Trusts & Estates Newsletter

Issue 2 / Fall 2009

• Diamonds Are Forever… Irrevocable Trusts May Not Be The Irrevocable Trust is one of the more important tools in the estate tax planning practitioner’s toolbox. Through the use of irrevocable trusts, a client is able to take advantage of important tax-savings strategies while at the same time continue to obtain an economic benefit through the terms of the trust if desired. But there is a catch. Irrevocable trusts are, well, irrevocable. Their provisions are permanent. As we all know, we live in volatile times where a client’s circumstances and expectations change and tax laws under which trusts operate are a moving target. Smart, creative drafting can never take into account every contingency a client may face during the administration of his or her trust.
• The Care and Feeding of Irrevocable Life Insurance Trusts An Irrevocable Life Insurance Trust (“ILIT”) is a commonly used estate planning tool. The purpose is to own one or more policies of life insurance on one or more individuals (the “Insureds”). While the valueof the death benefit of a life insurance policy owned by an Insured is included in the Insured’s estate for federal estate tax purposes, such a policy owned by an ILIT, if properly drafted, is not. An ILIT thereby provides death benefits in the form of liquid funds to the ILIT beneficiaries which death benefits will not be subject to federal (or state) estate taxes.
• Exploiting the Elderly and the Specter of Undue Influence in Will Contests The high profile will contest trial over the estate of New York philanthropist Brooke Astor hasbrought to the national stage a common form of financial exploitation. The Manhattan District Attorney accused Ms. Astor’s son, Anthony D. Marshall, and her former attorney of exerting undue influence over Ms. Astor to arrange for her Last Will and Testament to be amended to give her son control over a significant portion (approximately $60 million) of her estate that he had previously not been entitled to. This bitterly contested case came to a conclusion recently when the jury foundthe son guilty of criminal charges that he defrauded his mother and stole millions of dollars from her as she suffered from Alzheimer’s disease. The jury also convicted the decedent’s estate planning attorney of a series of fraud and conspiracy charges, as well as one count of forging Ms. Astor’s signature on a codicil.
• The Abuse of Durable Power of Attorneys and How an Estate Can Recover Misappropriated Assets The Durable Power of Attorney (“POA”) is one of the oldest estate planning tools available to families. These instruments allow the named agent the right to perform certain tasks on behalf of the person granting them the authority. As we lawyers say, the agent is legally stepping into the shoes of the person granting the authority, known as the principal. This power becomes especially important if the principal becomes unable to act for him or herself.
• Trends in Philanthropy Many of our clients have been asking us questions about the role philanthropy plays in relation to a client’s legacy planning and tax planning. While there are certainly many reasons why people give their hard earned capital to charities at different points in their life, a recent study* gives us some useful information about what factors motivate charitable giving.
• Might I Suggest an ESOP with That Family Business? As a family business owner, you understand the vast planning and strategizing required to achieve, maintain and perpetuate success.
• The Exit Event: It’s Not a Spectator Sport The seminal event in a closely-held and/or family held business is the exit. It is often the one and only chance for the owners to generate substantial liquid wealth both for themselves and to pass down to subsequent generations.
• Captives A captive insurance company (“Captive”) is a domestic or foreign insurance company formed by a business owner to insure the risks of the operating business. The owner of a business or a group of businesses can form a wholly owned Captive for the purpose of insuring his related companies. The insured businesses pay premiums to the Captive in exchange for insurance. The insurance premium paid is a deduction to the operating businesses income and, in many cases, the premium income received by the captive insurance company will be tax free.
• Rock N’ Roll and Estate Taxes How prophetic. Recently while driving my car to a meeting, I was listening to a news radio station discuss the current administration’s long term goals to raise all sorts of taxes. I quickly got bored (or maybe demoralized), so I hit the next button on my dial only to find my favorite rock station playing that witty Beatles song, written by George Harrison in 1966, entitled “Taxman.”