THE AMERICAN LAW INSTITUTE Continuing Legal Education. Tax and Non-Tax Aspects of Decanting Irreovable Trusts September 27, 2012 TABLE OF CONTENTS

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1 THE AMERICAN LAW INSTITUTE Continuing Legal Education Tax and Non-Tax Aspects of Decanting Irreovable Trusts September 27, 2012 PROGRAM FACULTY PARTICIPANTS FACULTY BIOGRAPHIES STUDY MATERIALS TABLE OF CONTENTS 1. The Tax Consequuences of DeCanting: An Overview of the Gift, Estate, Income and Generation-Skipping Transfer Tax Issues to Consider when Contemplating a Trust Decanting By Michael M. Gordon Co-Authored with Todd A. Flubacher, Meryl G. Finkelstein and Cynthia D.M. Brown 2. A Practitioner's Toolkit for Fixing Broken Trusts By Michael Morris Gordon 3. State Decanting Statutes By William R. Burford Page vii ix xi v

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3 Program Schedule September 27, 2012 Program Schedule Eastern Central Mountain Pacific & Arizona Alaska Hawaii Program Begins 12:30 p.m. 11:30 a.m. 10:30 a.m. 9:30 a.m. 8:30 a.m. 6:30 a.m. Adjournment 2:00 p.m. 1:00 p.m. 12:00 p.m. 11:00 a.m. 10:00 a.m. 8:00 a.m. Program: All Times Eastern 12:30 p.m. Program Begins Decanting is an increasingly popular strategy among estate planning practitioners to restructure otherwise irrevocable trusts to accomplish a variety of tax and non-tax objectives for their clients. Decanting refers to the distribution of property from one irrevocable trust to another pursuant to the trustee s discretionary authority to make distributions to, or for the benefit of, one or more trust beneficiaries. While a number of states have enacted decanting statutes, the income, gift, estate, and GST tax consequences of decanting an irrevocable trust are unclear. The Internal Revenue Service has sought commentaries in the past year from those most familiar with the technique before making any official statement on the tax aspects of decanting. This faculty will help resolve any uncertainties to clarify all aspects of decanting. 2:00 p.m. Program Ends What You Will Learn In this 90-minute program, you will learn from some of the nation s top practitioners the principal circumstances in which decanting is an appropriate strategy. The panelists will discuss practical and jurisdictional issues, with a particular emphasis on how decanting can be used to avoid or resolve trust disputes among trust beneficiaries. The panelists will also address the likely tax consequences of decanting based upon the most compelling commentaries that have been submitted to the IRS to date. Total 60-minute hours of instruction: 1.5 vii

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5 THE AMERICAN LAW INSTITUTE Continuing Legal Education Tax and Non-Tax Aspects of Decanting Irrevocable Trusts September 27, 2012 PLANNING CHAIR Nancy G. Henderson, Esquire Henderson Caverly Pum & Charney LLP Suite High Bluff Drive San Diego, CA FACULTY Kristen E. Caverly, Esquire Henderson Caverly Pum & Charney LLP Suite High Bluff Drive San Diego, CA Michael M. Gordon, Esquire Gordon, Fournaris & Mammarella, P.A Lovering Avenue Wilmington, DE William R. Burford, Esquire Executive Director J.P. Morgan Suite Avenue of The Stars Los Angeles, CA ix

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7 FACULTY BIOGRAPHIES PLANNING CHAIR Nancy G. Henderson PARTNER CHAIR OF ESTATE PLANNING GROUP Nancy G. Henderson is a founding partner and the Chair of the Estate Planning Group of Henderson, Caverly, Pum & Charney LLP. Ms. Henderson is a fellow of the American College of Trust and Estate Counsel ACTEC and a Certified Specialist in Estate Planning, Probate and Trust Law (California State Bar Board of Legal Specialization). Ms. Henderson is listed in Southern California Super Lawyers San Diego ( ) and was named by Worth Magazine as one of the nation s top 100 Attorneys ( ). From 1996 through 1999, Ms. Henderson served as a member of the Executive Committee of the Taxation Section of the California State Bar. Ms. Henderson obtained her law degree in 1991 from the Boalt Hall School of Law at the University of California at Berkeley, where she graduated in the top 10% of her class and was elected to the Order of the Coif. She obtained her bachelor s degree, magna cum laude, Phi Beta Kappa, from Duke University in Ms. Henderson has spoken and written extensively on estate, gift and income tax planning, and has presented outlines on numerous estate and charitable planning subjects through various organizations, including the University of Miami Institute on Estate Planning (the Heckerling Institute), ALI-ABA (various programs), CEB, the Notre Dame Institute, the Kasner Symposium, the Southern California Tax and Estate Planning Institute, the Hawaii Tax Institute, the USC Tax Institute, the American Bar Association, the California State Bar and the Washington State Bar. Ms. Henderson is co-chair of ALI-ABA s week long program, Estate Planning in Depth, which is held annually at the University of Wisconsin ( Madison). Some of the subjects on which Ms. Henderson has written and spoken include Sophisticated Uses of the Gift Tax Annual Exclusion; Planning for the Preservation of Cherished Family Properties; The Use and Taxation of Qualified Conservation Contributions; Family Limited Partnerships in Estate Planning; Disclaimers in Estate Planning and Postmortem Administration; Planning for the Benefits and Burdens of Inherited Wealth with Incentives Trusts; Estate Planning for Same-Sex xi

8 and Other Non-Traditional Couples; Planning for the Administration of Trusts with Carrot and Stick Provisions (Slicing and Dicing Trustees Duties and Responsibilities); Common Drafting Oversights that Complicate Estate Administration; Estate Planning for Siblings, Cousins, and Other Collateral Relatives; and Drafting the Dispositive Provisions of Wills and Trusts. Locally, Ms. Henderson is a member of the Board of Trustees of the Rady Children s Hospital Foundation, the Board of Directors of the Rancho Santa Fe Rotary Club, and the Board of Trustees of the Rancho Santa Fe Community Center. FACULTY Kristen E. Caverly PARTNER CHAIR OF LITIGATION GROUP Kristen E. Caverly is a founding partner of Henderson, Caverly, Pum & Charney LLP, and she is the Chair of the Litigation Group at the firm. Ms. Caverly provides advice, counsel and representation to Henderson, Caverly, Pum & Charney LLP clients in estate and trust controversies, probate matters, civil and commercial litigation, business disputes, and intellectual property litigation. Ms. Caverly s trial experience includes a breach of license trial resulting in judgment for the client of $174,900,000; a personal property valuation trial resulting in judgment for the client of more than $7,600,000; a breach of guarantee trial resulting in judgment for the client of more than $1,000,000; a prescriptive easement trial resulting in defense judgment for the client; a breach of contract arbitration resulting in judgment for the client of $359,000; and successful outcomes for clients in numerous estate and trust controversies. Ms. Caverly is certified as a Specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization. Ms. Caverly is the author of Representing the Beneficiary Defining Client s Goals and Managing Expectations published as Chapter 1 of Hartog and Kovar, Matthew Bender Practice Guide: California Trust Litigation (2011). Ms. Caverly has lectured on various estate administration and estate and trust litigation topics, xii

9 including for ALI-ABA s 2012 Estate Planning in Depth at the University of Wisconsin Law School, The Southern California Tax & Estate Planning Forum, the National Business Institute, San Diego Estate Planning Counsel, and Legal Secretaries, Incorporated. Ms. Caverly and partner Nancy G. Henderson co-authored the 2008 two-part article Planning for Family Vacation Homes, published in the California Trusts and Estates Quarterly, the Official Publication of the California State Bar Trusts and Estates Section. Ms. Caverly has been recognized repeatedly as a California Super Lawyer by Super Lawyers magazine in the area of estate and trust litigation. Ms. Caverly also has received the highest possible rating in both legal ability and ethical standards ( AV Preeminent ) from the Martindale Hubbell peer review rating service and has been selected for the Bar Register of Preeminent Women Lawyers. Ms. Caverly obtained her law degree from the University of San Diego School of Law, where she graduated second in her class and was elected to the Order of the Coif. Ms. Caverly was Executive Editor of the San Diego Law Review from 1993 to Ms. Caverly is admitted to practice before the United States Patent & Trademark Office; the United States Supreme Court, the United States Court of Appeals for the Federal Circuit and for the Ninth Circuit, all California state courts; and the United States District Courts for the Northern, Eastern, Central and Southern Districts of California. Prior to forming Henderson, Caverly, Pum & Charney LLP, Ms. Caverly was an attorney with the law firm of Brobeck, Phleger & Harrison, LLP. Before attending law school, Ms. Caverly was a physical scientist for the U.S. National Oceanic and Atmospheric Administration, Ninyo & Moore Environmental Consultants, and TorStan, Inc. Environmental Services. She earned her bachelor s degree in Zoology from the University of Maryland. William R. Burford EXECUTIVE DIRECTOR AT J.P. MORGAN Location Los Angeles, California (Greater Los Angeles Area) Industry Financial Services Education: New York University School of Law (LL.M., Tax) University of Michigan (B.A., Economics) University of Michigan Law School (J.D.) xiii

10 Michael M. Gordon DIRECTOR Gordon, Fournaris & Mamarella, P.A. MICHAEL M. GORDON is a Director at the Wilmington law firm of Gordon, Fournaris & Mammarella, P.A. He is a graduate of Fairfield University and the Catholic University of America, Columbus School of Law. He received his Master of Laws in Taxation from Villanova University School of Law in 2008 and is a member of the Delaware and Maryland Bar Associations. Michael is the current Chair of the Estates and Trusts Section of the Delaware Bar Association. He is also a member of the American Bar Association where he serves as Vice Chair of Asset Protection Planning Committee of the Section of Real Property, Trust & Estate Law. Michael s practice focuses on the unique aspects of Delaware trust law, including directed trusts, dynasty trusts, asset protection trusts and all aspects of the validity, construction and administration of Delaware trusts. Michael routinely petitions the Delaware Court of Chancery to transfer the situs of trusts to Delaware and to reform trusts. Michael drafts, reviews and comments on Delaware trust agreements for local and out of state clients and provides legal opinions on the validity of trusts under Delaware law. Michael resides in Wilmington, Delaware with his wife, Amie, and two daughters, Samantha and Mia. AREAS OF PRACTICE: Trusts and Estate Planning Taxation EDUCATION: Villanova University School of Law, Master of Laws (LL.M.) in Taxation 2008 Catholic University of America, Columbus School of Law, Juris Doctore 2003 Fairfield University, Bachelor of Arts 2000 xiv