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.

September 2006

ON THE COVER

September evokes a feeling of “return” for so many of us: Children return to school after a lazy summer; adults return to their fulltime job routines after two months of warm weather play. But few of us know the joy of “return” the heirs of Adele and Ferdinand Bloch-Bauer are experiencing: Five paintings by Gustav Klimt seized from their family by the Nazis during World War II were returned to them by the Austrian government this January. Four of these oils will be for sale by Christie’s New York this fall, including the 1912 portrait featured on our cover, “Adele Bloch-Bauer II.”

BRIEFING

12 Pension Protection Act
Bruce D. Steiner of Kleinberg, Kaplan, Wolff & Cohen, P.C in New York gives an overview of the groundbreaking Pension Protection Act of 2006 (PPA), which was recently signed into law. He notes the key provisions affecting inherited individual retirement accounts (IRAs), charitable IRA transfers, and company-owned life insurance policies..

13 Charitable Disincentives
David T. Leibell and Daniel L. Daniels, partners with Cummings & Lockwood in Stamford, Conn., warn that the provisions on charitable giving in the Pension Protection Act include sweeping reforms but very limited incentives for giving to charity. All charities should take note of these provisions, they say. For some, the PPA will mean a fundamental change in the way charities do business.

16 Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports on:
• Private Letter Ruling 200626043—in which property qualified for a qualified personal residence trust (QPRT);
• Internal Revenue Service Internal Legal Memorandum 200627023—in which there was no time bar to IRS security for Internal Revenue Code Section 6166 estate tax payments;
• Chief Counsel Advice Memorandum 200628042—in which there were no reasonable cause exceptions for a late IRC Section 6166 election or payment; and
• CCA 200628026 —in which a trust failed to qualify as a charitable remainder unitrust (CRUT).

17 Correction and Update
We misidentified author Kimberly Clouse in the August issue; but she got it right regarding the Securities and Exchange Commission’s next move in Goldstein.

FEATURES
ESTATE PLANNING & TAXATION

18 How to Undo an ILIT, If You Really Have Tos
By Charles L. Ratner

If your client’s irrevocable life insurance trust (ILIT) has outlived its welcome, what do you do? Charles L. Ratner explores the options, including moving a policy from an existing ILIT to a new one; he also gives some product-oriented solutions, with special attention to strategies and problems.

Charles L. Ratner is the national director of personal insurance counseling at Ernst & Young LLP in Cleveland. He also serves as both the vice-chair of the Trusts & Estates’ advisory board and as chair of the board’s committee on insurance.

INSURANCE

24 Sell Your Policy?
By Allen Goldstein, Leigh Harter and David Holaday

Is it a good idea to sell your life insurance policy? A life settlement provides liquidity, but there are a lot of issues to consider when making this decision. This article will help you figure out whether to sell. It also will help you navigate the life settlement process.

Allan Goldstein is chief executive officer, Leigh Harter is managing director, and David Holaday is an associate with the The Insurance Design Center, LLC, Deerfield, Ill..

FIDUCIARY LITIGATION

30 How to Fulfill Duties and Promote Good
By Marc J. Lane

Imagine the American Cancer Society having tobacco company stock in its portfolio. This is a fictitious example, but these kinds of things happen: An investor’s advisor, intent on maximizing profits, backs a company that contravenes the investor’s mission. The question is not only how to prevent such a sad absurdity, but also how to support companies that do right by the investors’ values—while still making money. The answer is socially responsible investing, and the trick is how to do it without violating legal or ethical rules governing fiduciaries. Here’s how it can be done.

Marc J. Lane is a principal with The Law Offices of Marc J. Lane, P.C., and Marc J. Lane Investment Management, Inc. in Chicago.

COMMITTEE REPORT
RETIREMENT BENEFITS

38 IRA Bequests to Charities
By Christopher R. Hoyt

If you are thinking about naming a trust with a charitable beneficiary as the recipient of some of your retirement assets, here is a word of advice: Don’t! With the important exception of a charitable remainder trust (CRT), such a trust can pose problems for the mandatory payouts from the retirement account as well as challenges for claiming charitable income tax deductions for the charitable gifts made by the trust. If a person would like to make a charitable bequest of some retirement assets, here’s the best way to accomplish that.

Christopher R. Hoyt is a professor at the University of Missouri-Kansas City Law School in Kansas City, Mo. He is also a member of the Trusts & Estates’ retirement benefits committee.

46 Coping With the IRA Raid
By Michael J. Jones

Inheritors of individual retirement accounts (IRAs) who don’t enjoy the tax-favored status of a surviving spouse can face steep income and estate tax bills. Many estate planners are aware of the tax raid that can fell large IRAs. It has become a tax planning article of faith that IRAs, especially large ones, are not worth much to those who inherit them. Life insurance is often proposed to fight the effects of the IRA tax raid problem. And it can be highly effective in that role. But this is no silver bullet. Estate planners and their clients also should consider how valuable stretching out IRAs can be.

Michael J. Jones is a principal with Thompson Jones LLP in Monterey, Calif. He also is the new chair of the Trusts & Estates’ retirement benefits planning committee.

50 Court Orders Work
By Marcia Chadwick Holt

Need to modify a trust or beneficiary designation? Through a discussion of three private letter rulings, this article demonstrates why a court order may be the way to go.

Marcia Chadwick Holt is a partner in the Denver office of Davis Graham & Stubbs LLP. She is also a member of the Trusts & Estates’ retirement benefits committee.

PERSPECTIVES
INTERNATIONAL PLANNING

54 Double Standards
By Richard J. Hay

The OECD report reveals how transparent nations are in the face of international exchange of financial information for tax enforcement. Further complications arise when larger countries don’t practice what they preach. Read the hidden story behind the OECD report and learn about its unique impact on the global economy.

Richard J. Hay is a tax partner and the head of the Private Capital Group at Stikeman Elliott LLP in London.