder€for€the€program€CD€is€included€too.€€In€addition,€theyŠ Į'#/ Šhave€recently€moved€to€1175€58th€Avenue,€Suite€200,€Greeley,€CO€80634,€(800)€288„9169€[no€Web€site,Š €(Š#0 Šyet].Š ?)$1 ŠĢ(7)€ņ ņEVP€(Estate€Valuations€&€Pricing€Systems,€Incó ó.€reports€(EVP€News€12/99€Vol.€1,€No.€2]€that€theyŠ ½* &3 Šhave€had€an€exclusive€contract€with€the€IRS€for€2€years€now€to€supply€Form€706€valuations€to€all€ten€of€theŠ |+Ģ&4 ŠIRS€Regional€Service€Centers€(their€current€contract€is€for€5€years).€€In€addition,€in€1999€they€created€twoŠ ;,‹'5 Šsend„only€mailing€lists€in€anticipation€of€any€Y2K€problems€[they€had€none€of€which€we€are€aware],€thoseŠ ś,J(6 Šbeing€"alter„list@evpsys.com"€and€"software„list@evpsys.com"€€They€also€are€about€to€releaseŠ ¹- )7 Šņ ņ"CostBasis€2000"ó ó€to€replace€their€now„defunct€DOS€version€of€the€same€program,€and€ņ ņ"EVP€Office,"ó óŠ ° Šwhich€is€a€site€of€historical€securities€pricing€applications.€And€did€you€know€that€their€ņ ņ"EstateVal€2000"ó óŠ oæ Šsoftware€is€currently€the€only€valuation€software€that€can€retrieve€prices€over€the€Internet?€€You€canŠ .~ Šsubscribe€to€either€or€both€of€these€lists€and€obtain€more€information€about€their€software€or€download€theŠ ķ= Šlatest€Version€6.1.0€of€"EstateVal"€by€going€to€their€Web€site€at€ņņŌ’Ōhttp://www.evpsys.comóóŌ’Ō.€€In€addition€[andŠ ¬ü Šthis€is€GREAT€NEWS€for€all€us€estate€administrators],€EVP€reports€in€this€Newsletter€that€there€is€a€newŠ k» Š[we€assume€free]€source€for€obtaining€ņ ņCUSIPsó ó€available€at€the€Johnson€Graduate€School€of€ManagementŠ * z ŠWeb€site€at€Cornell€University€at€URL€ņņŌ’Ōhttp://research.gsm.cornell.edu/research/search.htmlóóŌ’Ō.€€We€haven'tŠ é 9 Šchecked€this€one€out€yet,€but€this€is€very€good€news€if€it€is€true.Š Ø ų ŠĢ(8)€ņ ņCorel€Corporationó ó€had€just€released€the€ņ ņLegal€Editionó ó€of€their€new€ņ ņOffice€Suite€2000ó ó.€€For€moreŠ & v  Šinformation,€visit€ņņŌ’Ōhttp://www.corel.comóóŌ’Ō.€€Š å 5  ŠĢ(9)€The€ņ ņABA€Real€Property,€Probate€and€Trust€Law€Sectionó ó€has€a€newly€redesigned€ņ ņWeb€siteó ó.€€YouŠ c³  Šcan€visit€it€at€ņņŌ’Ōhttp://www.abanet.org/rpptóóŌ’Ō.€While€you€are€there,€you€can€(from€there)€subscribe€to€their€Š "r  Špopular€1,300€subscriber€ņ ņABA„PTL€discussion€listó ó€or€view€and€search€the€List's€Web„based€archive€atŠ į1  ŠņņŌ’Ōhttp://home.ease.lsoft.com/archives/aba„ptl.htmlóóŌ’Ō.Š  š  ŠĢ(10)€From€ņ ņLawgicó ó€of€Novato,€California,€they€have€just€released€a€ņ ņFlorida€Wills€&€Trust€System€ó ó€as€aŠ n  Šcompanion€to€their€popular€ņ ņCalifornia€Wills€&€Trusts€Systemó ó,€which€is€authored€by€Michael€Whalen€andŠ Ż- ŠEdmond€Davis,€California€partners€with€the€law€firm€of€Brobeck,€Philger€&€Harrison,€LLP.€The€FloridaŠ œģ Šsystem€is€authored€by€John€Arthur€Jones,€Edward€Koren,€Richard€Stockton€and€Bruce€Stone,€all€of€whomŠ [« Šare€Florida€partners€with€the€law€firm€of€Holland€and€Knight,€LLP.€€This€is€the€newest€kid€on€the€block€whenŠ j Šit€comes€to€document€assembly€for€wills€and€trusts,€and€this€product€holds€out€a€lot€of€promise€forŠ Ł) Šbecoming€a€leading€product€in€this€area€in€the€not€too€distant€future,€especially€for€practitioners€in€theŠ ˜č Šeastern€United€States€where€Holland€and€Knight€currently€maintains€several€offices.€€This€is€partlyŠ W§ Šbecause€the€end€result€documents€in€their€system€end€up€in€familiar€and€easy„to„use€Word€or€WordPerfectŠ f Šformat€(your€choice),€albeit€currently€only€in€RTF€format€[they€are€working€on€that€one].Š Õ% ŠĢAnd€last,€but€certainly€not€least€(only€because€their€names€starts€with€a€"Z".........Š S£ ŠĢ(11)€From€ņ ņZane€&€Associates:ó ó€€First,€they€will€provide€1€free€full€working€copy€of€their€709€software,€forŠ Ń! Šthis€coming€tax€season,€to€every€firm€that€visits€their€booth€at€the€Heckerling€conference.€This€is€beingŠ ą  Šdone€to€enable€lawyers€and€their€law€firms€to€see€and€use€their€new€32„bit€windows€software€first„hand.Š OŸ! ŠSecond,€they€are€announcing€new€lower€prices€for€their€software€based€on€"Seats."€This€lower€pricingŠ ^" Šscheme€will€allow€small€firms€to€have€access€to€and€use€the€same€software€that€previously€was€limited€toŠ Ķ# Šlarger€firms€and€law€practices.€For€examples:€their€Form€709€software€will€be€reduced€to€$295,€and€theirŠ ŒÜ$ ŠForm€706€and€Form€1041€software€will€be€reduced€to€$495.Š K ›% ŠĢ[ņ ņEd€Noteó 󀄀This€is€similar€to€the€pricing€structure€revolution€that€ņ ņVersusLawó ó€started€over€year€ago€whenŠ É!' Šthey€dropped€their€costly€annual€fee€approach€and€went€to€a€$6.95€per€lawyer€per€month€pricing€schemeŠ ˆ"Ų( Šfor€their€Internet„based€searchable€federal€and€state€caselaw€database.€€Zane€and€Associates€is€to€beŠ G#—) Šcommended€for€trying€to€positively€address€the€overhead€costs€of€solos€and€small€firms,€who€constitute€aŠ $V* Šmajority€of€the€membership€in€the€ABA€and€the€RPPT€Section.]Š Å$ + ŠĢLastly,€in€view€of€the€growing€interest€in€ņ ņDynasty€Trusts€in€Alaska,€Delaware€and€South€Dakotaó ó€(andŠ C&“!- Šnow€in€Illinois€and€Nevada€and€elsewhere),€some€of€the€usual€Banking€representatives€are€there,€includingŠ 'R". Šthe€following:€Š Į'#/ ŠĢAlaska€Trust€Company€„€AK€(pick€up€one€of€their€free€AT€CD's)Š ?)$1 ŠNational€Bank€of€Alaska€„€AKŠ ž)N%2 ŠFirst€PREMIER€Bank€„€SDŠ ½* &3 ŠNorwest€Bank€South€Dakota€N.A.€„€SDŠ |+Ģ&4 ŠUMB€Trust€Company€of€South€Dakota€„€SDŠ ;,‹'5 ŠWilmington€Trust€Company€„€DEŠ ś,J(6 ŠŠ ¹- )7 ŠIf€we€have€left€anyone€out,€or€overlooked€any€news€that€is€fit€to€print,€itŠ ° Šcertainly€was€not€intentional,€and€we€will€try€to€cover€that€in€futureŠ oæ ŠReports€as€time€permits.Š .~ ŠĢĢņ ņREPORT€#2ó óŠ k» ŠĢSubject:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#2€Š é 9 ŠDate:€Tue,€11€Jan€2000€18:43:08€„0700Š Ø ų ŠFrom:€"Joseph€G.€Hodges€Jr."€Š g ·  ŠReply„To:€The€Estate€Planner's€and€Administrator's€ListŠ & v  Š€To:€ABA„PTL@HOME.EASE.LSOFT.COMŠ å 5  ŠĢThe€following€is€Report€#2€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€events€andŠ c³  Špresentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ "r  Šis€being€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š į1  ŠĢThis€Report€covers€the€ņ ņRecent€Developmentsó ó€opening€session€and€other€CLE€sessions€that€were€heldŠ _Æ  Šon€Monday,€January€10th.Š n  ŠĢThis€report€was€filed€by€on„site€reporter,€and€Miami€resident,€Bruce€Stone.€Bruce€is€also€a€member€of€theŠ œģ ŠInstitute's€Advisory€Committee.€€Š [« ŠĢThe€University€of€Miami€Heckerling€Estate€Planning€Institute€convened€on€Monday€afternoon,€JanuaryŠ Ł) Š10th,€at€the€Fontainebleau€Hotel€in€Miami€Beach.€Over€2,600€registrants€enjoyed€80€degree€weather€withŠ ˜č Šsunny€skies€and€an€emerald€green€ocean€„€a€stark€contrast€to€last€year's€inhospitable€weather.€€Š W§ ŠĢContinuing€with€last€year's€success,€the€Institute€got€off€to€a€good€start€Monday€morning€with€aŠ Õ% Šņ ņFundamentals€basic€track€courseó ó€on€the€ņ ņFundamentals€of€Using€Life€Insurance€in€Estate€Planningó ó.€Š ”ä ŠIt€was€presented€by€ņ ņLawrence€Brodyó ó€and€ņ ņDonald€Jansenó ó€and€was€very€well€attended,€but€not€by€thisŠ S£ Šreporter.€€Š b ŠĢņ ņInstitute€Director,€Tina€Portuondo€of€the€University€of€Miamió ó,€officially€convened€the€34th€Institute€inŠ ą  Šthe€afternoon.€€After€introductory€remarks,€she€announced€that€Dick€Covey€has€decided€to€retire€from€hisŠ OŸ! Šcurrent€developments€duties,€which€he€has€delivered€each€year€since€1962€when€the€Institute€wasŠ ^" Šfounded.€€Tina€said€that€Dick€had€graciously€agreed€to€participate€as€part€of€a€recent€events€panelŠ Ķ# Šdiscussion€this€year€to€ease€the€transition.€€She€presented€Dick€with€a€gift€and€thanked€him€for€his€manyŠ ŒÜ$ Šyears€of€service.Š K ›% ŠĢĢņ ņDick€Coveyó ó€then€spoke,€telling€the€audience€how€Phil€Heckerling€had€talked€him€into€being€a€part€of€theŠ ˆ"Ų( Šconference€two€years€before€the€Institute€was€even€founded.€€He€said€that€after€all€these€years,€it€wasŠ G#—) Šsimply€time€to€let€someone€else€carry€on€the€tradition.€€He€said€that€this€year's€presentation€will€be€his€last.€Š $V* ŠHe€made€it€clear€that€although€he€is€retiring€from€the€Institute,€he€is€not€retiring€from€the€practice€of€law.Š Å$ + ŠDick€brought€his€standing€ovation€to€an€end€with€a€loud€and€falsely€gruff€"sit€down!"€€And€with€that,€theŠ „%Ō , Šcurrent€developments€discussion€began.€Š C&“!- ŠĢDick€touched€on€a€variety€of€topics,€including€Revenue€Ruling€2000„2.€€He€stated€that€this€ruling€was€noŠ Į'#/ Šsurprise,€because€the€section€2056€regulations€have€long€equated€a€withdrawal€right€with€the€right€toŠ €(Š#0 Šincome€for€marital€deduction€purposes.Š ?)$1 ŠĢHe€then€touched€on€cases€in€the€5th€and€9th€Circuits€which€he€said€have€now€laid€to€rest€any€question€onŠ ½* &3 Šhow€to€determine€the€amount€that€can€be€deducted€under€section€2053€for€claims€that€are€contingent€onŠ |+Ģ&4 Šthe€date€of€death€„€present€fair€market€value€concepts€are€to€be€used,€without€looking€back€to€see€howŠ ;,‹'5 Šmuch€was€actually€paid€out€after€the€date€of€death.€€He€next€reviewed€the€legislative€history€of€the€GSTŠ ś,J(6 Šeffective€date€rules€governing€general€power€of€appointment€marital€deduction€trusts€that€were€createdŠ ¹- )7 Šbefore€the€effective€date€of€the€GST€tax.€€If€a€spouse€dies€before€the€effective€date,€leaving€a€generalŠ ° Špower€trust,€and€the€surviving€spouse€dies€after€the€effective€date,€is€the€general€power€of€trustŠ oæ Šgrandfathered€from€the€GST€tax?€€Does€it€matter€if€the€surviving€spouse€exercises€or€doesn't€exercise€theŠ .~ Špower€of€appointment?€€These€questions€deliberately€were€not€answered€when€the€original€legislation€wasŠ ķ= Šdrafted.€€Based€on€the€cases€thus€far,€the€critical€factor€seems€to€be€whether€the€trust€property€remains€inŠ ¬ü Štrust€after€the€surviving€spouse's€death€(in€which€event,€caselaw€indicates€the€trust€is€not€grandfathered),Š k» Šor€whether€the€assets€are€distributed€outright€upon€the€surviving€spouse's€death€(in€which€eventŠ * z Šdistributions€to€skip€persons€are€exempt€from€GST€tax€because€of€grandfathering).Š é 9 ŠĢDick€then€reviewed€cases€involving€estate€tax€apportionment,€which€he€described€as€the€most€frequentŠ g ·  Štype€of€litigation€in€all€of€trusts€and€estates.€€He€described€the€8th€Circuit€Patterson€case€as€reaching€aŠ & v  Šresult€favorable€for€the€taxpayer,€but€on€bad€law€analysis.€€He€also€remarked€that€is€review€of€tax€litigationŠ å 5  Šin€general€has€led€him€to€the€conclusion€that€taxpayers€are€generally€more€successful€if€they€do€notŠ ¤ ō  Šproceed€to€Tax€Court,€but€instead€pursue€other€avenues€of€appeal€or€relief,€because€of€shifting€burdens€ofŠ c³  Šproof.Š "r  ŠĢDick€then€noted€that€no€new€rulings€have€been€issued€by€the€Service€on€split€dollar€arrangements€in€overŠ  š  Štwo€months.€€Dick€believes€that€a€significant€policy€change€must€be€in€the€works,€and€that€this€wasŠ _Æ  Šprobably€triggered€by€the€charitable€split€dollar€situation.Š n  ŠĢDick€next€reported€that€a€ruling€request€is€now€pending€on€the€effects€of€an€assignment€by€the€remainderŠ œģ Šbeneficiary€of€the€remainder€interest€in€a€zeroed„out€CLAT€to€a€GST€trust.€€He€said€to€look€for€a€ruling€inŠ [« Š60€to€90€days.€€He€also€reported€that€there€are€two€cases€pending€that€attack€the€validity€of€example€5€inŠ j Šthe€GRAT€regulations,€and€there€may€well€be€an€answer€to€that€issue€in€the€next€year.Š Ł) ŠĢDick€then€said€that€his€analysis€of€the€Hubert€regulations€requires€new€thinking€on€the€question€of€whichŠ W§ Šmarital€formula€is€best:€pecuniary€marital,€pecuniary€credit€shelter,€or€a€fractional€split?€€He€believes€thatŠ f Štaxpayers€are€no€worse€off€under€any€one€of€these€three€than€before€the€Hubert€regulations€were€madeŠ Õ% Šfinal,€but€that€perhaps€pecuniary€marital€formulas€may€have€more€advantage€than€before.€Š ”ä ŠĢHe€next€commented€on€the€estate€separate€share€regulation€project,€noting€that€the€purpose€of€theŠ b Šseparate€share€rule€for€estates€is€one€of€fairness€„€to€prevent€a€beneficiary€from€being€taxed€on€incomeŠ Ń! Šthat€really€can't€be€fairly€attributed€to€his€or€her€share.€€The€proposed€regulations€at€first€drew€muchŠ ą  Šadverse€comment,€because€they€indicated€that€the€practice€of€return€preparers€for€trusts€for€the€last€50Š OŸ! Šyears€has€been€wrong€(if€the€theory€of€the€proposed€regulations€were€to€be€applied€retroactively).€€ToŠ ^" Šdefuse€some€of€this€criticism,€the€Service€has€made€it€clear€that€the€regulations€will€be€appliedŠ Ķ# Šprospectively€only.€€In€essence,€a€separate€share€in€an€estate€will€exist€at€the€earliest€moment€when€it€canŠ ŒÜ$ Šbe€reasonably€determined€by€the€executor€under€known€facts€that€a€separate€economic€interest€in€theŠ K ›% Šestate€exists.Š  !Z& ŠĢDick€concluded€his€presentation€with€his€observations€about€the€overall€state€of€the€transfer€tax€system.€Š ˆ"Ų( ŠHe€said€that€estate€and€gift€tax€agents€are€down€in€numbers€about€30%€from€prior€years.€€With€the€boom€inŠ G#—) Šwealth€in€the€country,€and€the€greatly€increased€number€of€tax€filings,€things€are€getting€sloppy€in€theŠ $V* Šgovernment's€tax€administration€system.€€The€system€is€not€being€administered€with€the€same€high€level€ofŠ Å$ + Šprofessional€quality€as€in€the€past,€both€at€local€levels€and€in€the€national€office.€€Policies€in€the€nationalŠ „%Ō , Šoffice€of€the€Service€have€become€much€more€aggressive,€perhaps€in€response€to€aggressive€behavior€byŠ C&“!- Štaxpayers.€€In€all,€taxpayers€are€faring€better€with€the€disorganization€and€lowered€professionalism,€but€inŠ 'R". Šthe€end,€this€is€not€good€for€the€rule€of€law.Š Į'#/ ŠĢDick€then€bid€the€Institute€and€his€many€friends€farewell.€Š ?)$1 ŠĢņ ņMalcolm€Mooreó ó€then€resumed€the€current€developments€presentation,€observing€that€he€surely€had€theŠ ½* &3 Šhardest€act€of€anyone€ever€in€the€Institute€to€follow.Š |+Ģ&4 ŠĢMal€led€off€with€a€discussion€of€the€adequate€disclosure€regulations,€which€place€new€and€specialŠ ś,J(6 Šemphasis€on€obtaining€appraisals.€€The€later€regulations€are€much€better€than€the€first€proposedŠ ¹- )7 Šregulations€were.€€Mal€also€pointed€out€some€interesting€anomalies€in€running€of€the€statute€of€limitations,Š ° Šdepending€upon€whether€a€transaction€is€reported€as€an€incomplete€gift€versus€a€completed€gift.€Š oæ ŠĢMal€then€referred€to€various€rulings€which€have€allowed€rollover€treatment€even€if€the€spouse€is€not€directlyŠ ķ= Šnamed€as€the€plan€beneficiary.€€He€also€touched€upon€state€prepaid€tuition€plans.€Then€he€discussed€aŠ ¬ü ŠTAM€which€ruled€that€the€prepayment€of€tuition€made€directly€to€a€school€(not€involving€a€state€prepaidŠ k» Štuition€plan)€was€an€exempt€gift€under€section€2503(e).Š * z ŠĢMal€next€discussed€the€gift€of€a€limited€partnership€interest€as€qualifying€for€the€present€interest€exclusion,Š Ø ų Šas€long€as€the€general€partner€owes€normal€fiduciary€duties€to€the€limited€partners.€€He€warned€thatŠ g ·  Šcaution€should€be€exercised€if€restrictions€such€as€first€refusal€rights€are€layered€into€the€partnershipŠ & v  Šplanning.Š å 5  ŠĢHe€then€touched€upon€rulings€that€have€allowed€taxpayers€to€assert€an€income€tax€basis€different€from€theŠ c³  Šreported€706€values,€and€that€have€eased€requirements€on€obtaining€the€state€death€tax€credit€(by€notŠ "r  Šrequiring€actual€proof€of€payment).Š į1  ŠĢMal€then€briefly€noted€that€joint€purchases€still€have€viability€in€residence€purchases€for€QPRTs.Š _Æ  ŠĢMal€next€discussed€developments€that€show€that€marital€savings€clauses€in€documents€really€do€work.Š Ż- ŠĢMal€then€pointed€out€a€disturbing€ruling,€PLR€199903019,€which€incorporates€income€tax€concepts€inŠ [« Šdenying€qualified€disclaimer€treatment,€if€disclaimed€property€passes€to€a€private€foundation€that€isŠ j Šcontrolled€by€related€or€subordinate€parties,€even€though€the€disclaiming€party€does€not€exercise€controlŠ Ł) Šover€the€foundation.Š ˜č ŠĢHe€also€discussed€a€ruling€which€allows€a€way€to€limit€the€gift€tax€consequences€under€section€2519€whenŠ f Šthe€surviving€spouse€assigns€an€interest€in€the€QTIP€trust.€€1999„26019€approved€a€severance€of€a€QTIPŠ Õ% Štrust€into€separate€trusts,€followed€by€assignment€of€an€interest€in€one€of€the€severed€and€separated€trusts.€Š ”ä ŠGift€tax€is€calculated€only€with€reference€to€the€separate€trust€that€is€assigned.Š S£ ŠĢņ ņStacy€Eastlandó ó€was€the€final€Recent€Developments€lecturer€of€the€day.€€Stacy€first€discussed€a€largeŠ Ń! Šnumber€of€cases€(all€in€the€outline)€that€allowed€or€disallowed€valuation€discounts.€He€suggested€that€inŠ ą  Šsituations€where€there€is€a€close€order€of€death€between€two€persons,€the€beneficial€interest€of€the€secondŠ OŸ! Što€die€in€the€estate€of€the€first€to€die€should€be€discounted,€using€lack€of€marketability€concepts.€€The€rightŠ ^" Što€receive€the€inheritance€from€the€first€estate€is€delayed,€it€is€subject€to€claims€that€could€possibly€springŠ Ķ# Šup,€and€there€is€no€ability€to€alienate€or€sell€the€inheritance€generally.€€Stacy€said€that€his€firm€had€beenŠ ŒÜ$ Šsuccessful€in€negotiating€a€30%€discount€in€exactly€such€a€situation€in€audit€proceedings€with€the€Service.Š K ›% ŠĢStacy€also€commented€on€Nevada€law€being€the€most€favorable€of€any€jurisdiction€he€has€seen€in€terms€ofŠ É!' Šlimiting€the€rights€of€nonvoting€shares.€€He€also€discussed€the€Kerr€case,€involving€multiple€partnershipsŠ ˆ"Ų( Šand€life€insurance.Š G#—) ŠĢņ ņNow€For€Some€Additional€News€From€The€Vendors:ó óŠ Å$ + ŠĢ1)€The€ņ ņABA€Real€Property,€Probate€and€Trust€Law€Sectionó ó€has€just€posted€on€their€new€Web€site€theŠ C&“!- Šschedule€for€its€ņ ņSpring€CLE€Symposiumó ó€that€is€going€to€be€held€in€late€ņ ņMarch€in€Miamió ó.€€The€direct€URLŠ 'R". Šfor€this€information€is€ņņŌ’Ōhttp://www.abanet.org/rppt/meetings_cle/spring2000.htmlóóŌ’Ō.Š Į'#/ ŠĢ2)€ņ ņEVP€Estate€Valuations€&€Pricing€Systems,€Inc.ó ó€has€just€announced€the€availability€for€free€of€theirŠ ?)$1 Šnewest€software€release,€ņ ņCostBasis€2000ó ó.€You€can€either€download€it€from€their€Web€site€atŠ ž)N%2 ŠņņŌ’Ōhttp://www.evpsys.com€óóŌ’Ō€or€by€calling€them€at€(818)€313„6300.Š ½* &3 ŠĢ3)€ņ ņTimeValue€Softwareó ó€(not€a€vendor€this€year)€has€just€announced€a€new€area€on€their€Web€site€calledŠ ;,‹'5 Šņ ņņņwww.taxpenalty.comó óóó.€€Using€this€Web€site€you€can€run€a€series€of€alternate€calculations€and€chose€theŠ ś,J(6 Šlowest€penalty€results€for€Form€941€tax€deposit€penalty€cases.€€If€they€save€you€more€than€$500,€they€willŠ ¹- )7 Šcharge€you€$49€for€a€detailed€report€that€is€suitable€to€send€to€the€IRS.€€Otherwise,€if€the€savings€is€$500Š ° Šor€less,€you€will€get€the€report€for€free.Š oæ ŠĢ4)€The€ņ ņIRSó ó€has€just€added€a€new€interactive€feature€to€its€Web€site€entitled€the€ņ ņ"Spousal€Tax€ReliefŠ ķ= ŠEligibility€Explorer."ó ó€€This€new€tool€will€enable€taxpayers€to€learn€if€they€qualify€for€either€innocent€spouseŠ ¬ü Šor€injured€spouse€relief€from€a€joint€tax€liability€with€their€current€or€former€spouse€by€responding€to€aŠ k» Šseries€of€yes/no€questions.€€The€IRS€Web€site€is€located€at€ņņŌ’Ōhttp://www.irs.ustreas.govóóŌ’Ō.Š * z ŠĢ1)€Speaking€of€Banks€representing€states€with€no€RAP,€we€are€told€that€ņ ņCitibank€Trust€South€Dakotaó óŠ Ø ų Šalso€is€exhibiting€at€the€Institute€again€this€year.Š g ·  ŠĢThat's€it€for€Report€#2.Š å 5  ŠĢĢņ ņREPORT€#3ó óŠ "r  ŠĢSubject:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#3€Š  š  ŠDate:€Tue,€11€Jan€2000€18:53:20€„0700Š _Æ  ŠFrom:€"Joseph€G.€Hodges€Jr."€Š n  ŠReply„To:€The€Estate€Planner's€and€Administrator's€ListŠ Ż- Š€To:€ABA„PTL@HOME.EASE.LSOFT.COMŠ œģ ŠĢThe€following€is€Report€#3€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€events€andŠ j Špresentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ Ł) Šis€being€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š ˜č ŠĢThis€Report€covers€ņ ņNatalie€Choate'só ó€Tuesday€morning€session€entitled€ņ ņ"When€IRD€Meets€ERISA:Š f ŠMaking€Retirement€Benefits€Payable€to€Trusts."ó ó€€This€report€was€filed€by€on„site€reporter,€Robert€Wolf.€Š Õ% ŠBob€is€also€a€speaker€at€this€year's€Institute€and€an€acknowledged€expert€on€TRU.€Š ”ä ŠĢņ ņNatalie€Choateó ó€gave€a€brilliantly€clear€and€entertaining€session€on€the€most€difficult€issue€facing€estateŠ b Šplanners€dealing€with€retirement€plan€assets,€and€that€is,€when€is€a€trust€a€qualifying€trust€so€that€theŠ Ń! Šbeneficiaries€of€the€trust€can€be€considered€"designated€beneficiaries"€for€purposes€of€the€pay€out€rules€ofŠ ą  ŠSection€401(a)(9).€She€broke€the€issue€down€into€6€rules,€although€the€IRS€only€explicitly€admits€to€4.€SheŠ OŸ! Šhad€inquired€of€one€Treasury€official€as€to€why€their€4€was€really€6,€and€he€replied€that€"it€depended€uponŠ ^" Šwhat€the€meaning€of€4€was€for,"€or€words€to€that€effect.€These€rules€must€be€met€at€the€time€of€the€RBD,Š Ķ# Šor,€if€later,€at€the€date€the€trust€is€named€as€beneficiary.Š ŒÜ$ ŠĢ1.€Trust€must€be€valid€under€state€law.€No€big€problem€here.€A€testamentary€trust€should€be€O.K.Š  !Z& ŠĢ2.€Beneficiaries€must€be€"identifiable".€This€rule€causes€a€good€deal€more€difficulty„„as€of€the€RBD,€is€itŠ ˆ"Ų( Špossible€to€determine€who€is€the€oldest€person€who€could€ever€be€a€beneficiary€of€the€trust.(the€oldest€oneŠ G#—) Šneeds€to€be€determined,€because€it€is€the€oldest€one€used€for€the€life€expectancy€calculation).€Similar€toŠ $V* Šthe€common€law€Rule€against€Perpetuities,€because€even€the€possibility€of€flunking€the€test€is€enough.Š Å$ + ŠHence€"to€spouse€and€then€to€issue"€is€O.K.,€since€issue€must€be€younger€than€spouse€(query€by€reporter„Š „%Ō , Šadoption?),€but€if€it€is€to€spouse€and€then€to€issue€and€spouses€of€issue"€it€would€flunk,€because€the€childŠ C&“!- Šcould€marry€someone€older€than€the€child's€parent.€Š 'R". ŠĢ3.€Irrevocability.€The€trust€must€be€irrevocable€or€will,€by€its,€terms,€be€irrevocable€upon€the€death€of€theŠ €(Š#0 Šemployee.€This€is€the€"new"€rule„„Prop.€Reg.€Section€5(b)(2).€This€should€mean€that€a€revocable€livingŠ ?)$1 Štrust€or€a€testamentary€trust€should€qualify.Š ž)N%2 ŠĢ4.€Documentation€Requirement.Š |+Ģ&4 Šā āŠ ;,‹'5 Š(Death€before€RBD)€The€new€rule€here€has€been€relaxed,€to€allow€the€documentation€to€be€provided€"toŠ ° Šthe€plan€administrator"€by€the€end€of€the€ninth€month€beginning€after€the€death€of"€the€participant.€Either€aŠ oæ Šcopy€of€the€trust€or€certain€summary€information€about€the€trust€and€theŠ .~ Šā ābeneficiaries.Š ķ= ŠĢ(at€RBD)€to€get€to€use€a€beneficiary's€life€expectancy,€the€participant€must€provide€€a€copy€of€the€trust€toŠ k» Šthe€plan€administrator,€and€agree€that€if€the€document€is€amended€any€time€in€the€future,€to€provide€a€copyŠ * z Šof€the€trust€within€a€reasonable€time€to€the€plan€administrator.Š é 9 ŠĢNote€re€IRA's€„„they€have€no€plan€administrator,€so€the€custodian€is€the€safest€bet.€If€litigating,€theŠ g ·  Šparticipant€arguably€is€plan€administrator,€since€he€is€responsible€for€compliance€(not€the€custodian)€WhatŠ & v  Šabout€people€using€living€trusts€who€are€taking€out€over€single€life€expectancy€whose€RBD€arrivedŠ å 5  Šbetween€87and€97?€Could€they€convert€to€a€slower€payout€by€complying€now€by€following€the€rules€NOW?Š ¤ ō  ŠGood€question€„„no€answer€yet.Š c³  ŠĢ5.€All€beneficiaries€must€be€individuals.€A€charity€is€not€an€individual.€An€estate€is€not€an€individual,Š į1  Šaccording€to€the€IRS€in€this€context€(although€it€seems€to€be€for€the€purpose€of€spousal€rollovers).€If€yourŠ  š  Štrust€allows€payment€of€taxes€and€expenses€of€the€estate€from€the€trust,€arguably€the€estate€is€aŠ _Æ  Šbeneficiary„„hence€you€flunk€the€test.€Natalie€thinks€this€is€wrong,€because€of€the€treatment€of€estates€asŠ n  Š"look„through"€entities€for€spousal€rollover€purposes.€Why€not€this€too!€This€is€a€real€trap„so€put€languageŠ Ż- Šthat€prohibits€such€payment€from€these€assets€in€your€trusts.€If€you're€in€trouble€on€this,€you€may€want€toŠ œģ Šlook€for€some€protective€statute€in€your€state€which€holds€IRA's€and€qualified€plans€harmless€fromŠ [« Šcreditors.€For€arguments€on€this€see€the€September€issue€of€Trusts€and€Estates€Magazine.Š j ŠĢ6.€No€changing€beneficiaries€after€Participant's€death.€This€could€cause€problems€for€all€powers€ofŠ ˜č Šappointment,€but€several€private€letter€rulings€indicate€that€the€power€itself€should€be€O.K.,€so€long€as€theŠ W§ Šparticipants€themselves€would€qualify.€So,€as€long€as€no€possible€appointee€would€disqualify€the€trust,€youŠ f Šshould€be€O.K.Š Õ% ŠĢWho€are€beneficiaries„„note€that€you€can€disregard€contingent€beneficiaries,€if€they€will€not€take€if€theŠ S£ Špreceding€beneficiaries€live€to€their€life€expectancies.€So,€if€you€have€a€charitable€beneficiary€if€a€child€diesŠ b Šbefore€a€trust€terminates€at€35,€that€is€O.K.,€because€if€the€child€lives€to€their€actuarial€life€expectancy,€theŠ Ń! Šcharity€won't€take.€€Dynasty€Trusts„Natalie€thinks€these€will€flunk€simply€because€the€benefits€will€neverŠ ą  Šreally€all€go€to€beneficiaries€who€are€individuals.€€For€more€on€this,€and€also,€on€the€new€guidance€on€TIPŠ OŸ! ŠTrust€qualification€see€Natalie's€website€at€http//www.ataxplan.com.€Š ^" ŠĢThat's€it€for€Report€#3.Š ŒÜ$ ŠĢĢņ ņREPORT€#4ó óŠ É!' ŠĢSubject:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#4€Š G#—) ŠDate:€Wed,€12€Jan€2000€17:07:03€„0700Š $V* ŠFrom:€"Joseph€G.€Hodges€Jr."€Š Å$ + ŠReply„To:€The€Estate€Planner's€and€Administrator's€ListŠ „%Ō , Š€To:€ABA„PTL@HOME.EASE.LSOFT.COMŠ C&“!- ŠĢThe€following€is€Report€#4€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€events€andŠ Į'#/ Špresentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ €(Š#0 Šis€being€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š ?)$1 ŠĢThis€Report€covers€ņ ņall€the€Tuesday€sessionsó ó.€€More€in€depth€reports€on€the€sessions€that€were€done€byŠ ½* &3 ŠMessrs.€Choate,€Jansen€and€McCue€can€be€found€in€Reports€3€and€5.Š |+Ģ&4 ŠĢThis€report€was€filed€by€on„site€reporter,€and€Miami€resident,€Bruce€Stone.€Bruce€is€also€a€member€of€theŠ ś,J(6 ŠInstitute's€Advisory€Committee.€€Š ¹- )7 ЇThe€second€day€of€the€Heckerling€Institute€opened€with€a€ņ ņQuestion€and€Answer€sessionó ó.€€The€questionsŠ ° Šwere€fielded€by€ņ ņDick€Covey,€Mal€Moore,€Stacy€Eastland,€and€Dave€Cornfeld.Š oæ ŠĢó óThe€panel€opened€with€a€discussion€of€the€overall€state€of€the€transfer€tax€system.€€Mal€Moore€thinks€thatŠ ķ= Šrepeal€of€the€estate€and€gift€tax€is€unlikely,€but€he€said€that€the€question€is€how€do€we€advise€clients€in€theŠ ¬ü Šcurrent€situation?€€Perhaps€we€counsel€clients€not€to€make€large€taxable€gifts.€€€How€should€we€change€theŠ k» Šdrafting€of€our€documents?€€Stacy€added€that€estate€freezing€techniques€and€discounting€strategies€are€inŠ * z Šfavor€in€the€current€environment.€€The€panel€generally€thought€that€the€revenues€that€will€be€raised€by€theŠ é 9 Šestate€tax€in€the€coming€years€are€so€large€that€if€the€system€is€repealed,€it€will€have€to€be€replaced€withŠ Ø ų Šsomething€that€will€generate€a€large€amount€of€revenue€in€its€place.€Š g ·  ŠĢDick€addressed€a€question€that€asked€if€a€surviving€spouse's€elective€share€really€would€attract€DNI€if€itŠ å 5  Šdoes€not€receive€interest€or€any€share€of€post„mortem€income€under€state€law.€€He€said€that€the€answer€isŠ ¤ ō  Šclearly€yes,€it€will€attract€DNI.€€Elective€share€amounts€are€not€described€in€section€663(a)(1),€andŠ c³  Štherefore€they€will€attract€DNI€even€under€the€separate€share€rules.Š "r  ŠĢMal€answered€a€question€that€asked€if€a€simple€statement€that€a€sale€to€an€intentionally€defective€trust€isŠ  š  Šnot€a€gift€because€it€is€for€adequate€and€full€consideration€will€be€sufficient€under€the€gift€tax€disclosureŠ _Æ  Šregulations.€€Mal€thought€that€such€a€statement€should€suffice.€Furthermore,€if€a€gift€tax€return€is€filed€evenŠ n  Šthough€not€required,€it€should€commence€the€statute€of€limitations.Š Ż- ŠĢIn€addressing€another€question,€Stacy€stated€that€he€is€now€worried€much€less€about€section€2704(b)Š [« Šissues€in€family€limited€partnership€transactions€than€he€was€several€years€ago.€€He€does€utilize€gifts€ofŠ j Šlimited€partnership€interests€to€public€charities€fairly€frequently€in€his€planning.€€Giving€the€charity€a€Class€AŠ Ł) Špreferred€limited€partner€interest€(with€a€coupon€interest€rate)€allows€clients€to€pass€money€to€charitiesŠ ˜č Šwithout€regard€to€the€percentage€limits€on€charitable€donations,€AMT€concerns,€etc.€€Dave€said€that€aŠ W§ Šspouse€can€hold€a€$5,000€Crummey€withdrawal€right€without€estate€tax€problems€as€long€as€the€spouseŠ f Šdoesn't€make€a€contribution€to€the€trust.€€The€period€to€disclaim€a€5€and€5€withdrawal€right€wouldŠ Õ% Šcommence€each€time€that€a€contribution€was€made€to€the€trust€subject€to€the€withdrawal€right,€but€he€doesŠ ”ä Šnot€recommend€disclaiming€such€a€right€because€of€a€risk€that€the€disclaimer€might€be€regarded€as€aŠ S£ Šrelease€of€the€right.€It€is€better€simply€to€allow€each€withdrawal€right€to€lapse,€if€it€is€not€to€be€exercised.Š b ŠĢMal€said€that€an€intentionally€defective€trust€should€not€have€Crummey€withdrawal€powers.€€It€will€becomeŠ ą  Ša€grantor€trust€over€time€with€respect€to€the€Crummey€beneficiaries.€€If€the€transaction€is€properly€planned,Š OŸ! Šno€gifts€should€be€involved€with€transfers€to€the€trust€(other€than€any€initial€seed€gift€of€capital).Š ^" ŠĢStacy€recommends€the€use€of€disclaimers€of€pecuniary€amounts€over€$X€where€an€estate€has€hard€toŠ ŒÜ$ Švalue€assets,€and€for€the€will€to€provide€for€those€disclaimed€interests€to€pass€to€charity.€€He€described€thisŠ K ›% Šas€a€poison€pill€that€works.€€The€downside€is€that€you€may€have€to€negotiate€with€the€charity€or€with€theŠ  !Z& Šstate€attorney€general€over€the€value€of€the€estate€assets.€Š É!' ŠĢStacy€recommends€a€weighted€appraisal€approach€which€assigns€a€defined€percentage€of€emphasis€onŠ G#—) Šasset€valuations,€and€the€balance€of€the€percentage€emphasis€on€going€concern€factors,€and€thenŠ $V* Šapplying€minority€discounts,€etc.€€This€gives€guidance€in€how€much€discount€to€allow€for€built„in€capitalŠ Å$ + Šgains.Š „%Ō , ŠĢDave€said€that€a€gift€to€a€corporation€qualifies€for€the€annual€exclusion,€as€a€gift€to€the€shareholders,€as€doŠ 'R". Šgifts€by€analogy€to€LLCs€and€limited€partnerships€„€subject€to€the€facts€and€circumstances€of€eachŠ Į'#/ Šsituation,€of€course.Š €(Š#0 ŠĢMal€stated€that€a€surviving€spouse's€disclaimer€of€an€asset€that€would€not€receive€a€basis€step€adjustmentŠ ž)N%2 Šbecause€of€section€1014(e)€will€result€in€the€basis€adjustment€being€allowed€if€the€asset€passes€toŠ ½* &3 Šsomeone€other€than€the€spouse€(such€as€to€a€trust€in€which€the€spouse€has€a€beneficial€interest).Š |+Ģ&4 Šā āŠ ;,‹'5 ŠMal€said€that€if€the€beneficiary€of€a€QPRT€wants€to€buy€a€more€expensive€house€than€is€held€in€the€QPRT,Š ° Šthe€beneficiary€can€either€contribute€the€additional€cash€needed€(which€must€be€spent€within€3€months),€orŠ oæ Šdo€a€joint€purchase€with€the€QPRT€on€a€fractional€interest€basis.Š .~ Šā āĢStacy€said€that€the€most€common€drafting€error€in€family€limited€partnerships€that€he€encounters€is€givingŠ ¬ü Šthe€general€partner€too€much€wide€open€discretion€that€overrides€the€fiduciary€duties€that€the€generalŠ k» Špartner€otherwise€would€owe€to€the€limited€partners.Š * z ŠĢDave€stated€that€no€taxable€gift€will€be€caused€if€the€donor/custodian€of€an€UGMA€account€simply€resignsŠ Ø ų Šas€custodian€of€the€account€to€avoid€estate€tax€inclusion€under€section€2038.€€However,€if€the€custodianŠ g ·  Šdies€within€3€years€after€the€resignation,€inclusion€will€still€result€because€of€sections€2035(d)(2)€and€2038.Š & v  ŠĢDick€repeated€his€comments€from€yesterday€about€the€gradual€increase€in€the€lack€of€professionalism€ofŠ ¤ ō  Šthe€Service€in€the€past€few€years.€€As€an€example,€he€referred€to€TAM€199935003,€involving€theŠ c³  Šconsequences€of€a€commutation€clause€in€a€common€law€GRIT,€as€an€example€of€egregious€abuse€by€theŠ "r  ŠService€of€its€authority.Š į1  ŠĢFollowing€the€opening€Q&A€session,€ņ ņNatalie€Choateó ó€then€spoke€on€ņ ņtrusts€as€beneficiaries€of€qualifiedŠ _Æ  Šplansó ó.Š n  ŠĢShe€recommended€putting€on€your€estate€administration€checklist€to€give€a€copy€of€the€client's€trust€to€theŠ œģ Šplan€administrator€within€the€9€month€deadline,€if€the€client€dies€before€the€required€beginning€date€(RBD).Š [« Š(Note:€the€9€month€deadline€is€not€the€same€date€as€the€706€due€date.)€€If€the€client€dies€after€reaching€theŠ j ŠRBD,€Natalie€recommends€sending€a€copy€of€the€trust€to€the€administrator,€along€with€a€statement€that€theŠ Ł) Šclient€will€notify€the€administrator€of€any€later€amendments€to€the€trust.€A€copy€of€the€trust€should€be€sentŠ ˜č Što€IRA€administrators,€even€if€they€don't€want€it.€Š W§ ŠĢTo€avoid€the€IRS€rule€that€an€estate€does€not€qualify€as€a€designated€beneficiary,€the€trust€should€containŠ Õ% Šlanguage€prohibiting€payments€back€to€the€estate€to€pay€taxes,€administration€expenses,€claims,€andŠ ”ä Šunfunded€bequests.Š S£ ŠĢNatalie€brought€down€the€house€when€she€picked€up€a€copy€of€her€book€to€answer€a€point€aboutŠ Ń! Š"designated€beneficiaries"€„€she€turned€to€a€page€and€began€to€read€the€words€"...€she€moaned€softly€asŠ ą  Šhe€...."€Natalie€then€said€"oops,€that's€in€the€new€edition!"€€She€referred€the€audience€to€her€website€toŠ OŸ! Šreceive€an€updated€copy€of€her€outline€that€will€analyze€Revenue€Ruling€2000„2.€€Her€website€isŠ ^" Šwww.ataxplan.com.€Š Ķ# ŠĢFollowing€Natalie,€Don€Jansen€then€spoke€on€current€developments€on€the€use€of€life€insurance€in€estateŠ K ›% Šplanning,€and€generally€on€family€or€private€split€dollar€(PSD).Š  !Z& ŠĢDon€reviewed€a€number€of€rulings€dealing€with€exceptions€to€the€transfer€for€value€rules,€tax„freeŠ ˆ"Ų( Šexchanges€of€policies,€and€modified€endowment€contract€issues.€€He€then€turned€to€an€analysis€of€PSDŠ G#—) Šrulings,€noting€that€no€rulings€have€been€issued€since€1998€in€any€split€dollar€arrangement€(not€just€PSD).€Š $V* ŠBefore€then,€there€were€only€two€private€letter€rulings€on€PSD€arrangements.Š Å$ + ŠĢĢIf€the€noninsured€spouse€is€a€party€to€a€PSD€arrangement,€care€must€be€taken€to€address€what€happens€ifŠ 'R". Šthe€noninsured€spouse€dies€before€the€insured€spouse.€€The€noninsured€spouse's€interest€in€theŠ Į'#/ Šarrangement€should€not€pass€to€the€insured€spouse€or€to€any€trust€in€which€the€insured€spouse€is€aŠ €(Š#0 Šbeneficiary€or€trustee.Š ?)$1 ŠĢIf€the€insured€is€a€party€to€a€PSD€arrangement,€there€should€be€no€right€to€borrow,€and€there€should€onlyŠ ½* &3 Šbe€a€barebones€collateral€assignment€(a€security€interest€in€the€contract),€without€any€right€to€surrender,Š |+Ģ&4 Šborrow,€assign,€change€beneficiaries,€etc.Š ;,‹'5 Šā āŠ ś,J(6 ŠOverall,€due€to€the€lack€of€much€guidance,€and€due€to€the€apparent€attention€being€given€by€the€Service,Š ° Šā ācaution€should€be€exercised€in€the€use€of€PSD€arrangements,€especially€if€the€insured€is€a€party.Š oæ ŠĢFollowing€the€lunch€break,€ņ ņGeorgianna€Sladeó ó€spoke€on€ņ ņinter€vivos€planning€with€generation€skippingŠ ķ= Štrustsó ó.Š ¬ü ŠĢClients€should€make€GST€trust€grantor€trusts€for€income€tax€purposes€wherever€feasible,€and€should€fundŠ * z Šthe€trusts€with€cash€(full€basis,€with€no€possibility€for€valuation€disputes€and€arguments€over€GST€inclusionŠ é 9 Šratios).€€To€the€extent€possible,€the€trust€should€be€made€a€party€to€valuation€shifting€opportunities,€suchŠ Ø ų Šas€allowing€the€trust€to€take€advantage€of€business€opportunities,€or€by€making€loans€on€arms€length€termsŠ g ·  Što€allow€the€trust€to€make€investments€that€might€not€otherwise€be€possible€(such€as€hedge€funds).Š & v  ŠĢWhen€charitable€lead€trusts€are€used,€attention€must€be€paid€to€the€private€foundation€rules€if€closely€heldŠ ¤ ō  Šstock€is€used.€€Usually€the€excess€business€holding€and€jeopardy€investment€prohibited€transaction€rulesŠ c³  Šwill€be€involved,€because€ordinarily€the€charitable€deduction€will€exceed€60%.€€Georgianna€discussed€aŠ "r  Štechnique€that€might€possibly€minimize€GST€tax€ultimately€payable,€by€planning€with€the€generationŠ į1  Šassignment€rules.€€A€trust€can€be€drafted€for€the€benefit€of€great€grandchildren€(making€no€provisions€forŠ  š  Šchildren€or€grandchildren),€with€a€power€in€the€trustee€to€add€other€descendants€as€beneficiaries.€Š _Æ  ŠFollowing€the€initial€transfer,€the€transferor's€generation€assignment€should€drop€to€the€level€immediatelyŠ n  Šabove€the€great€grandchildren's€level.€€If€the€trustee€later€adds€children€or€grandchildren€as€beneficiaries,Š Ż- Šdistributions€to€the€grandchildren€should€not€be€subject€to€GST€tax.€This€could€be€coupled€with€a€power€toŠ œģ Šdivide€the€trust,€and€then€add€children€or€grandchildren€as€beneficiaries€only€for€a€separate€trust€after€theŠ [« Šdivision.Š j ŠĢFollowing€Georgianna,€ņ ņHoward€(Scott)€McCueó ó€spoke€on€ņ ņplanning€and€drafting€to€influence€theŠ ˜č Šbehavior€of€beneficiariesó ó.Š W§ ŠĢHe€cited€the€trend€of€ultra„wealthy€individuals€such€as€Bill€Gates€and€Warren€Buffet€not€to€leave€theirŠ Õ% Šdescendants€enormous€sums€of€money,€coupled€with€a€trend€to€create€incentive€trusts€for€clients€who€doŠ ”ä Šwant€to€leave€their€wealth€in€trust€for€their€descendants.Š S£ ŠĢClients€mostly€want€to€encourage€beneficiaries€to€receive€an€education,€to€work€hard,€to€enter€socialŠ Ń! Šservice€fields€(such€as€teaching,€although€this€is€nowhere€nearly€as€common€as€it€was€years€ago),€toŠ ą  Šprovide€stewardship€of€the€family€wealth€for€succeeding€generations,€and€to€engage€in€philanthropy.€Š OŸ! ŠThese€purposes€are€encouraged€almost€exclusively€through€the€use€of€trusts,€including€incentive€trusts.€Š ^" ŠHowever,€incentive€trusts€have€significant€disadvantages€„€they€lack€flexibility,€they€cannot€adapt€easilyŠ Ķ# Šover€time€to€changing€value€systems,€and€they€present€problems€of€enforcement.€€Scott€cited€one€exampleŠ ŒÜ$ Šof€a€beneficiary€who€was€required€to€undergo€drug€testing€every€month,€which€alienated€her€from€herŠ K ›% Šfamily€members€and€made€her€forego€her€interest€in€the€trust.Š  !Z& ŠĢScott€also€analyzed€how€entity€structures€that€are€now€commonly€used€in€estate€planning€(such€as€limitedŠ ˆ"Ų( Špartnerships)€may€strip€control€away€from€individual€family€members,€with€planned€or€unplannedŠ G#—) Šconsequences€on€behavior,€and€which€may€provide€wanted€or€unwanted€insulation€for€managers€of€theŠ $V* Šfamily€wealth.Š Å$ + ŠĢFollowing€Scott,€ņ ņMaria€Nunezó ó€gave€an€overview€of€the€ņ ņforeign€trust€rulesó ó€since€enactment€of€the€1996Š C&“!- Šand€1997€tax€legislation.Š 'R". ŠĢMaria€cautioned€practitioners€on€the€importance€of€understanding€what€is€and€what€is€not€a€foreign€trustŠ €(Š#0 Šunder€the€new€rules,€and€warned€that€common€sense€is€often€deceptive€and€wrong€in€this€area.€€GenerallyŠ ?)$1 Šspeaking,€a€trust€beneficiary€is€any€person€who€could€possibly€benefit€from€the€trust,€including€personsŠ ž)N%2 Šwho€could€benefit€if€the€trust€were€amended.€€In€most€trusts€this€cause€a€virtually€unlimited€class€ofŠ ½* &3 Šbeneficiaries,€both€domestic€and€foreign.€€It€is€easy€for€a€trust€to€be€foreign€and€not€know€it,€if€you€do€notŠ |+Ģ&4 Šhave€a€familiarity€with€the€new€rules.Š ;,‹'5 Šā āŠ ś,J(6 ŠThe€closing€speaker€for€Tuesday€was€ņ ņBruce€Rossó ó,€whoi€spoke€on€some€trends€in€the€rules€governingŠ ° Šā āņ ņprofessional€conduct€in€trusts€and€estates€practiceó ó.€€Š oæ ŠĢOnly€six€states€now€clearly€require€privity€as€a€condition€precedent€to€brining€a€claim€for€legal€malpracticeŠ ķ= Šin€estate€planning:€Ohio,€Maryland,€Nebraska,€New€York,€Texas,€and€Virginia.€€The€issue€is€in€a€case€thatŠ ¬ü Šwill€be€decided€by€the€Hawaii€Supreme€Court.Š k» ŠĢLiability€to€beneficiaries€for€attorneys€who€represent€fiduciaries€is€a€hot€area€now.€Generally,€privity€isŠ é 9 Šrequired€to€sue€an€attorney€representing€a€fiduciary€for€negligence.€€However,€if€more€than€negligence€isŠ Ø ų Šallegedly€involved,€such€as€aiding€and€abetting,€privity€requirements€are€being€relaxed.€€This€is€certainlyŠ g ·  Štrue€in€the€Restatement€of€Law€Governing€Lawyers.€€The€Ethics€2000€project€also€may€make€significantŠ & v  Šchanges€in€the€rules€governing€confidentiality€of€communications€between€lawyers€and€fiduciary€clients.Š å 5  ŠBruce€advised€that€ņ ņACTECó ó€has€completed€a€multi„year€project€on€publishing€ņ ņengagement€letters€inŠ ¤ ō  Šestate€planning€and€administration€mattersó ó.€€Those€letters€and€the€ņ ņthird€edition€of€the€ACTECŠ c³  Šcommentaries€on€the€rules€of€professional€conductó ó€can€be€purchased€from€ACTEC€by€anyone€at€aŠ "r  Šnominal€cost.€€[ņ ņEditor's€Note:ó ó€In€addition,€they€will€soon€be€available€in€full€text€on€the€public€side€of€theŠ į1  ŠACTEC€Web€site€at€ņņŌ’Ōhttp://www.actec.orgóóŌ’Ō€under€RESOURCES]Š  š  ŠĢThat's€it€for€Report€#4.Š n  ŠĢĢņ ņREPORT€#4Aó óŠ [« ŠĢSubject:€Miami€Heckerling€Institute€2000€„€Report€#4AŠ Ł) ŠDate:€Thu,€13€Jan€2000€15:59:27€„0700Š ˜č ŠFrom:€"Joseph€G.€Hodges€Jr."€Š W§ ŠReply„To:€Tax€law€discussion€Š f ŠTo:€ABA„TAX@ABANET.ORGŠ Õ% ŠĢThe€following€is€Report€#4A€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€eventsŠ S£ Šand€presentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€PlanningŠ b Šthat€is€being€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š Ń! ŠĢThis€Report€has€been€ņ ņnumbered€4A€becauseó ó€it€is€ņ ņa€clarifying€post€about€some€remarks€that€wereŠ OŸ! Šattributed€to€Mal€Moore€by€our€on„site€reporteró ó,€Bruce€Stone,€as€having€been€made€by€Mal€during€theŠ ^" ŠTuesday€morning€Q&A€session€that€Mal€and€Messrs€Covey,€Cornfeld€and€Eastland€presented.€€First,€hereŠ Ķ# Šfrom€Report€#4€[NOT€Report€#6]€(which€Report€was€all€about€the€software€vendors)€is€the€remark€inŠ ŒÜ$ Šquestion€that€Mal€supposedly€made€as€the€same€was€reported€to€us€by€Bruce:Š K ›% ŠĢ"Mal€said€that€an€intentionally€defective€trust€should€not€have€Crummey€withdrawal€powers.€€It€will€becomeŠ É!' Ša€grantor€trust€over€time€with€respect€to€the€Crummey€beneficiaries.€€If€the€transaction€is€properly€planned,Š ˆ"Ų( Šno€gifts€should€be€involved€with€transfers€to€the€trust€(other€than€any€initial€seed€gift€of€capital)."Š G#—) ŠĢIn€response€to€this,€the€following€messages€have€been€posted€on€the€ABA„PTL€list€and€are€beingŠ Å$ + Šrepublished€here€so€all€the€subscribers€to€all€of€the€lists€to€which€these€reports€are€being€sent€can€readŠ „%Ō , Šthem€and€reach€their€own€conclusions.€€In€addition,€should€Mal€wish€to€have€us€post€a€clarification€of€hisŠ C&“!- Šremarks€in€this€regard,€if€one€is€needed,€we€would€be€glad€to€do€so,€and€perhaps€one€of€our€on„siteŠ 'R". Šreporters€could€raise€this€issue€with€him€if€he€is€still€there€in€Miami.Š Į'#/ ŠĢ<>Š ?)$1 ŠDate:€€€€€€€€€Wed,€12€Jan€2000€21:18:14€ESTŠ ž)N%2 ŠFrom:€"Dennis€P.€Williams"€Š ½* &3 ŠSubject:€€€€€€Re:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€[sic€#4]Š |+Ģ&4 ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ ;,‹'5 ŠĢMal€suggested€thatŠ ¹- )7 Ї"Do€not€use€Crummey€withdraw€power€for€Trust€that€are€to€be€"Defective"€and€to€which€the€Grantor€will€sellŠ ° Šassets,€because€over€time€the€Powerholders€will€be€the€beneficiaries€of€the€Trust."€Š oæ ŠĢCorrect€me€if€I€am€wrong,€if€the€Grantor€trust€rule€under€Code€Section€671„677€are€"violated"€the€Trust€isŠ ķ= Š"defective"€with€respect€to€the€Grantor.€If€concurrently,€a€Beneficiary€is€a€"substantial€owner"€of€the€TrustŠ ¬ü Šunder€Code€Section€678,€because€of€the€lapsed€withdraw€power,€the€Code€Section€671„677€power€willŠ k» Šsupersede€the€Code€Section€678€provisions,€and€the€Grantor,€and€not€the€Powerholders,€will€be€treated€asŠ * z Šif€he/she€owned€the€Trust€property.Š é 9 ŠĢAfter€the€Grantor€death€(or€should€the€Code€Section€671„677€provisions€removed,€then€the€PowerholdersŠ g ·  Šwill€"spring"€into€being€the€"Substantial€Owner,€under€Code€Section€678.Š & v  ŠDoes€anyone€share€Mal's€concerns€about€having€Crummey€Powers€in€a€Trust€that€is€to€be€used€y€theŠ å 5  ŠGrantor€for€his/her€Sale€of€a€Defective€Grantor€Trust?€€This€is€important€to€me,€becuase€I€have€a€CrummeyŠ ¤ ō  ŠTrust€that€I€am€about€to€have€the€Grantor€sell€some€Class€B€Non„voitng€stock€(S„corportion)€Stock,€and€IŠ c³  Šneed€it€to€be€100%€defective,€with€respect€to€the€Grantor€(and€not€with€respct€to€the€Powerholders).Š "r  ŠĢAny€comments€will€be€appreciated.Š  š  ŠĢPlease€feel€to€e„mail€me€at€work€at€"dwilliams@webersterlinglaw.com"€Š n  ŠĢDennis€P.€WilliamsŠ œģ ŠWeber€&€Sterling,€LLCŠ [« Š419„893„7207Š j ŠFax€419„893„7146Š Ł) Š___________________________Š ˜č ŠĢ<>Š f ŠDate:€€€€€€€€€Thu,€13€Jan€2000€10:06:05€„0500Š Õ% ŠFrom:€"Š ”ä ŠSubject:€€€€€€Re:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€[sic€#4]Š S£ ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ b ŠĢIf€Mal€is€correct,€wouldn't€this€produce€a€*good*€result?€€During€the€grantor's€lifetime,€the€grantor€pays€theŠ ą  Šincome€tax,€even€though€the€trust€is€not€included€in€the€grantor's€estate.€€After€the€grantor's€death,€theŠ OŸ! Šbeneficiary€pays€the€income€tax,€even€though€the€trust€may€not€be€included€in€the€beneficiary's€estate.Š ^" ŠĢBruce€SteinerŠ ŒÜ$ Š_______________________Š K ›% ŠĢ<>Š É!' ŠDate:€€€€€€€€€Thu,€13€Jan€2000€12:36:30€„0500Š ˆ"Ų( ŠFrom:€Doug€Delaney€Š G#—) ŠSubject:€€€€€€Re:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€[sic€#4]Š $V* ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ Å$ + ŠĢAlso,€assuming€the€grantor€has€a€larger€marginal€income€tax€bracket€than€the€beneficiary,€isn't€the€auditŠ C&“!- Šrisk€lower€as€we€may€have€a€sizable€income€tax€refund€due?Š 'R". Š_________________________Š Į'#/ ŠĢ<>Š ?)$1 ŠDate:€€€€€€€€€Thu,€13€Jan€2000€07:57:19€„0800Š ž)N%2 ŠFrom:€Steve€Oshins€Š ½* &3 ŠSubject:€€€€€€Re:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€[sic€#4]Š |+Ģ&4 ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ ;,‹'5 ŠĢBruce„Š ¹- )7 ЇI€think€Mal's€comment€was€to€NOT€use€Crummey€powers.€€I€will€not€make€any€comments€on€that.€€ButŠ ° Šthere€is€at€least€one€PLR€out€there€on€that€(that€David€Handler€brought€to€my€attention€a€couple€of€yearsŠ oæ Šago€when€he€and€I€were€discussing€it).Š .~ ŠĢHowever,€with€respect€to€the€trust€being€grantor€defective€during€life€and€then€beneficiary€defective€afterŠ ¬ü Šdeath,€see€the€1990€PLR€on€this€which€was€later€changed€by€a€1993€PLR.€€According€to€the€1993€PLR,€itŠ k» Šdoesn't€work.€The€cites€to€the€PLRs€are€in€the€1998€T&E€article€my€father€and€I€co„authored€calledŠ * z Š"Protecting€&€Preserving€Wealth€into€the€Next€Millenium"€which€I€think€you€all€know€how€to€find€on€theŠ é 9 ŠPublished€Articles€page€at€ņņŌ’Ōhttp://www.oshins.comóóŌ’Ō.€€Sorry,€I'm€too€lazy€this€morning€to€look€for€the€actualŠ Ø ų Šcites.Š g ·  ŠSteve€Oshins,€Esq.Š & v  ŠOshins€&€AssociatesŠ å 5  ŠLas€Vegas,€NVŠ ¤ ō  Š702„341„6000,€ext.#2Š c³  ŠFAX:€702„341„6001Š "r  Šsteveo@wizard.comŠ į1  ŠĢņņŌ’Ōhttp://www.oshins.comŠ _Æ  ŠóóŌ’Ō_____________________________Š n  ŠĢ<>Š œģ ŠDate:€€€€€€€€€Thu,€13€Jan€2000€11:24:19€„0500Š [« ŠFrom:€Wes€Yang€Š j ŠSubject:€€€€€€Re:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€[sic€#4]Š Ł) ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ ˜č ŠĢSteve,Š f ŠĢIf€one€limited€the€withdrawal€rights€to€a€5€&€5€standard,€would€this€avoid€the€problem€of€beneficiaries€beingŠ ”ä Štreated€as€the€transferors?€€My€understanding€(perhaps€erroneous)€is€that€it€is€the€lapse€of€the€withdrawalŠ S£ Špower€above€the€5€&€5€amount€that€is€treated€as€being€transferred€by€the€beneficiary.€€While€this€obviouslyŠ b Šis€more€limiting€than€a€full€annual€exclusion€Crummey€withdrawal€amount,€it€would€at€least€provide€use€ofŠ Ń! Šsome€portion€of€the€annual€exclusion€on€gifts€to€the€defective€trust.€€I€understand€(or€at€least€I€think€I€do)Š ą  Šthat€the€exclusion€is€not€available€with€respect€to€the€GST,€and€therefore€GST€exemption€must€beŠ OŸ! Šallocated,€if€the€trust€is€a€GST€trust.€€Is€my€understanding€a€misunderstanding?€€Thanks.€€Wesley€Yang,Š ^" ŠEsq.,€CPAŠ Ķ# ŠĢKlett,€Lieber,€Rooney€&€SchorlingŠ K ›% ŠOne€Oxford€Center,€40th€FloorŠ  !Z& ŠPittsburgh,€PA€15219Š É!' Š412„392„2022Š ˆ"Ų( Š412„392„2128€FaxŠ G#—) Š_________________________________Š $V* ŠĢ<>Š „%Ō , ŠDate:€€€€€€€€€Wed,€12€Jan€2000€21:25:05€ESTŠ C&“!- ŠFrom:€"Dennis€P.€Williams"€Š 'R". ŠSubject:€€€€€€Re:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€[sic€#4]Š Į'#/ ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ €(Š#0 ŠĢOh,€one€final€question.Š ž)N%2 ŠĢIf€a€Defective€Grantor€Trust€has€a€provisions€that€obligates€the€Trustee€to€pay€to€the€Grantor€any€incomeŠ |+Ģ&4 Štax€attributable€to€the€Trust's€income€so€long€as€it€is€defective,€I€believe€there€is€a€PLR€that€states€there€willŠ ;,‹'5 Šbe€no€Code€Section€2036€or€2038€problem€for€the€Grantor.Š ś,J(6 ŠŠ ¹- )7 ŠWould€the€same€result€apply€if€the€Trust€has€such€a€provision€that€permits,€but€does€not€obligate,€theŠ ° ŠTrustee€to€pay€to€the€Grantor€an€amount€equal€to€the€income€tax€attributable€to€the€Trust's€income?€Š oæ ŠĢI€believe€Wealth€Transfer€Planning€form€use€"may,"€and€not€"shall"€in€the€provisions€related€to€paying€theŠ ķ= Šgrantor€an€amount€equal€to€the€income€tax€attributable€to€the€Trust€assets.Š ¬ü ŠĢI€would€rather€use€"may!"Š * z ŠĢThank€you€for€you€thoughts.Š Ø ų ŠĢDennis€P.€Williams,€JD€and€CPA€(inactive)Š & v  Š_____________________________________Š å 5  ŠĢ<>Š c³  ŠDate:€€€€€€€€€Wed,€12€Jan€2000€22:14:01€„0500Š "r  ŠFrom:€Don€Cairns€Š į1  ŠSubject:€€€€€€Re:€[ABA„PTL]€Defective€trusts€„€Report€#6€[sic€#4]€Š  š  ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ _Æ  ŠĢTry€to€avoid€needing€the€reimbursement€clause€„€in€non„GST€trust€you're€returning€value€to€the€settlor€„€inŠ Ż- ŠGST€context€you're€doing€that€and€wasting€the€GSTT€exemption.€€If€settlor€can't€handle€the€income€tax€(aŠ œģ Šgood€way€to€reduce€settlor's€estate€without€transfer€tax)€consider€giving€the€independent€trustee€authorityŠ [« Što€add€the€spouse€as€a€beneficiary€and€move€the€income€tax€money€out€of€the€trust€back€to€settlor/spouse.€Š j Š(Yeah,€yeah,€not€always€a€spouse€.€.€.€)€€€Using€power€in€trustee€to€add€beneficiaries€such€as€spouse€andŠ Ł) Šcharities€is€an€excellent€way€to€achieve€grantor€trust€status.Š ˜č Š_________________________Š W§ ŠĢ<>Š Õ% ŠDate:€€€€€€€€€Wed,€12€Jan€2000€22:16:36€ESTŠ ”ä ŠFrom:€"Dennis€P.€Williams"€Š S£ ŠSubject:€€€€€€Re:€[ABA„PTL]€Defective€trusts€„€Report€#6€[sic€#4]€Š b ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ Ń! ŠĢGood€Comments:Š OŸ! ŠĢI€generally€give€a€Disinterested€Trustee€the€power€to€remove€the€defective€provision€(and€add€them€backŠ Ķ# Šlater)€so€prospectively€the€tax€liability€can€be€shift€from€the€grantor€to€the€trust€and€back!Š ŒÜ$ ŠĢI€have€not€used€the€"reimbursement"€provisions,€because€I€do€not€like€to€rely€on€PLRs.Š  !Z& ŠĢDennis€P.€Williams,€JD€and€CPA€(inactive)Š ˆ"Ų( Š_______________________________________Š G#—) ŠĢ<>Š Å$ + ŠDate:€€€€€€€€€Thu,€13€Jan€2000€12:41:44€„0600Š „%Ō , ŠFrom:€"James€A.€Williams"€Š C&“!- ŠSubject:€€€€€€[ABA„PTL]€Crummey€Powers€in€Defective€Grantor€Trusts€Š 'R". ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ Į'#/ ŠĢOne€of€the€reports€[#4,€not€#6]€from€the€Heckerling€Institute€correctly€attributed€to€Mal€Moore€(while€servingŠ ?)$1 Šon€a€question€and€answer€panel)€the€flat€footed€comment€that€defective€grantor€trusts€shouldn't€haveŠ ž)N%2 ŠCrummey€powers.€€I€was€in€the€audience.€€€As€Dennis€Williams€points€out€in€his€earlier€post,€Mal€is€deadŠ ½* &3 Šwrong€on€this€point.€€He€overlooked€the€fact€that€grantor€held€powers€under€Sections€671„677€trump€Sec.Š |+Ģ&4 Š678€powers.€€I€think€he€was€just€going€too€fast€and€that€what€he€meant€to€say€was€that€it€is€generally€bestŠ ;,‹'5 Što€have€such€powers€lapse€protected.€€Unfortunately€the€other€panel€members€(Covey€and€Cornfield€andŠ ś,J(6 ŠEastland)€were€preoccupied€with€their€own€questions€and€Mal's€overstatement€wasn't€corrected.€€Ō_ŌThatŠ ¹- )7 Šwasn't€the€only€wrong€answer€given€by€the€question€and€answer€panel€during€that€session.€€It's€unfortunateŠ ° Šthat€the€reporter€passed€the€comment€along€without€editorial€comment€about,€at€least,€its€questionability.Š oæ ŠĢJames€A.€WilliamsŠ ķ= ŠGraves,€Dougherty,€Ō_ŌHearonŌ_Ō€&€MoodyŠ ¬ü Š515€Congress€Avenue,€Suite€2300Š k» ŠAustin,€TX€78701Š * z Š512.480.5622Š é 9 Šjwilliams@gdhm.comŠ Ø ų Š_______________________Š g ·  ŠĢ<>Š å 5  ŠDate:€€€€€€€€€Thu,€13€Jan€2000€13:33:10€„0600Š ¤ ō  ŠFrom:€"Jay€S.€Ō_ŌGoldenbergŌ_Ō"€Š c³  ŠSubject:€€€€€€Re:€[ABA„Ō_ŌPTLŌ_Ō]€Ō_ŌCrummeyŌ_Ō€Powers€in€Defective€Grantor€Trusts€Š "r  ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ į1  ŠĢ[W]€well,€there€is€an€alternative€answer.€While€I€consider€the€whole€Service€theory€on€Ō_ŌCrummeyŌ_Ō€powersŠ _Æ  Šmaking€the€holder€the€"owner",€I€point€out€that€678€was€only€*one*€of€the€theories€they've€propounded.Š n  ŠAnother€is€that€the€power€holder€is€treated€as€though€they€themselves€had€withdrawn€the€money€andŠ Ż- Šturned€around€and€Ō_ŌrecontributedŌ_Ō€„„€i.e.,€becoming€the€grantor!€In€fact,€this€theory€was€used€to€qualify€trustsŠ œģ Šas€S€shareholders.€In€such€case,€671€wouldn't€be€trumping€678,€because€it's€not€a€678€issue.Š [« ŠĢJay€S.€Ō_ŌGoldenbergŌ_ŌŠ Ł) ŠAttorney€and€CounselorŠ ˜č Š221€N.€La€Salle€St.Š W§ ŠSuite€2040Š f ŠChicago,€IL€60601Š Õ% Š312„346„7899Š ”ä Šattyjsg@chicplan.comŠ S£ ŠĢņņŌ’Ōhttp://www.chicplan.comŠ Ń! ŠóóŌ’Ō___________________________Š ą  ŠĢ<>Š ^" ŠDate:€€€€€€€€€Thu,€13€Jan€2000€14:37:05€ESTŠ Ķ# ŠFrom:€Nassaujim@AOL.COMŠ ŒÜ$ ŠSubject:€€€€€€Re:€[ABA„Ō_ŌPTLŌ_Ō]€Ō_ŌCrummeyŌ_Ō€Powers€in€Defective€Grantor€Trusts€Š K ›% ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ  !Z& ŠĢEducate€me:€I€thought€that€when€a€Ō_ŌCrummeyŌ_Ō€power€(Ō_ŌakaŌ_Ō€a€General€Power€of€Appointment)€is€allowed€toŠ ˆ"Ų( Šlapse,€the€beneficiary€who€allowed€the€lapse€to€occur€is€deemed€to€have€taken€the€property€andŠ G#—) ŠŌ_ŌrecontributedŌ_Ō€it€to€the€trust€for€purposes€of€the€grantor€trust€rules,€thereby€making€that€beneficiary€a€partialŠ $V* Šgrantor.€and€in€a€typical€defective€trust€arrangement,€this€dirties€the€diaper.Š Å$ + ŠĢand€unlike€the€transfer€tax€rules,€these€is€no€5€or€5€safe€harbor.€€I€have€heard€this€conclusion€from€aŠ C&“!- Šnumber€of€sources€other€than€Mal€Moore.€€if€this€is€wrong,€please€enlighten€me.Š 'R". ŠĢJimmyŠ €(Š#0 ŠĢJames€M.€Floyd,€LL.M.Š ž)N%2 Š2030€Franklin€StreetŠ ½* &3 ŠSuite€300Š |+Ģ&4 ŠOakland,€CA€€Ō_Ō94612ą ø ąą  ąą h ąą Ą ąą  ąą p ąą Č ąŌ_ŌŠ ;,‹'5 Š510/777„0900Š ś,J(6 Šnassaujim@aol.comŠ ¹- )7 Š_____________________________Š ° ŠĢ<>Š .~ ŠDate:€€€€€€€€€Thu,€13€Jan€2000€15:29:50€„0600Š ķ= ŠFrom:€"David€A.€Handler"€€Š ¬ü ŠSubject:€Re:€[ABA„Ō_ŌPTLŌ_Ō]€Ō_ŌCrummeyŌ_Ō€Powers€in€Defective€Grantor€Trusts€Š k» ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ * z ŠĢSection€678(b)€says€that€if€the€trust€is€a€grantor€trust€as€to€the€grantor€under€671„677,€then€678(a)€(whichŠ Ø ų Šmakes€it€a€grantor€trust€as€to€a€beneficiary)€doesn't€apply.€€However,€678(b)€says€that€in€suchŠ g ·  Šcircumstances€678(a)€doesn't€apply€€with€respect€to€a€power€over€income,€but€doesn't€say€anything€aboutŠ & v  Šprincipal.€€So,€one€could€argue€that€a€Ō_ŌcrummeyŌ_Ō€power€over€a€grantor€trust€Makes€the€beneficiary€the€ownerŠ å 5  Šof€the€principal€and€the€grantor€the€owner€of€the€income.€€Many€commentators€feel€this€is€a€drafting€errorŠ ¤ ō  Šand€thus€"read"€678(b)€as€if€it€says€income€and€principal.Š c³  ŠĢŌ_ŌPLRŌ_Ō€9141027€held€that€where€the€grantor€was€taxable€on€the€income€and€principal€under€677€and€674,€theŠ į1  Šholders€of€withdrawal€rights€would€not€be€treated€as€the€owners€of€any€part€of€the€trust€under€678.€€Thus,Š  š  Šthe€IRS€treats€678(b)€as€if€it€reads€"income€and€principal."€€Ō_ŌPLRŌ_Ō€9309023€concurs.€€There€are€no€rulings€inŠ _Æ  Šwhich€the€IRS€has€held€to€the€contrary.Š n  ŠĢDavid€A.€HandlerŠ œģ ŠKirkland€&€EllisŠ [« Š_________________________Š j ŠĢ<>Š ˜č ŠDate:€€€€€€€€€Thu,€13€Jan€2000€16:58:35€ESTŠ W§ ŠFrom:€"Daniel€R.€Ross"€Š f ŠSubject:€€€€€€Re:€[ABA„Ō_ŌPTLŌ_Ō]€Ō_ŌCrummeyŌ_Ō€Powers€in€Defective€Grantor€Trusts€Š Õ% ŠTo:€ABA„PTL@HOME.EASE.LSOFT.COMŠ ”ä ŠĢTo€the€best€of€my€knowledge€there€is€no€definitive€authority€of€the€income€tax€consequences€of€the€lapseŠ b Šof€a€5&5€power.€€A€number€of€years€ago€I€was€involved€in€a€panel€at€the€Hartford€Tax€Institute€discussingŠ Ń! Šthis€issue.€€A€follow„up€article€appeared€in€the€Journal€of€Taxation.Š ą  ŠĢThe€IRS€has€argued,€though€I€am€not€sure€there€are€any€published€rulings,€that€section€678,€unlikeŠ ^" Šsections€2041€and€2514,€contains€no€5&5€exception,€and€that,€therefore,€the€lapse€of€a€withdrawal€power,Š Ķ# Ševen€if€limited€to€the€5&5€level,€is€a€release€for€purposes€of€section€678.€€However,€I€and€the€otherŠ ŒÜ$ Španelists€concluded€there€was€more€to€the€analysis.€€Both€sections€2041€and€2514€contain€specificŠ K ›% Šlanguage€providing€that€the€lapse€of€a€power€shall€be€treated€as€the€release€of€a€power;€the€release€of€aŠ  !Z& Špower€is,€of€course,€a€taxable€event€under€section€2514€and,€in€specified€circumstances,€may€be€a€taxŠ É!' Štrigger€under€section€2041.€€Section€678,€like€sections€2041€and€2514€specifies€the€circumstances€when€aŠ ˆ"Ų( Šrelease€of€a€power€is€a€taxable€event,€but€unlike€the€estate€and€gift€tax€sections,€section€678€contains€noŠ G#—) Šlanguage€specifically€stating€that€a€lapse€of€a€power€shall€be€treated€as€a€release.€Unless€there€is€aŠ $V* Šcommon€law€concept€that€a€lapse€should€be€treated€as€a€release,€this€difference€in€statutory€languageŠ Å$ + Šwould€suggest€that€a€lapse€of€a€power,€whether€or€not€limited€to€the€5&5€level,€is€not€a€tax€trigger€forŠ „%Ō , Špurposes€of€section€678.Š C&“!- ŠĢIt€has€been€many€years€since€I€have€researched€this€issue.€€If€anyone€on€the€list€is€aware€of€any€authorityŠ Į'#/ Šthat€would€contradict€the€above€analysis,€I€would€be€most€interested.Š €(Š#0 ŠĢDaniel€R.€RossŠ ž)N%2 ŠCommons€&€Commons€Ō_ŌLLPŌ_ŌŠ ½* &3 ŠSuite€1210,€The€Cambridge€at€Alden€ParkŠ |+Ģ&4 Š2967€West€School€House€LaneŠ ;,‹'5 ŠPhiladelphia,€PA€19144„5212Š ś,J(6 Š215„849„4400Š ¹- )7 ŠŌ_ŌFax€215„849„5555Š ° Š_______________________The€EndŠ oæ ŠĢThat's€it€for€Report€#4A.Š ķ= ŠĢĢĢŌ€XšAXņōĮŌŌ€XļŲXXXšAŌņ ņREPORT€#4BŠ é 9 Šó óThe€following€is€Special€Report€#4B€regarding€the€34th€Annual€Philip€E.€Heckerling€Institute€onŠ Ļ  ŠEstate€Planning€that€was€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š µ   ŠŠ ŠThis€Report€has€been€numbered€4B€because€it€relates€specifically€to€previously€publishedŠ  Ń  ŠReports€4€and€4A€and€contains€Mal€Moore's€rebuttal€comments€about€some€remarks€that€wereŠ g·  Šattributed€to€him€by€our€on„site€reporter,€Bruce€Stone,€as€having€been€made€by€him€during€theŠ M  Šņ ņTuesday€morning€Q&A€sessionó ó€that€Mal€and€Messrs€Covey,€Cornfeld€and€Eastland€presented.Š 3ƒ  ŠŠ Šņ ņFirst,€here€from€Report€#4€are€the€remarks€in€questionó ó€that€Mal€supposedly€made€as€theŠ ’O  Šsame€were€reported€to€us€by€Bruce:Š å5 ŠŠ Š"Mal€said€that€an€intentionally€defective€trust€should€not€have€Crummey€withdrawal€powers.€ItŠ ± Šwill€become€a€grantor€trust€over€time€with€respect€to€the€Crummey€beneficiaries.€If€theŠ —ē Štransaction€is€properly€planned,€no€gifts€should€be€involved€with€transfers€to€the€trust€(other€thanŠ }Ķ Šany€initial€seed€gift€of€capital)."Š c³ ŠŠ ŠIn€response€to€this,€several€messages€were€subsequently€posted€on€the€ABA„PTL€list€taking€issueŠ / Šwoith€what€Mal€had€supposedly€said.€Those€messages€were€compiled€and€published€together€inŠ e ŠReport€4A.€They€also€can€also€be€found€in€the€ABA„PTL€Web„based€archive€that€is€located€atŠ ūK ŠURL€ņņŌ’ŌóóŌ’ŌŠ į1 ŠŠ Šņ ņIn€response€to€those€messages,€here€are€Mal€Moore's€rebuttal€comments:Š ­ż ŠŠ Šó óThis€is€my€response€to€the€various€comments€regarding€my€answer,€at€the€Heckerling€Institute'sŠ yÉ Šfirst€question€and€answer€session,€to€the€question€of€whether€the€defective€grantor€status€of€aŠ _ Æ  Štrust€would€be€changed,€or€in€some€way€make€its€application€questionable,€to€the€extent€that€theŠ E!•! Štrusts€granted€Crummey€withdrawal€powers€to€third€parties.€My€response€from€the€podium€wasŠ +"{" Šthat€I€thought€there€could€be€a€problem€since€the€Crummey€withdrawal€power€holder€could€alsoŠ #a# Šbe€a€deemed€a€grantor€of€the€trust€for€income€tax€purposes€and€hence,€the€first,€intentional,Š ÷#G$ Šgrantor€might€not€be€treated€as€the€sole€owner€of€the€trust€for€income€tax€purposes.Š Ż$- % ŠŠ ŠVarious€comments€after€the€session€pointed€out€that€I€should€have€mentioned€Section€678(b)Š ©&ł!' Šwhich€states€that€if€someone€is€treated€as€owner€of€the€trust€for€income€tax€purposes€underŠ 'ß"( ŠSection€678,€and€grantor€trust€treatment€is€already€being€applied€to€the€trust€by€reason€of€SectionŠ u(Å#) Š671€through€Section€677,€those€latter€taxation€provisions€would€"trump"€the€taxation€provisionsŠ [)«$* Šof€Section€678(a).€Hence,€despite€what€Section€678(b)€says€on€its€face€relating€only€to€powersŠ A*‘%+ Šover€income,€these€comments€state€that€if€an€intentionally€defective€grantor€trust€has€beenŠ '+w&, Šcreated€by€the€use€of€any€one€of€a€number€of€techniques,€then€the€fact€that€there€are€CrummeyŠ  ,]'- Šwithdrawal€power€holders€would€be€disregarded€and€that€the€"true"€grantor€would€continue€to€beŠ ó,C(. Šthe€entire€owner€of€the€trust€for€income€tax€purposes.Š Ł-))/ ŠŠ ŠI€certainly€should€have€mentioned€Section€678(b)€from€the€podium.€However,€Section€678(b)€isŠ –ę Šnot€a€complete€and€dispositive€answer€to€the€question€put€to€me.€First,€Section€678(b)€onlyŠ |Ģ Šapplies€to€powers€over€income,€and€not€to€principal.€While€there€have€been€a€number€ofŠ b² Šstatements€that€that€was€a€mistake€and€that€principal€as€well€as€income€was€intended€to€beŠ H˜ Šcovered€(I€said€that€myself€in€a€Miami€article€back€in€1988),€the€matter€has€never€beenŠ . ~ Š"officially"€resolved.€Another€speaker€at€the€Heckerling€Institute€this€year€(Larry€Katzenstein)Š  d Štold€me€that€10€years€ago€he€could€not€get€a€ruling€on€this€very€issue€because€the€governmentŠ ś J Šwas€not€willing€to€state€that€power€holders€over€principal,€as€well€as€income,€were€covered€byŠ ą 0 ŠSection€678(b).€Š Ę   ŠŠ ŠOne€of€the€respondents€to€the€list€serve€discussions€cited€two€Private€Letter€Rulings€whichŠ ’ā  Šappeared€to€deal€with€the€issue.€They€are€PLR€9141027€and€PLR€9309024.€Š xČ  ŠŠ ŠThe€1991€PLR€involved€a€situation€where,€because€all€the€income€could€possibly€be€distributedŠ D”  Što€the€grantor's€spouse,€the€original€grantor€was€treated€as€the€owner€of€the€trust's€income€underŠ *z  ŠSection€677.€The€grantor€was€also€the€owner€of€all€the€corpus€of€the€trust€under€Section€674Š ` Šbecause€of€a€power€of€appointment€over€corpus€held€by€the€grantor's€spouse.€In€concluding€thatŠ öF Šthe€grantor€was€taxable€on€all€of€the€trustee's€income,€the€ruling€simply€referred€to€SectionŠ Ü, Š678(b)€of€the€Code€providing€that€Section€678(a)€would€not€apply€with€respect€to€"a€power€overŠ Ā Šincome",€not€mentioning€a€power€over€principal.€Hence,€the€ruling€does€not€state€that€SectionŠ Øų Š678(b)€applies€with€respect€to€a€power€over€corpus,€although€the€conclusion€of€the€ruling€„„€thatŠ ŽŽ Šthe€original€grantor€was€the€owner€of€all€of€the€trust€for€income€tax€purposes€„„€is€inconsistentŠ tÄ Šwith€an€interpretation€of€Section€678(b)€which€would€apply€the€power€strictly€to€income,€and€notŠ ZŖ Šprincipal.Š @ ŠŠ ŠThe€1993€ruling€involved€an€inter€vivos€QTIP€marital€deduction€trust€which€required€that€allŠ  \ Šincome€be€paid€to€the€grantor's€spouse,€and€also€gave€the€trustee€power€to€pay€over€to€the€spouseŠ ņB Špart€or€all€of€the€trust€principal€as€the€trustee€"deems€necessary€or€desirable€for€any€reason€orŠ Ų( Šcause€that€the€trustee€deems€to€be€in€the€best€interests€of€Spouse".€The€spouse€also€had€aŠ ¾ Š"Crummey"€power€to€withdraw€the€amount€of€any€transfer€to€the€trust€within€30€days€of€theŠ ¤ō Štransfer.€The€ruling,€like€the€1991€ruling,€states€that€because€the€grantor€is€treated€as€the€owner€ofŠ Š Ś Šthe€trust€under€Section€677(a),€the€spouse€is€not€the€owner€of€the€trust€under€Section€678(a),Š p!Ą  Šciting€Section€678(b).€In€both€these€rulings€grantor€ownership€under€Section€677(a)€was€based€onŠ V"¦! Šthe€grantor's€spouse€being€an€income€and€principal€beneficiary€of€the€trust.€The€1991€rulingŠ <#Œ" Šinvolved€Crummey€withdrawal€powers€granted€to€both€the€spouse€and€children.€The€1993€rulingŠ "$r# Šinvolved€only€a€withdrawal€power€granted€to€the€spouse.Š %X $ ŠŠ ŠNeither€of€the€rulings€come€right€out€and€say€that€Section€678(b)€applies€to€powers€overŠ Ō&$"& Šprincipal€as€well€as€to€income.€Therefore,€I€do€not€conclude€that€these€two€rulings€will€"resolve"Š ŗ' #' Šthe€question€in€terms€of€someone€relying€upon€them€to€unequivocally€conclude€that€there€is€noŠ  (š#( Šproblem€with€a€Crummey€power€being€present€in€an€otherwise€grantor€trust€where€grantor€trustŠ †)Ö$) Štreatment€is€essential€„„€i.e.,€a€sale€to€a€grantor€trust€of€S€corporation€stock.Š l*¼%* ŠŠ ŠFurther,€I€believe€there€could€be€an€argument€(although€some€would€say€that€Section€678(b)Š 8,ˆ', Šwould€make€no€sense€if€the€following€argument€were€viable)€that€a€Crummey€power€holder€isŠ -n(- Šdeemed€to€have€withdrawn€the€property€from€the€trust,€redeposited€it,€and€retained€the€incomeŠ ° Šfrom€it,€thus€making€that€Crummey€power€holder€a€grantor€taxable€under€Section€671„677,€ratherŠ –ę Šthan€Section€678.€Indeed€one€of€the€comments€on€the€list€serve€stated€just€that.Š |Ģ ŠŠ ŠPrior€analyses€of€Section€678(b)€vis„a„vis€grantor€trust€treatment€were€made€a€time€when€theŠ H˜ Šintentional€use€of€grantor€trusts€was€not€nearly€as€extensive€as€it€is€now.€The€problem€was€lookedŠ . ~ Šat€in€past€years€not€so€much€from€the€point€of€view€of€there€being€a€grantor€trust€around,€but€ifŠ  d Šthere€happened€to€be,€what€did€that€do€to€the€otherwise€taxable€income€of€the€power€holder€underŠ ś J ŠSection€678.€Now€that€a€great€number€of€defective€grantor€trusts€are€being€created,€with€aŠ ą 0 Šnumber€of€sales€of€assets€being€made€to€those€trusts,€and€in€particular€S€Corporation€stock,€IŠ Ę   Šthink€it€is€too€simplistic€to€say€that€Section€678(b)€solves€the€problem€so€that€theŠ ¬ ü  Š"true"€grantor€will€continue€to€be€treated€as€the€sole€owner€for€income€tax€purposes€regardless€ofŠ ’ā  Šwhether€a€Crummey€power€holder€holds€powers€over€principal,€but€not€income.€On€its€faceŠ xČ  ŠSection€678(b)€does€not€apply€to€a€power€over€principal.€Further,€there€is€the€other€argumentŠ ^®  Šabout€the€Crummey€power€holder€being€a€separate€grantor.Š D”  ŠŠ ŠI€believe€I€did€say€from€the€podium€that€I€did€not€see€why€anyone€would€want€to€use€CrummeyŠ ` Šwithdrawal€powers€in€an€intentionally€defective€trust€to€which€either€large€contributions€orŠ öF Šsignificant€sales€of€assets€were€being€made.€Presumably€the€$10,000€annual€exclusions€could€beŠ Ü, Šused€in€some€meaningful€way€other€than€with€respect€to€transfers€to€a€grantor€trust€so€that€thereŠ Ā Šwould€be€no€chance€that€they€would€"gum€up"€the€pristine€grantor€trust€treatment€which€isŠ Øų Šnecessary€for€these€newer€transactions€to€succeed.€This€is€particularly€true€if€S€Corporation€stockŠ ŽŽ Šis€involved.Š tÄ ŠŠ ŠI€hope€this€clarifies€the€matter.€In€addition€to€Larry€Katzenstein,€I€also€consulted€with€two€otherŠ @ Švery€well€known€and€regarded€academics€in€the€area,€and€they€are€in€accord€with€I€am€sayingŠ &v Šhere.€My€editing€of€the€Q€and€A€session€transcript€will€reflect€these€clarifications€[in€the€printedŠ  \ Šbook€that€Matthew€Bender€will€publish€„€see€below].Š ņB ŠŠ Šņ ņFrom€the€Editors:€Thank€you,€Mal,€for€taking€the€time€to€prepare€the€above€reply€for€us.ó óŠ ¾ ŠĢAppended€here€is€further€commentary,€fromŻ‚’’’Żņ ņŻ  Ż€John€PriceŻ‚’’’®“!-Żó óŻ  Ż,€a€respected€ACTEC€Fellow€and€authorŠ Š Ś Šof€the€ACTEC€Commentaries.€His€analysis€here€is€an€excellent€addition€to€what€Mal€had€to€say.Š p!Ą  Š(the€editors)Š V"¦! ŠĢĢMal€Moore€is,€of€course,€correct€in€pointing€out€that€the€explicit€language€of€sec.€678(b)€providesŠ %X $ Šthat€secs.€673„677€trump€sec.€678(a)€only€"with€respect€to€a€power€over€income."€However,€asŠ ī%>!% Šindicated€in€my€1999€Heckerling€paper,€"In€effect,€the€IRS€disregards€the€portion€of€subsectionŠ Ō&$"& Š678(b)€which€on€its€face€limits€that€rule€to€cases€in€which€the€nongrantor's€power€is€'overŠ ŗ' #' Šincome.'"€The€same€conclusion€has€been€reached€by€other€commentators.€Thus,€ProfessorsŠ  (š#( ŠPeschel€&€Spurgeon€state€in€their€treatise€that,€"If€the€grantor€of€the€trust€is€taxable€on€someŠ †)Ö$) Športion€of€the€trust€because€of€retained€benefit€or€control,€Section€678(b)€overrides€SectionŠ l*¼%* Š678(a)."€Federal€Taxation€of€Trusts,€Grantors€&€Beneficiaries,€par.Š R+¢&+ Š9.04[2].€In€the€accompanying€footnote,€the€authors€note€that,€"Technically,€Section€678(b)Š 8,ˆ', Šprovides€for€an€override€only€in€the€case€of€a€power€over€income.€The€prevailing€view€is€that€thisŠ -n(- Šprovision€should€not€be€read€literally.€Early,€'Income€Taxation€of€Lapsed€Powers€of€Withdrawal:Š ° ŠAnalyzing€Their€Current€Status',€62€J.€Tax'n€198,€200€(1985)."€As€I€recall,€Professors€Ferguson,Š –ę ŠFreeland€and€Ascher€reach€the€same€conclusion€in€their€treatise.€Messrs.€Zaritsky€and€LaneŠ |Ģ Šsimply€note€that,€"Section€678€does€not€address€the€problem€of€dual€powers€over€trust€principalŠ b² Šthat€do€not€affect€the€payment€of€current€income.€There€is€no€sound€policy€reason€for€thisŠ H˜ Šdistinction€and€it€must€be€viewed€as€a€flaw€in€the€drafting€of€Section€678."€Federal€IncomeŠ . ~ ŠTaxation€of€Estates€and€Trusts,€para.€12.05.Š  d ŠGiven€the€past€history,€the€risk€that€the€IRS€would€apply€sec.€678(b)€literally€seems€very,€veryŠ ś J Šslight.€In€numerous€private€letter€rulings€the€IRS€has€concluded€that€the€grantor€trust€rules€ofŠ ą 0 Šsecs.€673„677€trump€a€beneficiary's€Crummey€power€of€withdrawal.€A€sample€of€the€rulings,Š Ę   Šwhich€deal€with€a€variety€of€issues,€including€the€application€of€the€Sub.€S.€rules€of€sec.€1361,Š ¬ ü  Šinclude,€LRs€8521060,€9140047,€9141027,€9226037,€9309023,€9450014,€and€9504024.€TheŠ ’ā  Šearliest€of€the€cited€rulings€deals€with€two€irrevocable€trusts€created€by€A€for€the€benefit€of€hisŠ xČ  Šminor€children€C€and€D,€each€of€whom€held€a€power€of€withdrawal€over€contributions€to€theŠ ^®  Štrust.€The€IRS€concluded€that,€"C's€treatment€as€owner€of€a€portion€of€Trust„C€is€conditioned€onŠ D”  Š(1)€A€not€being€treated€as€the€owner€of€the€portion€under€section€677€of€the€Code,€and€(2)€A€notŠ *z  Šbeing€treated€as€the€beneficiary€of€the€portion€under€section€662.€See€section€678(b)€of€the€CodeŠ ` Šand€section€1.677(b)„1(a)€and€1.677(b)„1(b)€of€the€Income€Tax€Regulations."€Others€reach€theŠ öF Šsame€conclusion,€not€infrequently€stating€that,€"Section€678(b)€provides€that€section€678(a)€shallŠ Ü, Šnot€apply€if€the€grantor€of€the€trust€or€a€transferor€(to€whom€section€679€applies)€is€otherwiseŠ Ā Štreated€as€the€owner€under€the€provisions€of€subpart€E,€part€I,€of€subchapter€J,€other€than€sectionŠ Øų Š678."€Having€never€seen,€or€heard€of€any€ruling€or€decision€that€expressed€a€contrary€view,€itsŠ ŽŽ Šdifficult€to€see€that€the€threat€is€serious.€Š tÄ ŠIMHO,€the€rulings€to€which€Mal€Moore€responded,€state€their€conclusions€in€clear,€unequivocalŠ ZŖ Šterms.€For€example,€LR€9141027€states€that,€"A€[the€grantor]€is€the€owner€of€all€of€the€income€ofŠ @ Šthe€trust€under€section€677€because€all€the€income€of€the€Trust€may€possibly€be€distributed€to€A'sŠ &v Šspouse.€A€is€the€owner€of€all€of€the€corpus€of€the€trust€under€section€674€because€of€the€power€ofŠ  \ Šappointment€over€the€corpus€held€by€A's€spouse,€B.€Because€A€is€the€owner€of€all€the€income€andŠ ņB Šcorpus€of€Trust,€the€holders€of€withdrawal€powers€will€not€be€treated€as€the€owners€of€any€part€ofŠ Ų( ŠTrust€under€section€678."€Similarly,€LR€9309023,€in€which€the€beneficiary€spouse€held€aŠ ¾ ŠCrummey€power,€concluded€that,€"Under€the€terms€of€the€Trust,€both€income€and€corpus€areŠ ¤ō Špayable€to€Spouse€during€his€life.Š Š Ś ŠAccordingly,€Transferor€is€treated€as€the€owner€of€the€Trust€under€section€677(a)€of€the€Code.Š p!Ą  ŠBecause€Transferor€is€treated€as€the€owner€of€the€Trust€under€section€677(a),€Spouse€is€not€theŠ V"¦! Šowner€of€the€Trust€under€section€678(a)."€Š <#Œ" ŠMal's€recent€message€concluded€with€clear,€helpful€advice„„Counsel€clients€against€givingŠ "$r# ŠCrummey€powers€of€withdrawal€to€the€beneficiaries€of€IDITs€to€which€the€grantor€may€makeŠ %X $ Šsales€of€appreciated€assets.€Š ī%>!% ŠŌ€ōĪņXXļŲŌŌ€ōĮņņōĪŌĢĢĢĢĢņ ņREPORT€#5ó óŠ *ß%+ ŠĢSubject:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#5€Š  ,]'- ŠDate:€Wed,€12€Jan€2000€17:07:20€„0700Š Ģ,(. ŠFrom:€"Joseph€G.€Hodges€Jr."€Š ‹-Ū(/ ŠReply„To:€The€Estate€Planner's€and€Administrator's€ListŠ ° Š€To:€ABA„PTL@HOME.EASE.LSOFT.COMŠ oæ ŠĢThe€following€is€Report€#5€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€events€andŠ ķ= Špresentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ ¬ü Šis€being€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š k» ŠĢThis€Report€covers€both€ņ ņDonald€Jansen'só ó€Tuesday€morning€session€entitled€ņ ņ"Life€Insurance€Potpourri:Š é 9 ŠNo€Employer?€„€Try€Family€Split€Dollar€and€Other€Recent€Developments"ó ó€and€ņ ņHoward€McCue'só óŠ Ø ų ŠTuesday€afternoon€session€entitled€:€ņ ņPlanning€and€Drafting€to€Influence€Behavior€(of€Children€andŠ g ·  ŠGrandchildren)."ó óŠ & v  ŠĢThis€report€was€filed€by€on„site€reporter,€Stephen€Leimberg.€€Steve€is€also€a€presenter€at€this€year'sŠ ¤ ō  ŠInstitute.€€He€will€be€co„presenting€(and€reporting€on)€the€TRU€Revolution€Special€Session€on€TuesdayŠ c³  Šafternoon€with€Robert€Wolf€and€Susan€Porter.Š "r  ŠĢņ ņTopic:€€€Life€Insurance:€Recent€DevelopmentsŠ  š  ŠSpeaker:€€€Donald€Jansen€of€Fulbright€and€JaworskiŠ _Æ  ŠĢó óDetails:€After€reviewing€recent€cases€and€rulings€involving€life€insurance,€Don€Jansen€covered€the€threeŠ Ż- Štypical€uses€of€private€split€dollar€(1)€"Parent€helps€child",€(2)€"Keep€control€of€the€cash€values€and€retainŠ œģ Šthem€for€retirement€„€yet€get€the€proceeds€of€out€the€estate",€and€(3)€Shift€wealth€at€minimum€gift€tax€cost.Š [« ŠHe€noted€the€two€theories€of€taxation€(no€compensation€or€stock„holding€involved€so€no€income)€and€(theŠ j Šwife€is€making€an€interest„free€loan€to€the€trust)€and€reiterated€the€history€and€taxpayer€„€favorableŠ Ł) Šconclusions€of€recent€rulings.Š ˜č ŠĢDon€was€the€second€speaker€in€two€days€who€mentioned€that€there€was€"a€cloud€on€split„dollar".€€HeŠ f Šnoted€that€there€are€rumors€of€a€major€change€in€the€income€taxation".€€He€expressed€surprise€since€theŠ Õ% ŠTreasury€has€a€major€task€force€studying€split„dollar€but€said€that€"there€may€be€something€going€on€in€theŠ ”ä ŠIRS€on€ALL€split€dollar€arrangements."€€He€didn't€elaborate€but€my€impression€is€that€the€IRS€will€move€inŠ S£ Šthe€direction€of€7872€treatment,€i.e.€below€market€loan€theory.€€This€would€cause€premium€payments€to€beŠ b Štreated€as€a€series€of€loans€with€below€market€rates.€€So€the€paying€"family€member€would€realize€interestŠ Ń! Šincome€equal€to€the€applicable€federal€rate€on€the€amount€of€premium€paid."Š ą  ŠĢDon€reminded€us€that€even€in€the€taxpayer„favorable€PLRs€9636033€and€9745019,€the€only€two€rulings€toŠ ^" Šfocus€specifically€on€private€split€dollar,€the€IRS€was€asked€to€respond€only€on€gift€and€estate€tax€issuesŠ Ķ# Šand€didn't€examine€the€income€tax€ramifications.Š ŒÜ$ ŠĢHe€cautioned€that€„€as€in€every€split€dollar€ruling€issued€in€recent€years€„€that€the€rulings€state€"we€expressŠ  !Z& Šno€opinion€regarding€the€application€of€Section€7872€to€this€transaction."€€€He€also€cautioned€that€it€wasŠ É!' Šessential€for€planners€to€explain€the€trade„off€(pay€estate€tax€on€the€cash€value€when€the€"owning€non„Š ˆ"Ų( Šinsured€spouse€dies€to€get€the€death€benefit€out€of€the€estate€yet€still€retain€control€of€the€cash€value)€andŠ G#—) Što€provide€for€disposition€of€the€non„insured€spouse's€interest.€€Don€also€warned€planners€to€be€careful€ofŠ $V* Šequity€in€private€split€dollar€situations.€He€expressed€concern€that€"there€is€a€risk€that€the€equity€build„upŠ Å$ + Šeach€year€might€constitute€additional€gifts€to€the€trust€or€third€party€owner€under€an€analogy€to€TAMŠ „%Ō , Š9604001."€€The€IRS€"might€still€argue€that€the€equity€is€transferred€for€gift€although€not€income€taxŠ C&“!- Špurposes€with€regard€to€private€split€dollar."Š 'R". ŠĢMy€take€on€Don's€talk€is,€"proceed€cautiously€in€the€area€of€private€split€dollar!"€€We€only€have€a€couple€ofŠ €(Š#0 ŠPLRs€and€these€are€(only)€PLRs.€€Š ?)$1 ŠĢņ ņTopic:€€€Planning€and€Drafting€to€Influence€Behavior€Š ½* &3 ŠSpeaker:€Howard€"Scott"€McCue€of€Mayer,€Brown,€&€PlattŠ |+Ģ&4 ŠĢó óSummary:€€The€line€between€guiding€and€controlling€beneficiaries€is€sometimes€thin.€€Howard€examinedŠ ś,J(6 Šmodern€business€structures€and€trust€designs€as€vehicles€for€enabling€planners€and€their€clients€toŠ ¹- )7 Šaccomplish€personal€as€well€as€tax€objectives.€€He€focused€on€the€use€of€incentive€trusts,€FLPs,€variousŠ ° Šsplit„interest€(charitable€and€private)€trusts€in€this€context€and€strategies€to€involve€younger€familyŠ oæ Šmembers€in€the€planning€for€multi„generational€transfers€of€wealth.Š .~ ŠĢDetails:€Howard's€witty€and€insightful€talk€gave€three€major€reasons€for€the€increased€interest€in€behaviorŠ ¬ü Šinfluence€planning€in€both€clients€and€planners:€(1)€the€explosion€of€wealth,€(2)€the€fact€that€the€tools€andŠ k» Štechniques€we've€used€have€worked€and€more€wealth€is€continually€being€shifted,€and€(3)€"the€tax€systemŠ * z Šas€we€know€it€can€not€endure".€€The€key€to€understanding€his€talk€and€its€major€import€is€his€statement€thatŠ é 9 Š"If€repeal€becomes€a€reality,€after€the€initial€flurry€of€planning€against€the€reintroduction€of€the€tax€(or€aŠ Ø ų Šworse€substitute),€clients€will€go€back€to€planning€to€accomplish€what€they€really€want€and€intend,€ratherŠ g ·  Šthan€what€we€force€them€into€in€the€name€of€the€avoidance€or€minimization€of€enormous€transfer€taxes.€Š & v  ŠEstate€planners€who€have€thought€about€the€effects€of€planning€and€drafting€on€beneficiary€behavior€willŠ å 5  Šbe€better€able€to€attract€and€keep€the€best€clients."€€Howard€pointed€out€that€we€need€to€consider€whoseŠ ¤ ō  Šbehavior€we€are€trying€to€influence€and€control€and€reminded€us€that€we€are€constantly€impacting€behaviorŠ c³  Šof€people€even€if€we€don't€consider€that€impact€(e.g.,€a€spouse€in€a€QTIP€situation)€and€think€carefullyŠ "r  Šabout€what€types€of€behavior€we€can€and€should€encourage€„€or€discourage.€€"Almost€everything€we€doŠ į1  Šhas€some€impact€on€behavior;€it's€only€a€question€of,€"Is€what€we€are€doing€sensible?"Š  š  ŠĢHe€discussed€a€number€of€techniques€and€stressed€the€importance€of€devices€that€rest€control€andŠ n  Šflexibility€in€the€client(s),€i.e.€FLPs,€LLCs,€S€corporations,€and€charitable€structures€such€as€foundations€orŠ Ż- Šdonor€advised€funds€that€allow€families€to€work€together€to€develop€shared€values€and€charitable€leadŠ œģ Štrusts€that,€if€the€children€are€involved,€can€teach€patience,€frugality,€and€stewardship.Š [« ŠĢHe€favors€tools€are€techniques€such€as€discretionary€trusts€which€adjust€well€to€changing€values€over€timeŠ Ł) Šand€don't€unduly€restrict€flexibility.€But€he€stressed€the€importance€of€providing€clear€guidelines€andŠ ˜č Šprotecting€the€trustee€through€exculpation€clauses.€€Incentive€trusts,€which€have€a€place€as€an€importantŠ W§ Štool,€must€be€carefully€thought„out€so€as€to€meet€changing€circumstances€and€the€"real€intent"€of€theŠ f Šdonor.€€A€provision€such€as€"earn€a€dollar€„€get€a€dollar"€for€example,€where€there€were€two€children€withŠ Õ% Šdrastically€different€incomes€may€not€have€the€result€the€client€intended.Š ”ä ŠĢĢHis€bottom€line€was,€"Talk€to€your€clients€about€how€they€want€to€influence€behavior,€and€be€sure€theyŠ Ń! Šconsider€the€implications€of€the€steps€toward€that€goal€that€they€take.€€As€Warren€Buffett€said,€"I€want€toŠ ą  Šgive€my€children€enough€so€they€can€afford€to€do€anything€they€want€to€do€„€and€not€enough€so€they€canŠ OŸ! Šafford€to€do€nothing".Š ^" ŠĢThat's€it€for€Report€#5.ą ø ąą  ąą h ąŠ ŒÜ$ ŠĢĢņ ņREPORT€#6ó óŠ É!' ŠĢÓ3° *ĄpČ xŠ (#°œX3ÓSubject:€[ABA„PTL]€Miami€Heckerling€Institute€2000€„€Report€#6€Š G#—) ŠÓH.°°` ø hĄpČ xŠ (#°*Ą†X(#HÓDate:€Wed,€12€Jan€2000€18:40:45€„0700Š $V* ŠFrom:€"Joseph€G.€Hodges€Jr."€Š Å$ + ŠReply„To:€The€Estate€Planner's€and€Administrator's€ListŠ „%Ō , Š€To:€ABA„PTL@HOME.EASE.LSOFT.COMŠ C&“!- ŠĢThe€following€is€Report€#6€from€our€on„site€reporters€regarding€some€of€the€highlights€from€the€events€andŠ Į'#/ Špresentations€that€are€taking€place€at€the€34th€Annual€Philip€E.€Heckerling€Institute€on€Estate€Planning€thatŠ €(Š#0 Šis€being€held€January€10„14,€1999€at€the€Fontainebleau€Hilton€in€Miami€Beach,€Florida.Š ?)$1 ŠĢThis€Report€covers€ņ ņmore€news€about€the€software€vendorsó ó€that€are€exhibiting€at€this€year's€Institute.Š ½* &3 ŠĢThis€report€was€filed€by€on„site€reporter,€Alan€F.Rothschild,€Jr.€€Alan€is€the€current€Chairman€of€the€K„2Š ;,‹'5 ŠTechnology€and€Economics€Committee€of€the€Probate€Division€of€the€ABA€Real€Property,€Probate€andŠ ś,J(6 ŠTrust€Law€Section.€€Š ¹- )7 ŠAlan€reports€that€the€Miami€Institute€always€boasts€a€large€number€of€vendors€displaying€their€latest€wares,Š ° Šbut€that€perhaps€the€biggest€news€this€week€is€not€a€vendor's€new€product,€but€the€lack€of€one.€€RIA,€whichŠ oæ Šfor€the€last€couple€of€years€spend€much€of€its€energy€at€Miami€on€the€Wealth€Transfer€Planning€system,Š .~ Šturned€the€system€back€over€to€its€originator,€The€Technology€Group,€in€December.€€RIA€will€instead€focusŠ ķ= Šits€efforts€on€its€Internet€research€product,€Checkpoint.Š ¬ü ŠĢņ ņCCH'só ó€primary€focus€is€also€on€its€Internet€research€services.€€As€CCH€and€RIA€have€each€built€Š * z Šcomprehensive€web„based€research€services,€many€practitioners€might€find€the€pricing€for€these€servicesŠ é 9 Šso€great€that€they€must€choose€a€single€vendor,€rather€than€continuing€to€enjoy€the€luxury€of€multiple€taxŠ Ø ų Šresearch€services,€and€many€solos€and€small€firms€(who€make€up€over€50%€of€the€membership€of€the€ABAŠ g ·  Šand€the€Real€Property,€Probate€and€Trust€Law€Section)€are€simply€no€longer€able€to€afford€to€pay€for€andŠ & v  Šuse€many€of€these€tax€services.Š å 5  ŠĢ[ņ ņEditor's€Note:ó ó€Apparently€these€tax€research€service€publishers€have€not€yet€embraced€the€rather€novelŠ c³  Šbut€welcome€reverse€pricing€structure€that€companies€like€ņ ņVersusLawó ó€(ņņŌ’Ōhttp://www.versuslaw.comóóŌ’Ō)€haveŠ "r  Šbeen€so€successful€with€recently,€whereby€they€charge€a€mere€$6.95€per€month€per€lawyer€to€gain€accessŠ į1  Što€their€entire€Internet€Web€site€database€of€federal€and€state€case€law.€€Now€that's€what€we€callŠ  š  Š"affordable"€legal€research€via€the€Internet.]€Š _Æ  ŠĢAnother€interesting€trend€is€that€many€users€are€electing€to€go€straight€from€hard€copies€of€researchŠ Ż- Šservices€to€their€web€products,€or€are€"upgrading"€from€CD€to€the€web€„„„€not€because€the€web€isŠ œģ Šnecessarily€better,€but€because€it€allows€the€practitioner€to€go€around€their€own€IT€departments,€whichŠ [« Šapparently€do€not€timely€load€or€install€the€latest€versions€of€research€s