On the Cover

Fue una primavera triste en Nueva York pero no sin esperanza. It was a sad spring in New York, but not without hope.

Every spring, Christie's and Sotheby's hold dueling auctions of Latin American art in New York City. And this year, both auctions, held during the last week of May, raked in less than presale estimates and were lackluster at best—especially when compared to results from the same auctions in May of 2008. That would be the May before the financial crisis hit.

This year, Sotheby's Latin sale earned less than a third of its 2008 total of $21.1 million. Christie's Latin sale earned just 41.3 percent of its 2008 total of $26.6 million.

Still, there were highlights, the art was beautiful and some people have even started saying that the financial crisis may have hit bottom. The Christie's Latin sale, for example, featured heartfelt pieces by two of Cuba's most accomplished artists—Mario Carreño and Cundo Bermúdez. And their vibrant colors are inspiring.

On our cover, Cundo Bermúdez' "La cena," ("evening meal") sold for $194,500. It shows a man serenading his female companion over dinner. Bermúdez' love for Cuba is reflected in his art, which is characterized by popular Cuban scenes and loud, tropical colors. "La cena" was painted in 1958, nine years before Bermúdez was forced to leave Cuba for political reasons.

The top lot in Christie's sale was Mario Carreño's "Fuego en el batey," ("Fire in the farm"). It sold for a presale high estimate of $2,188,100 and became the second highest auction price achieved for the artist. The painting, which depicts a family escaping a farmhouse in flames, was once thought a lost masterpiece of Cuban modernism. Only black and white photos of it were available to the public. But "Fuego" was recently rediscovered in a couple's private collection in New York, where it had been for more than 50 years. See page 14 for a color photo of the painting, completed in 1943, Carreño's most sought-after period.

BRIEFING

10/ Tax Law Update

David A. Handler, partner, and Alison E. Lothes, associate, in the Chicago office of Kirkland & Ellis LLP, report on:

  • Estate of Miller v. CommissionerThe Tax Court held that some, but not all, of the assets transferred to a family limited partnership were includible in a decedent's gross estate. The court looked at the decedent's health at the time of the transfer, the use and management of the transferred assets, and the amount left over in the decedent's possession to pay taxes anticipated on her estate.
  • Cox Enterprises, Inc. v. Comm'r The Tax Court held that a corporate general partner did not recognize gain under Internal Revenue Code Section 311(b) when it received partnership interests that the Internal Revenue Service alleged were worth less than the assets it contributed to the partnership.

12/ Philanthropy Dropped But Don't Panic—Yet

David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn., office of Wiggin and Dana LLP, report on the results from the latest survey from the Giving USA Foundation. Although 2008 saw the largest drop in annual charitable giving in more than 50 years, giving still remained relatively high, with donations to religious and public/society benefit organizations increasing (when adjusted for inflation).

FEATURES

Estate Planning & Taxation

16/ Estate Tax Exemption Portability?
By Jeffrey A. Baskies

Genuine estate tax reform may occur before the end of this year. And one potential piece of reform now being considered by Congress—estate tax exemption portability—would be monumental in the world of trusts and estates. This type of exemption allows the unused estate tax exemption that belonged to a first spouse to die, to pass to and benefit the surviving spouse. On one hand, it's a potential bailout for those who didn't bother to create estate plans. On the other hand, it could end up generating more tax revenue for Uncle Sam.

Jeffrey A. Baskies is a partner in Katz Baskies LLC in Boca Raton, Fla.

22/ To My Son, I Leave All My Passwords
By James D. Lamm

You've done your job: Your client has a solid estate plan in place that makes everyone happy. But what good is it, if all of your client's digital property, Internet accounts, contractual rights and passwords, are hiding in cyberspace with no means to access them in the event of your client's death or incapacity? While your client is healthy and has presence of mind, sit down with him and prepare a written or electronic list of online accounts, passwords, and other information about his digital life. And do it very, very soon.

James D. Lamm is a principal at Gray Plant Mooty in Minneapolis.

Fiduciary Professions

30/ A Silver Lining
By Laura H. Peebles & Dawn Angermaier

The year 2008 showered the country with losses in nearly every category. Some fiduciaries are experiencing ordinary business, casualty or theft losses for the first time in their careers and are not yet comfortable with the tax choices available. Moreover, all fiduciaries must consider the effect declaring these losses might have on the taxable income that flows to beneficiaries. Authors Laura H. Peebles and Dawn Angermaier shed light on the complexities of how to deduct a trust's net operating losses. Of course, it's better not to have a loss in the first place. But a tax deduction certainly can help recoup some benefit for the current and future trust beneficiaries.

Laura H. Peebles is tax director in the national office of Deloitte Tax LLP in New York.

Dawn Angermaier is a senior manager at Deloitte Tax LLP in New York.

Philanthropy

36/ Charities in Distress
By Christina M. Mason & Carolyn R. Caufield

How does a charity navigate perilous economic waters when its actions are scrutinized and governed by a multiplicity of interests? Responsibility for addressing a charity's financial difficulties lies with the directors, who must make a determination of what can, as well as what should, be done. A guide to how a nonprofit can cope in these troubled times.

Christina M. Mason is a partner in the New York office of Kelley Drye & Warren LLP.

Carolyn R. Caufield is a partner in the New York office of Kelley Drye & Warren LLP.

Retirement Benefits

41/ Got Stretch-Out?
By Steven E. Trytten

What to do when a trust is a beneficiary of retirement assets? Here's one way to give heirs the option of putting off paying income tax: Design the trust as "see-through," and include a provision that directs the trustee to distribute to the trust beneficiary any amounts the trustee withdraws from the plan. In other words, don't let plan distributions accumulate in the trust. What you are essentially creating is a "conduit trust"—a vehicle that directs plan distributions to go to the individual beneficiary. Author Steven E. Trytten provides the nuts and bolts of the requirements of a see-through trust, how a conduit trust is drafted, and when a conduit trust may be appropriate for planning. And there's bonus material: documents and sample language in our online Trusts & Estates Bookstore & Library at www.trustsandestates.com.

Steven E. Trytten is a principal in First Foundation, Inc, in Irvine, Calif.