Two Halves Do Not Make a Whole?

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Stepping away from celebrities for a minute and focusing on estate laws, yesterday the IRS issued proposed regulations to minimize valuation discounts in estate planning. In a nutshell, the regulations prohibit taxpayers from dividing property between family members and then claiming their proportionate shares are not worth the exact proportion because that small proportion does not have control of the property. Wonky? Yes.

 
Three small points:
1. These regulations have been bandied about for 25 years.
2. From a practice viewpoint, I have never completely bought into the idea of valuation discounts for marketable securities transferred to an LLC or partnership solely for the purpose of obtaining a reduced value for estate tax purposes.
3. Nonetheless, this issue seems to be one for Congress to address through legislation rather than one more edict from a lame duck (re: imperial) administration to issue in its waning days.
 

Simon Says This Is Not a Gift

simonMel Simon owned the Indiana Pacers with his brother, Herb, for 16 years. After the Malice in the Palace in 2004, the Pacers started losing money and Simon became disenchanted with his ownership of the team. He sold his interest to his brother in a very quiet deal that was two years in the making. The terms included being released from various personal guarantees. Simon died shortly thereafter of pancreatic cancer. The IRS determined that the deal was so favorable to his brother that his estate owes a gift tax of $21 million. His widow has sued the IRS for a refund of the gift tax paid.

Several quick points:

1. An individual may give away $5.45 million during his life before he has to start paying gift tax.

2. The gift tax rate is 40%.

3. The donor is the person responsible for paying the gift tax.

4. This deal between brothers sounds complicated. It is doubtful that one brother would intentionally give the other $83 million.

5. The widow can afford the tax bill – Simon’s estate was valued at $2 billion because of his pioneering development of shopping malls. 

6. Ironic that Simon’s loss of interest in basketball ownership is tied to the Malice in the Palace. Ron Artest – the gift that keeps on giving.

 

Back At It

jack soccer gameIn addition to a dearth of worthy estate planning news, it has been a busy and awesome two weeks. Two concerts, a soccer game in Columbus, business trip to Cleveland, and usual bike rides. With all of that, Jack’s smile is the highlight of the past two weeks. Post to follow.

 

Attacking Camelot

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Socialite Alicia Clark died in February. Her will left her $17.5 million estate to the Humane Society. Her estate is in the news because the administrator of her estate has filed a Freedom of Information request to open a file which might shed light on whether Clark was the mother of a JFK love child even though she had long denied having a child with the late President. 
 
She had reportedly planned to blackmail President Kennedy’s father in the early 60’s related to such rumors. The blackmail attempt only became public after her then attorney went public after she did not pay his $1.2 million bill (in 1961 dollars) for negotiating a will with her soon to die husband which gave her $10 million for 13 days of marriage. Meanwhile, a man in the Bahamas claims the will is fake and that her valid will is a handwritten will she made in the Bahamas in 2001. That alleged will left one million to each of the doormen at her NYC apartment and the caretaker of that apartment, and the rest to the guy in the Bahamas. Got it? 
 
So many possibilities, so let’s try to stay focused on the salient points: 
 
1. The JFK love child angle seems to be irrelevant. If Clark had a child and raised him, she would have provided for him in her will and would have been seen with him in the past 55 years. If she gave him up for adoption, that child has no rights under law because his rights to her estate would be terminated due to the adoption.  
 
2. Some (re: me) might think that the estate administrator is grandstanding (successfully because he made the news) or is running up a larger bill than necessary in looking for a love child who likely has nothing to do with the estate, even if he exists. 
 
3. Clark’s former attorney’s $1.2 million bill for what is essentially a pre-nuptial agreement seems excessively large by any standards much less those of 1961. Those agreements are not typically handled on a contingent fee basis which must have been the basis on which he billed. 
 
4. That said, $10 million for 13 days of marriage to a dying man might be worth a $1.2 million fee. 
 
5. Lastly, the Bahamas guy must be suffering from sunstroke or island fever. Everyone besides the writers of Harold and Maude knows that Manhattan socialites do not create handwritten wills on vacation to leave their estates to their staff and random guys in the islands.
 

Not Friends

 
anistonJennifer Aniston’s recently deceased mother allegedly left Aniston out of her will. Even though Aniston reportedly supported her mother in recent years, her mother left her personal belongings and condo to another unidentified relative. Aniston and her mother had been estranged for years and had only somewhat reconciled two weeks before the mother’s death.
 
Several very brief points:
 
1. Aniston’s mother was not required to leave any assets to Aniston by law. She may leave them to whomever she chooses.
 
2. Aniston certainly does not need any of her mother’s money.
 
3. Like any 40-something year old, it is doubtful that Aniston would want/need any of her mom’s tsochktes.
 
4. It is refreshing to read an article about Aniston that does not involve pregnancy speculation although it does mention Brad Pitt.