Wednesday, July 25, 2012

The 7520 rate for August 2012 has dropped even lower, to 1.0%.

The August 2012 Applicable Federal Rates can be found here.

Monday, July 23, 2012

Typically, a Trustee is an individual or entity who is responsible for all of the duties necessary to administer a trust, but, in this new statute, the Illinois legislature has created new roles to assist the Trustee in the performance of his or its duties.

On May 16, a bill entitled “Directed Trusts” passed both houses of the Illinois legislature. According to the synopsis of the bill, the amendment to the Illinois Trusts and Trustees Act “adds provisions establishing a directed trust as a type of trust and establishes responsibilities among” different directing parties.  The bill was sent to the governor for signature on June 14.  If the governor does not veto the bill, or sign it before then, the bill will become law on August 13.

The bill creates three types of directing parties: (1) an investment trust advisor, (2) a distribution trust advisor, and (3) a trust protector. Each of these three types of directing parties, if appointed pursuant to a governing instrument, is “a fiduciary of the trust subject to the same duties and standards applicable to a trustee of a trust as provided by applicable law” unless the trust instrument states otherwise.

If a trust appoints any of these directing parties, each party serves in the role appointed to him or her, and is only responsible and only liable for the role to which he or she is appointed. This differs from a situation in which multiple trustees are appointed over a trust and the trustees divide the responsibilities amongst themselves based on their respective strengths. In this situation, each trustee is still responsible for and liable for all aspects of the trust administration, whether he or she participated in that role or not.

As you might imagine, a “distribution trust advisor” is defined as a person or persons “given authority by the governing instrument to direct, consent to, veto, or otherwise exercise all or any portion of the distribution powers and discretions of the trust, including but not limited to authority to make discretionary distribution of income or principal.”

An “investment trust advisor” is defined as a person or persons with the authority “to direct, consent to, veto, or otherwise exercise all or any portion of the investment powers of the trust.”

A “trust protector” is defined by a list of powers found in the bill, including, for example, the power to modify or amend the trust instrument to achieve favorable tax status, remove and appoint trustees, or to terminate the trust.

The bill is now awaiting review of the governor. The full text of the bill can be found on the Illinois General Assembly webpage.

Monday, July 16, 2012

Much has been written about the potentially unique opportunities available to people to make gifts before year-end (for example, see our prior posts here and here). If Congress does not act, the increased $5,120,000 gift tax exemption will decrease dramatically. However, if you are the owner of an interest in a private equity or hedge fund, planning to gift part or all your interest in such fund requires particular care and attention.

Private equity funds are usually created as limited partnerships with two classes of owners. The limited partners are the investors in the fund, while the general partner is typically a business entity created as a limited liability company (“LLC”). A carried interest is normally held in and allocated to the LLC/general partner. A carried interest is the right to receive some of the profits of the fund. The initial value of a carried interest is speculative, as it is not certain how profitable the fund will ultimately be. Thus, gifting such an interest is often very attractive. It is imperative to get an appraisal of such interest by an experienced appraiser. Generally, the gift tax cost of the transfer should be relatively low, due to the low value attributed to the interest, but there is often significant potential appreciation inherent in the carried interest. (more…)

Tuesday, July 10, 2012

Two of our Atlanta attorneys, partner Kim Civins and associate Tiffany McKenzie, recently published an article in the Summer 2012 issue of Insights Magazine entitled “Estate Planning With Conservation Easements”.  Check it out here!

Monday, July 9, 2012

Since Tom is back in the news this week, and because I finally watched Ghost Protocol this weekend, I thought I’d re-post this November 2011 blog on Tom Cruise’s possible use of life insurance in his estate planning.  Keep in mind, based on any divorce settlement agreement he reaches with Katie Holmes, Tom’s need to maintain life insurance may change.

When I first saw this video of Tom Cruise performing his own stunts on the outside the Burj Khalifa in Dubai (the tallest building in the world), a mile and a half above the earth, for the movie Mission: Impossible — Ghost Protocol (aka Mission: Impossible IV),  my first thought was, “Wow, how much life insurance do you think he has?”  My next thought was “Think of the estate taxes his estate will have to pay on those life insurance proceeds if the life insurance isn’t held in a proper irrevocable life insurance trust.”  (Yes, as my law school friends would say, that’s the estate planning nerd in me coming through!) (more…)

Thursday, July 5, 2012

In a recent decision, Port v. Cowan, 2012 Md. Lexis 283 (May 18, 2012), the Maryland Court of Appeals held that Maryland courts will recognize a valid same-sex marriage entered into in another state for purposes of granting a divorce to such same-sex spouses who otherwise meet the criteria for divorce under the laws of Maryland. In support of its unanimous decision, the court cited the the general rule that Maryland courts will honor marriages entered into in another state, as long as the marriage was valid in the state where it was performed. Further, that court determined that recognition of a validly-performed out-of-state same-sex marriage is not repugnant to, but is actually consistent with Maryland public policy, in light of several currently enacted Maryland laws that protect and support same-sex couples.

As discussed in a recent article on CNN.com, Port v. Cowan highlights the challenge faced by same-sex spouses who enter into a valid marriage in a state that recognizes same-sex marriage, but thereafter relocate to a state that doesn’t recognize same-sex marriages and are unable to get a divorce. In fact, in this case the Maryland Court of Appeals issued a writ of certiorari (which means it agreed to hear the case) on its own initiative only after a Maryland circuit court had denied the couple’s request for a “no contest” divorce on the grounds that the subject marriage was “not valid” and “contrary to the public policy of Maryland.”

Currently, same-sex marriage cannot be validly performed in Maryland. Although the governor of Maryland approved a law in March 2012 that legalizes same-sex marriages performed in Maryland (the Civil Marriage Protection Act of 2012), the law does not go into effect until January of 2013. Further, opponents of the law have met the signature threshold to challenge the law and and ensure that the issue will appear on the November 2013 ballot for a referendum.

To read more about planning considerations for same-sex couples, click here.