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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

FALL 2000

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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