AALU on Incidents of Ownership Case

As 2011 rolls by, along with the increased ability to “gift”, the hesitations are becoming clearer...

Who exactly is making a large financial promise to the family?  Why life insurance company ratings matter...

On Dec. 17, 2010 a new tax bill was signed into law that provides affluent families unprecedented estate planning opportunities. The unification of Gift, Estate and GST Lifetime Exemptions at $5M gives every individual the ability to make significant additional gifts without incurring gift taxes. As the law stands now, the gift and estate tax exemptions return to $1M on Jan. 1, 2013.

Most estate planners have listened to clients expressing concern about the possible negative effects their money has or will have on their children. Most of us hear such comments as “My child doesn’t have the slightest idea of the value of a dollar;” “She will blow through her inheritance in five years;” and “If I leave my money to my son, he’ll never do anything with his life.”

The 1976 Tax Reform Act introduced the controversial concept of carryover basis. This replaced "stepping up" or down the adjusted basis of property to its date of death or alternate valuation date value. A fresh start rule exempted prior appreciation, "changing" the basis of inherited property to its December 31, 1976 value. The concept was so complicated that Jonathan Blattmachr, a co-author of this article, wrote a book about it.

In our Bulletins Nos. 09-16 and 07-21, we provided a description of state exemptions for what section 2011 of the Internal Revenue Code describes as "estate, inheritance, legacy or succession taxes" following the statutory "decoupling" of those exemptions from the Federal estate tax exemption. That Bulletin also included a summary of the then current status of the relevant law in each of the states. This Washington Report updates that information through June 8, 2010.

We thank the law firm of McGuire Woods LLP, of Charlottesville, Virginia, and one of its partners, Charles D. Fox IV, Esq., for permission to use the chart that is included here. The chart is maintained by Mr. Fox for the American College of Trust & Estate Counsel (ACTEC) Website on a non-exclusive basis and is updated regularly.

AALU has learned that at least four attorneys in academia and private practice have written to the Treasury Department asking that a durational limit - suggested to be two generations - be placed on trusts that qualify for the generation-skipping transfer (GST) tax exemption, thus eliminating the incentive to establish so-called "perpetual dynasty trusts" in jurisdictions that have abolished the common law "rule against perpetuities." The Treasury correspondence was submitted by Gregory S. Alexander of Cornell University Law School, Raymond H. Young of Young & Bayle (a Boston law firm), John H. Langbein of Yale Law School, and Lawrence W. Waggoner of the University of Michigan Law School.

In recent years, foundation donors and leaders have engaged in an increasing number of conversations on the phenomenon of foundation “spenddown,” or limited lifespan. These discussions have been spurred by the heightened visibility of individual philanthropists who have announced their intention to limit their foundation’s lifespan and by the fact that many family foundations created in the 1980s and 1990s are now facing a transition in leadership that leads them to consider foundation lifespan options that may be open to them.

Why do some philanthropists and/or foundation trustees and executives choose to spend down foundation assets?

Attorney May Be Liable to Executor for Damages for Negligent Advice With Respect to Decedent’s Life Insurance Policy.

Wealth advisors can become the bridge between a family’s human goals and their concrete results. In the 2nd of a series of three articles for the Journal of Practical Estate Planning, Tim Belber examines the idea of being a “Pragmatic Planner” and how that approach can lead to the accomplishment of important human goals through the use of excellent technical planning strategies.

Wealth planners have a unique opportunity to help client families succeed over multiple generations. In the 1st of a series of three articles for the Journal of Practical Estate Planning, Tim Belber explores the differences in thought and outcome between a transfer plan and a transition plan.

Is your client's life insurance at risk of creating additional taxation? With the advancement of health care and the resulting increase in life expectancy, it is possible some clients may outlive their coverage. These clients may face a taxable event if their policy matures during lifetime and becomes payable.

Excerpt: Neal C. Groff, Founder and Chairman of The Madison Group, said: “The addition of Family Wealth Services Group is a significant step for our firm. We strongly believe values-based planning is the most effective way to plan for the future, and this addition strengthens our ability to deliver perspective, clarity, and value to our clients.”

October 10, 2008 - Fred Jonske, President & CEO of M Financial Group discusses recent financial market events and distinguishes between stockholders and policyholders. "When you buy insurance you are not buying the stock of the insurance company, you are buying an asset that is subject to strict regulations designed to protect policyholders". Supported with research from Colin Devine, Managing Director of Citigroup Investment Research.

All Split-Dollar Arrangements that are subject to Section 409A must be amended to bring the arrangement into compliance with Section 409A by the end of 2008. Larry Brody, of Bryan Cave LLP (www.bryancave.com), details issues surrounding the 409A deadline, including the availability of alternative term rates for split-dollar arrangements and employer reporting of equity on termination of pre-final regulation arrangements.

An Update on Recent Developments Involving Stranger Owned Life Insurance (STOLI).

On August 13, 2007, The Madison Group, Inc. was pleased to host Donald O. Jansen, J.D., LL.M., (www.donaldjansen.com) as he presented to a group of Denver-area estate planning professionals. This paper will analyze one method of sheltering insurance from estate taxation and generation-skipping taxation - the irrevocable life insurance trust. In addition, gift, estate and GST tax problems and solutions will be reviewed.

This assessment includes an overview of the characteristics of NLG products, details different NLG types, and outlines strengths and weaknesses of NLG. In addition, there is a comparison of NLG versus a viable alternative, current assumption UL, and a list of critical questions to ask when considering UL versus NLG.