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15 Prac. Tax Law. [i] (2000-2001)

handle is hein.ali/practax0015 and id is 1 raw text is: THE PRACTICAL TAX LAWYER FALL 2000 VOLUME 15/NUMBER 1 Published by The American Law Institute-American Bar Association Committee on Continuing Professional Education with the Cooperation of The Section of Taxation, American Bar Association Transferable Options: When They Work, When They Don't Peter J. Melcher and Warren Rosenbloom ........... 5 Transferable options are really a special case of a very basic estate planning strategy: by gifting assets that are expected to appreciate rapidly in value, the tax- payer removes future appreciation from his or her estate and saves on transfer taxes. This article tests this claim for transferable options by comparing the benefits of transferring options as soon as they vest with holding the options until the end of the option term, exercising them, and gifting the underlying shares to the donor's beneficiaries at that time. The conclusion is that although transferable options can produce significant tax savings in certain situations, the economics of using this technique are not as sim- ple as many estate planners suppose. Sometimes an early transfer of options is advisable and sometimes it is not. A model for making this determination is provided for practitioners. Checklist for Drafting the Irrevocable Life Insurance Trust (with Sample Forms) Sebastian V Grassi, Jr. ..................... 13 This article is a checklist of selected key tax and drafting issues that should be considered when pre- paring an irrevocable life insurance trust to hold in- surance on the life of just the grantor. The article highlights provisions that are either necessary or desirable (for purposes of flexibility). The Appendix to the article contains sample drafting language for a practitioner to consider when preparing an irrevoca- ble life insurance trust. Will Drafting: It's Simple, Right? By Stephan R. Leimberg, Morey S. Rosenbloom, and D aniel J. Kaliner ............................. 35 There is much more to proper will drafting than can be found in any formbook. This article highlights both the technical and human aspects of the will drafting process and places it in the larger context of the overall identification and achievement of the client's objectives. It shows how the actual drafting of a will is only a small (but important) part of the attorney's far larger and more important goal: help- ing the client see and solve problems. In this case, the problem is estate planning: how to distribute the client's assets to his or her family in the way the client wants with the least amount of friction, taxes, and hassles. Fractional Interest Discount Planning with QTIPs by Susan K. Smith ........................... 47 Fractionalizing the ownership of an asset by dividing it between the estates of the two spouses and using a QTIP trust can produce significant valuation adjust- ments. Recent community property jurisdiction cases involving QTIP trust aggregation have significance for clients in common law states seeking to use QTIPs. Decisions relating to the division and the allo- cation of property held by both spouses while they both are alive become very important. Until the courts reverse the result in the four cases, aggrega- tion of ownership between the survivor's estate and the QTIP trust can be avoided in the survivor's estate. Here are some suggestions. Qualified Retirement Plans for Small Business Owners Irw in R ubin ................................ 55 A qualified retirement plan presents many advan- tages for an owner of a small business. The goal is to structure a qualified retirement plan that will maxi- mize the contribution for the owner of a small busi- ness while keeping common law employee costs at a minimum. Numerous planning techniques are avail- able which will attain such goals for some clients, especially older owner-employers who have not yet accumulated large retirement plan assets. The author identifies these techniques and demonstrates their application to particular types of clients. Taxing Decisions .................... 33 Programs, Publications, and Playbacks .................... 54 ALI-ABA and ABA Section of Taxation CLE Calendars ........... 62

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