Articles

Volume 33 Number 6 Thursday, November 13, 2008

Planning in a Low Interest Rate Environment: How Do Interest Rates Affect the Calculations in Commonly Used Estate Planning Strategies?

by Diana S.C. Zeydel, Esq. Greenberg Traurig, P.A. Miami, Florida*

Although most estate planners are generally aware that annuities and income interests are interest rate sensitive while unitrust interests are not, the interplay of the factors that enter the actuarial computations used to determine the value of an interest in property for gift tax purposes, when less than the entire interest may be transferred, are not always obvious.1 The purpose of this article is to illustrate in table form the actuarial elements that affect commonly used estate planning techniques such as a qualified personal residence trust (“QPRT”), a charitable remainder annuity trust (“CRAT”), a grantor retained annuity trust (“GRAT”), and a charitable lead annuity trust (“CLAT”).2 Certain comparisons will also be made to self-cancelling installment notes, private annuities, and installment sales to grantor trusts.3 This article assumes the reader is familiar with the income and gift tax aspects of these structures, and focuses exclusively on the computational elements.4

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Estate Planning With Alternative Investments — Or, Problems We'd All Like to Have and Some Possible Solutions

by Jeffrey A. Zaluda, Esq. and Margaret Hudgins, Esq.* Horwood, Marcus & Berk Chicago, Illinois

The growth of the “alternative investment” industry and the corresponding growth in the number of professionals and investors who manage those investments have highlighted the unique opportunities and challenges of transferring wealth from alternative investments to future generations. Estate planning for a client with an asset that is expected to explode in value is fun, satisfying and profitable for both the client and the planner. The classic example of this situation involves an entrepreneur who has built a successful business, and now plans to sell it in a private sale or through an initial public offering. When selling a business, the client and planner can usually determine with a fair amount of accuracy the amount of the sale and, of course, the asset to be sold. Alternative investment professionals, on the other hand, often own a variety of investments that may explode in value, but predicting which investments will generate the highest returns, when the returns will be realized, and what the returns might actually look like, is far from certain.

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Leading Practitioner Commentary

Will “Built-In Gains” Tax Discount Continue to Be Contested?

by Byrle Abbin, Managing Director

The government recently petitioned the Supreme Court for certiorari,1 hoping to obtain a reversal of several taxpayer-favorable circuit court decisions concerning the willing buyer-willing seller concept of valuation. These cases involve the discount in the value of a corporation's stock due to the inherent built-in gain (“BIG”) tax where the fair market value the corporation's asset(s) exceeds its tax basis. Hence the tax that would be incurred by the entity affects the value of the shares to current shareholders, or to new shareholders who might acquire those shares from current shareholders.

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