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CAEC | Michael Graham

Dee Davenport, Senior Vice President and Trust Officer at Delta Trust, is attending the Central Arkansas Estate Council’s presentation on May 10, 2012.  Michael Graham, Senior Lawyer of The Graham Law Firm in Dallas with 40 years of estate planning expertise, is the guest speaker and is presenting Not Again! What is the Plan Between Now and December 31, 2012. You can read Mr. Graham’s full bio here. Below are Dee’s comments and notes from Mr. Graham’s presentation.


Michael discusses the importance of collaboration among all professionals. Sees the estate councils as one of the best collaboration cultivators.

Not just tax issues, how not to ruin children and other important client concerns.

Now to estate, gift and generation skipping taxes. Haven’t we been here before. Yes like 2009.

Thinks unification of tax and gift in 2009 is the best and now most in jeopardy. So good, because don’t have to die to use gift exemption.

Congress still considering 10 year GRATS (Grantor Retained Annuity Trust) Half of the GRATS he trustees are under water and just reGRATS. No lose if keep rolling. The Walton GRAT is the national benchmark for this concept.


How did we get here:

2010 no estate tax and carryover tax basis.  No fun because fret over Generation Skipping Trust rules and so many people got frozen up and did not take advantage of 2010.  (He and Jonathan Blattmachr write software which lawyers use to craft estate plans)

2011,2012 law: $5million estate and gift lifetime exemption (reunification is key to everything)

2013: unless legislative action lifetime exemption will drop to $1million (This means that estates valued over $1million including lifetime gifts made will incur an estate tax.)

After 1976 estate law change his firm was cranking out 10 irrevocable trusts again. Because of urgency with $5million running out end of 2012, clients rushing to take advantage before end of year.

Recommends gift early and often and get the base and compounding out of estate.

Recommend use  Grantor trusts (gets asset out of Grantor estate and Grantor pays the income taxes) Prohibit in trust instrument repayments of Grantor paying income tax. If mandatory repayment to Grantor paid taxes, IRS will interpret this irrevocable trust includable back into Grantors estate.

Recommends QPRT put personal residence or vacation home in trust and retain occupancy for set term of years, say 15 and then ownership goes to remainder beneficiaries. Huge income tax benefits. everyone could benefit. If initially buy a $5million lake house have parents and children share paying for it and since interest rates are so low could do some intrafamily lending. Call it an intergenerational family residence trust.

Recommends that in 2012 superfund insurance trust to use gift exclusion to pay 7 or 10 years of insurance premiums into insurance trust.

Recommend make gifts $2million spouses to each other irrevocable trusts watch for reciprocal trust prohibition. Can do it spousal lifetime access to each others’ trust. One with power of appointment in one but not in other. Or make distributions out of trust at different times. These could solve reciprocal trust issue.

NY. Marcia Flood case got legs.  3rd Restatement of Trust says health education maintenance and support discretionary standard trusteed by beneficiary makes the whole trust subject to beneficiary’s creditors. Can pass a state law saying no.  Also worry about this concept causing the irrevocable trust to be includable in grantor’s estate for estate tax purposes defeating the initial purpose of the irrevocable trust. A good solution is to delay Grantor being discretionary beneficiary for about 5 years.

Recommend life insurance trust- enjoy the magic of tax free compounding. Own life insurance in irrevocable trust to provide better grantor creditor protection.

Recommends movie Salmon Fishing in the Yemen.

Recommend not rely on spousal portability, no creditor protection, no management protection, recommend file an estate tax return to document

Advisors be certain don’t slip over to conspiracy statutes.

Obama Administration proposal see attached.

Generation Skipping Tax ideas. Skip down to lower generations see attached for Michael’s ideas.

Bottom line now is an incredible opportunity to plan estates and push efficiently to next generations and expected to change by year end 2012.

On the Central Estate Planning Council front, the new officers for next year are:


President: Martha Hill

Vice President, Programs: Erin Behring

Treasurer: Jerry Coats

Secretary: Dan Young

Past President: Natalie Evans


Central Arkansas Estate Planning Council is a vibrant group providing collaboration opportunities to enhance the delivery of estate and trust planning and administration to our clients.

Signing off, I am Dee Davenport, JD in the trust department at Delta Trust.


Michael Graham’s presentation for download:

Not Again! What is the Plan Between Now and December 31, 2012


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