Planning Potpourri

More Discounts:

How many discounts for lack
of control (DLOC) are there? Many appraisals estimate discounts for lack of
control based on data from public companies. But a non-controlling minority
interest of a privately held company has a greater risk than a non-controlling
minority interest in a public company and warrants a greater DLOC. As but one
example, the public company has SEC and other governmental oversight, the
private company does not.

Estate Expenses:

In most estates it takes
some months before a will is admitted to probate, an estate tax identification
number obtained and an estate checking account opened. It is common for a
family member to advance expenses personally until that time. Rather than
handling this in the typical haphazard uncorroborated manner, have the estate
(even if signed initially by the executor named in the will waiting to be
appointed) sign a loan agreement with the family member acknowledging the
estate’s liability to reimburse for expenses advanced to the estate. Since the
amounts and timing are unknown, this can function akin to a line of credit,
like a draw down construction loan. Prepare a schedule of the expenses with
attached corroboration and treat each as a request for a further advance on the
loan.

Beware of Reciprocal Trusts:

Dad sets up a trust naming Mom and kids
as beneficiaries which owns $1M life insurance on Dad. Mom sets up a trust
naming Dad and kids as beneficiaries which owns $1M life insurance on Mom. The
trusts are substantially the same. The mirror image nature of the trusts could
justify unwinding the two trusts as being economically equivalent to no trust
having been established. U.S. v Grace, 395 U.S. 316 (1969). This would
undermine the intended results. Efforts should be made to differentiate trusts
established by spouses: different trustees, different assets (e.g., permanent
insurance on husband, term in a different amount on wife), document different
and independent planning objectives for each trust, different distribution standards,
etc.. If existing trusts might face this issue consider taking corrective
action at your annual trust review meeting. Have a trustee resign from one
trust, use powers to appoint new trustees, contribute a different asset to one
of the trusts, etc.