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Beverly Hills Estate Planning Council Event

On March 7, 2011, the Beverly Hills Estate Planning Council (BHEPC) welcomed WTAS’ Susan Amster and Deborah McGee as speakers. Before a sold out crowd, Amster and McGee presented a case study on estate planning entitled, “All of the King’s Men – The Family Office Team.”

In their 70-minute presentation, Amster and McGee defined family office, shared details of a factual four-generation family they served and illustrated the successful estate planning results.

McGee presented first and assured the crowd that if they have seen one family office, they in fact have seen only one family office. She described a variety of family office infrastructures, including ones designed and built to serve an individual’s or a family’s wealth using an outsourced model. This virtual family office infrastructure involves many professionals working together, including attorneys, insurance professionals, CPAs, valuation professionals and wealth advisors with one (often the one responsible for procuring the client and assembling the team) serving in a quarterback role. McGee also covered current topics and trends in family offices including: (1) families’ increased focus on their vulnerability to fraud; (2) a discussion of how the SEC’s ultimate definition of family office may still require certain complex family offices to register as Investment Advisors; and (3) a general trend toward “skinning down” in many family offices via outsourcing, simplification of structures and processes, and technology investments.

Amster continued with a presentation on her team approach to an estate plan for a multi-generational family office with net worth in excess of $100 million. The family had charitable inclinations and through the team’s planning, they were transferring wealth from generation one to generation four using generation-skipping tax (GST) exemptions and GST trusts while also funding a private foundation with the annuity payments from two charitable lead annuity trusts (CLATs) funded by generation one. The first CLAT was an inter-vivos CLAT that sold its remainder interest to a GST trust funded by generation two for the benefit of generation four. The second CLAT was a testamentary CLAT funded upon the death of generation one, with input from generation two who would inherit the assets. Both CLATs paid an annual annuity to a private foundation formed by generation two. Additional family planning involved transfer of wealth from generation two to generation three via a series of rolling two-year “zero-out” GRATs, with the excess appreciation at termination of the GRATs passing to generation three through a grantor trust. Finally, in or around 2008, generation two hoped to pass wealth to generation three through a sale to an intentionally defective grantor trust (IDGT) with a family limited partnership (FLP) holding real estate (that could be sold and developed); however, the real estate market crash did not enable this planning to fruition.

Many members of the BHEPC applauded the advanced planning as innovative and educational. Several noted that it is seldom they engage in planning at this level and thus appreciated the knowledge. In the end, Amster and McGee contributed to the BHEPC’s spirit of professional excellence and succeeded in sharing how “All of the King’s Men” must work together in an effort to serve the estate planning clientele. Please see www.bhepc.org for more details.