Thursday, May 19, 2011
Paul L. Caron posted a blog on the TaxProf Blog on May 16, 2011 entitled The Real Beneficiaries of Long-Term Trusts. The blog discusses long-term trusts and is below, in full:
Following up on Sunday's post, $100m Rule Against Perpetuities Bequest: Lives-in-Being + 21 Years = 92 Years, and the observation of Tax Prof Bridget Crawford (Pace):
What is eye-popping is that the trust's current value is $100 million to $110 million. How can that be, if Mr. Burt's estate had a date-of-death value of $40 million to $90 million?
The trustee, Citizens Bank Wealth Management, has asked to retain a reserve for termination fees and expenses, as is standard in these types of proceedings. If I were representing the trustee, I'd be worried about more than just termination fees, though. I'd be worried about a breach of fiduciary duty claim due to poor trust performance. ...
Who really benefits from a trust like the one created by Mr. Burt? Seems to me like the big winners are the trust professionals (bankers and lawyers) whose fees have and will be paid out of the trust.
Tax Prof David Elkins (Netanaya College School of Law, Israel; SMU)) crunched some numbers:
An estate of $40-$90 million grew to $100-$110 million in 92 years??? I think I would have long ago fired the fund manager.
According to this site, $40 million invested in 1919 in a Dow Jones Industrial Index with dividends constantly reinvested should now be worth over $138 BILLION. If the estate was $90 million, it would now be worth over $311 BILLION. True, reduce that by taxes on the dividends, fees and the small legacies he left to his children and staff, but still...