Om shanti, shalom aleichem, assalamu alaykum, peace be with you. It’s a good time of year to focus on hopes for peace and brotherhood for all mankind. So, in that spirit, we present some of the golden buddhas that sold at Sotheby’s auction, “Visions of Enlightenment,” in Hong Kong on Oct. 7. Rare bronzes from the early Ming dynasty (1368-1644)—one of China’s most prosperous. These once esoteric gilt-bronze figures—ranging from one to two feet tall—came from the Speelman collection, amassed by Jules Speelman and his late father, Alfred, over three decades. The buddha on our cover sold for the highest price ever paid in Hong Kong for any Chinese work of art: $116.6 million HKD ($15 million USD).

Among the other “Visions of Enlightenment” auction items featured in this issue are:

  • a gilt-bronze figure of Kapaladhara Hevajra (the highest-level meditational figure in Tantra yoga) from the Yongle period (1403-1424), which sold for $18.6 million HKD (about $2.399 million USD).
  • a gilt-bronze standing figure of Maitreya (the World Teacher) from the Yongle period (1403-1424), which sold for $30.92 million HKD (about $3.99 million USD).
  • a gilt-bronze figure of Vajrabhairava (one of the most powerful protector deities) from the Yongle period (1403-1424), which sold for $41 million HKD (about $5.287 million USD).
  • gilt-bronze bodhisattvas (dancing figures) from the Xuande period (1426-1435), which sold for $50.52 million HKD ($6.515 million USD).

BRIEFING

Private Annuity Regs
Andrew M. Katzenstein, a partner in the Los Angeles office of Katten Muchin Rosenman LLP, reports that changes proposed to regulations (Treasury Regulations Sections 1.72 and 1.1001-1(j)) governing the income taxation of private annuity sales substantially limit the ability to accomplish income tax savings using that technique. Estate tax advantages of private annuity sales remain, but must be reconsidered in light of these changes.

Tax Law Update
David A. Handler, partner in the Chicago office of Kirkland & Ellis LLP, reports on:

  • the technical background on proposed regulations for tax treatment of annuity contracts sales;
  • the U.S. Court of Appeals for the Second Circuit affirmed the Tax Court in Rudkin;
  • Chief Counsel Advisory 200644016, which found the right to receive income in respect of the decedent that is assigned to the estate beneficiary was not included in distributable net income; and
  • Revenue Procedure 2006-53, in which the Internal Revenue Service issued the 2007 inflation adjustments.

How the Rich Give
A new study on high-net-worth philanthropy shows that the rich are different. David T. Leibell and Daniel L. Daniels, partners of Cummings & Lockwood, LLC in Stamford, Conn., report.

FEATURES

ESTATE PLANNING & TAXATION

Got Real Estate?
By David T. Leibell and Daniel L. Daniels

Real estate can be an important component of a client’s portfolio. Authors David T. Leibell and Daniel L. Daniels offer a crash course on estate-and-gift tax concerns, income tax, corporate law, and the laws governing partnerships and limited liability companies (LLCs).

David T. Leibell is a partner in the Stamford, Conn., office of Cummings & Lockwood LLC. He is also the chair of Trusts & Estates’ Philanthropy Committee.

Daniel L. Daniels is a partner in the Stamford, Conn., office of Cummings & Lockwood LLC.

Lillie Rosen Revisited
By Daniel Mielnicki and G. Michelle Ferreira

The authors recount their experience as counsel to the Lillie Rosen estate in this infamous family limited partnership (FLP) case. They also share what they consider to be Rosen’s most important lesson—which planners should heed, they say, until the Tax Court fixes its mistaken ruling: If a client wants to retain partnership interests, advisors should establish two partnerships. The grantor can retain all of one partnership, but must be sure to completely divest herself (whether by gift or sale) of her interests in the second.

Daniel D. Mielnicki is a shareholder at Greenberg Traurig, and works out of the firm’s office in Boca Raton, Fla.

G. Michelle Ferreira is of counsel at Greenberg Traurig. She is based in Palo Alto, Calif.

FIDUCIARY PROFESSIONS

Appreciating Individual Trustees
By I. Mark Cohen

Many clients and advisors think that corporate fiduciaries are better than individual trustees. That’s not necessarily so. Corporate trustees have drawbacks, and individual trustees have many advantages—especially when they are well-served by an attorney, accountant and financial planner. Author I. Mark Cohen prefers individual trustees, but helps his clients make their own decisions by leading them through a review of the trust, the trustee’s jobs and each potential trustee’s ability to handle those jobs. Herewith: his process and reasoning.

I. Mark Cohen is a partner at Cohen & Burnett, PC, in McLean, Va.

Beneficiary-Controlled Trusts Can Lose Asset Protection
By Charles Harris and Tye J. Klooster

The beneficiary-controlled trust has proliferated dramatically in recent years. But recent legal developments have eroded its ability to protect assets. In fact, authors Charles Harris and Tye J. Klooster recommend that the use of the standard beneficiary-controlled trust be reconsidered—particularly when protection of trust assets is an overarching concern and one of the main reasons for using a trust.

Charles Harris is a partner at Katten Muchin Rosenman LLP in Chicago specializing in corporate and securities as well as trusts and estates.

Tye J. Klooster is an associate at Katten Muchin Rosenman LLP in Chicago, specializing in trusts and estates as well as taxation.

INVESTMENTS

Funding the Ventures Of Family and Friends
By Elizabeth Miller

Private equity is a hot investment these days. But most likely your wealthy clients will be asking your advice on some private equity opportunity offered by a family member or friend. Author Elizabeth Miller gives you 10 simple questions to help your client decide whether the investment is a good idea.

Elizabeth Miller is a managing director of Trevor Stewart Burton & Jacobsen Inc., an investment management and counseling firm in New York. Miller also is a member of Trusts & Estates Investment Committee.

PHILANTHROPY

The New Accountability
By Christie A. Lohkamp<

Nonprofits are being bombarded with compliance requirements. But how does that translate into everyday practice? We have a report from the front line in California, one of the first states to respond to the federal Sarbanes-Oxley Act by adopting its own Nonprofit Integrity Act of 2004. California’s experience shows what other states considering similar legislation may undergo. Also, California’s law impacts any nonprofit doing business there.

Christie A. Lohkamp wrote this article while serving as a manager at Deloitte Tax LLP in San Diego. Starting in December, she became director of corporate tax with the Mayo Clinic in Rochester, Minn.

HIGH NET WORTH FAMILIES

The Sentimental Auction
By David Altshuler

Most wills simply state, “I give my tangible property equally to my children.” But that’s no help in deciding who gets which low fair-market-value but sentimentally precious object. This is the problem the author’s family faced when his father died. Their solution: an auction that uses no money and is conducted in cyberspace. It was so successful, he suggests lawyers give clients the option of writing sentimental auctions into their wills.

David Altshuler is executive director of TechFoundation in Cambridge, Mass. He also is an adjunct professor of law at the University of Pennsylvania in Philadelphia.

Special report

New Paradigm for the Wealth Management
Industry?

Patenting Tax Strategies
By Mary Lee Turk

Tax advisors are in an uproar over the issuance of patents for tax strategies, fearing a logistical nightmare and complete remodeling of their industry. Author Mary Lee Turk outlines the issues, history and potential problems. Then she offers some solid solutions. The new Congress should stop this madness, she says, or at the very least make the process more rational.

Mary Lee Turk is a partner at McDermott Will & Emery in Chicago.