The 7520 rate for June 2012 dropped to 1.2%.
The June 2012 Applicable Federal Rates can be found here.
As Facebook prepares to go public on Friday, many news articles, such as this Forbes article, have discussed the fact that Facebook co-founders Mark Zuckerberg and Dustin Moskovitz have funded annuity trusts, most likely Grantor Retained Annuity Trusts (GRATs), with Facebook stock. This stock is set to increase exponentially in value with the IPO takes place on May 18. If these annuity trusts are, in fact, GRATs, they may be transferring millions of dollars worth of Facebook stock to their beneficiaries, potentially free of any transfer tax.
For more information on the benefits of planning with Grantor Retained Annuity Trusts, see our September post by Justin Flach and Doug Stanley, GRAT Planning in a Down Market.
For the first time, in Wandry v. Commissioner, the Tax Court approved a defined value formula clause without a charitable component. In this federal gift tax case, the Tax Court determined, in a memorandum opinion, that the taxpayers’ respective defined value gift clauses were enforceable under state law, were defined value gifts of LLC membership interests instead of gifts of percentage interests and, thus, were to be respected for federal gift tax purposes.
Summary
Albert and Joanne Wandry (“Petitioners”) and their children formed Norseman Capital, LLC (“Norseman”). The Petitioners wanted to make gifts to their children and grandchildren using their annual exclusion and lifetime exemption amounts, so they consulted a tax attorney to begin a gift-giving program. On January 1, 2004, the Petitioners transferred gifts of specific dollar amounts of membership units in Norseman to their children and grandchildren. The gift documents stated that if the IRS challenged the eventual valuation of the units, the capital accounts would be adjusted so that the number of units transferred equaled the specified values. An independent appraiser determined the value of the LLC and the Petitioners’ CPA used the appraisal to report the number of units transferred on the Petitioners’ gift tax returns. However, the IRS determined that the values of the gifts exceeded the Petitioners’ Federal gift tax exemptions and issued a deficiency notice on February 4, 2009. (more…)
McLean V. Ponder, Cause No 36V010500665-01, Circuit Court of Butler County, Missouri, is a case that has been followed closely by practitioners across the country as the first case involving a claim filed by a trust beneficiary against the trust’s “trust protector.” After the plaintiff, Robert McLean, the trust beneficiary, had fully presented all of his evidence against Michael Ponder, the trust protector, during the jury trial last October, the trial court granted Ponder’s motion for directed verdict, taking the case away from the jury. Apparently, McLean had failed to prove the allegations in his petition that had previously garnered so much press as “bad facts” that had previously enabled the beneficiary to win a reversal of the summary judgment in favor of the trust protector and a remand to the trial court for trial.
This case involved a (d)(4)(a) type special needs trust created for Robert McLean with the settlement proceeds from his personal injury case, to protect those funds from having to be used to repay Medicaid for his medical benefits obtained after an accident rendered him a quadriplegic. Merrill Lynch Trust Company and David Potashnick were appointed to serve as the initial trustees, but both resigned within a month or so after the creation of the trust. Michael Ponder, who had been appointed as the “trust protector” for the trust with the authority to remove and replace the trustees, appointed Patrick Davis as successor trustee. Davis had represented McLean in the past and had referred McLean to Ponder to handle the personal injury case. Within 2 years after being appointed, Davis and Ponder resigned and a new trustee and trust protector were appointed. That newly appointed successor trustee, having served for less than a year, resigned and McLean’s mother was appointed to serve as successor trustee. (more…)
Whether post-death creditor protection is available to inherited IRAs under the 2005 Bankruptcy Act has been the subject of a number of cases decided in the last several years. The argument made by bankruptcy trustees is that, on the death of the IRA owner, the IRA ceases to be “retirement funds” as it is not the retirement funds of the beneficiary. Consequently, the bankruptcy trustees argue that the inherited IRA ceases to have the protection afforded to IRAs under the Bankruptcy Code.
In Re Stephenson, U.S. District Court, E.D. Mich., No. 4:11-cv-10848-MAG-MAR, December 12, 2011 is the latest in a long line of cases that have been decided in the last several years under the 2005 Bankruptcy Code. While the Bankruptcy Court in this case agreed with the Trustee that the inherited IRA was not exempt from the bankrupts’ estate, the District Court did not agree.
In this case, Janet Stephenson had inherited an IRA from her mother two years before filing bankruptcy. The Stephensons claimed an exemption for the IRA under the Federal Exemptions in § 552(d)(12), and the Trustee objected. In reviewing this bankruptcy case, the District Court first reiterated the two-prong test used in each of the cases previously decided under the 2005 Bankruptcy Code, whether the funds were “retirement funds” and whether the funds are exempt from taxation.
The Court reviewed all of the cases decided under the 2005 Bankruptcy Code: (more…)
Our clients are increasingly concerned about the preserving the assets their children will inherit from them in the event of divorce. The New Jersey court in Tannen v. Tannen, 416 N.J. Super. 248, 3 A. 3d 1229 (2010) wrestled with the issue of the extent to which a trust created by parents should impact the award of alimony in a divorce.
In this case, after Mark and Wendy Tannen were married, they moved into a large house that was given to Wendy by her father. Several years later, (more…)
Kimberly E. Civins and Brent A. Howard serve on the board of the 1873 Society Club, the junior board for the Atlanta Humane Society (“AHS”), and organized a Bryan Cave LLP walk team for AHS’ Pet Parade. The Pet Parade is an annual event that helps promote AHS and raises money for AHS while giving dogs exactly what they want, play time and a walk. The Bryan Cave walk team had a lot of fun and helped raise money for AHS. AHS is the oldest private charitable organization in Atlanta, founded in 1873. Originally chartered to protect women, children, and animals, AHS is now a widely recognized pet adoption center, clinic, and educational program provider, which has been serving Atlanta at 981 Howell Mill Road since the 1930s. AHS does not euthanize for time or space. To adopt, volunteer or donate, you can visit AHS’ website.
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Generally, there are three basic goals of estate, generation skipping transfer, and gift tax planning: (1) the reduction of estate and gift taxes upon transfer; (2) the deferral of the estate, generation skipping transfer, and gift tax burden; and (3) ensuring for the necessary liquidity to pay the taxes when they come due.
We are in the midst of very volatile times which, at least for a foreseeable future, although no one knows for how long, can provide opportunities to achieve these goals in particularly beneficial and tax-efficient ways. This is the result of the present low interest rates and the drop in value of most types of assets, which allows clients to engage in some estate planning that may not be available when interest rates rise and values are driven higher.
In Re: Stephen M. Gunther Revocable Living Trust, 2011 Mo. App. LEXIS 1293, October 4, 2011, is one of the first cases interpreting the duties of a trustee of a revocable trust during the settlor’s lifetime under the Uniform Trust Code. Here, the court ruled that under the provisions of R.S. Mo. §456.6-603 (a Uniform Trust Code provision), the trustee had duties only to the settlor while the trust was revocable.
In this case Stephen M. Gunther established a revocable trust for his own benefit in 1997, naming J. Barry Gunther as the initial trustee. Several years later, Stephen amended the trust to name himself as trustee and J. Barry Gunther as his successor trustee. Stephen died in 2009. Upon Stephen’s death, his two minor children became the residuary beneficiaries. A year after Stephen’s death, the beneficiaries sued the trustee seeking an accounting of the trust from its inception in 1997, except for the time when the settlor served as the trustee. The court affirmed the summary judgment in favor of the trustee that was granted by the trial court. (more…)
From BryanCaveFiduciaryLitigation.com
Effective May 1, 2012, new amendments to the Delaware Chancery Court Rules will materially change the required content of consent petitions to modify trusts. The official website of the Delaware judiciary describes the amendments as “help[ing] the Court protect trust assets of minor and unborn beneficiaries and ensur[ing] the integrity of the Court in the process of modifying trusts.”
So what’s the big deal? Let’s see . . .
For starters, the petition must specifically cover a lot of ground, including a lot of facts about the history of the trust, and nine separate points that must be pleaded “with particularity” (e.g., how the relief requested will affect current, vested future, and contingent beneficiaries; whether the relief requested will result in releases or indemnification of the fiduciary; and so on . . .).
Here are some other highlights:
- A whole bunch of exhibits must accompany the petition, including the consent of the trustor of the trust, if living; a redlined version of the trust instrument; and a family tree;
- A set of specific requirements as to the form and content of each consent; and
- Detailed requirements regarding virtual representation, including a certification that no material conflict of interest exists between the consenting party and the person represented; and a detailed certification of the attorneys filing the petition.
While these new amendments will certainly make consent petitions to modify trusts longer, the sheer volume of information and exhibits that must now accompany a petition may, as a practical matter, make trust modification in Delaware cost prohibitive in a number of situations.
