COMPREHENSIVE REPORT
All Reports from the institute posted as one file. Please note this is a very long file.

back to 2002 Table of Contents

INTRODUCTION
back to 2002 Table of Contents

As we have done in January for the last five years, and again with the permission of the University of Miami School of Law Center for Continuing Legal Education, we will be posting to this list throughout the coming week highlights of the proceedings of the 36th Annual Philip E. Heckerling Institute on Estate Planning that is being held January 7-11, 2002 at the Fontainebleau Hilton Resort and Towers in Miami Beach, Florida.

Our on-site local reporters there in Miami this year will include:

Stephan R. Leimberg Esq. of Bryn Mawr, PA - Steve@leimbergservices.com Bruce Stone Esq. of Miami, FL - BruceStone@aol.com Theodore B. Atlass Esq. of Denver, CO - TAtlass@atlass.com as well as others yet TBD

We also will be posting the full text of this year's Reports on the ABA RPPT Section's Web site, as we did last year  All the Reports from last year's 35th 2001 Institute are posted there now, at URL http://www.abanet.org/rppt/meetings_cle/meetings_cle/heckerling/home.html In addition, each Report can also be accessed at any time from the ABA-PTL Discussion List's Web-based Archive at URL http://mail.abanet.org/archives/aba-ptl.html

=================
Again this year a complete listing of the proceedings and speakers is available on the Institute's Web site.  The URL for that site is http://www.law.miami.edu/heckerling For those of you without access to the Web, here are the core parts of the schedule:

SCOPE:

The "Miami Institute" is widely recognized as the premier estate planning program in the country. It is designed for sophisticated attorneys, trust officers, accountants, insurance and financial planners who, through years of experience and practice, are familiar with the principles of estate planning. The Institute offers something of interest to every member of the estate planning team.

A recent developments panel on Monday afternoon, featuring three of the nation's foremost estate planning experts, kicks off the Institute and will guide us through last year's developments on the tax front.

Tuesday's program features the beginning of the Institute's general session lectures.  These lectures, which run through Friday noon, provide in-depth analysis of topics of timely interest to experienced estate planners, and are presented by some of the nation's leading estate planning authorities.

On Wednesday and Thursday afternoons, the Institute offers a wide variety of workshops and panel discussions, including case studies that will illustrate and provide practical guidance on how to implement sophisticated estate planning techniques.

Finally, this year's Institute once again includes the popular Fundamentals Programs. The first two fundamentals sessions will provide a thorough review of two topics central to the estate planning process: planning for the orderly devolution of the closely held business, and what every estate planner should know about the securities laws. The final session will explore basic estate planning for non-U.S. persons and U.S. persons with foreign connections.

Because of the scope and quality of its educational programming, the Institute has grown to be the largest meeting of estate planning professionals in the country, with a record number of over 2,500 individuals from around the nation in attendance. As the regular attendees know, this concentration of talent has led the Institute to have some of the better characteristics of a national convention of estate planners. The week long program provides the opportunity to exchange ideas, to network, and to review the latest in technology, products, and services displayed by over 100 vendors in an exhibit hall dedicated entirely to the estate planning industry. We invite those of you who have never attended this program, or who have been absent in recent years, to join us in Miami Beach January 7 - 11, 2002, to take advantage of this unique event.

THE INSTITUTE 2002 FACULTY:

Prof. Mark L. Ascher
University of Texas School of Law

Brian T. Atkinson Esq.
Moore & VanAllen, PLLC

Ronald D. Aucutt Esq.
McGuire Woods LLP

Dennis I. Belcher Esq.
McGuire Woods LLP

Jackson M. Bruce Jr. Esq.
Dunwody, White & Landon, P.A.

Richard B. Covey Esq.
Carter, Ledyard & Milburn

Henry Christensen III Esq.
Sullivan & Cromwell

Lauren Y. Detzel  Esq.
Dean, Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A.

S. Stacy Eastland Esq.
Goldman, Sachs & Co.

Charles D. Fox IV Esq.
Schiff, Harden & Waite

Eileen Gallo
The Gallo Institute

Jon J. Gallo Esq.
Greenberg, Glusker, Fields, Clayman, Machtinger & Kinsella, LLP

Robert W. Goldman Esq.
Goldman & Felcoski, P.A.

Max Gutierrez Jr. Esq.
Brobeck, Phleger & Harrison

Carol A. Harrington Esq.
McDermott, Will & Emery

T. Randolph Harris Esq.
McLaughlin & Stern, LLP

Jerome M. Hesch Esq.
Greenberg Traurig

Zoe M. Hicks Esq.
Hicks & Hicks, P.C.

Linda B. Hirschson Esq.
Greenberg Traurig

Marcia Chadwick Holt Esq.
Davis, Graham & Stubbs, LLP

Prof. Christopher R. Hoyt Esq.
University of Missouri School of Law

Mildred Kalik Esq.
Simpson, Thacher & Bartlett

Beth S. Kaufman Esq.
Caplin & Drysdale

Curtis R. Kimball
Willamette Management Associates

Robert C. Lawrence III Esq.
Cadwalader, Wickersham & Taft

Mary Ann Mancini Esq.
Steptoe & Johnson, LLP

Neill G. McBryde Esq.
Moore & Van Allen, PLLC

Carlyn S. McCaffrey Esq.
Weil, Gotshal & Manges LLP

Jerry J. McCoy Esq.
Law Office of Jerry J. McCoy

Howard M. McCue III Esq.
Mayer, Brown & Platt

Louis A. Mezzullo Esq.
Mezzullo & Guare, PLC

Malcolm A. Moore Esq.
Davis Wright Tremaine, LLP

Richard W. Nenno Esq.
Wilmington Trust Company

Prof. Jeffrey N. Pennell
Emory University School of Law

Lloyd Leva Plaine Esq.
Sutherland, Asbill & Brennan, LLP

Beth Clerk Rodriguez Esq.
J. P. Morgan Private Banking

Bruce S. Ross Esq.
Holland & Knight, LLP

Sterling L. Ross Jr.
Esq. Robb & Ross

Gideon Rothschild, Esq.
Moses & Singer, LLP

Edward S. Schlesinger Esq.
Hofheimer, Gartlir & Gross, LLP

Kathleen R. Sherby Esq.
Bryan Cave LLP

Bruce Stone Esq.
Holland & Knight, LLP

D. John Thornton Esq.
Thornton & Byron, LLP

Ralph C. Wileczek Esq.
Wilmington Trust Company

THE PROGRAM SCHEDULE:

Monday, January 7

8:00 a.m. 2:00 p.m.
Registration
8:00 9:00 a.m.
Complimentary Continental Breakfast

9:00 10:30 a.m. /
10:45 a.m. 12:15 p.m.
OPTIONAL PRE-CONFERENCE FUNDAMENTALS
PROGRAM Planning or the Orderly Devolution of the
Closely Held Business
Louis A. Mezzullo

10:30 10:45 a.m.
Break

2:00 2:10 p.m.
Introductory Remarks
Tina Hestrom Portuondo,
Institute Director

2:10 3:30 p.m.
Recent Developments in Estate, Gift and
Income Taxation 2001 - Part One.
Dennis I. Belcher
Carol A.Harrington
Prof. Jeffrey N. Pennell
Materials by Richard B. Covey

3:30 3:45 p.m.
Break

3:45 5:15 p.m
Recent Developments in Estate, Gift and
Income Taxation 2001 - Part Two.

6:00 7:00 p.m.
Complimentary Reception for Registrants
__________________________________                 

Tuesday, January 8

7:30 - 8:30 a.m.
Complimentary Continental Breakfast

8:30 - 9:15 a.m.
Navigating the Single Stock Monetization and Diversification
Tax Maze
S. Stacy Eastland

9:15 10:90 a.m.
The New Minimum Distribution Rules
Marcia Chadwick Holt

10:00 - 10:45 a.m.
The Family Wins When IRD is Used for Charitable Bequests
Prof. Christopher R. Hoyt

10:45 11:00 a.m.
Break

11:00 11:45 a.m.
Understanding Your Client's Money Personality
Jon J. Gallo

11:45 a.m. 12:30 p.m.
Choice of Law and Trusts
Malcolm A. Moore

12:30 2:00 p.m.
Lunch Break

2:00 3:30 p.m.
Planning and Drafting in a New Statutory Environment - Part One
Ronald D. Aucutt
Max Gutierrez Jr.
Mildred Kalik
Beth S. Kaufman
Lloyd Leva Plaine

3:30 - 3:45 p.m.
Break

3:45 - 5:15 p.m.
Planning and Drafting in a New Statutory
Environment - Part Two
__________________________________
                 
Wednesday, January 9

7:30 - 8:30 a.m.
Complimentary Continental Breakfast

8:30 - 9:15 a.m.
Life Insurance as the Life Preserver for the Closely Held Business
Mary Ann Mancini

9:15 - 10:00 a.m.
Non-Tax Considerations in the Succession of Closely Held
Businesses
Charles D.Fox IV

10:00 - 10:45 a.m.
Uses of Installment Sales, Private Annuities and SCINs
Jerome M. Hesch

10:45 11:00 a.m.
Break

11:00 a.m. - 12:30 p.m.
Question & Answer Session
Dennis I. Belcher
Carol A. Harrington
Prof. Jeffrey N. Pennell

12:30 2:00 p.m.
Lunch Break

2:00 3:30 p.m. /
3:45 5:15 p.m.
FUNDAMENTALS PROGRAM
What the Estate Planner Must Know About the Securities Laws
(Runs concurrently with the Special Sessions.)
Neill G. McBryde
Brian T. Atkinson

2:00 3:30 p.m.
Special Sessions I

I-A CASE STUDY Navigating the Single Stock Monetization
and Diversification Tax Maze
S. Stacy Eastland

I-B Children, Family Wealth and Estate Planning
John J. Gallo
Eileen Gallo

I-C Minimum Distribution Rules
Marcia Chadwick Holt

I-D Life Insurance and the Closely Held Business
Mary Ann Mancini

I-E Choice of Law and Trusts
Malcolm A. Moore

3:30 3:45 p.m.
Break

3:45 5:15 p.m.
Special Sessions II

II-A CASE STUDY Business Succession Planning
Charles D. Fox IV

II-B What's New in Ethics for the Trust and Estates Lawyer?
Jackson M. Bruce Jr.
Bruce S. Ross
Kathleen R. Sherby

II-C Asset Protection Planning: Protection vs. Control
Gideon Rothschild

II-D IRD and Charitable Giving
Prof. Christopher R.Hoyt

II-E Planning With Installment Sales, Private Annuities and
SCINs
Jerome M. Hesch
_______________________________
                 
Thursday, January 10

7:30 -8:30 a.m.
Complimentary Continental Breakfast

8:30 - 9:15  a.m
Subchapter J - Recent Developments Relating to the Income
Taxation of Trusts and Estates
Prof. Mark L. Ascher

9:15 10:00 a.m.
The State Income Taxation of Multi-Jurisdictional Trusts
Max Gutierrez Jr.

10:00 10:45 a.m.
Implementing Total Return Trust Statutes
Richard W. Nenno

10:45 -11:00 a.m.
Break

11:00 -11:45 a.m.
Generation-Skipping Transfer Tax Planning
Lloyd Leva Plaine

11:45 a.m. 12:30 p.m.
Special Needs Trusts
Sterling L. Ross Jr.

12:30 p.m. 2:00 p.m.
Lunch Break

2:00 3:30 p.m. 
3:45 5:15 p.m.
FUNDAMENTALS PROGRAM
Basic Estate Planning for Non-U.S. Persons
and U.S. Persons with Foreign Connections
(Runs concurrently with the Special Sessions)
Carlyn S. McCaffrey
Robert C.Lawrence III

2:00 3:30 p.m.
Special Sessions III

III-A CASE STUDY Implementing Total Return Trusts
Richard W. Nenno
Ralph C. Wileczek

III-B Advanced LP, LLP and LLC Valuations
D. John Thornton
Curtis R. Kimball

III-C When Charitable Trusts Go Off The Track
Jerry J. McCoy

III-D Florida Law Update
Lauren Y. Detzel
Robert W.Goldman
Bruce Stone

III-E Future of the Profession
T. Randolph Harris
Zoe M.Hicks
Howard M. McCue III
Beth Clark Rodriguez

3:30 3:45 p.m.
Break

3:45 5:15 p.m.
Special Sessions IV

IV-A CASE STUDY Special Needs Trusts
Sterling L. Ross Jr.

IV-B Advanced LP, LLP and LLC Valuations
(repeat of Session III-B)
D. John Thornton
Curtis R. Kimball

IV-C What To Do With Life Insurance After the Hearse
Leaves With Your Client In It
Edward S. Schlesinger

IV-D How to Succeed in (the) Business (of Practicing)
Without Really Trying
Stephan R. Leimberg

IV-E Income Taxation of Trusts and Estates
Mark L. Ascher
Linda B. Hirschson
___________________________
                 
Friday, January 11

7:30 - 8:30 a.m.
Complimentary Continental Breakfast

8:30 - 9:15 a.m.
Are Tax Havens on Life Support
Henry Christensen III

9:15 10:00 a.m.
Ethical Solutions to the Estate Planner's Dilemma
Howard M. McCue III

10:00 10:15 a.m.
Break

10:15 a.m. 12:00 p.m.
CASE STUDY -Wrapping it Up - Applying What We
Have Learned
Louis A. Mezzullo
___________________________


GENERAL INFORMATION:
 
Inquiries/Registration:
Philip E. Heckerling Institute on Estate Planning
University of Miami School of Law
Center for Continuing Legal Education
P.O. Box 248087
Coral Gables, FL 33124-8087
Telephone: 305-284-4762 / FAX: 305-284-6752
===========================================
Headquarters Hotel - Fontainebleau Hilton, Miami Beach, FL
Telephone (305) 538-2000, FAX (305) 674-4607
===========================================
NOTICE: Although audio tapes of all of the substantive session
at the Miami Institute currently are only made available to Institute
registrants for purchase, the entire proceeding of the Institute are
published annually by Lexis/Nexis. For further information, go to
their Web site at <http://www.lexis.com/>.

The text of these proceedings is also available on CD ROM from
Authority by Matthew Bender. For further information, contact
your Matthew Bender sales representative, or call (800) 533-1637,
or fax (800) 828-8341, or go to URL <http://www.bender.com/>, or
write to Matthew Bender & Co., Inc., Attn: Fulfillment Dept., 1275
Broadway, Albany, NY 12204.
______________________________________________________
Joseph G. Hodges Jr. Esq., Denver, CO
ABA-PTL Discussion List Chief Moderator
jghodges@jghlaw.com
<http://www.jghlaw.com/>
URL for ABA-PTL Web-based Archives:
<http://mail.abanet.org/archives/aba-ptl.html>

back to 2002 Table of Contents

Report #1
back to 2002 Table of Contents

As we have done in January for the last five years, and again with
the permission of the University of Miami School of Law Center for
Continuing Legal Education, we will be posting to this list throughout
the coming week highlights of the proceedings of the 36th Annual
Philip E. Heckerling Institute on Estate Planning that is being held
January 7-11, 2002 at the Fontainebleau Hilton Resort and Towers
in Miami Beach, Florida.
 
Our on-site local reporters there in Miami this year will include:
 
Stephan R. Leimberg Esq. of Bryn Mawr, PA - Steve@leimbergservices.com
Bruce Stone Esq. of Miami, FL - BruceStone@aol.com
Theodore B. Atlass Esq. of Denver, CO - TAtlass@atlass.com
as well as others yet TBD

We also will be posting the full text of this year's Reports on the
ABA RPPT Section's Web site, as we did last year  All the Reports
from last year's 35th 2001 Institute are posted there now, at URL
<http://www.abanet.org/rppt/meetings_cle/meetings_cle/heckerling/home.html>
In addition, each Report can also be accessed at any time from the
ABA-PTL Discussion List's Web-based Archive at URL
<http://mail.abanet.org/archives/aba-ptl.html>

=================
Again this year a complete listing of the proceedings and speakers is
available on the Institute's Web site.  The URL for that site is
<http://www.law.miami.edu/heckerling>
===================================================
REPORT NO. 1 - Monday, January 7, 2002

The following preliminary report has been filed concerning the vendors who are in the Exhibit Hall this year and other technology news:

As the size of the institute grows, so does the number of vendors, and there are multiple vendors in almost all categories, including the following:

Administration support services, such as deed preparation
Appraisal and valuation companies
Auction houses and services
Book and reference material sales, including the latest edition of Natalie Choate's Retirement Plans book
Missing persons and heirs locators
Software sales - these include software for planning and administration and document assembly
Trust departments/companies and other companies managing assets and investments


And now for some news highlights from the vendors:

First, the following statement has been issued recently jointly by Lawgic and the authors of the Florida Wills and Trusts system:

>>>>
"Dear Subscriber:

As many of you have become aware, Lawgic has been affected by the economic
downturn and has had to curtail much of its operations, including sales,
training and customer support. We apologize if you have tried but been
unable to contact us, and want to assure you we are doing all we can to move
forward and preserve the Lawgic program you have come to rely upon. The
program should operate normally during 2002, but if you receive an
expiration notice, you may download a patch off our website to extend your
use.

Currently we are in the midst of negotiations with several large legal
publishers to sell the Lawgic system, and hope to have a resolution in the
very near future. The authors of Florida Wills and Trusts are aware of this
process and agree with the approach. We anticipate you will be able to use
and enjoy this wonderful program for many years to come. We will keep you
advised of developments."

Edward F. Koren, Holland & Knight LLP, ekoren@hklaw.com
Co-Author, Lawgic Florida Wills and Trusts Software Program
Ste 2300, 400 N. Ashley Dr., Tampa, FL 33602, (813)227-6655
92 Lake Wire Dr.,Lakeland, FL 33815, (863) 499-5314
>>>>

Second, the Technology Group's LawOnTheWeb.com Web site is back up and running again. More information about their recent financial and management difficulties is available at www.LawOnTheWeb.com <http://www.lawontheweb.com/>.

Third, ACTEC Fellow, Larry Katzenstein, has recently updated his TigerTables program. It seems to have some nice new additional features that can be checked out at www.tigertables.com <http://www.tigertables.com/>. We hope to post a more detailed review of this new software update on one of our later reports.

Fourth, Estate Valuations & Pricing Systems, Inc. has recently announced the release of the latest version of its industry-leading historical securities valuation software: EVP Office XP (Version 6.4.0). Included in this release are new versions of EstateVal, CostBasis, and CapWatch. The programs can be downloaded from <http://www.evpsys.com/software>. The most significant feature of the new version of EstateVal, allows estates affected by the market closures in the wake of the attacks on the World Trade Center to be re-evaluated, at no cost, with full pricing. Also included is EVP's new pricing structure, and the ability to re-print old billing records with the appropriate data. These billing records can now be exported to a spreadsheet, as well. All the changes can be found on EVP's Web site, at <http://www.evpsys.com/software/eo_changes.html>.

Fifth, a recent issue of Steve Leimberg's e-mail based Charitable Planning Newsletter [ <http://www.leimbergservices.com/>] contained a Review by subject matter of 2001 IRS Charitable TAMs/PLRs by LISI commentator Johni Hays, co-author of the just released book, Tools and Techniques of Charitable Planning. Steve Leimberg's Charitable Planning Newsletter.  A recent issue of Steve's Estate Planning Newsletter dealt with the new IRS Guidance on Split-Dollar Life Insurance that were issued on January 3 [Notice 2002-8, 2002-4 IRB 1 revoking Notice 2001-10 which was issued in January of 2001.  In a recent issue of his Employee Benefits and Retirement Planning Newsletter, LISI Commentator and Technical Editor Barry Picker, the author of "Barry Picker's Guide to Retirement Distribution Planning" shares important information on a recent IRS safe harbor notice [Notice 2002-3] which requires written notice on Certain Qualified Plan Distributions to reflect the changes that were made by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), P.L. 107-16.  Information on how to subscribe to this and other LISI E-Mail Newsletters can be found at <http://www.leimbergservices.com/>.

Sixth, the newest iMac was released at MacWorld on Monday (it's on the cover of the Time magazine issue for this week. An article on this is at: <http://www.computerworld.com/storyba/0,4125,NAV47_STO67176,00.html>.

Seventh, WealthCounsel's new significantly expanded Document Assembly System is being introduced at Heckerling this year.  It offers a complete estate planning system for Advanced Estate Planning Law.  It is programmed to be used with HotDocs 5.X, which makes it easy to use and modify the standard text.  The systems now includes forms and supporting documents for:

            * Family Limited Partnership Module
             * Charitable Planning Module
             * Revocable Living Trust Module
             * Irrevocable Trust Module
             * Testamentary Will Planning Module
             * Split Interest (QPRT)

This system has been designed using plain English drafting, but gives the user the ability to modify it to the user's own writing style with great ease.  Stop by their booth in the Exhibition Hall and give this document assembly system a good look-see, as they are offering it at a special sale price if it is ordered during Heckerling.  More information can be found at www.wealthcounsel.com <http://www.wealthcounsel.com/>.

Next, on the news front, the following IRS SS-4 news has recently been released:

Lastly, for announcements, the American Association of Attorney-Certified Public Accountants has issued the following e-mail invitation:

___________________________________________________
That is it for Report No. 1.  The full text of all the Reports
will be posted on the ABA RPPT Web site at
www.abanet.org/rppt <http://www.abanet.org/rppt>.

======================================
MIAMI INSTITUTE GENERAL INFORMATION:

Inquiries/Registration:
Philip E. Heckerling Institute on Estate Planning
University of Miami School of Law
Center for Continuing Legal Education
P.O. Box 248087
Coral Gables, FL 33124-8087
Telephone: 305-284-4762 / FAX: 305-284-6752
===========================================
Headquarters Hotel - Fontainebleau Hilton, Miami Beach, FL
Telephone (305) 538-2000, FAX (305) 674-4607
===========================================
NOTICE: Although audio tapes of all of the substantive session
at the Miami Institute currently are only made available to Institute
registrants for purchase, the entire proceeding of the Institute are
published annually by Lexis/Nexis. For further information, go to
their Web site at <http://www.lexis.com/>.

The text of these proceedings is also available on CD ROM from
Authority by Matthew Bender. For further information, contact
your Matthew Bender sales representative, or call (800) 533-1637,
or fax (800) 828-8341, or go to URL <http://www.bender.com/>, or
write to Matthew Bender & Co., Inc., Attn: Fulfillment Dept., 1275
Broadway, Albany, NY 12204.
______________________________________________________
Joseph G. Hodges Jr. Esq., Denver, CO
ABA-PTL Discussion List Chief Moderator
jghodges@jghlaw.com
<http://www.jghlaw.com/>
URL for ABA-PTL Web-based Archives:
<http://mail.abanet.org/archives/aba-ptl.html>

back to 2002 Table of Contents

Report #2
back to 2002 Table of Contents

Monday, January 7, 2002

The below Report was compiled by our on-site Reporter, Bruce Stone, who is

also a distinguished member of the Institute's Advisory Committee and a

partner in the Miami, Florida law firm of Holland and Knight, LLP.

2:00 2:10 p.m.

Introductory Remarks

Tina Hestrom Portuondo,

Institute Director

Tina Portuondo convened the 36th annual University of Miami

Heckerling Institute on Estate Planning by welcoming approximately 2,400

registrants.

After some brief remarks by Law School Dean Dennis Lynch, Tina

introduced the panel that presented this year’s review of recent

developments: Dennis Belcher, Carol Harrington, and Jeff Pennell.

2:10 5:15 p.m.

Recent Developments in Estate, Gift and

Income Taxation 2001 - Parts One and Two

Dennis I. Belcher

Carol A.Harrington

Prof. Jeffrey N. Pennell

Materials by Richard B. Covey

Dennis gave a brief overview of key provisions of the transfer tax

changes made in the 2001 tax act. He noted that advisers and clients

should not automatically assume that with the increase in the applicable

exclusion amount from $675,000 to $1 million, an additional $325,000 can be

gifted without incurring gift tax liability. Clients who had made adjusted

taxable gifts in excess of the former applicable exclusion amount will owe

some small amount of gift tax on a gift of $325,000. In fact, if adjusted

taxable gifts of about $3 million have already been made, the additional

amount that can be gifted now free of gift tax is only about $250,000.

Dennis briefly viewed what he regarded as other significant

changes: the reduction in state death tax credit (which he predicted will

cause a number of states to adjust their revenue laws fairly quickly and

which will lead to more jurisdiction shopping for domicile); the repeal of

section 2057 (QFOBI) and the expansion of benefits for conservation

easements and estate tax deferral.

Carol reviewed some of the changes made to the GST tax in the 2001

legislation. She noted that the GST tax is de-unified from the estate tax

for 2002 and 2003. The GST exemption for 2002 is $1.1 million, and it may

be adjusted for inflation in 2003, but it will be identical to the estate

tax applicable exclusion amount beginning in 2004.

In Carol’s view, the most significant of the GST changes is the

ability to accomplish downstream splits or severances in trusts which have

an inclusion ratio of something greater than zero and less than 1. She

noted that a good bit of activity can and should be expected in trust

reformation to take advantage of this, but also cautioned that this remedy

is not a substitute for good estate planning.

Other significant GST changes were the extension of section 9100

relief for allocation of GST exemption, the new automatic allocation rules

(which she described as very complex, and potentially very dangerous), and

the allowance of a late allocation of GST exemption if a nonskip child dies

after creation of a trust but before the occurrence of a taxable

termination. With respect to the last change, Carol was not sure how this

will tie in with the ETIP rules.

Carol noted with some humor that with all the inflation adjusted

exemptions and exclusions being rounded to multiples of thousands, tens of

thousands, and hundreds of thousands of dollars, the 2002 amount of gifts

which a US person can receive from a NRA without reporting is now $11,642.

Jeff Pennell reviewed the IRS business plan for pending

projects. He noted that the IRS plan year is now on a fiscal year ending

June 30, which is why there was no major flurry of regulations issued in

December 2001 (unlike in prior years). Chief among the new projects will

be new regulations defining income under section 643(b), the anticipated

issuance of new model charitable remainder trust forms, the supposed

issuance of section 2057 regulations (which Jeff doesn’t think we will see

because of the repeal of section 2057 itself), and regulations under

section 2519 dealing with whether net gift rules will apply when a

surviving spouse triggers acceleration of the remainder interest in a QTIP

trust. The key question under section 2519 is whether the 2207A right to

recover gift tax from the remainder beneficiaries will reduce the amount of

the taxable gift, and Jeff believes the answer to that question should be

"yes."

Dennis discussed the Mellon case (Federal Circuit, 265 F.2d 1275)

which held that the 2% floor under section 67 applied to payments made by a

trustee to outside investment advisers and for accounting and tax

services. He noted that the IRS is now treating the deduction of those

expenses as an audit item for trust 1041's. But he also noted that there

is a case pending in the 4th Circuit which will address raises the same

issue. The Service’s position (and the holding of Mellon) is that to be

deductible, expenses must be paid in the administration of the trust, and

they must be incurred only because the property is held in trust.

Dennis also briefly discussed split dollar developments, which

will be addressed later in the week in more detail. He noted the issuance

of Notice 2002-8, which revokes Notice 2001-10. Notice 2002-8 sets forth

positions expected to be found in the pending regulations. In essence, if

the employer owns a split dollar policy, the arrangement will be

characterized as an employment arrangement. If the employer is not the

owner (which is more typical in estate planning situations), the

arrangement will be treated as a loan arrangement subject to section

7872. January 28, 2002 will be a grandfather date for split dollar

arrangements: inside build up will not be taxed annually, and the insurer’s

alternative rates (one year term) can be used. There will be a 2-year

correction period allowed for rollout of split dollar arrangements.

Carol discussed the final charitable lead trust regulations

governing measuring lives, and PLR 200127023, which analyzed the tax

consequences of terminating a charitable remainder unitrust on an actuarial

basis. She also discussed PLR 200140027, in which a donor who proposed to

accelerate the charitable remainder by assigning his unitrust interest to

the charitable remainder beneficiary. The ruling followed Rev. Rul. 86-60

in holding that the partial interest rule of section 170(f)(3) does not

prevent the allowance of an income tax deduction for the released interest.

Dennis covered two rulings not in the seminar materials. In PLR

200150027, a charity formed a single member LLC to receive a gift of real

estate which it did not wish to own directly, and the Service ruled that

the LLC would be disregarded as a separate entity. Although the ruling did

not address tax consequences under section 170, Dennis felt that a

deduction should be allowable to the donor. PLR 200152018 addressed a

charitable remainder unitrust in which the donor had retained the right to

change the charitable beneficiaries. The donor proposed to exchange his 5%

unitrust interest for a charitable gift annuity. The PLR addresses the

income tax consequences to the donor arising out of the exchange.

Carol discussed the 2001 legislative changes to section 529, and

Notice 2001-55 which liberalized the restrictions on making changes in

investment strategy for 529 plans. Dennis noted that the definition of

"education" under section 529 is broader than it is for gift tax purposes,

because it includes room and board, which often are more significant than

tuition payments.

Jeff discussed the proposed regulations under section 643(b). He

noted that with respect to the inclusion of capital gains in DNI, the only

really significant departure from prior law in the proposed regulation is

that the governing instrument itself can now be the source of authority for

allocation rules. He also noted that gains and losses must be netted out

against each other before allocation under the DNI rules. He also cautioned

that even though capital gains may be included in DNI, an in kind

distribution of assets to satisfy a fixed amount (such as income) will

trigger gain under the standard Kenan rules.

Carol discussed the conversion of GST grandfathered trusts to

unitrusts under the proposed regulations. She noted that the proposed

regulations had not addressed the consequences of moving a grandfathered

trust from a state which does not have law authorizing an income interest

to be defined in unitrust concepts to a state which does have such a

law. Carol has asked the Treasury Department to address this in the

regulations.

Dennis observed that in drafting unitrust clauses in total return

trusts, rolling averages of fair market value should be used to avoid rapid

and severe upswings or downswings in distributions to income beneficiaries

due to market fluctuations.

Carol discussed the Read case (114 T.C. 14), which was recently

affirmed by the Eleventh Circuit. The case involved the redemption of

stock owned by a wife pursuant to a divorce decree, and at her husband’s

election the wife’s stock spouse was redeemed by an ESOP. The redemption

was treated by both courts has having been made on behalf of the husband.

In a general review of family limited partnership cases, Jeff

stated that in the last 18 months, the government’s arguments challenges to

partnerships as bona fide arrangements that can achieve valuations

discounts have failed. In addition the government’s argument seeking to

apply sections 2703 and 2704 have failed. Jeff noted that in FSA 200049003

the government still seeks to argue for gifts upon creation of FLPs, but he

noted that the government has lost those arguments in Strangi (115 T.C.

478, which was appealed to the Fifth Circuit) and in Jones (116 T.C. 121).

Jeff observed that it is more accurate to state that the

government is losing more valuation arguments based on its appraisals than

that taxpayers are winning their arguments. In summary, Jeff believes that

we are where we were 6 years ago: namely, that the governing rule is still

"willing buyer, willing seller" – but that most people tend to focus only

on the willing buyer and not the willing seller. Would the seller really

sell at the appraised price?

Jeff noted that a New Jersey court has refused to allow a

valuation discount for employee benefits because of the income tax

liability that must be paid by the recipient. He stated that the public

policy really should be that section 691(c) provides relief for this in the

contest of estate tax valuations.

Carol discussed the 1997 Mitchell case (74 TCM 872) in which the

burden of proof shifted to the IRS because its position in an estate tax

deficiency notice was arbitrary and excessive.

Dennis discussed the 1999 Gross case (78 TCM 201), which dealt

with the issue whether valuations of subchapter S stock should be "tax

affected" by assumed corporate tax rates. The case was recently affirmed

by the Sixth Circuit. Both the Tax Court and the Sixth Circuit rejected

the taxpayer’s argument in favor of discounts. Dennis noted that this

should not be a stand-alone issue. Depending upon which valuation

methodology is being used (EBITDA, comparison to C corporations, inside

asset valuations, etc.), tax effects may or may not have direct relevance,

and should be address by a qualified appraiser in an overall composite manner.

Jeff said that there are now at least 3 cases where lottery winner

with nonassignable winnings died before complete payout. One case

(Shackleford, 262 F.2d, 9th Circuit) allowed a valuation discount, but two

cases did not: Gribauskas (116 T.C. 142) and Cook (83 TCM 154).

Jeff also discussed the Schwan case (82 TCM 168), which involved a

double evaluation, first for estate tax inclusion, and second for estate

tax charitable deduction purposes. That led to a discussion among Jeff,

Dennis, and Carol whether spendthrift clauses in a trust could produce a

discount when valuing an the interest passing to a beneficiary. Jeff

observed that this could be a double edged sword, and that perhaps

spendthrift clauses should not be used automatically in boilerplate

provisions, especially in marital deduction trust.

Jeff touched quickly upon some recent cases dealing with

deductibility of administration expenses after the Hubert regulations, and

he cautioned drafters to include language in governing instruments that

will allow debts, expenses, and taxes to be paid from income or from principal.

Carol noted that in the current low interest rate environment,

QPRTs and charitable remainder annuity trusts are not as

attractive. Dennis commented that by the same token, charitable lead

annuity trusts and GRATs are excellent tools now. Carol observed that the

7872 regulations were proposed in 1985 and have not been finalized. Under

those regulations prepayment options are to be ignored. So in

restructuring transactions that have already been completed in order to

take advantage of the current low rates, refinancing should be a viable

option. Dennis queried whether you can use long term rates if there is a

prepayment option. Both he and Carol believe the answer is yes.

Jeff discussed the Armstrong case (132 F.Supp.2nd) where there had

been a net gift in which the donees had agreed to pay gift taxes if the

asset was valued over a certain amount. The IRS valued the asset in excess

of that amount, and because the donor died within three years, the gift tax

was also grossed up into the estate. the taxpayers argued that there

should be a valuation discount because of the possibility of a gift tax

liability and the potential for estate tax gross-up. The court ruled that

the potential liability was too speculative to affect the value of the

gift. Jeff commented that tax apportionment clauses in wills and trusts

should be reviewed to see how they deal with gross-up of gift taxes. He

also noted that net gift transactions should be carefully structured and

clear, because the Armstrong court had characterized the transaction before

it as "suspiciously confusing."

Carol and Dennis commented on the Trotter case (82 TCM 633),

another case in which the government was successful in imposing estate tax

under section 2036 where the decedent had continued to live in a residence

that she had transferred to a trust of which she was not a beneficiary.

Jeff discussed PLR 200101021, which involved a joint revocable

trust in which the first spouse to die would have a general power of

appointment over the surviving spouse’s share of the trust assets. The

objective was to achieve a 100% basis step up upon the death of the first

spouse, in the same manner as community property. The ruling said that

there would be no 100% basis adjustment, and Jeff said no one should be

surprised that the government wouldn’t concede this in a ruling. However,

he said that the ruling had a number of favorable points, and that it

actually shows a valuable planning tool for married couples whose estates

are less than two applicable exclusion amounts. The IRS ruled that 100% of

the trust assets were included in the deceased spouse’s estate, which meant

that a credit shelter trust could be created for the benefit of the

surviving spouse without further inclusion of that credit shelter trust in

the estate of the surviving spouse. The value of this as a planning

technique is that you don’t need to worry about severing jointly owned

assets into the separate names of each spouse to ensure use of the full

unified credit. Jeff said that the most questionable part of the ruling

was the IRS’s ruling that the surviving spouse’s grant to the deceased

spouse of the general power of appointment over the surviving spouse’s

share of the trust qualified for the gift tax marital

deduction. Nevertheless, Jeff said that he feels planners can feel

comfortable in relying on this ruling. Dennis pointed out that the estate

planner should be aware of the conflicts of interest issues between the

spouses, and also should make sure that there are no creditors (in states

where assets subject to a general power of appointment can be reached by

the decedent’s creditors).

Carol discussed the 1997 Smith case (108 T.C. 412) in which the

Tax Court allowed an estate tax deduction for a contingent claim based upon

the amount of a settlement reached 15 months after death. That decision

was reversed by the Fifth Circuit (198 F.3rd 515). She then discussed

later cases raising these issues: McMorris (77 TCM 1552) and O’Neal (102

T.C. 666).

Jeff reviewed the handout materials which note that state law

generally provides for interest on an outright bequest and for a share of

income to be paid on bequests in trust. A choice between the two

approaches can be made in a will or trust. When dividend yields on

investments are low, it might seem preferable instead to provide for

payments of interest. But the IRS position is that interest paid to the

beneficiary is taxable as income but is not deductible by the estate or

trust, whereas if the beneficiary receives an allocable share of estate or

trust income, that will be deductible by the estate or trust under the DNI

rules.

Carol discussed some recent GST developments. She cautioned the

audience to remember the Cottage Savings case – even though the 2001 tax

legislation and the laws of many states now allow GST trusts to be reformed

and reorganized, if the beneficial interests before and after the

reformation are materially different, there may be an income tax

recognition event.

Carol reviewed PLR 200143019, which held that a loan from a

grandfathered trust to beneficiaries did not cause the trust to lose its

grandfathered status, because the loan was secured. Carol believes that

the presence of absence of security is irrelevant, if the loan is bona fide.

In PLR 200107105, a child assigned a remainder interest in a

charitable lead annuity trust to her children (who were skip persons), in

hopes of avoiding GST tax by becoming transferor over the trust because of

the gift of the remainder interest. The ruling concluded that the child

became the transferor for GST purposes of a portion of the trust equal to

the present value of her remainder interest, and that the original grantor

remained such for the balance of the trust. Carol said that the ruling

does not make a thorough or careful analysis of the issues, and that if you

advise clients in carrying out such a transaction, be sure they understand

there are risks and that the desired results might not be obtained.

Dennis reviewed the Cook case (269 F.3rd 854), in which the 7th

Circuit affirmed that revocable spousal interests in a GRAT do not reduce

the value of the taxable gift because they are not "qualified

interests." Of course, that holding is not so important in light of

Walton, which allows GRATs to be zeroed out for gift tax purposes, even

though the IRS has appealed Walton. Carol does not expect Walton to be

reversed on appeal.

Carol observed that it is important when zeroing out a GRAT to

have the balance of the interest payable to the grantor’s estate. But what

do you do with that interest once it is in the estate? One way to deal

with it is to have the annuity paid to the surviving spouse by a specific

devise in the will or revocable trust. This certainly works. If the

remaining term interest is devised to a QTIP trust, the QTIP trust should

require payment to the surviving spouse of the greater of the annuity

interest or the QTIP trust income. Having the grantor’s estate retain the

reversionary interest in the GRAT avoids the nondeductible terminable

interest rules under section 2056, if the annuity interest is then devised

to the spouse.

Jeff very briefly mentioned the True case ((82 TCM 27), a 270 page

opinion dealing with the effect of a buy-sell agreement in fixing values

for estate tax purposes. Jeff said that the opinion is of some relevance

to older buy-sell agreements but that case is mostly a testament to an

arrogant taxpayer.

Dennis mentioned PLR 200129018, which allowed a change in the

operation of a business from a trust to an LLC without adverse effects

under section 6166.

Jeff discussed savings clauses and FSA 200122011. The FSA said

that a formula clause awarding any "excess" value in a transaction to

charity was void as against public policy. However, Jeff felt that not all

savings and formulas clauses are invalid. He contrasted the Procter case

(142 F.2d 824), which invalidated a savings clause, with the King case

which upheld the validity of a clause which required the parties to

restructure the transaction if the values found by the government were not

in accord with the values set by the parties. But Jeff also referred to

the McLendon case (TC Memo 1993-459) in which the Tax Court said King was

specifically clear in that there was no donative intent, and further that

the Tax Court likely would not reach the same holding in King if it were

presented again. So Jeff says that there is uncertainty about tax savings

clauses and formula clauses today. Carol commented on how inconsistent it

is for the government to take this position in this context, whereas it

specifically blesses formula clauses in matters such as QTIP

elections. Jeff said that he was not defending the government’s position,

but that the FSA and the McLendon cases are clear warning signs, but he

supposes that including such clauses in documents doesn’t hurt. Carol

disagreed somewhat, saying that clients can get whipsawed – the result

would be that a document would require an interest to be transferred to a

charity or other party based upon an adverse valuation determination,

whereas the government would not give recognition to the interest actually

being transferred.

Jeff closed the presentation with a brief review of an equitable

recoupment case (Mueller, 107 T.C. 189),which held that equitable

recoupment can be used defensively against a valid claim but not

offensively to collect a time barred underpayment or overpayment of

tax. Carol observed the very need to resort to equitable doctrines in Tax

Court is somewhat humorous, and that a better technique is to file

protective claims for refund while there is still time.

___________________________________________________

That is it for Report No. 2. The full text of all the Reports

will be posted on the ABA RPPT Web site at

www.abanet.org/rppt.

======================================

MIAMI INSTITUTE GENERAL INFORMATION:

Inquiries/Registration:

Philip E. Heckerling Institute on Estate Planning

University of Miami School of Law

Center for Continuing Legal Education

P.O. Box 248087

Coral Gables, FL 33124-8087

Telephone: 305-284-4762 / FAX: 305-284-6752

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NOTICE: Although audio tapes of all of the substantive session

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published annually by Lexis/Nexis. For further information, go to

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The text of these proceedings is also available on CD ROM from

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your Matthew Bender sales representative, or call (800) 533-1637,

or fax (800) 828-8341, or go to URL http://www.bender.com, or

write to Matthew Bender & Co., Inc., Attn: Fulfillment Dept., 1275

Broadway, Albany, NY 12204.

______________________________________________________

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ABA-PTL Discussion List Chief Moderator

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Report #3
back to 2002 Table of Contents

Tuesday, January 8, 2002

The below Report was compiled by our on-site Reporter, Ted Atlass, who is a

distinguished member of the Colorado Bar Association practicing in Denver,

Colorado.

TUESDAY, JANUARY 8, 2001

SINGLE STOCK MONETIZATION AND DIVERSIFICATION TECHNIQUES

S. Stacy Eastland, Esq., Goldman, Sachs & Co., Houston, Texas

I. INTRODUCTION

Discussed were tools for monetizing or diversifying concentrated

stock holdings while delaying the imposition of income taxes. There is no

one magic bullet - it is often necessary to combine the use several strategies.

II. WHY DIVERSIFY?

A properly diversified portfolio will both reduce the risk and

enhance the expected return to be achieved.

III. NON-TAX FACTORS TO CONSIDER

Tax considerations cannot be considered in a vacuum. Business laws - such

as state and federal securities laws, and the Hart-Scott-Rodino Act, need

to be considered, as well as the client's non-tax objectives (e.g.,

generating immediate cash or ongoing cash flow, simplifying his or her

investments, desires to get funds to family or charity in immediate or long

term, desire to control the investments, unrelated business taxable income,

and the market's sensitivity to the client's disposition of shares, etc.).

IV. SELECTED DIVERSIFICATION TECHNIQUES

A. Issues involving the use of traditional charitable remainder

trusts were discussed, including CRATs, CRUTs, and NIMCRUTs - including

their being non-amendable and irrevocable, the impact of inflation of a

CRAT payments, the impact of raising and falling asset values on CRUTs, the

tax disadvantages of CRTs (re the tier system under IRC Sec. 664, the

problems re unrelated business income investments, etc.), and the risk of

premature death causing a charitable windfall. Also discussed were the

added advantages of traditional NIMCRUTs, especially their flexibility.

B. An innovative variation on the spigot NIMCRUT was discussed,

involving the gifting of non-callable preferred limited partnership

interests (representing perhaps 90% of all of the partnership's

outstanding units) to a NIMCRUT. Management and growth units in the

partnership would be kept in the family. An appreciated asset would first

be given to a partnership, the partnership units then gifted to a NIMCRUT

(structured to provide at least the minimum 10% charitable deduction), and

the appreciated asset subsequently sold by the partnership. Such gifted

non-voting preferred limited partnership units would provide that all

payments be deferred for many years (perhaps 20 years) before becoming due

shortly before the NIMCRUT is to end. Most of the gain from the sale of

the asset would thus be deferred for 20 years under the tier rules of IRC

Section 664.

C. Also discussed was a technique where appreciate property would

be exchanged for an annuity from a partnership owned mostly by a public

charity (perhaps a donor-advised fund) - where the partnership would

subsequently sell its assets for a long-term note to a different limited

partnership consisting of the donor's children, with interest at the AFR

rate. Such note could be a SCIN if it were desired to eliminate the

mortality risk associated with the early deaths of the donors.. The

children would get the benefit of any investment return that beat the AFR

rate, and the parents would get the favorable IRC Sec. 72 tax rules

relating to annuity payments (rather than less favorable IRC Sec. 453

installment sale treatment). There were a lot of details and issues

relating to this technique which were covered in detail in the outline.

D. Public or multi-client exchange funds were discussed as a

means of diversifying one's stock holdings (although the stock ultimately

received would not have a stepped-up basis). Such partnership must stay in

existence for 7 years, and no cash can be received in the first two years,

in order to avoid disguised sale rules. Also, such partnerships must be

formed other than strictly with public securities.

E. A derivative technique, called a "collar", combines the

purchase of a put option and the sale of a call option - where the price

received and paid for such options offset each other (i.e., a "zero-cost"

collar). Economic risk must exist, but is limited - and most of the

owner's equity can thus be immediately borrowed out and redeployed in other

investments, even though income taxation is postponed because the original

stock has not yet been sold.

F. Another derivative technique, called a "prepaid variable rate

forward", combines a collar structure with a loan in a single transaction -

the shareholder's risk is limited, and the shareholder gets about 85% of

his or her equity out up front - and, in 3 or so years, is obligated to

tender an appropriate amount of stock to close out the deal (less shares

need be tendered if the stock goes up, and income taxes are postponed until

such stock is tendered).

G. Another technique, called the "mixing bowl example," involved

the use of appreciated stock , a partnership, and a c corporation, was

discussed that may allow a family to achieve results not unlike those

obtained with a public exchange fund.

V. COMPARISON OF TECHNIQUES

Extensive spreadsheet were attached to the outline and compared

the different diversification discussed diversification strategies with

each other - and which indicated that there is no one technique which is

always better than the others.

THE NEW MINIMUM DISTRIBUTION RULES

Marcia Chadwick Holt, Esq., of Davis Graham & Stubbs LLP, Denver, Colorado

I. THE 2001 PROPOSED REGULATIONS

Proposed regulations relating to minimum distributions were

released on January 17, 2001, and issuance of final regulations is expected

in the near future - possibly February. The required minimum distributions

(RMDs) under the 2001 Regulations are generally smaller than those required

by prior law,

II. CAVEAT RE BENEFICIARY DESIGNATIONS

The preemption of ERISA over state law was emphasized, and the

need to designate a new beneficiary after becoming divorced was discussed -

in the Engelhoff case, the state statute cutting out an ex-spouse from

non-probate assets upon divorce was held inapplicable where the decedent

had not changed the beneficiary designation that named his former spouse as

beneficiary.

III. QUALIFIED PLAN DISTRIBUTION OPTIONS

Remember that ERISA requires that married participant in a pension

plan, including a money purchase pension plan: (a) at retirement is

required to take a qualified joint and survivor annuity, and (b) at death

prior to retirement must take a qualified pre-retirement survivor annuity.

The plan may, but need not, offer optional benefit forms with spousal consent.

IV. DISTRIBUTIONS DURING LIFE OF PARTICIPANT OR OWNER

The required beginning date (RBD) is generally April 1st of the

calendar year following the later of the year the participant attains age

70-1/2, or, unless a 5% owner or IRA owner, April 1st of the calendar year

the participant retires.

The 2001 proposed regulations provide a new lifetime uniform table

for determining required minimum distributions (RMDs) which must be taken

after the RBD. Such tables can be used even where there is no Designated

Beneficiary. No life expectancy recalculation is required. The

participant's age is used to get the divisor. An exception to the new

tables applies if the spouse is a designated beneficiary and is more than

10 years younger than the participant - and meets certain other

requirements - in which case a "joint life and last survivor expectancy

table" can be used to computed the MRD.

A controversial provision in the proposed 2001 regulations would

require "IRA trustees, issuers, and custodians" to report RMDs annually to

the IRS, the IRA owner and the IRA beneficiary. Many comments were made to

the IRS regarding this requirement, and no effective date has yet been set

for it. Additionally, new aggregation rules for multiple IRAs will now apply.

V. DESIGNATED BENEFICIARIES

The proposed 201 regulations provide that during the life of an

IRA participant or owner, the new uniform table (or exception re 10 year

younger spouse) applies - whether or not there is a Designated

Beneficiary. The Designated Beneficiary's life expectancy only matters

after the death of the participant or IRA owner.

The Designate Beneficiary is determined on December 31st of the

calendar year following the calendar year of the participant's or IRA

owner's death. The interim or shakeout period after death can thus be used

to get rid of unwanted beneficiaries (i.e., cash them out, do disclaimers,

eliminate beneficiaries who die in common disasters, etc. - although not

all plan administrators will recognize disclaimers) - so that the remaining

beneficiary qualifies for favorable stretched out RMDs.. Individuals, not

estates or charities, can be Designated Beneficiaries. If there are

multiple beneficiaries, use the factor for the beneficiary with the

shortest life expectancy. Certain trusts can be designated beneficiaries.

VI. POST-DEATH DISTRIBUTIONS

There are two rules that may govern how quickly distributions must

be made from a qualified plan and IRA where death is before the RBD or

before distributions commence - (a) one allows use of the life expectancy

of the Designated Beneficiary per Reg. Sec. 1.72-9, Table V), and, (b) the

other requires that all distributions be made by the end of the calendar

year in which occurs the 5th anniversary of the death of the participant or

owner. The plan controls which applies - but if the plan is silent, then:

(1) the life expectancy rule applies if there is a Designated Beneficiary,

and (2) the five-year rule applies if there is no Designated

Beneficiary. A special rule applies if the surviving spouse if the

Designated Beneficiary and the sole beneficiary of the account. - and

allows use of the surviving spouse's life expectancy, which is

automatically recalculated. An "at least as rapidly" rule applies where

death occurs after the RBD, or after distributions commence - and an

exception applies where the deceased participant or IRA owner had no

Designated Beneficiary.

VII. SUMMARY CHART FOR DETERMINING RMDs

A very useful summary chart for determining RMDs was provided in

the outline.

VIII. SPOUSAL ROLLOVERS

It was pointed out that the proposed 2001 regulations require that

a surviving spouse, who is age 70-1/2 or older, must first take the RMD for

that year as owner - and only the balance may be rolled over. Also, it was

pointed out that EGTRRA of 2001 expanded permitted spousal rollovers to be

made to IRC Sec. 401(a) plans, Sec. 457 plans, and annuities under Sec.

401(a) and (b). Additionally, in certain circumstances, the Secretary can

now waive the 60 day rollover requirement.

USE OF IRD FOR CHARITABLE BEQUESTS

Prof. Christopher R. Hoyt, University of Missouri School of Law, Kansas

City, Missouri

I. GIFTS THAT PRODUCE THE BEST TAX RESULTS

Generally, the best tax results come from the lifetime gifts of

appreciated long-term capital gain property to charity, as a charitable

deduction for the full fair market value results, and the built-in capital

gain is avoided. Reduced tax benefits apply to charitable gifts of

ordinary income property, such as inventory, and to gifts of tangible

personalty, such as paintings.

At death, it is best to give so-called "IRD" (income in respect of

a decedent) assets to charity, as the estate is reduced for death tax

purposes by the full amount of the IRD, the charity is not subject to being

income taxed on receipt of the IRD (as would be a non-charitable

beneficiary), and other assets (which will not be income taxable to

non-charitable beneficiaries, and which will qualify for basis step-up, if

appreciated) are thus freed to be gifted to non-charitable beneficiaries.

It was interesting to learn that of the roughly 2% of decedents

who are required to file estate tax returns, only 17% to 19% of the estate

tax returns filed in several selected years in 1986 to 1998 claimed

a charitable deduction.

II. FUNDAMENTAL PLANNING POINTERS

Testamentary charitable gifts should be made from IRD

assets. Even persons not inclined to make charitable bequests may consider

gifting retirement plan assets to charity at death, due to the high double

tax on such assets if such assets pass to individual beneficiaries. Also,

naming a charitable remainder trust to be the testamentary beneficiary of a

retirement plan or of other IRD assets at death is a way to defer the

income taxation on such IRD.

III. OVERCOMING OBSTACLES

Ideally, IRD assets will go directly to charity at death - so that

the IRD never hits the estate's income tax return (e.g., charity will be

the direct beneficiary of the retirement plan or U.S. Savings Bonds having

accrued but untaxed interest). Otherwise, if the estate collects the IRD,

it is necessary that the state qualify for the charitable income tax

deduction via a well-timed payment to charity, or via the permanent

charitable set-aside deduction under IRC Sec. 642(c).

The executor/trustee should be given authority to make non-pro

rata distributions (so IRD assets can be distributed to charity), and there

should be language in the document (which, it is hoped - but not guaranteed

- that the IRS will respect) that any charitable bequests are deemed

funded first from IRD.

Additionally, under the 2001 proposed regulations dealing with

required minimum IRA distributions (which provide that the Designate

Beneficiary is determined on December 31st of the calendar year following

the calendar year of the participant's or IRA owner's death - see summary

of Marcia Holt's talk for more details) - it will be advisable, if charity

and individual beneficiaries are to share an IRA, that the charity be paid

in full by December 31st of the calendar year following the account owner's

death, if a separate account is not established for the charity, so that

the remaining individual beneficiary can get maximum deferral.

IV. LIFETIME CHARITABLE GIFTS FROM IRAs AND QUALIFIED PLANS

Lifetime gifts from retirement plans result in the participant

having both income from a retirement plan distribution and an offsetting

charitable income tax deduction - so contributing appreciated stock during

life is a better deal, from income tax standpoint. But income tax savings

can result from the lifetime charitable gift of a retirement plan

distribution in certain circumstances involving lump sum distributions

(either of employer stock, or which qualify for forward-averaging tax).

V. STRUCTURING CHARITABLE BEQUESTS UNDER THE 2001 PROPOSED REGULATIONS

DEALING WITH RMDs

The outline contains a detailed analysis of how to structure

charitable bequests under the 2001 proposed regulations dealing with

required minimum distributions.

VI. LEGAL AUTHORITY ON POINT

Useful as a reference, a number of private letter rulings dealing

are cited in the outline which deal with the issue of charitable gifts and IRD.

UNDERSTANDING YOUR CLIENT'S MONEY PERSONALITY

Jon J. Gallo, of Greenberg, Glusker, Fields, Clayman, Machtinger & Kinsella

LLP, Los Angeles, California

I. IMPORTANCE OF CLIENT VALUES

Every client has values and desires, separate from saving taxes,

that must be considered. We must humanize are approach to estate planning

- i.e., be both "high tech" and "high touch."

II. REDUCTION OF STRESS

Planners don't realize how stressful the estate planning process

is to clients - e.g., how stressful thoughts and discussions of his or her

own death, the death of a spouse or child, divorce, financial calamity,

disability, sale of one's business, etc., are to the client.

Client stress can be reduced by: (1) Listening (i.e., more human

interaction, rather than mail and e-mail contacts, etc.), (2) Normalizing

(i.e., explain the estate process and that most clients don't like to think

about such things, have trouble making decisions, have to revisit the

estate plan every few years, etc.); and (3) Reframing (i.e., rather than

talking about death and taxes - instead focus on a family vision statement,

goals, and values). It was suggested that the concept of the "ethical

will"be looked at in this regard.

III RELATIONSHIP WITH MONEY

Estate planners must understand the client's relationship with

money - i.e., how they feel, how they think and how they deal with

it. Attitudes towards the acquisition of money (could they not care less

about it, or would they do anything to get more of it), the use of money

(is the client a miser, or do they spend everything they get), and the

management of money (do they micro-manage every dime, or are they

disorganized and hate being involved in money management).

CHOICE OF LAW IN TRUSTS: HOW BROAD IS THE POSSIBLE SPECTRUM?

Malcolm A. Moore, Esq., of Davis Wright Tremaine, Seattle, Washington

I. INTRODUCTION

The governing law with respect to the validity, construction,

administration, and meaning and effect of a trust was reviewed. Due to

policy reasons, a settlor has historically had the least amount of

flexibility (re choice of laws) with reference to issues of

validity. Section 403 of the new Uniform Trust Code would eliminate the

traditionally differences in rules relating to trusts with land and trusts

with other assets, relating to the determination of the trust's validity

and meaning and effect - thus granting more authority re choice of law

matters than has historically existed.

Questions of validity (e.g., public policy issues such as the

rights of creditors or surviving spouses) involving trusts holding land

have historically been governed by the law of the land's situs - at least

while such land continued to be held by the trust. Questions dealing with

the validity of other trusts have historically be decided by the law of

the testator's (or settlor's domicile), or (if no public policy in the

testator's or settlor's domicile is violated), by the law of the state

with the most significant relationship with respect to the particular issue

at hand.

Questions of construction, absent a choice of laws clause, seem to

be less well-settled. They may be decided by the law of the settlor's (or

decedent's) domicile, or where the trust is administered, or the law where

the most significant relationship to the matter at issue exists, depending

upon the circumstances. The key is that these are default rules that can

generally be overridden by a specific choice of laws clause in the

document. Such choice of laws clause may mandate what law is to apply, or

may give the trustee (or trust protector) some flexibility to choose what

law is to apply.

II. SITUS

Situs generally means the place of the trust's

administration. Where the choice of law is tied to situs, moving the place

where the trust is administered (typically where the trustee is located)

may change applicable law as to the rights of creditors of settlors or

beneficiaries, accounting requirements, availability of non-judicial

settlement provisions, state income tax consequences, etc.

III. WHEN CAN A SETTLOR/TESTATOR CHOOSE THE APPLICABLE LAW?

Historically, there is little law re the ability of settlors and

testators to choose what law governs the validity of a trust of land. The

Uniform Trust Code will presumably create such an ability where there is

some nexus between the trust and the jurisdiction whose law is

chosen. Settlors and testators of trusts of movables have historically had

broader rights to designate a choice of law governing the validity of a

trust of movables,, at least provided that there is some nexus with the

chosen jurisdiction and where no strong public policy of the settlor's or

testator's law of domicile is violated.

Testators and settlors have long been able to make choice of state

laws provisions re construction and administration (e.g., trustee powers ,

compensation, indeminficiation and succession; trust investments and

termination; and principal and income issues). It was suggested that they

should also be able, via incorporation by reference, to cause a uniform act

(such as the Uniform Trust Code or Uniform Principal and Income Act) to

govern a trust.

IV. MOVING A TRUST

Trustees may be given directly given the right to move a trust's

situs or its principal place of administration to a different jurisdiction,

or such a change of jurisdiction may happen indirectly by reason of a

change of trustee occurring (via resignation, removal, or the exercise of a

power of appointment), a trustee moving, etc.

V. WHY MOVE A TRUST

Moving a trust's situs to a different jurisdiction could be

desirable for a number of reasons, including more favorable income tax

consequences, to have different rules re the availability of court

oversight or alternative dispute resolution, to allow the application of

different principal and income rules (including a total return investment

concept), etc.

VI. CHOICE OF LAWS FROM STATES OTHER THAN THE STATE OF SITUS

The trustee or a third party, such as a trust protector, could be

given the power to adopt the laws of other jurisdictions (including the

laws of different jurisdictions for different issues), so long as the

chosen jurisdiction has some relationship to the trust where matters of

validity are concerned), so long as the state whose laws are being adopted

does not have limitations that have not been met (such as requiring that a

trust's principal place of administration be in the state in order for such

power to apply to a trust).

VII. LIMITATIONS MAY NEED TO EXIST

Trustees, protectors, and beneficiaries should not be given such

broad discretion as will cause potential gift and estate tax problems

(e.g., causing a taxable power of appointment to occur, etc.), or which

could defeat the objectives of the settlor/trustor. Additional, attempts

to grant powers which would violate strong public policy (encourage

divorce, limit spousal rights, defeat creditors, etc.) would presumably be

ineffective.

VII. DRAFTING CONSIDERATIONS

It was suggested that validity of the trust be covered by whatever

applicable law would support such validity, and that the trustee be given

broad authority to select what laws (including laws of jurisdictions and

uniform acts) are to govern questions of construction, the meaning and

effect of the trust's terms, and the administration of the trust -

including moving the trust, or not exercising such powers. In default of

such an exercise of discretion, the laws of the place of administration

would apply. Additionally, the trustee would be prohibited from any

exercise of discretion that would cause the trustee to be deemed to possess

a general power of attorney for federal gift and estate tax purposes.

HECKERLING SPECIAL:

Stephan Leimberg <steve@leimbergservices.com> has recently informed us that

his Company [Leimberg & LeClair] is willing to offer a Heckerling Special

for anyone who sees this announcement and subscribes to his LISI Newsletter

service during the time the Institute is taking place All you have to do

is send an e-mail to service@leimbergservices.com and include the words

HECKERLING DISCOUNT in the subject. Bob LeClair will get back to you and

handle the sign-up. They will give those people a monthly price of $13.95

rather than the $14.95 regular price. They also can take a free look at

the site and its many services by going to http://www.leimbergservices.com

and clicking on the blue FREE TRIAL button on the top right.

NEWS FROM THE IRS:

>The IRS has just publishes the New Form SS-4, Application for Employer

>Identification Number

>(PDF). It is a Two-page PDF document. (Internal Revenue Service).

>

>The instructions are also there in a separate file - iss4.pdf

>

>The form may be obtained from the IRS Forms and Publications site. The link

>to the .pdf version is below.

>

>http://ftp.fedworld.gov/pub/irs-pdf/fss4.pdf

___________________________________________________

That is it for Report No. 3. The full text of all the Reports

will be posted on the ABA RPPT Web site at

www.abanet.org/rppt.

======================================

MIAMI INSTITUTE GENERAL INFORMATION:

Inquiries/Registration:

Philip E. Heckerling Institute on Estate Planning

University of Miami School of Law

Center for Continuing Legal Education

P.O. Box 248087

Coral Gables, FL 33124-8087

Telephone: 305-284-4762 / FAX: 305-284-6752

===========================================

Headquarters Hotel - Fontainebleau Hilton, Miami Beach, FL

Telephone (305) 538-2000, FAX (305) 674-4607

===========================================

NOTICE: Although audio tapes of all of the substantive session

at the Miami Institute currently are only made available to Institute

registrants for purchase, the entire proceeding of the Institute are

published annually by Lexis/Nexis. For further information, go to

their Web site at http://www.lexis.com.

The text of these proceedings is also available on CD ROM from

Authority by Matthew Bender. For further information, contact

your Matthew Bender sales representative, or call (800) 533-1637,

or fax (800) 828-8341, or go to URL http://www.bender.com, or

write to Matthew Bender & Co., Inc., Attn: Fulfillment Dept., 1275

Broadway, Albany, NY 12204.

______________________________________________________

Joseph G. Hodges Jr. Esq., Denver, CO

ABA-PTL Discussion List Chief Moderator

jghodges@jghlaw.com

http://www.jghlaw.com

URL for ABA-PTL Web-based Archives:

http://mail.abanet.org/archives/aba-ptl.html

Report #3a
back to 2002 Table of Contents

REPORT NO. 3A - Friday Afternoon, January 11, 2002

This report is brief and is being sent to all of you mainly to let you know that there is a lot more to come, so stay tuned.  It takes time for our reporters to compile their stories and send them in to the Editors, then some more time for the Editors to compile those stories into the Reports that are being transmitted to all of you. 

We are running behind at the present time, but Report #4, dealing with the vendors who were at Heckerling this year and a lot of other interesting "techie" news, will go out sometime tomorrow morning (there will be some great stuff in that one).  This will be followed soon thereafter, Saturday afternoon and Sunday, with Reports #5, #6, etc. covering the sessions that were held Tuesday afternoon (Drafting for EGERTA), as well as Wednesday through Friday mornings, and some of the Special Session presentations that were given in the afternoon on Wednesday and Thursday.  We hope to have all of the Reports for 2002 out by no later than the middle of next week at the latest.  The last Report will be denoted as the "Final" one so you will know you have been sent all of them.

In the meantime, here from Report #3 is a reminder about one of the previously announced HECKERLING SPECIALS (and there will be some more great ones coming soon), and more late-breaking news from the IRS............................

HECKERLING SPECIAL (a repeat announcement):

Stephan Leimberg <steve@leimbergservices.com> has recently informed us that his Company [Leimberg & LeClair] is willing to offer a Heckerling Special for anyone who sees this announcement and subscribes to his LISI Newsletter service during the time the Institute is taking place and before the Final Report is issued.  All you have to do is send an e-mail to service@leimbergservices.com and include the words HECKERLING DISCOUNT in the subject. Bob LeClair will get back to you and handle the sign-up.  They will give those people a monthly price of $13.95 rather than the $14.95 regular  price.  They also can take a free look at the site and its many services by going to <http://www.leimbergservices.com/> and clicking on the blue FREE TRIAL button on the top right.

MORE NEWS FROM THE IRS:

The Nov. 2001 Form 706 and Instructions is now available from the IRS Web site at <http://www.irs.ustreas.gov/basic/forms_pubs/formpub.html>irs.ustreas.gov/basic/forms_pubs/formpub .html <http://www.irs.ustreas.gov/basic/forms_pubs/formpub.html>
It was posted there on 1/9/02

In additon, the new Form 709 is there too.

__________________________________________________
That is it for Report No. 3A.  The full text of all the Reports
will be posted on the ABA RPPT Web site at
www.abanet.org/rppt <http://www.abanet.org/rppt>.

======================================
MIAMI INSTITUTE GENERAL INFORMATION:

Inquiries/Registration:
Philip E. Heckerling Institute on Estate Planning
University of Miami School of Law
Center for Continuing Legal Education
P.O. Box 248087
Coral Gables, FL 33124-8087
Telephone: 305-284-4762 / FAX: 305-284-6752
===========================================
Headquarters Hotel - Fontainebleau Hilton, Miami Beach, FL
Telephone (305) 538-2000, FAX (305) 674-4607
===========================================
NOTICE: Although audio tapes of all of the substantive session
at the Miami Institute currently are only made available to Institute
registrants for purchase, the entire proceeding of the Institute are
published annually by Lexis/Nexis. For further information, go to
their Web site at <http://www.lexis.com/>.

The text of these proceedings is also available on CD ROM from
Authority by Matthew Bender. For further information, contact
your Matthew Bender sales representative, or call (800) 533-1637,
or fax (800) 828-8341, or go to URL <http://www.bender.com/>, or
write to Matthew Bender & Co., Inc., Attn: Fulfillment Dept., 1275
Broadway, Albany, NY 12204.
______________________________________________________
Joseph G. Hodges Jr. Esq., Denver, CO
ABA-PTL Discussion List Chief Moderator
jghodges@jghlaw.com
<http://www.jghlaw.com/>
URL for ABA-PTL Web-based Archives:
<http://mail.abanet.org/archives/aba-ptl.html>

Report #4
back to 2002 Table of Contents

        ===================================================
REPORT NO. 4 - The Vendors and Other Techie News

This report is usually Report #1, but it took us longer than expected to gather up all the information we could from the vendors who were in the Exhibit Hall at Heckerling this year and compile it into this Report.  In addition, it took us much longer than we expected to compile this Report.  Due to these delays, we have been able to negotiate extensions of some of the special show deals and prices that were being offered by the vendors at Heckerling (see further below re).

We are indebted to Jim Eidelman of Eidelman Associates (President of the Company that markets the EP Expert software system that is built on top of his WinDraft system and Microsoft Word - further details on this product are below) and Alan Rothschild, the current Co-Chair of the ABA RPPT Sections Public Web Site Committee and former Chair of the PT Division’s Technology Committee) for carrying the laboring oar on the below "Reports from the Exhibit Hall."

First, a list of who was (and, interestingly, was not) there (in alpha order):

BNA Software - www.bnasoftware.com <http://www.bnasoftware.com/>
Brentmark Software - www.brentmark.com <http://www.brentmark.com/>
Cowles Legal Systems - <http://www.cowleslegal.com/>
Crescendo Software - www.crescendosoft.com