Classic Trusts and Estates Magazine

Trusts & Estates, the journal of wealth management, is the how-to manual for advisors to high-net-worth individuals, families, and foundations. Published since 1904, Trusts & Estates publishes the works of the top practitioners in estate planning, trusts, insurance and other wealth-management disciplines. Readers include estate-planning and probate lawyers, trust bankers and officers, accountants, investment and insurance advisors, financial planners and key decision-makers at non-profit institutions, foundations, government agencies and educational institutions. These readers-who have an average of 20 years in the business-serve about 11 million clients, and influence more than $40 trillion in assets.

March 2004

12 A Demanding Gift
Joan Kroc’s surprise donation to the Salvation Army.

14 Charitable Giving
David T. Leibell and Daniel L. Daniels report on an IRS ruling giving its blessing to Harvard’s plan to allow its charitable trusts to participate in the return on the school’s endowment.

16 Tax Update
David Handler reports on a way for spouses to double the $1.5 million estate tax exclusion.

18 Corrections
Setting the record straight.


20 In Defense of Quiet Trusts
By Donald D. Kozusko

Should a settlor keep a trust secret from its beneficiaries? The Uniform Trust Code says no; its supporters hold that sunlight defeats trustee fraud and abuse. But Donald D. Kozusko argues that that grantors have excellent reasons for wanting beneficiaries in the dark. And he shows how the UTC can be rewritten to honor that desire-yet still prevent fraud and abuse.

-Donald D Kozusko is a partner at Kozusko Lahey Harris LLP, Washington, D.C.

29 Go Offshore To Avoid Trust Transparency?
By Ian Marsh and Michael Ben-Jacob

U.S. judges are trending toward more disclosure of trust information to beneficiaries and states are adopting the Uniform Trust Code, which mandates trust transparency. But settlors might be able to do an end-run around these growing disclosure requirements by going offshore. Ian Marsh and Michael Ben-Jacob explain what is and is not possible.

-Ian Marsh is a principal in the London office of the law firm Withers LLP.

-Michael Ben-Jacob is an associate in the New York office of the law firm Withers Bergman LLP.

32 Why More Clients Should Choose Trusts
By Gideon Rothschild

Some people hesitate to create trusts for their children, fearful that they will be perceived as trying to rule from beyond the grave. Instead, they’re inclined to leave their children outright gifts. But trusts actually provide far more asset protection than lump sums of money. Gideon Rothschild describes how to create trusts that preserve many of the advantages of giving children cash gifts, while still providing protection from future lawsuits.

-Gideon Rothschild is a partner with New York City’s Moses & Singer LLP, where he co-chairs the estate planning and wealth preservation group. He is also an adjunct professor at the University of Miami Law School Graduate Program.


38 Donating Right Before The Deal
By Laura H. Peebles

Can a client who waits until right before his company is bought or his stock options realized donate to charity yet avoid being taxed on the donated stock’s gain? For now, the answer, frequently, is yes, if certain conditions are met. But the Internal Revenue Service might soon change that. Laura H. Peebles describes how to avoid getting stuck with the tax bill and where the IRS threat lies.

-Laura H. Peebles is the tax director of estate, gift and trust services in the national office of Deloitte & Touche LLP, in Washington, D.C. She previously headed the estate, individual and charitable planning practices in the firm’s New Orleans office.


42 Patenting Tax Strategies
By Wendy Davis

Some pioneering advisors are patenting their tax-saving strategies. Should you?

-Wendy Davis is the senior editor of Trusts & Estates.

45 Wanted: Outside Counsel For Wealthy Family Offices
By Hannah Shaw Grove and Russ Alan Prince

When family offices need legal advice, they tend to turn to outside lawyers, according to a survey by Russ Alan Prince and Hannah Shaw Grove. And both single-family and multi-family offices say they intend to rely on outside legal counsel even more in the future.

-Hannah Shaw Grove is managing director and chief marketing officer at Merrill Lynch Investment Managers in Princeton, N.J.

-Russ Alan Prince is president of the market research and consulting firm Prince & Associates in Redding, Conn. He advises financial institutions and others on issues related to the affluent.


47 Consider SLP Liquidation Activity
By Annika M. Reinemann and Katherina Kuzina

Liquidation announcements or liquidation-like behavior decreases a discount by up to 20 percentage points. Are these liquidations driving down discounts in general? Using 19 years worth of studies, Annika Reinemann and Katherina Kuzina analyze the facts.

-Annika M. Reinemann is a principal in the San Francisco office of Houlihan Valuation Advisors.

-Katherina Kuzina is a financial analyst with the San Francisco office of Houlihan Valuation Advisors.

51 Don’t Accept Defeat
By Radd Riebe

Some of the Tax Court’s most crucial valuation decisions were made based on the testimony of experts that went uncontested. Had the taxpayers in the three key cases of 2003 presented the Tax Court with alternative methodologies to support their positions, they may have received more favorable results.

-Radd Riebe is a managing director in the valuation and litigation advisory services group at Stout Risius Ross, Inc., where he concentrates in business valuation, litigation advisory, and mergers & acquisitions. Prior to joining Stout Risius Ross, Inc., he was the co-founder and director of Key Business Valuation Services, a business valuation unit of KeyBank.

56 Deconstruct the Studies
By Rod P. Burkert

Internal Revenue Service experts recently dug up studies dating back to 1989 to support the case for lower discounts. But do those studies actually prove the Service’s case? Rod Burkert suggests other interpretations.

-Rod P. Burkert is a co-founder of Burkert Valuation Advisors, LLC, a valuation and litigation consulting services firm in Philadelphia. He is a certified public accountant, lead instructor for the National Association of Certified Valuation Analysts, chairman of its executive advisory board, and a past chairman of its education board.


64 Target: Abusive Roth IRA Deals
By Natalie B. Choate

Promoters took a legitimate savings vehicle-the Roth IRA-and turned it into an abusive tax shelter. Now the IRS is fighting back. Natalie Choate examines the Service’s efforts to attack certain types of transactions involving Roth IRAs.

-Natalie B. Choate is of counsel to Bingham McCutchen LLP, in Boston and author of the book Life and Death Planning for Retirement Benefits.


The United States had not yet entered World War II, but for his debut issue in March 1941, Captain America is on the cover punching Adolph Hitler in the kisser. Captain America would become one of the most beloved superheroes of the Golden Age of comics (which roughly spanned the 1940s and 1950s.) This issue now ranks sixth on the Top 100 Golden Age Books list compiled by Robert M. Overstreet, author of a respected price guide to comics. This copy of the issue originally was part of a famous cache kept by comic book collector Edgar Church. More recently, it was part of the collection of a noted comic enthusiast, the actor Nicolas Cage, who sold the book at a Heritage Comics auction on Feb. 3 for $64,400.

Other comic books sold at the Heritage auction and featured in this issue:

� p. 28-Action Comics No. 1, issued in June 1938, introduced Superman. This book marks the true beginning of the Golden Age of comics. The Overstreet Comic Book Price Guide calls Action Comics No. 1 “the most important comic book ever published,” as it singlehandedly elevated the comic industry from a second-rate medium of strip reprints to one whose sales would overtake best-selling magazines. This copy sold Feb. 3 for $57,500.

� p. 31-Amazing Spider-Man No. 1, published in March 1963 and one of the most cherished Silver Age comics, sold for $52,900, almost double the expected price of $32,000. The Silver Age started in the 1960s, when most homes had television sets and comic book sales began to decline.

� p. 46-Detective Comics No. 27-number two on Overstreet’s Top 100 Golden Age Comics list-features Batman and sold for $48,300, though it was estimated to go for $62,000. Batman’s creator, Bob Kane, was just 22 years old when this issue hit the stands in May 1939.

� p. 50-Marvel Mystery Comics No. 9, dated July 1940, is a classic cover by famous comic book artist Alex Schomburg, featuring the Sub-Mariner (water) battling the Human Torch (fire.) Estimates had it selling for $16,000. Price paid: $42,550.

� p. 55-Superman No. 1 launched the Man of Steel’s own series in 1939, a year after he was introduced in Action Comics No. 1. Predicted to sell for $32,000, this book went for $47,150. The issue contains the story of Superman’s origins, as told by his creators Joe Shuster and Jerry Siegel.


The six graphs in “Where the Money Goes,” page 67 of the October 2003 Trusts & Estates, which accompanied the article “Holistic Planning,” by H. Allan Shore and Seth R. Kaplan, contained inaccuracies. The correct graphs, which chart how charity lead trusts fare under varying 7520 rates and with different investment returns, can be seen below.