Articles

Volume 34 Number 4 Thursday, July 9, 2009

Grantor Retained Annuity Trusts: Issues Raised by Voluntary Termination Before Expiration of the Term Interest

by Doug H. Moy Lake Oswego, Oregon

A grantor retained annuity trust (“GRAT”) is “[a]n irrevocable trust into which the grantor (settlor) transfers property in exchange for the right to receive fixed payments at least annually, based on the original fair market value of the property transferred” to the trust.1 The fixed payments to the grantor must be a qualified annuity interest (the total annuity payments referred to herein as the “qualified annuity interest” and the individual payments referred to herein as the “annuity amount”) and must be payable to, or for the benefit of, the holder of the qualified annuity interest (the “holder”) at least annually.2 Per Treasury Regulations, commutation of the annuity amount is prohibited.3

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What Every Planner Should Know About Real Estate FLP Planning in California

by by R. Zebulon Law, Esq. Costa Mesa, CA

Anyone reading this article will likely be familiar with the advanced estate planning technique referred to as a family limited partnership (FLP).2 The FLP is used to limit potential liability and to accomplish substantial reductions in estate values, with commensurate estate tax savings.3 In situations involving California real estate, planners should also consider certain available real property tax planning exemptions in developing the overall estate plan. This article is intended to summarize the available real property tax planning opportunities, and will describe how some California real estate FLP transactions may need to be implemented differently from FLP transactions involving real property in other states.

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Leading Practitioner Commentary

A “Spouse” by Any Other Name Is Not Necessarily a “Spouse”

by Jeffrey A. Zaluda, Esq. Horwood, Marcus & Berk Chartered Chicago, Illinois

As former Justice Sandra Day O'Connor noted, “the demographic changes of the past century make it difficult to speak of an average American family.” In fact, among adult Americans, more people now are unmarried than are married, and the number of individuals living together in monogamous, dedicated non-marital relationships continues to grow dramatically with each new census. There are many possible reasons for this, including legal inability to marry, not wanting to lose Social Security benefits, not wanting to take on medical costs for a spouse, religious or other personal ethical reasons, among many others. In light of this reality, laws that concern the establishment, maintenance, and termination of families continue to rapidly adapt to the changing definitions of “family.” And this may be nowhere more true than when defining a “spouse” for tax purposes.

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