Heckerling
Institute 2003
Reports from the event, as posted to the ABA-PTL List Serve |
FINAL REPORT - SUPPLEMENTAL
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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.
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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.
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Denver, Colorado
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