Heckerling
Institute 2003
Reports from the event, as posted to the ABA-PTL List Serve |
Introduction
back
to 2003 Table of Contents
INTRODUCTION
As we have done in January for the last six 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 37th Annual Philip E. Heckerling
Institute on Estate Planning that is being held January 6-10, 2003
at the
Fontainebleau Hilton Resort and Towers in Miami Beach, Florida.
Our on-site local reporters there in Miami this year will be identified
as
their reports are received and published:
We also will be posting the full text of this year's Reports on
the ABA
RPPT Section's Web site, as we have since the 2000 Institute. Those
Reports can be found at URL
http://www.abanet.org/rppt/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 of the Institute:
The Philip E. Heckerling Institute on Estate Planning is the nation’s
leading conference for estate planning professionals. It is designed
for
sophisticated attorneys, trust officers, accountants, insurance
professionals, and financial planners who, through years of experience
and
practice, are familiar with the principles of estate planning. This
year’s
program will provide the information you need to remain up-to-date
on the
latest developments in the estate planning field.
· A recent developments panel on Monday afternoon will guide
you
through the year’s developments in estate, gift, and income
taxation.
· The Tuesday morning program marks the beginning of our
general
session lectures. The lectures provide in-depth analysis of topics
of
timely interest to experienced estate planners, and are presented
by some
of the nation’s leading authorities.
· Tuesday afternoon will include a panel focusing on estate,
gift and
generation-skipping planning and drafting issues in the new statutory
environment.
· On Wednesday and Thursday afternoons, the Institute offers
a wide
variety of workshops, panel discussions, and case studies, that
will
examine and provide practical guidance on sophisticated estate planning
techniques.
· Finally, this year’s Institute once again includes
our popular
Fundamentals Program, designed to be of interest to not only entry-level
practitioners, but also to more experienced planners who would benefit
from
a thorough review of these topics central to the estate planning
process.
As the largest gathering of estate planners in the country, the
Institute
offers a unique 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 hope that you will join us in Miami Beach January 6-10,
2003,
to take advantage of this unique event.
THE INSTITUTE 2003 FACULTY:
Roy M. Adams
Sonnenschein Nath & Rosenthal
Steve R. Akers
Bessemer Trust
Russell G. Allen
JP Morgan
Albert S. Barr, III
Law Office of Albert S. Barr, III LLC
Susan T. Bart
Sidley Austin Brown & Wood
Martin E. Basson
Internal Revenue Service Estate and Gift
Edward Jay Beckwith
Baker & Hostetler LLP
Norman J. Benford
Greenberg Traurig
Jonathan G. Blattmachr
Milbank, Tweed, Hadley & McCloy LLP
Alexander A. Bove, Jr.
Law Offices of Alexander A. Bove
Karen E. Boxx
University of Washington
Lawrence Brody
Bryan Cave LLP
J. Donald Cairns
Spieth, Bell, McCurdy & Newell, L.P.A.
Natalie B. Choate
Bingham Dana LLP
Richard B. Covey
Carter, Ledyard & Milburn
David J. Dietrich
Dietrich & Cole
S. Stacy Eastland
Goldman, Sachs & Co.
Mary Lou Edelstein
Internal Revenue Service Appeals
Timothy P. Flaherty
Silver Creek SV, LLC
Paul N. Frimmer
Irell & Manela LLP
Jon J. Gallo
Greenberg, Glusker, Fields, Claman
Machtinger & Kinsella LLP
Leslie C. Giordani
Giordani, Schurig, Beckett & Tackett, LLP
Joseph G. Gorman, Jr.
Sheppard, Mullin, Richter & Hampton LLP
Carol A. Harrington
McDermott, Will & Emery
Ellen K. Harrison
Shaw Pittman
Dan T. Hastings
Skadden, Arps, Slate, Meagher & Flom LLP
Joseph G. Hodges, Jr.
Attorney at Law
Edmond M. Ianni
Wilmington Trust Company
Lawrence P. Katzenstein
Thompson Coburn LLP
William Lapiana
New York Law School
John B. Lawson
Insurance Distributors International (Bermuda) Ltd.
Ralph E. Lerner
Sidley Austin Brown & Wood LLP
Mary Ann Mancini
Steptoe & Johnson LLP
Daniel H. Markstein, III
Maynard, Cooper & Gale, P.C.
Carlyn S. McCaffrey
Weil, Gotshal & Manges LLP
Jerry J. McCoy
Law Office of Jerry J. McCoy
Judith M. McCue
McDermott, Will & Emery
Louis A. Mezzullo
Mezzullo & Guare, PLC
John R. Price
Perkins Coie LLP
John W. Porter
Baker & Botts, L.L.P.
Susan Porter
United States Trust Company
Richard B. Robinson
Lentz, Evans & King P.C.
Pam H. Schneider
Gadsden Schneider & Woodward LLP
Howard M. Zaritsky
Attorney at Law
Henry Steinway Ziegler
Fiduciary Trust Company International
THE PROGRAM SCHEDULE:
Sunday, January 5
Registration
Monday, January 6
OPTIONAL PRE-CONFERENCE FUNDAMENTALS PROGRAM
ERISA for Estate Planners - Natalie B. Choate
Introductory Remarks - Tina Portuondo, Institute Director
Recent Developments in Estate, Gift and Income Taxation 2002
Carlyn S. McCaffrey
Dan T. Hastings
Howard M. Zaritsky
Materials by Richard B. Covey and Dan T. Hastings
Tuesday, January 7
Adventures in Life Insurance! (And You Thought It Would Be Boring)
Jonathan G. Blattmachr
Turning the Tables: When Do the IRS Actuarial Tables Not Apply?
Lawrence P. Katzenstein
What To Do With Art and Other Valuable Stuff
Ralph E. Lerner
Charitable Lead Trusts Re-Examined: The Dawning of a Golden Age?
Edward Jay Beckwith
Drafting After EGTRRA (and Other Recent Developments):
How Different Is It?
Pam H. Schneider
Paul M. Frimmer
Carol A. Harrington
Did They Get It Right? The Final Minimum Distribution Rules
Louis A. Mezzullo
State Law Developments Searching for Revenue and Other Quests
William Lapiana
Wednesday, January 8
Worth the Effort Even Beyond the Grave An Update of Post-Mortem
Planning Issues
Steve R. Akers
From the Far Bank of The River Styx: Post-Mortem Problems and
Opportunities With Family Partnerships
Daniel H. Markstein, III
Question & Answer Session
Carlyn S. McCaffrey
Dan T. Hastings
Howard M. Zaritsky
FUNDAMENTALS PROGRAM Estate Planning in a Low Interest
Rate Environment (Runs concurrently with the Special Sessions)
Lawrence P. Katzenstein
Special Sessions I
I-A CASE STUDY The 529 Drop-Kick Through the Financial
Goalposts of Education Savings
Susan T. Bart
I-B Our Best Ideas That We Are Willing To Talk About
S. Stacy Eastland
Jonathan G. Blattmachr
Ellen K. Harrison
I-C Charitable Planning: What’s on Your Desk?
Jerry J. McCoy
Edward Jay Beckwith
Ralph E. Lerner
I-D Fielding the Throwback and Other Considerations for NRAs
With U.S. Heirs
Henry Steinway Zeigler
I-E Ethics as Part of the Daily Mix Has Enron Raised the Bar?
Joseph G. Gorman, Jr.
J. Donald Cairns
Judith W. McCue
Special Sessions II
II-A CASE STUDY Moving the Immovable Protecting Real
Estate From Creditors
Alexander A. Bove, Jr.
II-B Transfer Tax Audit Issues: What's Hot, What's Not
Norman J. Benford Mary Lou Edelstein
Martin E. Basson John W. Porter
II-C Advanced Investments in Life Insurance Strategies Use of
Hedge Funds in Offshore Private Placement Life Insurance
Lawrence Brody
Leslie C. Giordani
Timothy P. Flaherty
John B. Lawsond
II-D Back to the Future: Carryover Basis in 2010
William Lapiana
Susan Porter
II-E Ethics as Part of the Daily Mix Has Enron Raised the Bar?
(Repeat of Session I-E)
Joseph G. Gorman, Jr.
J. Donald Cairns
Judith W. McCue
Thursday, January 9
Estate Planning With GRATs and Near-GRATs Opportunities and
Pitfalls of a Cloudy Crystal Ball
John R. Price
Unwinding the Discount Entity: What Happens When the Family
Wants To Take Their Share and Run?
Richard B. Robinson
What Do You Mean, Subpoena? I’m a Lawyer!
Russell G. Allen
One Percent, Two Percent, Three Percent, Four No Matter What
12:15 p.m. You Pay, the Bene Wants More
Susan Porter
FUNDAMENTALS PROGRAM Everything You Ever Wanted To
Know About Generation-Skipping But Were Afraid To Ask
(Runs concurrently with the Special Sessions)
Jon J. Gallo
Special Sessions III
III-A CASE STUDY Unwinding Discount Entities
Richard B. Robinson
III-B Transfer Tax Audit Issues: What's Hot, What's Not
(Repeat of Session II-B)
Norman J. Benford
Mary Lou Edelstein
Martin E. Basson
John W. Porter
III-C Post-Mortem Planning in Transition
Steve R. Akers
III-D Fiduciary Firewalls: A Look at Blind Trusts
Edmond M. Ianni
III-E Timely Tech Topics & Ticklers "Must Have" Software,
"Must Know" Technology, and "Must Do" Stuff
Joseph G. Hodges, Jr.
Albert S. Barr, III
Special Sessions IV
IV-A CASE STUDY Post-Mortem Planning With Partnerships
Daniel H. Markstein, III
IV-B GRATs
John R. Price
IV-C The FLP Side: Fiduciary Liability Potential
Russell G. Allen
Susan Porter
IV-D Pleasing Mother Earth and the IRS: Using Conservation
Easements To Save Open Space, Income and Estate Taxes
David J. Dietrich
IV-E Split-Dollar Life Insurance
Lawrence Brody
Jonathan G. Blattmachr
Mary Ann Mancini
Friday, January 10
The Durable Power of Attorney: Why You Should Give More
Attention to Estate Planning’s Stepchild
Karen E. Boxx
Terrorism or Its Prospect The Impact on Estate Planning
Roy M. Adams
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD ROM from
Authority On-Demand by LexisNexis Matthew Bender. For further
information, contact your sales representative, or call (800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order Fulfillment
Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
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back
to 2003 Table of Contents
PROGRAM
back
to 2003 Table of Contents
This e-mail includes the program and the summaries
from the 37th Annual Heckerling Institute on Estate
Planning.
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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.
===================================================
37TH
ANNUAL
HECKERLING
INSTITUTE
ON ESTATE
PLANNING
Sunday, January 5
12:00 – Registration
6:00 p.m.
Monday, January 6
8:00 a.m. Registration
8:00 – Complimentary Continental Breakfast
9:00 a.m.
9:00 – OPTIONAL PRE-CONFERENCE FUNDAMENTALS PROGRAM
–
10:30 a.m. / ERISA for Estate Planners
10:45 a.m. –
12:15 p.m. Natalie B. Choate
Everything you need to know about estate
planning for qualified retirement
benefits except the minimum distribution rules: the
types of retirement plans
(defined benefit, Keogh, 401(k), ESOPs), and implications
of each for your
client’s estate plan. Navigating the sea of plan administration:
information you
need to know and how to get it, spousal rights under
federal law, prohibited
transactions, plan-owned life insurance, contrast between
qualified plans and
IRAs (and which one is better for whom: the "Rollover
Roadmap"). Special
income tax deals for certain people – don’t let your
client miss out. Estate tax
issues: the latest on valuation and available discounts.
Disclaimers: be sure
you know what you’re doing when you adopt a "disclaimer
plan" for retirement
benefits. With forms, case studies, and specific planning
ideas.
10:30 – Break
10:45 a.m.
2:00 – Introductory Remarks
2:10 p.m.
Tina Portuondo, Institute Director
2:10 – Recent Developments in Estate, Gift and
Income Taxation – 2002
3:30 p.m. Part One
Carlyn S. McCaffrey
Dan T. Hastings
Howard M. Zaritsky
Materials by Richard B. Covey and Dan T. Hastings
3:30 – Break
3:45 p.m.
3:45 – Recent Developments in Estate, Gift and Income
Taxation – 2002
5:15 p.m. Part Two
6:00 – Complimentary Reception for Registrants
7:00 p.m.
Tuesday, January 7
8:00 – Complimentary Continental Breakfast
9:00 a.m.
9:00 – A d v e n t u res in Life Insurance! (And You
Thought It Would Be Boring)
9:45 a.m.
Jonathan G. Blattmachr
This presentation will cover how to
obtain income tax "deductions" for term
premiums paid, how to avoid GST tax for a life insurance
trust without using
GST tax exemption, how to double the power of Crummey
withdrawal rights,
and how to plan with split-dollar life insurance.
9:45 – Turning the Tables: When Do the IRS
Actuarial Tables Not Apply?
10:30 a.m.
Lawrence P. Katzenstein
This presentation will examine when
departures from the IRS actuarial tables are
permitted or required, including situations of under-productive
property and
increased risk of mortality, and will consider the implications
of recent decisions
permitting departures from the tables in valuing the
right to receive state lottery
payments.
10:30 – Break
10:45 a.m.
10:45 – What To Do With Art and Other Valuable Stuff
11:30 a.m.
Ralph E. Lerner
When a client owns valuable collectibles
it can require unique planning
techniques to save taxes. This presentation will address
income tax, gift tax,
and estate tax planning for collectibles, valuation
issues, IRS guidelines and
procedures, and the complications caused by a client’s
emotional attachment to
his or her "stuff"!
11:30 a.m. – Charitable Lead Trusts Re-Examined:
The Dawning of a Golden
12:15 p.m. Age?
Edward Jay Beckwith
In light of recent changes, both in
tax laws and the financial markets, it is likely
the charitable lead trust will become even more popular
over the balance of this
decade. This session will examine the factors contributing
to this likely trend as
well as the more creative uses and abuses of charitable
lead trusts.
12:15 – Lunch Break
2:00 p.m.
2:00 – Drafting After EGTRRA (and Other Recent Developments):
3:30 p.m. How Different Is It?
Pam H. Schneider
Paul M. Frimmer
Carol A. Harrington
The panelists will discuss how the
language in their documents has changed (or
not changed, as the case may be) in light of the purported
"repeal of the death
tax," technical GST tax changes included in EGTRRA,
and other recent
developments. The focus will be on specific will and
trust provisions.
3:30 – Break
3:45 p.m.
3:45 – Did They Get It Right? The Final Minimum Distribution
Rules
4:30 p.m.
Louis A. Mezzullo
A discussion of the final regulations
dealing with required minimum distributions,
including planning issues and problem areas.
Tuesday, January 7 (continued)
6
4:30 – State Law Developments – Searching
for Revenue and Other
5:15 p.m. Quests
William Lapiana
This program will discuss recent developments
in state law, both decisional and
legislative, with a special emphasis on state responses
to the elimination of the
federal state death tax credit. If time permits, mention
will also be made of
non-tax developments.
Wednesday, January 8
8:00 – Complimentary Continental Breakfast
9:00 a.m.
9:00 – Worth the Effort Even Beyond the Grave – An Update
of Post-Mortem
9:45 a.m. Planning Issues
Steve R. Akers
The extremely broad range of post-mortem
planning strategies can be daunting.
A good planner must be knowledgeable of a wide array
of individual and
fiduciary income tax, gift tax, estate tax, and GSTT
planning traps and strategies.
This session will address important planning issues
and current developments.
9:45 – From the Far Bank of The River Styx:
Post-Mortem Problems and
10:30 a.m. Opportunities With Family Partnerships
Daniel H. Markstein, III
This presentation will focus on planning
for the payment of estate tax, funding
charitable and other bequests, and dealing with existing
and newly created
partnerships after the death of the propertied spouse.
10:30 – Break
10:45 a.m.
10:45 a.m. – Question & Answer Session
12:15 p.m.
Carlyn S. McCaffrey
Dan T. Hastings
Howard M. Zaritsky
12:15 – Lunch Break
2:00 p.m.
2:00 – FUNDAMENTALS PROGRAM – Estate Planning
in a Low Interest
3:30 p.m. / Rate Environment (Runs concurrently
with the Special Sessions)
3:45 –
5:15 p.m. Lawrence P. Katzenstein
What estate planning techniques work
best when interest rates are low? What
techniques work better when interest rates are high?
What techniques are
unaffected by interest rates? This program will examine
these questions and
look at the effect of varying interest rates on a variety
of estate planning
techniques.
2:00 – Special Sessions I
3:30 p.m.
I-A – CASE STUDY – The 529 Drop-Kick Through
the Financial
Goalposts of Education Savings
Susan T. Bart
Learn how to create a game plan for
education savings by combining 529
savings accounts with other techniques from your playbook
and how to
Tuesday, January 7 (continued)
7
implement a successful 529 play by selecting the right
state program, using
trusts and other entities as account owners, and coordinating
the estate plan.
I-B – Our Best Ideas That We Are Willing To
Talk About
S. Stacy Eastland
Jonathan G. Blattmachr
Ellen K. Harrison
The panelists will discuss their best
ideas with respect to estate planning,
charitable planning, insurance planning, option planning,
and post-mortem
planning.
I-C – Charitable Planning: What’s on Your
Desk?
Jerry J. McCoy
Edward Jay Beckwith
Ralph E. Lerner
This charitable "Hot Topics"
session will review recent developments and
discuss questions previously submitted by attendees.
Registrants will be
invited to submit noteworthy planning problems in advance
of the session.
I-D – Fielding the Throwback and Other Considerations
for NRAs
With U.S. Heirs
Henry Steinway Zeigler
An increasing number of high net worth
non-U.S. families have at least one child
who is a U.S. taxpayer. This presentation will address
some of the opportunities
and pitfalls for multinational families with U.S. heirs,
with emphasis on foreign vs.
domestic trusts and entities and how to save U.S. taxes
for the heirs after the
death of the nonresident alien parent.
I-E – Ethics as Part of the Daily Mix – Has
Enron Raised the Bar?
Joseph G. Gorman, Jr.
J. Donald Cairns
Judith W. McCue
A discussion of many situations that
arise regularly in an estate planner’s
practice, with a focus on what, from a practical viewpoint,
should be done, and
how to do it.
3:30 – Break
3:45 p.m.
3:45 – Special Sessions II
5:15 p.m.
II-A – CASE STUDY – Moving the Immovable – Protecting
Real
Estate From Creditors
Alexander A. Bove, Jr.
A discussion and case study illustrating
creative solutions to the perennial
dilemma faced by estate and asset protection planners:
How to protect
investment real estate from creditors without losing
the benefits of ownership for
the client and her family.
II-B – Transfer Tax Audit Issues: What's Hot,
What's Not
Norman J. Benford Mary Lou Edelstein
Martin E. Basson John W. Porter
This panel, representing the views
of the practitioner and Internal Revenue
Service, will take a practical approach to the discussion
of significant current
issues in estate, gift, and generation-skipping tax
audits, including valuation
matters (discounts, present interest qualification,
built-in gain, impact of
post-death events, use of appraisers, adequate disclosure
rules, and defined
Wednesday, January 8 (continued)
8
value issues); procedural considerations (tips for effective
appellate practice,
fast track mediation, burden of proof issues); and Graegin
notes and other
deduction issues.
II-C – Advanced Investments in Life Insurance
Strategies – Use of
Hedge Funds in Offshore Private Placement Life Insurance
Lawrence Brody Leslie C. Giordani
Timothy P. Flaherty John B. Lawson
This panel will discuss the use of
hedge funds in private placement variable life
insurance policies, issued by non-U.S. based insurance
carriers. The panel will
discuss attributes of hedge funds and why they and other
tax inefficient
investments may make sense in a variable life policy,
the U.S. tax considerations
of variable life insurance, including diversification
and investor control issues,
the advantages and disadvantages of private placement
life insurance, the
advantages and disadvantages of private placement variable
life insurance
offered by non-U.S. insurance carriers, and the special
issues involved in the
purchase by U.S. persons of policies issued by foreign
carriers.
II-D – Back to the Future: Carryover Basis
in 2010
William Lapiana
Susan Porter
This program will discuss the carryover
basis provision scheduled to come into
effect in 2010, especially what can and should be done
now to plan and draft for
the possible future.
II-E – Ethics as Part of the Daily Mix – Has
Enron Raised the Bar?
(Repeat of Session I-E)
Joseph G. Gorman, Jr.
J. Donald Cairns
Judith W. McCue
Thursday, January 9
8:00 – Complimentary Continental Breakfast
9:00 a.m.
9:00 – Estate Planning With GRATs and Near-GRATs – Opportunities
and
9:45 a.m. Pitfalls of a Cloudy Crystal Ball
John R. Price
Despite important recent developments,
including the Walton decision, the
taxation of GRATs and near-GRATs remains a work-in-progress,
with continuing
uncertainty regarding some critical issues. This presentation
will provide a road
map of the tax issues, discuss the opportunities and
pitfalls of GRATs, sales to
IDITs, and private annuities, and review the issues
that should be considered in
deciding whether to use one of these popular techniques.
9:45 – Unwinding the Discount Entity: What
Happens When the Family
10:30 a.m. Wants To Take Their Share and Run?
Richard B. Robinson
The use of valuation discount planning
entities such as FLPs can produce major
income tax headaches when one or all of the family wants
out. This program will
identify income tax problems and provide exit strategies
to minimize the income
tax costs to the family.
10:30 – Break
10:45 a.m.
Wednesday, January 8 (continued)
9
10:45 – What Do You Mean, Subpoena? I’m a
Lawyer!
11:30 a.m.
Russell G. Allen
State law rules governing civil discovery
of attorney-client communications and
attorney work product vary significantly. Federal law,
different still, applies in
most of our tax controversies. This program will provide
a primer for trusts and
estates lawyers, focusing on problems commonly encountered
in estate
planning and administration.
11:30 a.m. – One Percent, Two Percent, Three
Percent, Four – No Matter What
12:15 p.m. You Pay, the Bene Wants More
Susan Porter
This presentation will cover practical
problems facing professional fiduciaries
when exercising discretionary powers pursuant to either
local law or the
governing instrument.
12:15 – Lunch Break
2:00 p.m.
2:00 – FUNDAMENTALS PROGRAM – Everything You
Ever Wanted To
3:30 p.m. / Know About Generation-Skipping But Were
Afraid To Ask
3:45 – (Runs concurrently with the Special Sessions)
5:15 p.m.
Jon J. Gallo
This presentation is designed for estate
planners with a working knowledge of
estate and gift taxation, but who are uncomfortable
when faced with planning
and drafting multi-generational estate plans. Special
attention will be given to
interrelated marital deduction/generation-skipping drafting
issues, as well as
planning and drafting the multi-generational life insurance
trust.
2:00 – Special Sessions III
3:30 p.m.
III-A – CASE STUDY – Unwinding Discount Entities
Richard B. Robinson
Using typical client fact patterns,
this session will examine income tax traps and
pitfalls when unwinding family limited partnerships
and family corporations that
were used to obtain valuation discounts.
III-B – Transfer Tax Audit Issues: What's
Hot, What's Not
(Repeat of Session II-B)
Norman J. Benford Mary Lou Edelstein
Martin E. Basson John W. Porter
III-C – Post-Mortem Planning in Transition
Steve R. Akers
This workshop will focus on post-mortem
planning issues during the transition
years of the "phase out" of the estate tax.
III-D – Fiduciary Firewalls: A Look at Blind
Trusts
Edmond M. Ianni
Blind Trusts, originally (and still)
utilized by public officials to avoid conflicts of
interest, are widely used in the private sector. In
an environment of heightened
Thursday, January 9 (continued)
10
corporate scrutiny and regulation, blind trusts continue
to provide a wealth
management solution for business insiders. This presentation
will examine the
practical uses and benefits of blind trusts, particularly
in the corporate sector.
We will review how blind trusts can accomplish different
wealth management
strategies and how to structure them.
III-E – Timely Tech Topics & Ticklers
– "Must Have" Software,
"Must Know" Technology, and "Must Do"
Stuff
Joseph G. Hodges, Jr.
Albert S. Barr, III
A summary and an overview of "must
have" software; effective (and easy to set
up and administer) professional web sites; obtaining
client information without
having to meet with the client; the current state of
data gathering and document
assembly programs; the future of e-filing of estate
planning and administration
documents; and lots of helpful tech tips for both large
and solo/small firms along
the way.
3:30 – Break
3:45 p.m.
3:45 – Special Sessions IV
5:15 p.m.
IV-A – CASE STUDY – Post-Mortem Planning With
Partnerships
Daniel H. Markstein, III
Several case studies will be used to
examine problems and opportunities that
may arise with post-mortem planning for family partnerships.
IV-B – GRATs
John R. Price
This session will focus on hypotheticals
that involve the consideration of settled
and unresolved tax issues.
IV-C – The FLP Side: Fiduciary Liability Potential
Russell G. Allen
Susan Porter
Knowing that the fiduciary must act
reasonably for the benefit of all
beneficiaries and may not delegate to others, how is
the fiduciary to carry out
responsibilities to avoid incurring liability when today's
beneficiaries'
expectations are often in conflict and the financial
marketplace is
ever-changing? This discussion will examine the effect
of the USA Patriot's Act
on confidentiality, transition problems with the Principal
& Income Act (including
significant state law variations), discretionary distribution
controversies,
investment-related matters (including the issues of
what is concentration and
the definition of diversification), tax-related conflicts,
and the attorney-client
and attorney work product discovery controversies.
IV-D – Pleasing Mother Earth and the IRS:
Using Conservation
Easements To Save Open Space, Income and Estate Taxes
David J. Dietrich
This program will examine federal regulatory
and selected state law requirements
for conservation easements to achieve charitable income,
federal estate
Thursday, January 9 (continued)
and gift tax planning. The program
will give examples of specific conservation
easement language, will discuss practical drafting considerations
for urban and
rural open space easements, and will emphasize the integration
of conservation
easement planning with estate and income tax planning.
IV-E – Split-Dollar Life Insurance
Lawrence Brody
Jonathan G. Blattmachr
Mary Ann Mancini
This panel will consider the provisions
of the long awaited proposed regulations
on the treatment of split-dollar arrangements and possible
planning techniques.
Friday, January 10
8:00 – Complimentary Continental Breakfast
9:00 a.m.
9:00 – The Durable Power of Attorney: Why You Should
Give More
9:45 a.m. Attention to Estate Planning’s Stepchild
Karen E. Boxx
Durable powers of attorney are extremely
common and deceptively simple.
They create a unique yet ill-defined fiduciary role,
somewhere between an agent
and a trustee. This presentation will cover the scope
of the fiduciary role, the
p roblems and possible solutions re g a rding the document’s
eff e c t i v e n e s s ,
including multistate use, and recent statutory trends.
9:45 – Terrorism or Its Prospect – The Impact
on Estate Planning
10:30 a.m.
Roy M. Adams
Since the terrible day of September
11, 2001, our world is no longer the same
and neither are the concerns and needs of many of our
clients. Many have
reconsidered where they live, where they own property,
and what types of trusts
they will use. This delicate topic must be addressed
because it is on the minds
of so many with whom we counsel. In this program, Roy
Adams will analyze the
major issues we need to address in light of the new
fears that exist, and will also
look at how we can help ease some of those fears through
prudent planning.
10:30 – Break
10:45 a.m.
10:45 a.m. – CASE STUDY – Wrapping It Up – Applying
What We Have Learned
12:00 p.m.
Louis A. Mezzullo
One or more case studies will be used
to demonstrate the practical application
of many of the planning techniques discussed during
the 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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.htmlTable
of Contents
back
to 2003 Table of Contents
Report
#1- Software Vendors
back
to 2003 Table of Contents
As we have done in January for
the last six 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 37th Annual Philip
E. Heckerling
Institute on Estate Planning that is being held January
6-10, 2003 at the
Fontainebleau Hilton Resort and Towers in Miami Beach,
Florida.
Our on-site local reporters there in Miami this year
will be identified as
their reports are received and published:
We also will be posting the full text of this year's
Reports on the ABA
RPPT Section's Web site, as we have since the 2000 Institute.
Those
Reports can be found at URL
http://www.abanet.org/rppt/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.
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 - Tuesday, January 7, 2003
The following report has been filed concerning the
software vendors who are
in the Exhibit Hall this year and other technology news
by our on-site
Reporter, Jason Havens Esq. of Destin, Florida, the
creator of the Legal
Research for Estate Planners Web site (http://www.jasonhavens.net):
This report covers the software and some other vendors
who are exhibiting
at the Institute. The number of software and other vendors
at the 2003
Institute has grown to 106. The software vendor list
this year includes, in
alphabetical order:
Advance Choice/Docubank
Advanced Planning Solutions, LLC
BNA/Tax Management, Inc.
Brentmark Software, Inc.
CCH INCORPORATED
CEPAC Communications
Connect2A.com
Crescendo Interactive, Inc.
Datatech Software
Eidelman Associates/WINDRAFT
Estate Works
EVP Systems, Inc.
Fast-Tax Trust Services
FASTER Systems, LLC
The Lackner Group, Inc.
LAWGIC, LLC
LexisNexis
Lynx Software
PG Calc Incorporated
Power Presentations
ProBATE Software
ProDoc
Schumacher Publishing, Inc.
WealthCounsel, LLC
West
Zane & Associates, Inc.
zCalc, LLC
Following are the highlights from the "first round"
among the software and
other vendors. These highlights are generally classified
in categories that
will hopefully prove helpful to list members. Additional
"rounds" will
follow.
A. CALCULATION SOFTWARE:
1. Brentmark: Brentmark has an exciting new software
that "does a
comprehensive estate plan" known as the Kugler
Estate Analyzer (TM). The
program uses three steps: client information, assets
& liabilities, and
techniques. The program combines Brentmark's Estate
Planning QuickView and
Estate Planning Tools capabilities in that the user
can perform calculations
and illustrate planning techniques with flowcharts.
However, the new Kugler
program includes "Inter-related Planning Techniques"
such as GST trusts,
QPRTs, GRATs, CRTs, CLATs, sales to grantor trusts,
FLPs, testamentary
charitable gifts, and more. The Kugler Estate Analyzer
(TM) is advertised
at a price of $595 with a $199 annual maintenance fee.
Brentmark also offers the Pension & Roth IRA Analyzer,
which performs
minimum required distribution calculations and many
others. Brentmark has
introduced the Asset Transfers System, which tracks
transferring and
retitling assets for a client. The Asset Transfers System
will populate
documents with the asset information entered once for
a client.
Brentmark has also taken over the ownership and future
support and
maintenance of the US Trust EPlan and Form 706 programs.
Finally, Brentmark has developed its PFP Notebook (TM),
which allows the
user to create a personal financial plan for a client
and can interact with
other
Brentmark programs.
2. CCH: CCH has also introduced a comprehensive program
known as CCH
ViewPlan Advanced (TM). This program integrates the
features of the basic
CCH ViewPlan, Beneview, and Factuary modules. The user
can calculate and
illustrate more than twenty different asset transfer
techniques including
CRTs, NIMCRUTs, CLTs, GRTs, QPRTs, and SCINs. The graphical
flowcharts are
accompanied by built-in calculation logs. The program
works seamlessly with
other CCH products such as Enteract (TM) financial planning
and Pro System
fx (R) tax software programs, and uses Microsoft standards.
3. Thomson: Thomson has brought together various products
and services.
Beyond West, Thomson now includes the Zane products:
FAS (fiduciary
accounting), 706, 1041, 709, and Fiduciary Calendar.
Thomson also offers
the RIA products, including Warren, Gorham & Lamont's
superb treatises and
the various journals of that group, including Estate
Planning.
4. zCalc: zCalc's Tool Box illustrates most estate
planning techniques.
Unlike other programs, zCalc can be customized by changing
the Tool Box
templates or the actual functions in the function library.
zCalc is still
one of the most reasonable programs of its kind at $295
for the initial
purchase and $150 per year thereafter.
B. DRAFTING SOFTWARE:
1. WealthCounsel: WealthCounsel is again a popular
booth. The
WealthCounsel drafting system includes various practice
systems built on the
HotDocs (R) document assembly platform. WealthCounsel
includes more
practice systems than most other drafting systems, from
trusts to FLPs to a
comprehensive charitable system that even features private
foundations.
WealthCounsel membership also includes a list serve,
continuing education,
and an impressive knowledge base. For all of this, users
pay a rather
costly price. An Institute special "competitive
upgrade" advertisement for
switching drafting systems offers three payment options:
(a) $590 for 20
months; (b) $2,900 down plus $390 per month for 12 months;
or (c) $6,900
paid in full for the first year.
2. Lawgic: Lawgic has been revived from the brink of
bankruptcy! Bruce
Grewell, the new "captain" of Lawgic, intends
to ensure the survival of the
Lawgic program by updating the California, D.C., Florida,
Georgia, Maryland
& Massachusetts products. It is anticipated that
the excellent attorneys at
Holland & Knight will update all such products in
the future. Lawgic offers
wills, disability planning documents, and a number of
trusts (from revocable
inter vivos trusts to ILITs to various grantor trusts),
as well as ancillary
documents and client letters. Lawgic states that it
will add states in the
near future, including New York and Virginia.
3. ProDoc: ProDoc offers Ronald Lipman's will and trust
forms, the Florida
Lawyer Support Services, Inc. (FLSSI) probate and guardianship
forms, and
probate management and accounting software as a part
of its Estate Planning
Library, which is advertised at $95 per month. Other
practice systems are
available. The newest feature of ProDoc is the Small
Office Suite, which is
essentially a case management program (somewhat similar
to Amicus Attorney
or PCLaw) that affords contact management, calendaring,
and time billing
capabilities.
4. Eidelman Associates: EP Expert (TM) uses an underlying
engine, WinDraft,
to produce documents. A user can build his or her own
document assembly
system with his or her own forms. This program also
works with DOCS Open or
iManage document assembly software.
5. Datatech: ThinkDOCS also allows a user to build
his or her own document
assembly system.
C. TRUST ACCOUNTING & RELATED ADMINISTRATION SOFTWARE:
1. Thomson: Fast-Tax gives the trust administration
user the ability to
produce tax forms. Fast-Tax interacts with Zane fiduciary
accounting
software, which is also part of the Thomson group.
2. ProBATE Software: ProBATE Software offers fiduciary
accounting and tax
compliance software, as well as a new digital workflow
program through its
new related company, Ike.com.
3. FASTER Systems, LLC: FASTER software offers a single-entry
system for
fiduciary accounting.
4. EstateWorks: EstateWorks is a web-based system that
tracks and assists
with the preparation of estate administration cases.
Users can "click"
through any part of the program and can see at a glance
the status of cases
and a checklist for each case. EstateWorks generates
documents and merges
data into MS Word and Adobe files.
5. Advanced Planning Solutions, LLC: FundingPro (TM)
trust funding software
system works similarly to the Brentmark software mentioned
above. Then
SettlementPro (TM) trust settlement software may be
used during the
post-mortem and disability administration of a trust.
Both programs run on
HotDocs (R) and are compatible with the WealthCounsel
document assembly
(drafting) system.
D. APPRAISAL & VALUATION SOFTWARE:
1. Estate Valuations & Pricing (EVP) Systems, Inc.:
EVP has released a new
version of its excellent stock and bond valuation software.
2. Other appraisal and valuation vendors abound, and
will be featured later
as time permits.
E. RESEARCH SOFTWARE & SERVICES:
1. Lexis-Nexis: Lexis features numerous estate planning
titles in its
Estate Practice and Elder Law Library, including the
University of Miami
Philip E. Heckerling Institute on Estate Planning materials.
2. Thomson: West offers a number of estate planning
research tools as well.
F. MISCELLANEOUS VENDORS:
1. Foundation Source (TM): Foundation Source offers
administration services
for private foundations. These services include maintenance
of governing
documents, tax filings, and grant processing and compliance.
Investment
services are not included and are not intended in the
scope of the offered
services.
2. Connect2A.com: Connect2A.com allows estate planning
professionals to
network, and is evidently compatible with HotDocs (R)
and thus loosely
affiliated with Advanced Planning Solutions, LLC and
WealthCounsel, LLC (all
in a row together).
3. CEPAC Communications: This company is also involved
in marketing
services specifically for legal professionals.
If any vendors or any important developments were omitted
that we should
have mentioned, please stay tuned. We will attempt to
cover all items of
interest in future reports as time permits. Thank you.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on
CD ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
d
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report
#2 - Recent Developments
back
to 2003 Table of Contents
As we have done in January for
the last six 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 37th Annual Philip
E. Heckerling
Institute on Estate Planning that is being held January
6-10, 2003 at the
Fontainebleau Hilton Resort and Towers in Miami Beach,
Florida.
Our on-site local reporters there in Miami this year
will be identified as
their reports are received and published:
We also will be posting the full text of this year's
Reports on the ABA
RPPT Section's Web site, as we have since the 2000 Institute.
Those
Reports can be found at URL
http://www.abanet.org/rppt/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.
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. 2 - Monday, January 6, 2003 - Recent Developments
The following report has been filed by on-site reporter
Eugene Zuspann II
Esq. of Denver, Colorado regarding the following:
Recent Developments in Estate, Gift and Income Taxation
– 2002
Parts One and Two
Carlyn S. McCaffrey
Dan T. Hastings
Howard M. Zaritsky
Materials by Richard B. Covey and Dan T. Hastings
Howard Zaritsky started with an analysis of the estate
tax atmosphere in
Washington (DC) and now feels that there is at least
a 50% chance in the
next few years that Congress will repeal the estate
tax.
He discussed the regs on Split dollar arrangements.
He feels that the
final regs will adopt most of the proposed regs. They
will affect any
arrangement other than those with no equity component.
He is not
recommending any split dollar arrangements until the
regs are finalized
other than those without an equity component. Also,
he discussed the
corporate Responsibility Act of 2002 that states that
a public company may
not extend credit to any executive officer or director
and the penalties
and fines associated with this Act.
Dan Hastings - revisited the revised Uniform Principal
and Income Act and
the states adopting unitrust alternatives. He indicated
the hardest thing
is to keep up with the different states. There currently
seem to be 12
states that now have or are considering unitrust statutes.
He also discussed the proposed regs under §643
and the fact that they have
not yet been adopted as final. The effective date will
be the first year
after the regs become effective. The main issue is whether
a state’s
unitrust statute will be within the ambit of the proposed
(or final) regs.
This causes a problem in the estate tax area. A trust
which in
grandfathered from GST tax will lose its protection
if a modification
proscribed by the GST modification regulations occurs.
Income accumulated
under a pre-existing power is grandfathered because
the accumulation is not
a constructive addition, but a modification that adds
or enhances a power
to accumulate income would be a proscribed modification
because it could
increase the property passing to a lower generation.
Both the power to
adjust from income to principal and the conversion to
a unitrust could
result in such an increase, unless the trustee already
has the power to
accumulate income. He is recommending that no adjustments
be made until
after the regs become final.
Next discussed were CRT’s
Atkinson case appeal. A CRT was adopted. The instrument
was
proper but the provisions of the trust were not followed.
The payments as
provided were not paid. The court held that failure
to comply mandated a
complete denial of the charitable deduction.
Carlyn -
Final regs under §645 (election to treat trust
as part of an
estate) were issued. This is not in the materials because
it was issued
shortly before X-mas [PDF link to the same is in the
ABA-PTL
Archives). These include changes to the definitions
of a QRT (qualified
revocable trust), the election, TIN and filing requirements
and
others. Carlyn pointed out problems with the comments
(but not with the
regs) in the definition of a QRT where the grantor is
incapacitated. She
also discussed those trusts where the grantor is living
abroad, and several
other aspects of the comments. See T.D. 9032 in the
Dec 24, 2002. Federal
Register.
She discussed the Cottage Savings case and PLR 2002231011
and the
realization of gain or loss on exchange of property
interests under
§1001. In this ruling a dispute arose to the administration
of a
trust. The trust provided that the grandson was to receive
an annuity for
life with the remainder to charities. The dispute was
settled with the
charities receiving an amount now with the remaining
assets remaining in
trust. Payments will be made the grandson with the remainder
pursuant to a
general power of appointment in the grandson.. The issue
in the ruling is
whether any party would have taxable income. Anything
not appointed would
go to his descendants. The ruling held that this was
a disposition of his
interest in the trust because his entitlements are different
than those he
currently possesses. Also, any basis assigned to his
interest is
disregarded and the gain will be long term capital gain.
Dan Hastings - joint spousal revocable trusts. Two
rulings denying the
step-up in basis for the property of the surviving spouse
were issued. The
authority cited by the rulings is §1014(e). There
are two articles on this
topic in 2002 - one in Probate and Property by Howard
Zaritsky and one in
Estate Planning by Cason. Dan now feels that in certain
circumstances, the
use of this technique may have a chance of success with
no downside potential.
Carlyn discussed the final regs on ESBTs issued this
year. She discussed a
number of provisions in the final regs. The regulations
prevent the use of
currently exercisable powers of appointment. There is
not a lot that can
be done. The regs require a permanent release of this
power of
appointment. Also, the final regs permit a grantor trust
to elect to be an
ESBT.
Dan Hastings - valuation cases.
Trusts owning stock will not be aggregated to determine
control unless the
decedent has a general power of appointment. A GPOA
will be construed as
ownership.
In the Estate of Dunn, the issue is the amount of the
discount for built-in
capital gains, or more precisely, how much of a discount
should be allowed
for the tax on such gains. The Tax Court held that some
discount less than
100% rather than 100% of the tax is correct. The Fifth
Circuit held that a
discount of 100% of the tax on the built-in gains was
appropriate.
Howard discussing FLP’s.
Appeal of Strangi to the Fifth Circuit. The appeals
court supported the
Tax Court on all issues except 2036, which it remanded
to the Tax Court to
determine whether 2036 is applicable. Howard believes
that this issue is
the most relevant attack by the Service and that will
be the only one that
the Service may win in future cases.
To support the operation of an FLP, minimum documentation
should be
maintained. This includes Minute book.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on
CD ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report
#3 - Tues. a.m. 1/7/03
back
to 2003 Table of Contents
As we have done in January for
the last six 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 37th Annual Philip
E. Heckerling
Institute on Estate Planning that is being held January
6-10, 2003 at the
Fontainebleau Hilton Resort and Towers in Miami Beach,
Florida.
Our on-site local reporters there in Miami this year
will be identified as
their reports are received and published:
We also will be posting the full text of this year's
Reports on the ABA
RPPT Section's Web site, as we have since the 2000 Institute.
Those
Reports can be found at URL
http://www.abanet.org/rppt/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.
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. 3 - Tuesday, January 7, 2003
The following report has been filed by on-site reporter
Eugene Zuspann II
Esq. of Denver, Colorado regarding the following:
Adventures in Life Insurance! (And You Thought It Would
Be Boring)
Jonathan G. Blattmachr
This presentation covered how to obtain income tax "deductions"
for term
premiums paid, how to avoid GST tax for a life insurance
trust without
using GST tax exemption, how to double the power of
Crummey withdrawal
rights, and how to plan with split-dollar life insurance.
About 80% of states completely exempt life insurance
proceeds from
creditors claims.
Jonathan first discussed the types of life insurance.
His conclusion -
there is only one real type of life insurance and that
is term insurance.
Life insurance is the only investment that has tax
free compounding (as
opposed to tax deferred compounding). This is even true
in muni bonds
because the issuer does not pay a rate comparable to
a taxable investment,
i.e. the bond has a lower rate.
Jonathan draws life insurance trusts so that the entire
gift lapses in the
year of the gift and the beneficiaries have the right
to withdraw their
prorata share in excess of the 5 and 5 power. This allows
the transferor
for generation skipping purposes to change to the children.
The Code
provides that each child’s shares will be considered
a separate
trust. This allows the trust to qualify for gst exemption.
Jonathan calls
this technique cascading Crummy powers.
A problem with the above scenario is that, except in
4 or 5 states, this
trust may be subject to the claims of creditors. Texas
has acknowledged
the problem and changed the law to exclude annual exclusion
gifts from
creditor claims.
Next he discussed §264 of the Code stating that
life insurance premiums are
not deductible.
He discussed the benefit of preloading a life insurance
policy so that the
excess cash in the purchase will, with the tax free
earnings, pay for the
policy over the desired term. His example had the insured
funding the
policy with $54,000 so that, with the earnings, the
policy would pay the
$91,000 premiums on a 20 year term policy at which time
the insured,
Jonathan, would let the policy lapse.
PLR 9636033
Avoiding the 3 year rule under §2035. There is
an exception for a full and
adequate sale of the policy. This can be done by making
sure the life
insurance trust is a grantor trust, and sell the policy
for the
interpolated terminal reserve to the trust.
PLR 9413045
Turning the Tables: When Do the IRS Actuarial Tables
Not Apply?
Lawrence P. Katzenstein
This presentation examined when departures from the
IRS actuarial tables
are permitted or required, including situations of under-productive
property and increased risk of mortality, and will consider
the
implications of recent decisions permitting departures
from the tables in
valuing the right to receive state lottery payments.
The purpose of this presentation is to analyze when
the actuarial tables do
not or should not apply.
An example when the tables are not used are simultaneous
deaths. They also
do not apply to retirement plans as “those sections
[of the Code] have
their own separate, prescribed rules for determining
actuarial
values.” There are also exceptions provided in
the regulations. See
Reg. Section 1.7520-3(a). Most of these deal with different
authority
provided by other sections of the Code.
The statutory authority for the tables is under IRC
§7520. Larry discussed
the ability of the service to ignore the tables. The
Service has tried to
bootstrap Revenue Rulings, rather than regulations,
to set doctrine for
ignoring the tables. He does not believe this is correct,
and that the
Service must use the tables in any case in which the
regulations do not
provide an exception
One exception in which the regs are totally silent
is the creditworthiness
of the payor in an annuity situation, i.e. an annuity
from Enron. Another
area is that of trust exhaustion. The materials cite
Estate of Benjamin
Shapiro, which is a 2013 credit case. In this case,
the Service argued
that the trust would be exhausted within 4 years. The
Tax Court held that
the tables must be used. The regulations were changed,
but Larry still
believes the regulations are wrong. The regs conclude
that if the trust
will be exhausted, the gift to the remainder beneficiaries
will go up, but
the value of the gift should go down. Larry concludes
that the correct
answer is to take into account the life expectancy of
the beneficiary and
the payment to the beneficiary, capped by the amount
going into the trust.
Another situation is that of underproductive property.
If the property in
the trust does not produce income, i.e. closely held
stock paying no
dividends in which the beneficiary does not have the
right to make the
property productive, then the tables may not be used.
Larry pointed out
the O’Reilly case in the Eighth Circuit holding
that the tables could not
be used where the dividend rate was far less than the
10% interest rate
assumed by the tables. This is a pre-7520 regulation
case.
The next situation that has little litigation or ruling
activity is when
the mortality tables cannot be used because of the physical
condition of
the measuring life. The regs provide that if the individual
is known to be
terminally ill, the tables will not apply. The regs
do provide a
rebuttable presumption that the tables may be used if
the person survives
for 18 months.
Another problem area is where the decedent has won
the lottery but dies
before receiving full payment. There are a number of
cases that hold that
the estate does not have to use the tables. This departure
from the tables
is surprising and the practitioner needs to read the
cases if the issue
presents itself.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on
CD ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report #4 - Wed. a.m. 1/8/03
back
to 2003 Table of Contents
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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. 4 - Wednesday 1/8/3
Worth the Effort Even Beyond the Grave - an Update of
Post-mortem Tax Planning Strategies
Steve R. Akers 1/8/3
The emphasis of the presentation was on current events
- Steve has a 145 page outline and did not try to cover
any significant portion of his materials.
Effect of 2% floor on miscellaneous itemized deductions
- §67. Scott case issued in 2002 was a
Virginia case. The case held that because in Virginia
a fiduciary could be protected by investing in certain
statutorily approved investments, that there is no reason
to hire an outside advisor. As such, in Virginia,
any such expense would be subject to §67. There
is still uncertainty in this area.
Steve discussed the new §645 regs. These were
also discussed by Carlyn on Monday. He pointed
out many of the differences between the proposed regs
discussed in his materials, and the final regs.
Alternate valuation date - dealing with assets in a
poor economy. Remember to consider an election
under §2032. Also, consider making sufficient
disclaimers or reducing the QTIP election to cause a
small amount of tax to be payable. Remember the
issue is different than several years ago because the
estate may pay some tax now that would not be due at
all if the estate tax is repealed.
Deduction of Administrative expenses attributable to
QTIP trust or other non-probate assets. The Grant
case (2d Cir, 2002) was discussed regarding the disallowance
of administration expenses and personal representative
fees on the decedent’s estate tax return. Although
the case seems to say these were not deductible due
to the fact that the majority of the estate was in a
revocable trust (11000 of 876000), the facts actually
indicate that many of the expenses were not deductible
anyway, i.e. expenses in selling the residence when
the estate had adequate cash to pay the estate taxes.
Also, the Maryland statutes limit the amount of both
PR and trustee fees, and those charged substantially
exceeded that amount.
Valuation of disputed claims in an estate. The
cases continue to hold that post death events are not
to be considered in determining the deduction - it is
to be determined at the moment of death. Steve
discussed the holding in the O’Neal case.
The 11th Circuit held that the IRS
cannot even admit into evidence the fact that the claim
was settled for 1/17th of the amount claimed on the
706. A significant factor is that the IRS did
not put on its own expert in determining the value of
this claim, even though the parties had been ordered
to put on evidence of their positions.
Transfer of an interest in a QTIP trust. This
issue arises when the surviving spouse wants the QTIP
assets to go to the children without waiting for his/her
death. If they disclaim this extra amount in the
decedent’s estate there will be estate tax. An
alternative is to leave the assets outright to or in
a QTIP trust for the surviving spouse, who can assign
an interest in the property or trust. This should
not be a prearranged event. However, it uses the
applicable exclusion amount of the surviving spouse
rather than causing tax in the decedent’s estate. A
proposed reg was issued this year explaining the tax
effects assigning an interest in a QTIP - Prop.
Reg. §25.2511-2.
Steve discussed the valuation issues regarding funding
a marital deduction with assets subject to discounts,
where the estate had control of such assets. The
cases governing this issue are Chenowith, Bellinger,
Disanto, etc. Possible methods suggested
for avoiding the problem: Fund the marital bequest with
a note, have someone purchase the minority interest
from the estate within the first six months and elect
the alternate valuation date, fund using a defined value
formula conveyance or make these marital gifts during
lifetime.
======================================
From the Far Bank of the River Styx: Post-mortem Estate
Planning with Limited Partnerships
Dan Markstein
1/8/3
Holding or investing in Limited Partnerships by Fiduciaries.
Bogart on Trusts states that retention of such
an interest, without express authority in the governing
instrument, could expose the fiduciary to liability.
This is enforced by a similar ruling by the U.S. Comptroller
of the Currency. There are examples of language
authorizing the investment in or retention of an LP
interest in the materials.
There are funding problems associated with LP interests.
The estate must engage an appraiser to determine the
discounts, not only for the estate tax return but also
for the funding of the trusts. Dan also further
discussed the Chenoweth problem discussed by
Steve Akers. This should usually not be a problem
unless the discount on an interest used for funding
is greater than that used for the entire interest on
the estate tax return.
There are also potential problems with funding a trust
with a limited partnership interest. One of these
is reporting income from the partnership on the trust
return where the cash distribution is less than the
income. If the trust has to distribute all income,
then it may not have enough cash left to pay the tax
on the excess income it did not receive. An alternative
is to sell the partnership interest for a note.
The value of the note must be equal to the value of
the interest sold. The materials set out different
statutes, regs and cases on valuing a note. (See,
Harper 83 TCM 1641 (2002) discounting a third-party
secured note by 12% for estate tax purposes) Failure
to do so may constitute a gift.
Another issue discussed is whether Regulation U issued
by the Federal Reserve applies to the grant of a security
interest in the limited partnership interest that is
sold? Although staff opinions indicate that this
is not true, there does not seem to be solid authority.
Solutions:
Do
not secure the note with the security interest (the
LP)
Enhance
the note - maybe with a guarantee by some of the beneficiaries.
Get
a letter of credit
(This is a complex issue covering about 15 pages in
the materials - get and read the materials)
Paying the estate tax. Dan does not like borrowing
from the LP interest - it goes against the argument
that the interest is illiquid used in the appraisal
for the discount.
Possibility
of elections under 6161 and 6166
Borrow
from a bank - without using the LP as security
Variable
rate demand note
He closed by discussing the post-mortem creation of
a partnership. Funding of the marital and by-pass
trusts should be completed before the creation of a
partnership to avoid a reverse Chenoweth type
problem. Another question is whether there is
a 2519 issue if a QTIP trust is involved in the formation,
but FSA 199920016 says not.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report #5
back
to 2003 Table of Contents
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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. 5 - Tues Jan 7
First - several hot new items:
- A fact sheet on the President's
stimulus proposal can be accessed at
http://www.whitehouse.gov/news/releases/2003/01/20030107.html
- The fourth quarterly edition of the Uniform
Trust Code Notes has been released. It includes
an article by David English on the Kansas adoption of
the UTC and an article by Ed Halbach on the duties of
trustees.
The newsletter is available on the homepage of the NCCUSL
website - <file://www.nccusl.org>www.nccusl.org
- under "Important Documents."
Also, an omission occurred in the introduction to this
year's program. Michael Weinberg, of Denver, Co
is also one of the panel in the breakout session on
Thursday. The correct information should be:
IV-E Split-Dollar Life Insurance
Lawrence Brody
Jonathan G. Blattmachr
Mary Ann Mancini
Michael D. Weinberg
===============================
The following report has been filed concerning the software
vendors who are
in the Exhibit Hall this year and other technology news
by our on-site
Reporter, Jason Havens, Esq. of Destin, Florida, the
creator of the Legal
Research for Estate Planners Web site (http://www.jasonhavens.net).
This
report continues the coverage of software and some other
vendors who are
exhibiting at the Institute. Although our reports do
not include direct
hyperlinks, we would recommend that users search for
a particular vendor
using a search engine such as Google (http://www.google.com).
Following are the highlights from the "second round"
among the software and
other vendors. These highlights are generally classified
in categories that
will hopefully prove helpful to list members. A final
"round" will hopefully
follow.
A. CALCULATION SOFTWARE:
1. Thomson (continued): Thomson also offers the Intuitive
Estate Planner,
which will probably face serious competition from the
new Kugler Estate
Analyzer (TM) by Brentmark (mentioned in our first software
report for 2003)
and the new Advanced ViewPlan by CCH.
2. BNA Estate Tax Planner: BNA's Estate Tax Planner
is still available, as
is BNA's tax preparation software.
3. Crescendo Interactive, Inc.: Crescendo has long been
recognized for its
excellent charitable planning software that handles
calculations and also
produces illustrations of charitable planning techniques.
4. PG Calc, Incorporated: PG Calc offers software for
charitable gift
planners.
B. DRAFTING SOFTWARE:
1. Lawgic (continued): Lawgic also intends to add a
list serve and bulletin
board feature to serve its users. The addition
will emulate the ABA-PTL
list serve.
2. Eidelman Associates (continued): EP Expert (TM) will
allow a user to
"drag and drop" people into various roles
in structuring documents, e.g.,
dragging a person into a fiduciary role as a trustee
or personal
representative/executor/executrix. EP Expert also
handles pronouns, commas,
and other common grammatical issues. Several large
firms apparently use EP
Expert to produce their custom forms based on their
own language.
3. Datatech Software, Inc. (continued): ThinkDOCS uses
an integrated
database that stores answers that users input in dialog
boxes. Therefore,
if a change is made (e.g., changing a client's name
from "Bill" to
"William"), the database can prompt the user
that a change has occurred and
can then apply the change to all of the client's documents.
Users can also
use templates to make ThinkDOCS more efficient and effective,
similar to
other drafting programs. ThinkDOCS costs $695
for a two-user license as of
May 2002 (according to Law Office Computing).
Datatech also offers Quick and Easy, a program that
facilitates the
preparation of tax returns (as listed under category
C below). This program
will probably become one of the most popular tax preparation
packages due to
its ease of use.
C. TRUST ACCOUNTING & RELATED ADMINISTRATION SOFTWARE:
1. The Lackner Group, Inc.: The Lackner Group, Inc.
has consistently offered
a single-entry estate administration program known as
the 6-in-1 Estate
Administration System. This system produces the
706, 1041, the accounting
and inventory for the estate administration, and relevant
state tax forms as
well.
2. Financial Data Service, Inc.: This program also produces
the 706 and 709
transfer tax returns, as well as probate reports and
other items.
3. Lynx Software Systems, Inc.: Lynx offers a trust
accounting software
package to United States and international customers.
D. APPRAISAL & VALUATION SOFTWARE:
(N/A for 2003 software report #2)
E. RESEARCH SOFTWARE & SERVICES:
(N/A for 2003 software report #2)
F. MISCELLANEOUS VENDORS:
1. Advance Choice, Inc./DocuBank: DocuBank (R) offers
a secure place to
store disability planning documents, such as durable
powers of attorney,
health care surrogates/durable powers of attorney for
healthcare, and living
wills. Attorneys can apparently join for free,
and will then receive
discounts for their clients.
2. Power Presentations: This company offers packaged
presentations for
estate planning seminars and client presentations.
3. Thomson: Practitioners Publishing Company (PPC) offers
a "Basic Estate
Planning Complete Engagement Kit" that purports
to be a comprehensive tool
to understand the basic estate planning techniques and
the technology
resources to help attorneys advise their clients in
a profitable manner.
4. Schumaker Publishing, Inc.: This company markets
packaged websites for
estate planning attorneys.
If any vendors or any important developments were omitted
that we should
have mentioned, please stay tuned. We will attempt to
cover all items of
interest in future reports as time permits. Thank you.
=====================================
What to Do with Art and Other Valuable Stuff
Ralph Lerner
Tues, Jan 7
The primary issue of the presentation is to make
sure the contribution is correctly made so that the
anticipated income, estate and gift tax consequences
are obtained.
Before making the gift, the donor must determine 4 things:
1.
The status of the charitable organization - a public
vs private charity
2.
The type of property being contributed - capital gain
property is best
3.
Whether the property satisfies the related use rule,
and
4.
Obtain a qualified appraisal if the value and type of
property so requires.
The donor should write a letter to the charity before
the contribution describing the property and asking
what use the charity will make of it. Documentation
of a related use is necessary to protect the donor’s
tax deductions.
Remember, if the donor retains too many rights, that
the gift may be of a future interest and no charitable
deduction would be allowed. Ralph’s materials
also include checklists for letters to appraisers and
forms to be used in making the gift.
Interspersed with a number of great comments and war
stories, this program was both entertaining and enlightening.
Charitable Lead Trusts Re-examined:
The Dawning of a Golden Age
Ed Beckwith
Jan 7
Ed reviewed of CLTs in the current atmosphere of
uncertainty regarding the estate and gift tax and the
increasing unified credit amount.
Discussed were Qualified Non-grantor CLT’s - those that
are treated as separate taxpayers, and Qualified Grantor
CLT’s - those that are grantor trusts, and finally,
Non-Qualified Non-grantor CLT’s.
Because for gift tax purposes, a deduction is allowable
for the present value of the charitable interest, the
lower the 7520 rate, the better.
He discussed the GST effects of such trusts - no GST
effects on creation but GST may be due upon termination
if the remainder beneficiaries are skip persons.
The taxation of the trust and the beneficiaries, and
the excised taxes that could be imposed were also explained.
Ed then went through some of the advanced planning considerations.
These include opportunities created by the 2001 Tax
Act and general planning considerations applicable to
CLT’s, as well as using the CLT as the family’s charitable
pocketbook. Finally, he finished with a summary
of current developments occurring in this area.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report #6
back
to 2003 Table of Contents
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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. 6
Unwinding the Discount Entity: What to do When the
Family
Wants to Take the Money and Run
Rich Robinson
January 9
Rich’s program describes the tax effects of unwinding
an entity taxed as a partnership. He debunks the
theory that unwinding or withdrawing property from such
a partnership is always a tax free transaction.
He discussed and analyzed 3 sections that cause significant
headaches in distributing property from the FLP/FLLC:
The general rule under §731 is that no gain is recognized
when a partnership distributes property to a partner
unless the amount of cash distributed exceeds the distributee’s
basis for the partnership interest. However, the
following sections may create substantial income tax
liability if they apply.
§704(c)(1)(B) gain. If partner A contributes appreciated
property to a partnership and within 7 years, such property
is distributed to another partner, partner A is taxed
on the built-in gain (FMV at date of contribution less
adjusted basis) as if it was sold by the partnership.
§731 gain. Cash includes marketable securities
unless the partnership is an investment company and
the distributee is an eligible partner or the distributee
partner previously contributed the securities to the
partnership. This rule often causes a distribution
of marketable securities to be treated as cash, and
the FMV of the securities is greater than the distributee
partner’s adjusted basis.
§737(a) gain. If with 7 years after the date of
the contribution, a distribution is made to a partner,
such partner shall be treated as recognizing gain in
an amount equal to the lesser of the excess distribution
(the excess of FMV of the distributed property over
the partner’s adjusted basis) or the partner’s pre-contribution
gain. Pre-contribution gain is the 704(c)(1)(B)
gain which would be allocated to the partner if all
of that partner’s contributed property had be distributed
to another partner
Rich then discussed several examples and the tax effects
of each. Many of the problems arise because of
the normal operation of an FLP/FLLC - mom and dad form
the partnership and then make gifts, often substantial,
to the children. The rules will operate on distributions
of property after these gifts and the gain can often
exceed the amount of the FMV of the distribution and
affect all of the partners, not just the distributee.
A short example (most had numbers associated, and Rich’s
analysis is quite complete):
Mom contributes assets to an FLP, including a condo.
She makes gifts of 30% of the FLP to children.
Within 7 years, the condo is distributed back to Mom.
Result: 30% of the condo is a 704(c)(1)(B) taxable distribution
with respect to the children and the same 30% would
be a §737 taxable distribution to Mom since it is no
longer her previously contributed property under the
“step into the shoes” rule.
CAVEAT: Before advising a partnership anticipating
making a distribution from a partnership, either study
the rules or retain competent tax counsel (or both)
to make sure the anticipated tax effects are correct.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report #7
back
to 2003 Table of Contents
This report from Glen Yale covers several presentations.
Also, a later report from John Warnick does the same.
Joe Hodges has provided a copy of the full institute
program that sent in a separate e-mail. If you
have questions about the programs referred to in this
report, please see the program description.
- Gene Zuspann
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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. 7
The following report was sent by Glen A.Yale.
It covers Estate Planning With GRATs and Near-GRATs
– Opportunities and
Pitfalls of a Cloudy Crystal Ball by John R. Price,
What Do You Mean, Subpoena? I’m a Lawyer! by Russell
G. Allen, and One Percent, Two Percent, Three
Percent, Four – No Matter What, You Pay, the Bene Wants
More by Susan Porter
Russell Allen gives superb
coverage of the issues involved in his two
sentence titled topic "What Do You Mean Subpoena?
I'm a Lawyer!" After
reviewing the attorney-client privilege, the attorney
work product doctrine
and the tax practitioner's privilege, Allen shows that
under the common law
there was a fiduciary exception to the attorney-client
privilege under the
notion that advice given the trustee was ultimately
for the benefit of the
beneficiaries and could be discovered. Recent cases
in Texas and California
in addressing situations in which the attorney-client
privilege is codified
take the better approach that the attorney represents
the trustee and the
beneficiaries are better served by permitting the attorney
to seek
privileged advice. He gives proposed language to draft
around the problem
in states that do not follow the Texas and California
approach.
In Federal tax
controversies the attorney-client privilege is often
unavailable because of the view that advice for tax
preparation was not for
purposes of litigation and that business advice or communication
to prepare
a tax return was not legal
advice. The work product doctrine suffers
particularly under the anticipation of litigation
requirement. Some recent
cases that take a more reasonable
approach are discussed. Communications
that involve advice may be protected
if there is no waiver and documents
that explain a transaction but does not contain
legal advice will also not
be privileged.
In Estate Planning
with GRATs and Near-GRATs ? Opportunities
and
Pitfalls of a Cloudy Crystal Ball, the learned Prof.
John R. Price proposed
a new device after stating the two gambles of
a GRAT, (1) the value of the
property transferred will appreciate at a rate
greater than the §7520 rate
and (2) the grantor will survive the reserved term;
and giving his argument
that the IRS position is
highly questionable that IRC §2039 applies to
bring into the grantor's estate the entire trust
property when the grantor
does not survive the trust term. Prof. Price
proposes eliminating some of
the risks of the GRAT
by a sale to an income tax defective
trust in
exchange for an annuity for a fixed term.
His article gave more detail on
the device:
1. Client creates an IDIT, from which discretionary
distributions can be
made to his children and grandchildren.
2. Client transfers a significant amount
of property, say $100,000 to
$1,000,000 to the IDIT. Client's GSTT exemption is allocated
to the
transfer so the IDIT will be completely exempt.
3. Client transfers assets that qualify
for a substation valuation
discount (e.g., closely held stock or units of an FLP
or LLC) to the IDIT
in exchange for payment of an annuity for a fixed term.
Payments are to be
made to the client as long as he lives. If the client
dies before the end
of the term any remaining payments are to be made to
his estate. The
annuity agreement should be drafted to meet the requirements
of §2702.
Prof. Price proceeded to set
forth the income, gift, GST and estate tax
consequences of his device. With Waltan and his
new devise, the advantages
are "almost irresistible."
Susan Porter with
U.S. Trust Company gives the independent trustee's
perspective on how to approach
the income beneficiary's and remainder
beneficiary's high expectations as to investment
returns and allocation of
income and principal as well as distribution
expectations in One Percent,
Two Percent, Three Percent,
Four?No Matter What You Pay, the Bene Wants
More. In her paper and
her oral presentation she explained
how an
ascertainable standard limited to
"health, education, maintenance and
support" might not meet the grantor's expectations
of distributions to the
income or residuary beneficiaries.
Further, ascertainable standards may
require distributions that are not desired,
such as funds that disqualify
for government assistance.
Independent trustees favor "wide-open"
discretionary distribution standards so expected distributions
can be made.
Through three cases, McNeil I, McNeil
II, and Hinrichs, the distribution
decision-making where the trustee has sole discretion
were explored by Ms.
Porter. Trustees must give full communication to the
beneficiaries to avoid
liability, but after doing so the discretion
at most will be subject to a
reasonableness standard.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
Report #8A
back
to 2003 Table of Contents
This message varies in format from the others sent
in the past The materials from John Warnick are
a collection of notes from Tues, Wed. and Thurs that
John forwarded to me in one file. This report
is sent in two parts due to its large size.
Although some of the material has been covered in other
reports, the views of several people seems better than
those of just one so all material received is included,
even though it is repetitive.
There are a couple of other reports still to be sent,
but due to problems in Miami, no one was left to handle
these.
- Gene Zuspann
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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. 8A
The following are the John Warnick's notes covering
presentations over three days. John has some page
references to the materials. I have left these,
both for those that were in Miami and have the materials,
and those that were not, but get the proceedings from
Matthew Bender.
JONATHAN BLATTMACHR – Some Fundamental and Fine Points
in Uses of Life Insurance in Estate and Financial Planning.
Cascading Crummey Powers – hanging powers aren’t always
the best thing. Why not let the power lapse immediately
so that that the child will be considered to be the
transferor for the amount which will be treated as a
release and hence as a gift by the donee. This
should permit approximately 80% of the gift that the
parent makes to the ILIT for the child to be treated
as a transfer from the child to the grandchildren.
Because the trust will be treated as separate trusts
for GST purposes this will permit the trustee to make
distributions to the child from the portion that the
parent is tgreated as transferor for GST purposes.
Also, that portion of the trust can be used to make
distributions to the grandchildren for health and education
because there is an exception for such distributions
under the GST tax. But any other distributions
to the grandchildren will be made from the roughly 80%
which is treated as a separate share and which the child
is treated as the transferor for GST purposes.
Note: You can pay for Term Insurance with Pre-Tax
Income Which is Never Taxed. Since the profit
earned on the cash value component of a life insurance
policy is not subject to income tax until the profit
is withdrawn. By using those earnings to pay for
the term cost of the insurance, it should be possible
to pay for life insurance with income which will never
be subject to tax. That is as good, if not better,
than making those premiums tax deductible.
Split Dollar arrangement – increases the leverage of
cascading crummy powers.
PLR 9413045– says that Allen (10th
Cir. 1961) doesn’t apply to the sale of a life insurance
policy to a trust. It may offer a vehicle for
defeating the three year pullback rule where the insured
is the owner of a policy and we want to transfer it
to an ILIT.
LAWRENCE P. KATZENSTEIN – Turning the Tables: When Do
the IRS Acturial Tables Not Apply.
If you have a bunch of people in a car who are trying
to figure out where to go, the one looking out the rearview
window is the actuary. He is trying to get to
where we need to be by looking at where we have already
been.
We have a lot more freedom to argue when the tables
should apply or should not apply then what we thought
we would have when the tables were first introduced
in a statutory context through Sec. 7520.
The interest rates are rounded to every two-tenths of
one percent to save printing costs.
He would propose using an average of the last five or
ten years rather than what current rates are.
But what the current rules permit us to do is to take
advantage of anomalies in interest rates by using the
techniques which are most favorable given the current
interest rate climate.
Why do we use the tables at all? Estate of Benjamin
Shapiro TC-Memo 1993-483, 66 T.C.M. 1067: acturial tables…are
an administrative convenience in that they provide a
“bright line” approach to valuation making it unnecessary
to hypothesize as to the facts and circumstances surrounding
each case.”
Cases where the Code directs the Tables Should Not Apply:
Retirement Plan:
Regulatory Exception: Does this mean that the
Service can’t depart from the tables unless it goes
through the formal regulatory process. Maybe Congress
meant that the Service can’t depart from the tables
unless they do so by regulation rather than by the use
of rulings and procedures.
Effective Date: The regulations didn’t become effective
until 1995. What happens for the first six years,
between 1989 and 1995, while we were waiting for the
IRS to issue the regulations? The Service takes
the position that 7520 didn’t abrogate all the case
law that had developed in the prior 50 years.
But if you read the statute it appears that is exactly
what Congress intended to do.
If you have a simultaneous death or unproductive property
case during the 1989 to 1995 period, you may have a
very good case that you still should be able to use
the table.
Rev. Rul. 96-3 –
Harrison case. The Tax Court has been much more
favorable for the IRS than other courts.
Other Regulatory Exceptions – Reg. Section 1.7520-3(a)
- 1. Retirement
plans.
- 2. Section
72 (annuity rules) however note that charitable annuities
and gift annuities are taxed under Section 72 but
the income tax charitable deduction is computed under
7520.
Marketability Discount: The regulations don’t address
the creditworthiness of the payor of the annuity or other
obligation.
Trust Exhaustion – He thinks the IRS is just wrong on
this. Shapiro is the pre-7520 law on that point.
Example 5 of Reg. 25.7520-3(b)(2)(v), in Katzenstein’s
opinion, misunderstands the nature of exhaustion.
What gift is there to a remainder beneficiary if the trust
is going to be exhausted? There is nothing left
for the remaindermen. This is also inconsistent
with Rev. Rul. 77-374.
Unproductive and Underproductive Property. The IRS
is very clear that we can’t use the tables with unproductive
property except in limited circumstances.
The IRS won’t permit the tables to be used with unproductive
property unless the income beneficiary has the right under
either state law or the trust instrument to make the trust
productive. The IRS doesn’t treat underproductive
property any more favorably. Katzenstein believes
the 1990 Tax Court opinion in the O’Reilly case (95 T.C.
646) should be good law and should survive enactment of
7520. In the regulations the IRS says that Congress
didn’t intend to supercede prior case law.
How do we deal with an income interest where there is
a power of invasion. It is clear that we can’t use
the tables if the power of invasion is unrestricted.
But the IRS in the regulations seem to suggest that we
can deal with such interests using nonstandard tables
if the power of invasion is governed by ascertainable
standards.
Judicial Exceptions
The Lottery Cases
In California the lottery payments can’t be assigned.
Amazingly, the 9th Circuit held that
we don’t have to value the lottery payments for estate
tax purposes under the actuarial tables. 2001-2
USTC ¶60,356. The Tax Court has disagreed in a Connecticut
lottery case. 116 TC 142.
RALPH E. LERNER What To Do With Art and Other Valuable
Stuff.
The Step Donation – Give away an undivided 25% interest
to a museum. Then a few years later give away another
25%. That 25% will be worth more now because once
the initial gift is made to the museum it will be listed
on the list maintained by the auction houses and museums.
That listing generally means the value of the painting
will go up. The museum will usually insist on a
gift promise that you will leave them the balance of the
art upon your death so that they won’t end up as co-owner
with squabbling siblings.
Charitable remainder Unitrust – The 170(a)(3) problem.
PLR 9452026 creates an opportunity if you sell the item
within the first year. The deduction is allowed
under 170(a)(3) at the time the art is sold. The
amount of the deduction will probably be limited to the
collector’s cost since the contribution would not satisfy
the related use rule.
Private Operating Foundation. This may be a viable
alternative for certain collectors. Very humorous
story about a wealthy collector’s willingness to grant
public access to his collection.
Copyright. In preparing a will for a collector an
attorney should take care to make sure that if the collector
does own any copyright interest it is transferred to the
charitable organization along with the work of art to
avoid the possibility of running afoul of the related
use rule of section 2055(e)(4)(C).
Quedlinburg Treasures case.
Using Rev. Proc. 96-15 to obtain an advance valuation
ruling on a gift. But remember that it can also
be used for an estate to obtain an early valuation of
art work. This can be a tremendous advantage for
the estate.
Edward J. Beckwith – A Reexamination of Charitable Lead
Trusts.
The gift tax value of a $4 Million 6% payout CLAT for
15 years would be slightly more than the applicable exclusion
amount. If the trust can achieve a return equal
or greater to the 6% Payout there will be at least $4
million at the end of the 15 years.
PLR 199927031 illustrates the IRS approval of a formula
used to fund the CLT at death. The only variable
to be determined at death was the amount of the interest
rate.
Operating a CLT as the Family’s Charitable Pocketbook.
Funding the Family Foundation with a Charitable Lead Trust
– PLR 200138018.
Drafting After EGTRRA (and other recent developments):
How Different Is It?
Panel discussion led by Pam Schneider with Paul Frimmer
and Carol Harrington
They consider the outline very much a work in progress.
What changes have you made as a result of EGTRRA?
Frimmer: has made almost no changes. Typically gives
an independent trustee broad powers. In almost all
situations an independent trustee will not do anything
without broad consensus from the beneficiaries.
Harrington: Surprised to see that there are so many different
patterns and permutations. So there isn’t necessarily
an efficient way to deal with EGTRRA. It is troubling
to her because it is so time-consuming and client-sensitive.
Schneider: She had always stressed the philosophy of not
letting the tax tail wag the dog. But now the choices
are unlimited. It is very difficult to have a very
efficient client meeting as a result.
How much attention are you paying to the Carry-over Basis
Rules:
Frimmer: has done nothing. Carryover basis seems
to be an allocation post-mortem process. If there
is going to be contention, he is uncertain what to do
to make it easier. He has included some language
at page 6-15. He is using a Bad Faith standard and
putting the burden on the beneficiary to show that the
fiduciary has used bad faith. Frimmer gives an independent
trustee power to make distributions even over the QTIP
so as to facilitate post-mortem estate planning.
Harrington: Has tried to introduce flexibility into her
documents. But hasn’t felt that it makes a lot of
sense to spend a lot of time on the carry-over basis because
she doesn’t have a great deal of confidence that we really
know what is going to happen. She gives some specific
examples of clauses to ensure flexibility at Pages 6-13
to 6-14. In addition to size of the trust, they
have now included changes in tax law or family circumstances
as factors that justify termination of the trust.
In B at 6-13 she included a power in the independent trustee
to amend the trust to carry out the grantor’s purposes.
There is a savings clause that protects against adversely
affecting either the marital or charitable deductions.
In C at page 6-14 she gives the independent trustee discretion
to make distributions. Paul noted that sometimes
he has given this independent trustee the power to amend
the trust during an elderly client’s incapacity.
Schneider: There are some forms at page 25 of the Recent
Developments materials. But she hasn’t done a great
deal other than to make sure that the fiduciaries are
indemnified against any claims as a result of their exercise
of the allocation choices they make.
Frimmer: Ira Lustgarten used the ultimate ambulatory estate
planning document: a will that left everything to the
surviving spouse with disclaimer trusts that accomplished
a variety of different objectives. Then it permitted
the surviving spouse to pick and choose at the first spouse’s
death.
Formula Clauses:
Schneider: Pg. 6-1 A contains the Cap/Floor approach.
In 3 at page 6-2 Pam offers two different alternatives
to deal with the definition of the IRC which will define
the size of the marital share in the event of repeal.
A relies on an independent trustee to interpret what should
be done. B refers to a specific point in time.
Harrington: At page 6-3 in ¶4 1.03 Carol attempts
to define whether the estate tax or GST tax has been repealed.
Then 1.01 and 1.02 deal with the possibilities of what
to do if the taxes are repealed at my death or at my spouse’s
death. In ¶ 5 at the bottom of page 6-3 second
line should read “husband/wife’s later death”
Frimmer Another approach would be to give everything to
a credit shelter trust that could qualify as a QTIP and
then give the independent trustee the power to terminate
the trust in favor of the surviving spouse.
What Do You Say In Your Marital Deduction Formula About
The Repeal Of The State Death Tax Credit?
Schneider There are two variables. 1) what
tax are we trying to eliminate? Is it just the Federal
estate tax or is it both the federal and state death taxes?
2) Do we take state death taxes into consideration or
only if they would be increased?
Take a look at your current language. Is it a bit
ambiguous?
This problem is going to go away in 2005 because there
won’t be a state death tax credit at that time.
If you are dealing with a state that has a true pick-up
tax and has decoupled, then use
¶ B1 on pages 6-4.
On the other hand look at the two options in ¶B2 a or
b on pages 6-4 and 6-5. This would apply to states
which have frozen its pick-up tax at the rates in existence
and/or the unified credit available at some time before
2002. ¶a bets on repeal or that there will be too
small of an estate at the survivor’s death to incur any
tax. The opposite example is ¶b which seeks to eliminate
federal tax even if it means an increase in state tax.
You need to be aware that this is changing day by day
as the various states try to sort out what they can or
want to do.
Pennsylvania has decoupled but there are many people who
feel that this is unconstitutional because the PA constitution
requires that there be no discrimination in tax burden
between individuals. Since the death tax may not
be a flat tax perhaps it won’t pass constitutional muster
in PA.
Frimmer – note that a Section 529 plan can be a problem
for a marital deduction bequest because it may not qualify
for the marital deduction. We used to use language
to protect the marital deduction. But many people
have deleted that language. Look at the language
at ¶ C2 on page 6-5.
The Destructible Marital Trust may make a lot of sense
in many smaller estates.
There are distinct disadvantages of not using a QTIP other
than the Ramon/Ramona problem. One is the PTP credit
under 2013 and the other is the Mellinger discount opportunity.
The surviving spouse could disclaim the power to revoke
within nine months and preserve the opportunity to take
advantage of Mellinger/Bonner valuation opportunities
for a fractionalized interest. The 15 months…when
coupled with the nine month disclaimer period…takes you
out to the full 24 months for the 100% PTP credit.
The clauses at ¶ E1 on pages 6-6 through 6-8 permit
the survivor to create a reverse QTIP and a Credit Shelter
Trust through disclaimer but still have the opportunity
to completely revoke the trust and take all of the assets
out of the trust if the survivor lives more than 15 months
after the first spouse’s death. NOTE: After the
Lassater case it is clear that the spouse can make a disclaimer
into a trust that the survivor has a power of appointment
over if that trust will be included in the surviving
spouse’s taxable estate.
Schneider Pam likes to tie up her definition of
available GST Exemption. See her form at ¶ B on
page 6-9.
Harrington. Carol doesn’t feel the need to protect
against the interested fiduciary making the GST elections
and allocations.
Frimmer ¶ C2 on page 6-10 deals with one approach to protect
against repeal of the GST tax. Another approach
is to give the surviving spouse the power to add a deceased
child’s spouse or another non-skip person as a beneficiary.
Yet another alternative is to give the power to an independent
trustee the power to add a non-skip beneficiary.
Schneider: Would you add language that makes it obvious
that after the GST Tax is repealed the trust can be terminated?
Remember that the GST regulations deal with the substitution
of a nominal beneficiary merely to avoid the taxable termination
of a trust.
Downstream Split of a Trust Now Permitted under the 2001
Act – How Do We Take Advantage of That?
Schneider – If you look at your trust language or at state
law, generally you will find that division is permitted
only on identical terms. But the new law’s flexibility
permits the division to be made into trusts that don’t
have identical terms. Her language and the variations
on the theme is found at ¶ D on page 6-10.
Harrington Her language is found at at ¶D5
on pages 6-10 through 6-12. Note: they use the words
“adversely affect” rather than just “affect” because they
have run into a situation where they wanted to qualify
and weren’t able to do so because it would affect qualification.
Schneider: Look at at ¶E on page 6-12 . The
revised (B) and (C) are suggested because we now have
the opportunity to make a qualified severance. She
believes the downstream severance rules won’t sunset.
She believes they will be kept in any future law that
replaces EGTRRA.
She puts language on what her intention is to provide
some protection against the problem that there is a slip
between the lawyer and the CPA. Paragraph ¶F on
page 6-12
And 6-13 deals with the situation where you want to see
automatic allocation. Paragraph ¶G is just
the opposite where you want to opt out of the automatic
allocation of GST exemption.
Frimmer: Offers an alternative to the Procter clause
in a sales transaction. See the suggestion at the
bottom of page 6-17. Schneider offers the more traditional
defined value approach in Clause B starting at page 6-16.
Schneider: Expanded definition of descendants to deal
with post-death conception. The goal is to have
a clause that 90%+ of your clients will like. She
doesn’t think that it is quite there yet.
Harrington: Final question: what is the generation assignment
of a clone?
LOU MEZZULLO Did They Get It Right? The Final Minimum
Distribution Rules
The simplest part is the chart at page 7-29 which allows
you to determine the applicable distribution period.
This chart deals with three different contingencies.
The second column give us the rules if the participant
is alive upon the RBD. The third column deals with
what happens if the participant dies before the RBD.
The fourth column deals with what happens at the time
the participant dies when he/she has lived beyond the
RBD. There is a change here for the non-spousal
DB from what the 2001 proposed regulations had started
with.
Neither the participant’s estate nor Beneficiaries who
take under a state’s anti-lapse statute is considered
a beneficiary.
You have three options after the participant dies.
Option #1 – cash out the beneficiary. Make a distribution
to the beneficiary to satisfy the bequest.
Option #2 - Disclaimer
Option #3 – establish separate accounts. Final regulations
have muddied up the water on what we have to do to establish
separate accounts. Majorie Hoffman’s comments would
indicate you must set up the separate accounts by September
30th of the year following the year
of date.
Spousal rollover. She may not want to do the rollover
before she turns 59 ½ because if she needs a distribution
she will be subject to a penalty on a premature distribution.
Having the spouse as the “sole DB” gives you some advantages
but at the cost of losing some of the traditional protections
associated with having a trust as the beneficiary.
PROFESSOR LAPIANA – State Law Developments – Searching
for Revenue and Other Quests
There are three alternatives for dealing with the potential
disconnect between federal and state death tax exemption
or rates.
Disclaimer
Partial QTIP election
Clayton election – have the trustees hold the portion
of the Marital Trust which doesn’t qualify for the marital
deduction as a separate trust on the same terms and conditions
as the Family Trust or Credit Shelter Trust.
STEVE R. AKERS – Worth The Effort Even Beyond The Grave
– An Update of Post-Mortem Tax Planning Strategies
Does The 2% Floor Apply to Investment Fees Incurred
By a Trustee?
Mellon, O’Neill and Scott. There is a conflict between
the circuits and taxpayers may want to consider taking
advantage of that conflict. However, taxpayers should
expect a challenge on the issues raised in O’Neill and
Scott. The Scott case is currently on appeal and
the result in Scott may be heavily influenced by local
law.
Suggestion by Akers: Trustees might consider charging
a higher trustee fee and then paying the investment advice
and accounting services separately.
Another point: Estates are not subject to the 3%
cutback or the 80% reduction in itemized deductions that
individuals are subject to. Therefore, optimal planning
would be to pay enough expenses each year to fully offset
the estate’s gross income. And, in the final year
of an estate you may want to consider optimizing the expenses.
This will take careful planning to assure that the estate
is terminated in that year and that all of its assets
are distributed in time.
Note: the estimated payments made by a trust or estate
may, by election, be treated as having been made on behalf
of one or more beneficiaries. This election may
be made even if the trust or estate has not made an overpayment
of tax. This is a change from former law.
Section 645 – Final Regulations issued and effective on
12/24/2002. Changes in the final regulations: It
includes a trust which is revocable only with the consent
of an adverse party. It is ok to have a foreign
trust. Maximum election period – later of two years
after date of death or six months after the issuance of
a closing letter plus another six months. This is
an addition of six months to the period provided in the
proposed regulations.
What type of a return does the QRT have to file at the
end of the first short year. The proposed regulations
had required you file a full return. There was a
lot of criticism of the proposed regulations because of
the cumbersome task of trying to sort out the income between
the short period and the estate’s return. The final
regulations permit the trustee to merely file an information
return for that short year. Even decedents dying
before 12/24/02 can rely on the final regulations and
avoid filing the full return.
The final regulations do permit the trust to avoid filing
estimated income taxes for the first two years.
Alternate Valuation Date complications with a pecuniary
marital deduction formula that uses date of distribution.
In this case the pecuniary bequest forces the entire loss
on the credit shelter trust.
Consider using a marital deduction formula that shifts
at least part, if not all, of the depreciation in value
against the marital share. But how can you use the
alternate valuation date in this situation since it requires
that the combined amount of estate tax and GST tax be
decreased? Consider making a small disclaimer or
a partial QTIP election to force payment of a small amount
of tax.
Deduction of Personal Representative Fees as Administration
Expenses Limited Because the Bulk of the Assets Passed
Under a Revocable Trust. Grant v. Comm’r 294 F.3d
(2d Cir. 2002), aff’g T.C. Memo 1999-396.
This case arose under Maryland law and reaches a very
bad result. The Second Circuit decision suggests
that a big difference in the deductibility of administration
expenses turns on whether the assets are passed to the
beneficiaries by probate or in a non-probate transfer.
Maryland imposes a very low cap on trustee fees.
Since most of the assets were in the revocable trust only
$1,000 would be allowed for the personal representative
fees.
SOLUTION: If your client resides in a state with law similar
to Maryland, consider having a pour-up revocable trust.
If there are no creditor concerns, this may result in
the availability of a larger deduction without adversely
impacting the estate.
Note: The Tax Court’s analysis suggests that section 2053(b)
may not be applicable to assets in a revocable trust.
2053(b) applies to expenses of administering property
not subject to claims. Revocable trust assets typically
are subject to creditors claims in most states.
Therefore, the technically correct Code section for deducting
expenses of administration would be section 2053(b).
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
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back
to 2003 Table of Contents
Report #8B
back
to 2003 Table of Contents
This report is a continuation of 8A. It was broken
due to the large size.
- Gene Zuspann
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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. 8B
DANIEL H. MARKSTEIN, III From The Far Bank Of The River
Styx – An Update of Post-Mortem Planning Issues
p. 41 – Sale of a partnership interest to a grantor
trust – concerns have been raised regarding the value
of the note issued by the trust and the possibility
that treatment of the debt as equity might result in
the transaction being subject to Sections 2701 or 2702.
Also, watch out if you have a GST trust and you are
using a beneficiary guaranty that you don’t end up with
a taxable gift to the trust by the guarantors who would
then become both transferors and partial grantors of
the trust, thereby fragmenting the trust’s grantor trust
status.
Perfect the security interest which collateralizes the
note. Is there any problem with this. See
the discussion of Regulation U at page 50.
There is a margin requirement of 50%. Would that
apply to the limited partnership interest sold?
There are two Federal Reserve Board staff opinions that
support the position that a security interest in a limited
partnership interest would not implicate Regulation
U because the partnership interest is not “margin stock”.
But these are only staff opinions. There is no
Board opinion. The only other comfort is the fact
that the cases that have been litigated under Regulation
U suggest there is no private cause of action for a
violation of Regulation U. But the draconian sanctions
which can be imposed on Regulation U violators may still
suggest caution.
What can be done to avoid Regulation U status?
Perhaps a beneficiary guaranty is the answer.
Or perhaps a letter of credit from an independent bank.
Markstein is using that and has got a letter of credit
issued for 35 basis points. How can the IRS argue
it isn’t a debt instrument or that the note isn’t worth
its face amount. Perhaps paying some gift tax
to fund up the trust so that it will have adequate collateral
to stand behind the note is an answer.
What do you do if at the death of a taxpayer, the estate
is largely illiquid because it holds a minority interest?
Consider borrowing using a Variable Rate Demand Note.
The problem is that to obtain an estate tax deduction
for unpaid but accruable interest the IRS has ruled
that the obligation must not be subject to prepayment
or to acceleration upon default. If the interest
can be made deductible there is a double bonus because
the amount that will have to be borrowed to pay estate
tax will be reduced. There is a trade-off in that
the fiduciary income tax return will not be able to
deduct that interest if it has been taken on the estate
tax return.
There is a corporate financing technique called a
VRDN (“Variable Rate Demand Note”) that involves a taxable,
floating rate, credit enhanced security sold to institutional
investors. The interest rate can be converted
from a floating rate to a fixed rate using the issuance
of an interest rate swap. To enhance the borrowing
leverage the estate would get a letter of credit from
a bank that would back the estate’s VRDN.
Hollywood has really started to focus on estate planning.
Consider the following recent releases:
For the client who really is concerned that he doesn’t
want his children to be spoiled by a large inheritance:
Inherit the Wind
For the client who believes we will see permanent estate
tax repeal:
Die Another Day
For the client who really wants to be aggressive in
his estate tax planning:
Catch Me If You Can
Dean John R. Price – Estate Planning With GRATs and
Near-GRATs – Opportunities and Pitfalls of a Cloudy
Crystal Ball
In designing GRATs consider establishing separate
GRATs for separate classes or types of assets.
Example: Contrast separate two year GRATs created January
1, 2001 with a tech stock and a gold mining stock.
Don’t forget what Dick Covey terms the common law GRIT
when your client has aunts, uncles, nieces, nephews
or cousins whom he/she wants to benefit. These
individuals are not family members for purposes of Chapter
14 and hence you escape the reach of 2702.
Walton creates an opportunity to have tremendous upside
potential with little downside. It is particularly
attractive in light of the uncertainty of the future
of the transfer taxes.
Consider purchasing a term insurance policy as a hedge
against premature death.
The private annuity trust cases directly relate to what
Dean Price calls the “Variation on a GRAT” which he
feels is extremely attractive. This involves the
sale to an intentionally defective irrevocable (grantor)
trust in exchange for a private annuity for a fixed
term. The private annuity will be ignored for
income tax purposes. This eliminates one of the
serious disadvantages of private annuity transactions.
The annuity can be structured, much like a GRAT, to
generate little or no gift tax results. To do
so, the annuity agreement must provide that payments
be made to the annuitant or to his or her estate for
the entire term. If desired, the annuity payments
could be graduated and increase by 20% a year.
The initial funding of the IDIT would have GSTT consequences
so the grantor’s exemption would have to be used to
give the trust a “0” inclusion ratio. Also, another
advantage is that unlike the GRAT the GST allocation
occurs upon funding of the trust and we don’t have the
ETIP complications of the conventional GRAT.
The biggest advantage this variation offers over a GRAT
would be the strength of the argument that only the
discounted value of the remaining payments under the
annuity for a term is includible in the annuitant’s
estate under Section 2033. Under the Fabric,
Stern and LaFargue cases the taxpayer has a much
stronger argument to avoid full inclusion of the trust
assets.
If the grantor is married, consider using a GRAT that
would qualify for the marital deduction if the grantor
dies before the annuity term expires. The simplest,
but least effective for estate tax minimization purposes,
approach is to have the GRAT terminate upon the grantor’s
death and distribute its assets to the grantor’s estate
from which it will pass to or in a trust for the benefit
of the surviving spouse. Another alternative provides
that the annuity payment is the greater of a percentage
or actual income of the trust. This may permit
qualification for the marital deduction. Question:
can this be set up so that only in the event of the
grantor’s death will the greater of the annuity payment
or actual trust income be distributed.
See Mulligan, The Reinvigorated GRAT: Is a Sale to
a Defective Trust Still Superior? 29 Est.
Plan. 379 (Aug. 2002).
RICHARD B. ROBINSON – Unwinding the Discount Entity:
What to do When the Family Wants to Take the Money and
Run?
We should be paying as much attention to the path for
unwinding a FLP or FLLC as we do to the formation of
the entity. Failure to do so can result in disastrous
estate or income tax consequences. The family
will want to liquidate the partnership immediately upon
the death of the parent. However, that can have
a disastrous impact on the estate’s ability to take
a marketability discount for estate tax purposes.
Likewise, if the liquidation will take place within
seven years of formation or contribution of appreciated
assets to the partnership there may be deemed sale income
tax consequences.
Note: There is no explicit “step in the transferor’s
shoes” rules for the excess distribution rules under
Section 737(a) as there is for the built-in gain rules
under Reg. § 1.704-4(d)(2). There is a disagreement
among the commentators on whether there should be a
step in the shoes rule for the excess distribution rules.
See the argument Robinson offers at p. 12-4 that if
the distribution consists of all the step
in the shoes property. Robinson’s conclusion
is that you should postpone making the distribution
until you are outside the seven year period that commences
upon the contribution of the appreciated property to
the partnership.
Think about when you want and don’t want the valuation
discount. It has a dramatic impact on basis step-up
at death. It is generally desirable to get as
much basis step-up as possible.
How Do We Allocate Basis Between a Controlling and Non-Controlling
Interest in a Family Entity:
See Rev. Rul 84-53. The rules for basis are different
than the rules for holding period. We could theoretically
have a single basis for a partnership interest but have
multiple holding periods for portions of that interest
depending on when it was acquired.
What happens when the partnership interest is transferred,
either by death or by gift. Reg. § 1.61-6(a) provides
that the single basis is allocated to the portion transferred
and the portion retained based on the relative values
of each interest. See the example at p. 12-22.
These rules prove that if you can keep your head when
all around are losing theirs, then it is clear you really
don’t understand the situation.
RUSSELL ALLEN – JP Morgan Private Bank “What Do
You Mean Subpoena? I’m a Lawyer! “
The three most common areas of controversy of concern
to trust and estate lawyers should be: what constitutes
legal advice; when is there a legitimate expectation
of confidentiality; and when has the privilege been
waived?
It is likely the IRS’ efforts to discover or characterize
a transaction as a sham or as a step transaction or
arguments over the business purpose of a transaction
will result in an increasing number of discovery requests
of counsel concerning their efforts on behalf of and
communications with clients.
The new tax practitioners’ privilege is shrouded in
ambiguity. This makes communication between a
client and accountant the source for almost as much
concern as it traditionally has been. Furthermore,
anytime an accountant is involved in a communication
the attorney-client privilege is at risk.
It is unlikely that an appraisal – whether obtained
by the client or by the client’s lawyer – can qualify
for the privilege. See U.S. v. McKay, 372 F. 2d
174 (5th Cir. 1967).
How to minimize the risk of waiver of the privilege
by having the lawyer hire “experts”. See U.S.
v. Kovel, 296 F.2d 918 (2d Cir. 1961) and U.S. v. Schwimmer,
892 F.2d 237 (2d Cir. 1989).
Inadvertent disclosure cases. Bank Brussells Lambert
v. Credit Lyonnais (Suisse) S.A. 160 F.R.D. 437.
If the client uses the content of confidential communications
to defend against a penalty assessment or fraud allegation,
the client waives the privilege as to that and all related
communications. The IRS will take the position
that seeking an estate tax deduction for legal fees
or other expert costs is a waiver of the privilege.
See O’Neal v. U.S., 258 F.3d 1265 (11th
Cir. 2001).
Allen suggests that if a lawyer is engaged to prepare
estate tax returns that the client may want to consider
engaging separate counsel (whose fees he suggests will
likely be non-deductible) to provide advice about matters
that are likely to be controversial. He also suggests
that consideration be given to retaining separate counsel
if “hard questions” arise in the audit arena.
Allen’s approach is to have two experts – one to testify
and one to deal with the “hard questions”.
For planning purposes, trust and estate lawyers should
assume that their communications with clients that involve
advice concerning the law and application of the law
to particular facts may enjoy protection under
the attorney/client privilege if care
is taken to make sure confidentiality is not waived.
For instance, communications with any other professional
advisor (accountant, appraiser, CLU, financial consultant,
etc.) will probably not be privileged. Careful
attention should be paid to how and from whom the lawyer
requests, receives, analyzes and memorializes information.
Particular attention needs to be paid to electronic
communications. You may want to adopt a rule that
you assume every electronic mail will be read by an
audience much broader than initially intended. Waiving
the privilege by disclosure to non-clients should be
a constant concern. Likewise, disclosure of information
to estate or trust beneficiaries can also raise the
possibility of waiving the privilege.
SUSAN PORTER – US Trust Company
“One Percent, Two Percent, Three Percent, Four – No
Matter What You Pay, the Bene Wants More”
Susan believes not enough attention has been given in
literature and symposiums to the issue of designing
trusts to be as flexible as possible in regard to discretion
over trust distributions of income or principal.
She also feels it is critical that we educate our clients
on the breadth and depth of the discretionary powers
they want to give the trustee and to help them focus
on the final objectives for their trust.
She noted the limitations which trusts run into when
ascertainable standards are used rather than giving
independent trustees much broader powers. She
reviewed some cases in which the court have not respected
the “absolute” or “sole” discretion granted a trustee.
Thursday afternoon Workshop on Hot Topics
Martin E. Basson – IRS
The IRS know has a national coordinator for FLPs/FLLCs.
They have five regional coordinators. They have
a person in Washington, D.C. who makes the decision
on whether to litigate. They have a monthly conference
call for the agents on FLP/FLLC issues.
Mary Lou Edelstein – IRS - She is the national coordinator
for the appeals officers for FLPs/FLLCs. They
have different rules for different types of entities
and circumstances. For instance, their range of
settlement (not clear if this is their offer or where
what they view as a cap on settlements). death
bed and 2036 0% to 15%. Actual operating companies
and active real estate – 35% to 40%. Marketable
securities partnerships – 25% to 30%.
John W. Porter – Baker & Botts, Houston John’s
standard rule in answering audit requests. But
they don’t produce documents that are subject to the
attorney-client privilege. This analysis is made
on a case by case basis. Correspondence and bills
are not provided. The new burden of proof rules
require that we have cooperated with reasonable requests
from the IRS to have the burden of proof shift to the
government. Last ten years of bank statements.
Porter will case the IRS agent and see if there is some
other way to accomplish what the agent is after without
it being so burdensome. He likes to document the
agreement with the IRS on what is being produced and
what is privileged and not privileged.
Martin Basson – About 18 months ago a Texas collection
agent reported that there was an amazing number of cases
in which there was a default. In Florida there
was a tremendous number of defaults. What is happening
now the government is being forced to protect its lien
position. The letter will say file a bond or give
us some property to file a lien against. The letters
will be coming out of the Cincinnati service center
in the very near future.
Transfer tax returns have been centralized in Cincinnati.
There is a toll-free number for the estate and gift
tax group. 866-699-4083. It is an automated
service but they will call back. There is a small
business/self employed tab under the IRS web site.
Under that tab you will find the estate and gift tax
group and its contact information.
Mary Lou Edelstein – Don’t bury your best issue at the
bottom or in the body of your appeal. Start off
with your strongest argument. Make them very clear
and very thorough. Attach as many exhibits as
appear relevant. The exhibits aid clarity and
add credibility. Keep in mind that ex parte rules
in Appeals. The Appeals Officer is not allowed
to discuss your case with a Compliance employee without
your permission or presence. See Rev. Proc. 2000-43.
Appeals Officers are encouraged to attempt a resolution
with just one conference. Most officers will want
to try to get as much resolved in the initial conference
as possible with a hope that will be the only conference.
You can also request fast-track mediation while the
case is still in Compliance. If you have additional
information which wasn’t previously provided to the
compliance officer, please get it to the Appeals Officer
before your conference. Before you meet with the
Appeals Officer, have a realistic assessment of your
case and if possible a range of settlement percentages.
There is a post-appeals mediation process for large
cases. Don’t be afraid to extend the statute of
limitations. Appeals is trying to address all
cases as quickly as possible.
Norman Benford – Greenberg Traurig, Miami – Adequate
disclosure
Follow the rules meticulously.
John Porter – Valuation Developments
Jameson was reversed by the Fifth Circuit (267 F.3d
366, 5th Cir. 2001). The Fifth
Circuit rejected the Tax Court’s strategic buyer analysis.
Estate of Dunn v. Commr. No. 00-6-614 (5th
Cir. August 1, 2002) applied a dollar for dollar discount
for unrealized capital gains when determining the value
of a 64% interest in a closely held Texas corporation.
You may not get a dollar for dollar discount for pass-through
entities because of the availability of the Section
754 election.
Martin Basson – The IRS will look at the capital gain
exposure as part of the marketability discount.
They don’t feel it is appropriate to treat it as a separate
discount.
John Porter TAM 200247001 – How do you value an IRA
for estate tax purposes? The IRS felt that the
691 deduction takes into account the tax effects.
There are a number of cases in audit where this issue
is being argued.
S Corporation stock valuation cases – Gross (272 F.3d
333 – 6th Cir. 2001) and Adams (83
T.C.M. 1421 (2002). The Tax Court has refused to tax
adjust the income stream from a S corporation under
either of these cases.
There is another case, Heck (sp?) where the argument
is being made that the marketability discount for a
S corporation stock should be enhanced because of the
statutory eligible shareholder limitations.
Basson and Edelsteing 2036 issues are going to be raised
more frequently if the transferor doesn’t keep some
assets outside of the LP. They are going to look
at whether there has been any co-mingling of funds and
whether the partnership agreement has been strictly
followed. They also will look at whether the distributions
appear to be related to what the income realized by
the transferor prior to formation. They are also
going to look at the issue of whether there are disproportionate
distributions. The liquidation during the pendency
of the audit or appeal will generally result in a much
lower settlement offer.
John Porter - Strangi is back in the Tax Court on remand.
It was formed just two months before his death.
Briefs have been filed now. We may see an opinion
during the next 6 to 12 months.
John Porter - Kerr held that 2704(b) would not apply
to the restrictions on liquidation and dissolution.
Many planners have recommended having a charity as a
limited partner to make 2704(b) not applicable.
That was the situation in Kerr because the University
of Texas was a limited partner.
John Porter – McCord – this is a case pending in the
U.S. Tax Court that involves a valuation definition
clause.
John Porter – importance of the appraisal. Because
the appraisal filed with the transfer tax return constitutes
an admission of value by the taxpayers, it is important
for the taxpayer to obtain well-reasoned appraisals
from a qualified appraiser when the return is filed.
John Porter – in the area of undivided interests look
at the Sels case and Baird case. Sels resulted
in a 60% discount. It involved an undivided interest
in 79,755 of acres of timber. Baird involved Louisana
undivided timber. Estate of Baird v. Commr.,
82 T.C.M. 666 (2001). In that state you have to own
an undivided interest of 80% or more to compel the harvest
of the timber. Another important note about the
Baird case was the fact the estate used an expert who
was involved in the buying and selling of undivided
interest in timber. His testimony was very persuasive.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
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//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.html
back
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FINAL
Report
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to 2003 Table of Contents
This is the final report on
the 2003 Heckerling Institute on Estate
Planning. It contains several reports from Jason Havens.
Also, I received the following from Joe Hodges:
The Moderators of the ABA-PTL List wish to thank the
following people for
providing all of this year's reports:
Glen A.Yale Esq. Oppenheimer, Blend, Harrison &
Tate, Inc. San Antonio, TX
<gyale@obht.com>
Jason E. Havens Esq. Hall & Runnels, P.A. Destin,
FL <jehavens@hrhlawfirm.com>
Eugene E. Zuspann Jr. Esq. Zuspann & Zuspann Denver,
CO and Goodland, KS
<ezuspann@zuspann.com>
John A. Warnick, Holme, Roberts and Owen LLP, Denver,
CO
As we have done in January for the last six 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 37th Annual Philip
E. Heckerling
Institute on Estate Planning that is being held January
6-10, 2003 at the
Fontainebleau Hilton Resort and Towers in Miami Beach,
Florida.
We also will be posting the full text of this year's
Reports on the ABA
RPPT Section's Web site, as we have since the 2000 Institute.
Those
Reports can be found at URL
http://www.abanet.org/rppt/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.
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.
===================================================
FINAL REPORT
The following report has been filed concerning the
software vendors who are
in the Exhibit Hall this year and other technology news
by our on-site
Reporter, Jason Havens, Esq. of Destin, Florida, the
creator of the Legal
Research for Estate Planners Web site (http://www.jasonhavens.net).
This
report continues the coverage of software and some other
vendors who are
exhibiting at the Institute. Although our reports do
not include direct
hyperlinks, we would recommend that users search for
a particular vendor
using a search engine such as Google (http://www.google.com).
Following are the highlights from the "third round"
among the software and
other vendors. These highlights are generally classified
in categories that
will hopefully prove helpful to list members. This final
"round" concludes
these reports for the 2003 Institute.
A. CALCULATION SOFTWARE:
(N/A for 2003 software report #3)
B. DRAFTING SOFTWARE:
1. Lawgic (continued): Lawgic is apparently offering
a discounted renewal
license to its users. Lawgic has also reestablished
its customer service
efforts. For basic users, a "Getting Started Guide"
is available within the
2001 updated program and also via Lawgic's website.
A "How To" question is
also available at the beginning of the program on question
number one
("Select An Activity"). Lawgic was featured
during the Institute's Special
Session on technology.
2. Datatech Software, Inc. (continued): ThinkDOCS (drafting)
was also
featured during the Institute's Special Session on technology.
3. LawontheWeb.com/Wealth Transfer Planning: I spoke
with Jonathan
Blattmachr, Esq., the author of LawontheWeb.com/Wealth
Transfer Planning,
which was historically an excellent drafting system
and was mentioned in the
Special Session's materials. I do not have any details
for this final
report, but will post an update on this drafting system
on this list serve
in the future which will likely be entitled "Wealth
Transfer Planning
Software Updated" (if a user wants to search the
archives for this topic).
C. TRUST ACCOUNTING & RELATED ADMINISTRATION SOFTWARE:
1. The Lackner Group, Inc. (continued): The 6-in-1
Estate Administration
System is a Windows- or Mac-based system that includes
the latest tax
preparation forms, including the new Form 1041. Lackner
has also updated
its system to anticipate all known "decoupling"
states (i.e., those states
that are deviating from the "pick-up" tax,
based on the state credit for
federal estate taxes, the process of which is probably
summarized in another
report and is definitely included in the Institute's
materials prepared by
Pam Schneider, Esq. and others). Lackner is compatible
with the well-known
File Maker Pro database program. The Lackner 6-in-1
Estate Administration
System was featured during the Institute's Special Session
on technology.
2. Datatech Software, Inc. (continued): Quick and Easy
(tax preparation) was
also featured during the Institute's Special Session
on technology.
D. APPRAISAL & VALUATION SOFTWARE:
(N/A for 2003 software report #3)
E. RESEARCH SOFTWARE & SERVICES:
(N/A for 2003 software report #3)
F. MISCELLANEOUS VENDORS:
(N/A for 2003 software report #3)
If any vendors or any important developments were omitted
that we should
have mentioned, please stay tuned. We will attempt to
cover all items of
interest in future reports as time permits. Thank you.
=============================
Following are the highlights from the Institute's Special
Session on estate
planning technology. These highlights are generally
classified in categories
that will hopefully prove helpful to list members. Some
of these comments
update the materials provided at the Institute's Special
Session on estate
planning technology.
E-MAIL and E-MAIL SOFTWARE PROGRAMS:
1. Eudora e-mail program: The Special Session mentioned
Eudora, an e-mail
program that offers much of the same functionality as
popular e-mail
programs such as Microsoft Outlook. (Please note that
this vendor was not
displayed at the Institute.)
2. McAfee Spam Killer: The Special Session also mentioned
McAfee Spam
Killer, a program that will evidently minimize and hopefully
eliminate spam.
E-MAIL DISCUSSION LISTS
Besides this list, which is probably the premier list
for professionals and
others in the area of estate planning and administration,
the following
lists were also mentioned at the Special Session:
1. LISI/Leimberg Information Services, Inc.: These
newsletters are authored
by a number of well-known estate planning experts. The
newsletters are not
in a discussion-based format, but provide excellent
coverage on a variety of
topics.
INFORMATION MANAGERS:
1. Amicus Attorney: This program functions as an amazing
organization tool.
Amicus Attorney includes group calendaring, contacts
management, and
conflicts checking. The program also integrates with
e-mail, billing, and
word processing programs. Timers are included in each
aspect of the program
to allow for easy time tracking. The more advanced versions
of the program
also include synchronization with Palm- and Windows-based
personal data
assistants. All of these information management programs
integrate with
time and billing software such as Timeslips.
DOCUMENT ASSEMBLY:
Please see the technology reports from the Institute,
which include many
highlights on document assembly programs.
ESTATE PLANNING SOFTWARE:
Again, please see the technology reports from the Institute,
which include
many highlights on estate planning software.
TAX RETURN PREPARATION SOFTWARE:
Again, please see the technology reports from the Institute,
which include
many highlights on tax return preparation software.
__________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on
CD ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado Mail: ezuspann@zuspann.com
Goodland, Kansas WWW: www.zuspann.com
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
FINAL REPORT - SUPPLEMENTAL
back
to 2003 Table of Contents
This is an additional report from the 2003 Heckerling
Estate Planning Institute.
It summarizes the Thursday afternoon breakout session
entitled "Split-Dollar Life Insurance."
The four panelists were
Lawrence Brody, Jonathan G. Blattmachr,Mary Ann Mancini
and Michael Weinberg.
The editors wish to thank Mary Ann for providing this
synopsis.
As we have done in January for the last six 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 37th Annual
Philip E. Heckerling Institute on Estate Planning that
is being held January 6-10, 2003 at the Fontainebleau
Hilton Resort and Towers in Miami Beach, Florida.
We also will be posting the full text of this year's
Reports on the ABA RPPT Section's Web site, as we have
since the 2000 Institute. Those Reports can be
found at URL http://www.abanet.org/rppt/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.
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 - Supplemental report
Larry Brody began by introducing the panelists
quickly by stating that they needed no introduction.
He explained what the panel would try and cover during
the 90 minute presentation. Mary Ann Mancini then
began by providing an overview of what happened in the
split dollar area in 2002. The year began with
Notice 2002-8, a generally favorable Notice for taxpayers,
but by the time of the issuance of the Proposed Regulations
on Split Dollar in July, after six months of a struggling
economy, corporate scandal and stories of excessive
executive compensation, including split dollar plans,
the Proposed Regulations were much less favorable than
expected. Shortly thereafter a New York Times
article drew the public's attention, including Congressional
attention, to certain split dollar arrangements and
Treasury and the IRS reacted by issuing Notice 2002-59
less than three weeks later. In the meantime,
Congress passed the Sarbanes Oxley bill with its impact
on split dollar, namely a prohibition on loans and extensions
of credit to executives of publicly traded companies.
The year closed with a Republican controlled congress
and possible hearings on Sarbanes Oxley in the spring
of 2003.
Jonathan Blattmachr then discussed Notice 2002-8, and
the provisions of the same, including the favorable
grandfather and transition rules of the Notice.
He pointed out the different set of rules that apply
to arrangements entered into before January 28, 2002
as opposed to the rules that apply for arrangements
entered into after that date but before the issuance
of Final Regulations. Arrangements entered into
before January 28, 2002 have the most favorable provisions,
including the ability to terminate the arrangement tax
free before January 1, 2004, the ability to recharacterize
the arrangement as a loan for all periods after January
1, 2004, the ability to continue to use P.S. 58 rates
and the ability to continue to use the insurer's published
premium rates. The rules for arrangements entered
into after January 28, 2002 are less favorable (but
still more favorable than the Proposed Regulations)
and include the ability to elect the economic benefit
tax regime or the loan tax regime and the ability to
continue to use the insurer's published premium rates,
with certain modifications.
Larry Brody then discussed some of the issues and ambiguities
of Notice 2002-8, such as the requirement in the Notice
that for pre-January 28, 2002 arrangements to take advantage
of the grandfathering rules, the company must be entitled
to receive full repayment of all of its payments.
Larry also observed that taxpayers have received no
guidance on when an arrangement is entered into, for
purposes of grandfathering. Larry then addressed
planning under Notice 2002-8 and when and if split dollar
arrangements that fall under the Notice should be terminated
or continued to be maintained and the factors that should
be considered when making that determination.
Michael Weinberg then made a power point presentation
on the planning opportunities under the Notice.
His presentation began with a discussion on how tax
efficient split dollar plans can be for funding the
clients' needs for liquidity, such as the need to meet
estate tax burdens, business continuity plans, buy-sell
agreements, charitable bequests and installment sales.
In addition to being tax effective, Notice 2002-8 also
provided the taxpayer with flexibility since the taxpayer
can now switch between a loan transaction and an economic
benefit transactions. He then reviewed some sample
cases that illustrated when the switch should occur
and the consequences of the switch. Mike ended
his presentation with six questions a client should
ask his or her insurance agent to ensure that the agent
has the requisite expertise to work on this type of
transaction.
Finally, Mary Ann Mancini provided a brief synopsis
of the provisions of the Proposed Regulations and some
of the issues presented by these Regulations, such as
the broad definition of a split dollar arrangement found
in the Proposed Regulations and the confusing owner
and deemed owner rules.
__________________________________________
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
Web site: www.law.miami.edu/heckerling
E-mail: heckerling@law.miami.edu
===========================================
Headquarters Hotel - Fontainebleau Hilton
4441 Collins Avenue
Miami Beach, FL 33140
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.lexisnexis.com/productsandservices.
The text of these proceedings is also available on CD
ROM from
Authority On-Demand by LexisNexis Matthew Bender. For
further
information, contact your sales representative, or call
(800) 833-
9844, or fax (518) 487-3584, or go to http://www.bender.com,
or write to Matthew Bender & Co., Inc., Attn: Order
Fulfillment Dept.,
1275 Broadway, Albany, NY 12204.
______________________________________________________
Brought to you by the ABA-PTL Discussion List Moderators
URL for ABA-PTL searchable Web-based Archives:
http://mail.abanet.org/archives/aba-ptl.html
To search the ABA-PTL archives online or manage your
subscription, go to
http://mail.abanet.org/archives/aba-ptl.html
//-----------------------------------------------------------------------
Eugene P. Zuspann II
Denver, Colorado
Mail:
ezuspann@zuspann.com
To search the ABA-PTL archives online or manage your subscription,
go to http://mail.abanet.org/archives/aba-ptl.html
back
to 2003 Table of Contents
|
