Saturday, December 1, 2012


Lawyers feel fulfilled when they are successful in a case and when they have met a client’s expectations.  These moments are becoming less and less frequent as well as less and less satisfying.  In part, this is due to the lack of court services caused by extreme budgeting problems in Los Angeles County as well as other counties around the state of California.  Mostly it is caused by the ever-increasing difficulties resulting from the stress, lack of control and anxiety of the opposing attorneys and clients, which cause even relatively normal people to behave badly, and by the lack of funds to pursue the correct course of action(s) in any given case. Practicing collaborative law can give attorneys a better sense of fulfillment and confidence. Rather than contending with delays, judicial cuts, difficult temperaments, a hostile court environment and a variety of unpleasant, unhappy people, a family law litigant can be treated during negotiations to the comparative creature comforts of a law office and the pleasure of being listened to - uninterrupted.

In the standard litigation model, the minor children are subject to hostility and complaints from each parent toward the other.  For example, the 13-year-old son is having behavioral issues at school and his report cards show a decline in grades. Dad believes his son needs stricter boundaries and seeks to have Johnnie live with him so he can control his environment. Both mom and dad are afraid that if they are strict, their child may want to live with the other parent. Minor children over a certain age now have the right to testify as to their preference. The client may feel like he or she is losing the right to parent as he or she sees fit.  All the things that matter most to the client, including the health and welfare of the minor children, family finances and peace of mind - are becoming compromised. The feeling of lack of control becomes overwhelming. The client begins to realize that s/he may have to pay an unpredictable amount of money, and may have to wait an unpredictable amount of time, to receive an unpredictable and uncontrollable outcome.

In comparison to the litigation model, in the collaborative process, the parties meet with both of their collaborative attorneys. They come together in a small conference room. Each client’s attorney has a communication specialist sitting with the client. The attorneys’ attention is with their clients. They are offered fruits, sweets, tea and coffee. The attorneys make sure all parties are comfortable. Everyone is respected. One party is asked by the other party’s attorney to speak about her concerns, needs and wants. When she says all the things she needs to say, all the people in the room listen to her and validate her. The other party does not interrupt, because both of them were taught how to listen and not interrupt. He also knows that he will have his turn and he does. If one of them interrupts the other, the communication coach is right there redirecting him or her to listen. When one of them speaks about his or her concerns, needs and wants, the other has the peace of mind that they don’t have to defend themselves. This is not an adversarial system. Both clients know the process will not end in an outcome unless the outcome is acceptable to both of them. They have control over the outcome. Your client learns to listen. She finally can hear him, maybe for the first time after many years, because the communication specialists and the collaborative attorneys reiterate what each client’s commitment and interests are with what they are saying. The client realizes and learns what has been the real experience of the other party.  Weight is lifted off of each of them as they each realize that so much unnecessary stress can now be released. The clients practice open communication with each other with the help of the team in the collaborative divorce process, which they can hopefully carry over into their future interactions concerning the children. The clients work together to plan for the children, which is their common interest. They learn to respect each other in the process, and take home this valuable lesson to their kids.

The collaborative process is not always pleasant. In fact, many times, collaborative attorneys deal with anger, rage, hostility, suspicion and feelings of betrayal and abandonment, just like those involved in trying to get a judge to hear their story and rule in their favor.  The great value of the process is that each attorney is not alone dealing with all of it; the attorneys support each other and are supported by the communication specialists. The collaborative team provides a safe space for all that needs to transpire. The collaborative process has a unique psychological aspect to it. There is at least one mental health professional in a collaborative team (communication specialist). The collaborative team consists of collaborative lawyers, mental health professionals and an impartial financial expert (where necessary).  They provide all that the clients need to resolve their issues collaboratively. Working with the team in creating options that meet both clients’ needs is very fulfilling. A lasting relationship is built between all parties and professionals involved. The attorney’s caring and respect for the other party goes a long way. The parties learn to build a new relationship with the other parent or spouse through respectful and responsible communication. They also learn to have a new respect for the other party by the way the professionals relate to them.

Evidence of Hanukah and Christmas in Published Decisions

I recently found some evidence of Christmas and Hanuka in a few published decisions. For example, in the 1890's, an employer had always given his employee a $2,500 Christmas gift. Then he raised the employee’s salary. At Christmas the annual gift was given again. The employee said thanks and the boss said he was glad the employee was pleased. Later, the boss told a bookkeeper to charge the check back to the employee. The employee questioned the deduction and the boss said he had forgotten the new salary and had not intended a $2,500 gift on top of the raise. The employee sued. New York’s highest court called this case peculiar, saying it was clear the employer intended to give a Christmas gift and clear the boss later realized his mistake. But when the boss handed over an envelope with $2,500 and expressed good wishes, all the elements of a gift were present: intent to give, and delivery of the gift. The court ruled for the employee in Pickslay v. Starr, (1896) 44 N.E.163. In another Christmas case, the Illinois Supreme Court in Dow & Hurd v. Phillips (1860) 24 Ill. 249 reprints telegrams between partners. This case is a good read for whoever thinks only the internet created long back-and-forth message strings. The last of the series, a Christmas Day message, directs the partner to send a third party $300, followed by “Merry Christmas.” It is the first “Merry Christmas” in reported American decisions. But not so merry for the defendant who sent the message and tried to avoid liability. The court found them obligated to pay. The 150 year-old communications read like today’s email strings. Hanukkah dates back 2,100 years, but it was not in a published decision until 1962. Mr. Oxenhandler suggested that a bank create a Hanukah Savings Plan, like Christmas Clubs already available to the public. The bank did so. Oxenhandler thought he should be paid for the good idea but the evidence showed five other banks had Hanukah savings plans. Because the idea was not novel, the claim was denied. Oxenhandler v. Dime Savings Bank (1962) 227 N.Y.S.2d 642. If you know of any other interesting decisions revolving around these holidays, please post.


Saturday, August 25, 2012

Whose inheritance is it, anyway?

Is there a point where a Testator's unfettered right to do what he or she wants with his or her property can be limited by public policy?

A gay man and his longtime partner decide to become parents using a surrogate mother. Shortly after their son is born, the couple gets married. But there's a catch for this modern family: A will left by the man's wealthy father decrees that he must marry the mother for the child to collect an inheritance.

What do you think?

View article...

Friday, June 22, 2012

The Family Law Community in California, the United States and even the world, mourns the loss and reflects upon the life of Judith Wallerstein at the age of 90.  As my esteemed colleague and long-time friend Leslie Shear, CFLS, another custody attorney such as myself, stated today to our Association of Certified Family Law Specialists list serve, Judy was a pioneer in child custody research. She was the author of the influential amicus briefs filed in Burgess and other moveaway cases in the U.S. and Canada that made it easier for "primary" parents to move. We learned a lot from her work. She founded the Center for Families in Transition in Marin (also known as the Wallerstein Center)  that produced a lot of the very important research shaping our understanding of the psychology of divorce. 

Some of Wallerstein's important works include:
Surviving the Breakup: How Children and Parents Cope with Divorce by Judith S. Wallerstein and John Berlin Kelly (Sep 15, 1980)

Second Chances : Men, Women and Children a Decade after Divorce by Judith S. Wallerstein and Sandra Blakeslee (1989)

The Good Marriage: How and Why Love Lasts by Sandra Blakeslee and Judith  S. Wallerstein (1995)
The Unexpected Legacy of Divorce: The 25 Year Landmark Study by Judith  S. Wallerstein, Julia M. Lewis and Sandra Blakeslee (2000) 

What About the Kids?: Raising Your Children Before, During, and After Divorce by Judith  S. Wallerstein and Sandra Blakeslee (2003)

In 1976, Judith Wallerstein and Joan Berlin Kelly published the initial findings of their study of divorcing families in scholarly journals. The families studied were the last of the mid-century traditional family structure, who were upper middle class families from Marin County who agreed to be study in exchange for some divorce and custody counseling. 

"Joint custody was brand new as an idea in the late 1970's. Roman and Haddad published The Disposable Parent in 1978and Miriam Galper also published Co-Parenting: Sharing Your Child Equally : a Source Book for the Separated or Divorced Family  in 1978No-fault divorce began in 1970 here in California, and the maternal presumption was repealed shortly thereafter but survived in practice. 

Saturday, May 19, 2012  Cannot believe that Harry's Law, one of the finest ensemble shows on television, was canceled because its audience was too old.  What next?

Tuesday, March 6, 2012

The Secret Life of Huguette Marcelle Clark

This story caught my attention enough that I wanted to share it with other bloggers. I have modified and combined several stories taken from the Associated Press.

Huguette Marcelle Clark lived a quiet secluded life, which for more than two decades consisted of residing under fake names in a hospital room, although in relatively good physical health. Shy and sad, she was almost entirely alone, aside from her private nurse, other helpers and occasional visits by her accountant. She had a slew of attorneys, one of whom represented her for 20 years without meeting her face to face, but instead talking to her on the phone and through a closed door. In the last year of her life, her three empty mansions drew the attention of a reporter for In late 2009, she became a subject of public fascination, a trending topic of searches on Google and Yahoo and pictured on the cover of the New York tabloids, with fan pages on Facebook and a biography on Wikipedia. Her story was read by millions of people. Nevertheless, the last known photograph of her was made in 1930.

Bill Dedman, a Pulitzer Prize-winning reporter for, introduced the public to heiress Huguette Clark through his series of narratives on and NBC's TODAY Show. He lives in suburban Connecticut, where he discovered the first of Clark's three vacant palaces. His narratives on the Clark family have been the most popular story in the history of, topping 100 million page views. He received more than 1,000 letters and emails from readers of the Clark series, many of them confessing to an obsession with the mystery heiress. As a young woman in New York, actress Kimberly Belflower, explained to her Twitter followers: "Don't mind me, I'll just be reading about Huguette Clark for the rest of my life." Huguette spent more than $3 million dollars on dolls. Nearly $2 million was donated to her attorney's favorite charity. No matter, as she had over $43 million to spend and now her heirs, none of whom have seen her for many, many decades are coming forward to stake a claim to their interests. When another $380,000 in checks was written to her staff on a single day, the press started to ask questions.

These details were revealed in court documents filed in the early stages of a legal battle over the $400 million copper-mining fortune of this late reclusive heiress. They raise serious questions about the actions of her attorney and accountant, who are under criminal investigation after her death in May, 2011 at 104 years of age.

Attorneys are readying for a massive battle in the probate court known as Surrogate's Court in Manhattan. The building is less than a mile from Exchange Place near Wall Street, where Clark's father, former U.S. Sen. William Andrews Clark, managed the fortune he made from the mines of Montana and Arizona, and from banks, railroads and other ventures. Clark's relatives, kin from her father's first marriage, are challenging her last will and testament, which cut out her family entirely, leaving about $34 million to her nurse and more than $17 million to her attorney and accountant through fees and direct bequests. In this early phase of the massive estate case, her attorney and accountant have had to account to the court for all financial transactions they made using her legal power of attorney. They held that power, in various forms, for the last 15 years of her life, beginning in July 1996 when she was 90 years old, including the sale of various properties owned by Clark. The pair asked the court to keep their financial accounting secret, arguing that they wanted to protect Clark's privacy. But the court rejected their request, making the following details available for anyone to read at the Surrogate's Clerks office.

In all, the records show $126.3 million in spending by her attorney and accountant from her accounts during those 15 years, and another $43.3 million that was transferred into her personal account, apparently to cover her own spending. Between January 1997 and February 2009, a period of 12 years when she was between 90 and 102 years old, her magic checkbook was refilled in the amount of $43,325,000. Au Nain Bleu, a renowned doll and toy shop in Paris, was paid $2.5 million in 110 separate payments from 1997 to 2006. One of Clark's friends has said that her dolls were "her closest companions." The largest payment was for $82,513 in February 2004.Theriault's doll auctions received $729,000 in 21 payments from 1997 to 2009. The largest was $232,680 in July 2007. The total of $170 million works out to $1 million per month for a woman who never left her hospital room during that time.

Attorney Wallace "Wally" Bock says he has always done exactly what his client, heiress Huguette Clark, has asked. However, he acknowledged soliciting from her a gift of $1.5 million for the community where his daughter and grandchildren live. Court records show the amount to be actually $1.85 million. Clark, who was raised a Roman Catholic, made several large contributions to Jewish settlements on the West Bank, where her attorney's daughter lives. disclosed in 2010 that the attorney, Wallace "Wally" Bock, 79, asked Clark to contribute $1.5 million to a security system for his daughter's settlement. Bock acknowledged that payment in a legal filing last year, but the new accounting shows that the total was actually $1.85 million. Bock or Clark's accountant, convicted felon and registered sex offender Irving Kamsler, 64, wrote four checks on her account totaling $1.65 million from 2000 through 2002 to the Central Fund of Israel. Then in September 2003, Bock wrote a check on her account for $200,000 to American Friends of New Communities in Israel.

The accounting shows that Kamsler received a stipend for his accounting services, peaking at $7,500 a month, or a rate of $90,000 per year. Bock's law firm was paid $18,000 to $25,000 per month, or about $250,000 per year. If the will is upheld, they stand to gain much more. Bock and Kamsler would receive $500,000 each as beneficiaries, and about $8 million each if the court allows them to serve as executors of her estate, with additional fees or salary as directors of a charitable foundation to be established to show her art in her California mansion. Both men have declined to comment on their actions, but their spokesmen have said the men both acted honorably in carrying out Clark's wishes. The most remarkable day covered by the financial disclosure may have been Nov. 16, 2009. This was one month after this reporter met with Bock at his office and made clear that was going to publish a story raising questions about Clark's whereabouts and financial affairs. On that Monday in November, Bock or Kamsler wrote $380,000 in checks on Clark's personal account, which apparently hadn't been used in nine months. Checks went to Dr. Henry Singman, her internist, for $50,000; nurse Hadassah Peri for $60,000; her husband Daniel Peri for $60,000; accountant Kamsler for $60,000; personal assistant Christopher Sattler for $60,000; nurse Geraldine Coffey for $30,000; goddaughter Wanda Styka for $50,000, and nurse Erlinda Ysit for $10,000. That was followed three weeks later by a check to attorney Bock for $60,000. In all, $440,000
Through the years her main private nurse, Hadassah Peri, received $2,520 a week, or $131,040 a year. She also was paid a lump sum of $5 million in 2009. Clark gave Peri the money to buy four homes for herself and her children. If the will is upheld, Peri would receive about $34 million, in addition to Clark's doll collection valued at millions more. Beth Israel Medical Center, the New York hospital where she lived for years, received $4.9 million from December 1997 through February 2011, not counting payments to various doctors and departments. That works out to about $1,000 per day. The hospital has declined to explain why it allowed Clark, who was said to be quite healthy, to live in hospital rooms for the last 22 years of her life. Her primary physician, internist Dr. Henry S. Singman, received regular monthly payments peaking at $5,000 a month, or $521,000 during this period. He is named in her will for another $100,000. Her closest friend, Suzanne Pierre, received regular payments of $50,000 for service as a social secretary, totaling $1.7 million. Pierre also received a $10 million gift back in 2000. Pierre, who was the widow of Clark's physician, died just weeks before Clark.

Only a few public charities appear in the accounting. The largest is $810,000 to the Corcoran Gallery of Art in Washington, D.C., where the bulk of her father's art collection resides. In the will, the Corcoran stands to receive one of Monet's Water Lilies series, a small canvas valued at roughly $25 million. The painting has not been seen publicly since 1925.

Bock or Kamsler wrote checks for other small charitable gifts: $1,000 to the Music Academy of the West, $100 to the New Canaan Firefighters Benevolent Fund, $25,000 to the Santa Barbara Community Arts Music Association. Two gifts were made in the spring of 2010, just after her case came to light: $10,000 to the Paul Clark Home founded by her father in Butte, Mont., and $1,000 to the Spence School, her alma mater in Manhattan. Other charitable gifts may have been made from her personal checkbook.

Clark, who had no children of her own, apparently paid tuition and fees for several students. Bock or Kamsler wrote checks to Boston College ($53,000), Boston University ($20,000), New York City College of Technology ($6,600), and four Catholic Schools: Long Beach Catholic School ($25,000), Sacred Heart Academy ($47,700), St. Bernard's School ($15,000), and Saint Ignatius Loyola School ($500).

She made payments to the IRS for $45 million, and New York state income tax of $15 million. And state gift tax payments of $975,000.

Her unoccupied 5th Avenue apartments, said to be the largest property under a single ownership anywhere on the prestigious avenue, cost $3.75 million during these 15 years just for the taxes and co-op fees, peaking at $28,844 per month. She has 15,000 square feet on two floors of 907 Fifth Ave. at 71st Street. Another $900,000 went to Anton Sattler Management Co., which handled affairs at her apartment. And $1.5 million was paid through the years to Christopher Sattler, who worked as a personal assistant and property manager. He also would receive $500,000 if the will is upheld.

Her vacant country home in New Canaan, Conn., on the market for several years at $24 million, cost over $100,000 a year just to pay the property taxes. Her unoccupied Santa Barbara oceanfront estate, with an estimated value of $100 million, cost her $8.8 million in various operating costs from 1997 to 2011.

All of Clark's properties are locked down now, protected by the court until the case is resolved.

The expenditures will be investigated by attorneys for the New York County Public Administrator, whose office was appointed by the Surrogate's Court to serve as a third temporary executor, along with Bock and Kamsler. One of the roles of the Public Administrator in this case is to make sure the estate was protected, both before and after Clark's death.

To keep up with the spending, her attorney and accountant were raising money during this period as well: $87 million transferred in from a custody account at J.P. Morgan, $15 million from a Bank of America account, a $5 million loan from J.P. Morgan in 2009, the $6 million sale of one of her Stradivarius violins, and $52 million in sales at Sotheby's. (Her last major purchase at Sotheby's was in 2000 for $124,000.)

Huguette Clark did save considerable money through the years in one respect: electricity. As she lived in a hospital room on the Lower East Side, the Con Edison bill at her 15,000-square-foot apartments on Fifth Avenue rarely rose above $100 a month.

A previous will, signed just six weeks earlier, left $5 million to the nurse, and all the rest to Clark's family. The family was cut out of the second will entirely.

Clark reached age 98 without directing who should inherit her fortune, one of America's greatest from the Gilded Age, estimated to be at least $400 million. Her nurse, an immigrant from the Philippines, assigned to Clark by a home care agency almost 20 years ago now owns a $200,000 Bentley Arnage luxury sedan and five houses. Money to purchase four of those houses was given to her through the years by Clark. Nineteen of Clark's relatives filed an objection to the second will this week in Surrogate's Court in Manhattan, who claim that Clark "was not competent to make a Will . . . in that she did not know the nature, extent or value of her assets, was not of sound mind or memory and was not mentally capable of making a Will." The relatives’ attorney claims in the pleadings that the will "was not freely and voluntarily made," that it was "procured by the undue influence of [attorney] Wallace Bock, [accountant] Irving Kamsler, Hadassah Peri, and/or by other persons acting in concert," and that the same people obtained the will by fraud.

A key issue in the case will be the close timing of the two wills, just six weeks apart. If Clark was not competent to sign a will in March 2005, then how was she competent to sign a will in April 2005? Of course, from the family's perspective, it doesn't matter if the judge throws out both wills. In that case, if she dies without a valid will, the family inherits everything under state law.

Another key issue will be the extent of contact between the relatives and the reclusive Clark. Her attorney and accountant portray the relatives as distant, having no contact with Clark. The relatives have said they and their older relatives had contact with Clark through the years, exchanging letters and telephone calls while respecting her desire for privacy, and that those contacts were cut off abruptly by her attorney about the same time as the wills were signed.

The second will tells a different story, attempting to foreclose any claim by family. "I intentionally make no provision in this my Last Will Testament (sic) for any members of my family, whether on my paternal or maternal side, having had minimal contacts with them over the years. The persons and institution named herein as beneficiaries of my Estate are the true objects of my bounty."

The 19 relatives are descended from the first marriage of Clark's father, the former U.S. Sen. William Andrews Clark (1839-1925).

Huguette Clark, born in 1906, was married only briefly and had no children. Her only full sister died at age 16 and had no children. Her mother had no other children. Under state law that leaves 21 "intestate distributees" — the relatives who would inherit her estate if she left no will or if the court chooses to uphold the earlier will instead of the later one. Of those 21, 19 are challenging the will in court.

A public official investigating Clark's finances, the Public Administrator of the city of New York, has accused the attorney and executive of fraud in handling Clark's taxes. The attorney and accountant, also the subject of a criminal investigation by the Manhattan district attorney, have said they handled Clark's finances appropriately and according to her wishes. No criminal charges have been filed. A judge has suspended them from being executors, a role which would have earned them about $8 million each.

Speaking for nurse Peri, attorney Harvey E. Corn argued in court documents on Dec. 7 that Clark gave the money, and her doll collection, to her out of "gratitude for Ms. Peri's devoted service." Corn says that "Ms. Peri saw or communicated with the Decedent almost every day" during her nearly 20 years of service. And he says that hospital records from the six months around the signing of the wills show that Clark was in good health, "conversant, cheerful, well read and engaged in taking care of her personal affairs."

Hadassah Peri has not spoken publicly about Clark, but a press agent issued a statement on her behalf in June after she was named in the will: "I saw Madame Clark virtually every day for the 20 years. I was her private duty nurse but also her close friend. I knew her as a kind and generous person, with whom I shared many wonderful moments and whom I loved very much. I am profoundly sad at her passing, awed at the generosity she has shown me and my family, and eternally grateful. Just as Madame Clark demonstrated kindness toward others in her actions, so, too, will I and my family devote a substantial portion of this bequest toward making the world a better place for all people."

The public administrator's office has said in court papers that it might seek to "claw back" into the estate some of the gifts given from Clark's accounts while she lived. The administrator said the powers of attorney that Clark signed over to her attorney and accountant did not include the authority to give gifts, including a $5 million check written to Peri in 2009, after Clark herself stopped writing checks on her account.

Te New York attorney general has also entered the case, representing the interests of charities that could be helped or hurt by the decision —those include the Corcoran Gallery of Art in Washington, which is named in the second will to receive one of Monet's "Water Lilies" series of paintings, and the yet-unborn Bellosguardo Foundation, the art museum to be set up at her California home under the second will.”

Cooper-Gordon LLP will be closely following this very fascinating story and will be providing updates as they arise.

Monday, February 27, 2012

Deadline to Make Portability Election Extended

February 2012.  The Internal Revenue Service has issued guidance which allows estates of individuals who died during the first six months of 2011 to extend the deadline to make a portability election.

The portability election is the ability for spouses to share their estate tax exemptions ($5,000,000 for 2011 decedents and $5,120,000 for 2012 decedents) with each other by making certain elections in the estate of the first spouse to die. The portability provisions of the Tax Relief Act allow a surviving spouse to use the unused exemption from his or her deceased spouse to transfer property during life or at death free from federal estate tax.

Under previous guidance, an estate had to elect portability within 9 months of the date of death on a timely filed estate tax return, even if the executor was not otherwise obligated to file an estate tax return. Under this recent IRS guidance, estates of individuals who died within the first 6 months of 2011 may extend the time to elect portability by filing an application for extension of time to file an estate tax return (Form 4768) within 15 months of the date of death. The portability election still must be made on an estate tax return (Form 706) within the extended time frame.

This notice is another clarification by the IRS in the wake of the sweeping changes brought about by the Tax Relief Act of 2010, which increased the federal estate tax exemption to an unprecedented $5,000,000, indexed for inflation, and introduced the concept of portability.

For more information on portability, please contact Frieda Gordon or Avery Cooper at

Monday, January 30, 2012

Huge Tax Savings Available for Short Time Only

There exists right now a brief window of opportunity regarding family gifting. The Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2011 (2010 Tax Act) increased the lifetime gift tax exemption to $5 million in the year 2011, with an inflationary adjustment, to $5.12 million in 2012.  The 2010 Tax Act will no longer be in effect after Dec. 31, 2012, and according to the current law, the lifetime gift tax exemption is scheduled to revert to $1 million on Jan. 1, 2013. Until then spouses who have not previously made substantial gifts have the ability to transfer up to $10.24 million to friends and family or to trusts for them, if the gift is made before Jan. 1, 2013, with maximum rate schedules at 35 percent.

Through the remainder of this year, a number of opportunities for wealth planning are available. It is impossible to know what Congress will do, if anything, to prevent the scheduled exemption reduction to $1 million in 2013.  As a result, the amount of the gift tax exemption after Dec. 31, 2012 remains unclear. Thus, it may be prudent to consider certain wealth planning vehicles to utilize the benefits of the current exemption of $5.12 million effectively while in effect, even if your total assets do not meet the $5.12 million and $10.24 million thresholds.

Some of the benefits and opportunities of a gifting program utilizing all or a part of the lifetime exemption are as follows:

1. Reduction in Estate Tax: If the exemption is reduced in future years, a current lifetime gift can substantially reduce the estate tax burden to a family on the death of the donor. In many cases, a current gift of $5 million can reduce the estate tax burden by 40 percent of the gifted amount, or $2 million, thereby increasing by that amount assets ultimately available to the family, all assuming the exemption is reduced to $1 million as scheduled. Gifts can also reduce the state estate tax burden that exists in many states.

2. Removal of Future Appreciation From Tax: A current gift removes any appreciation on the gifted asset from the estate. Thus, if $5 million is given today of an asset likely to appreciate (say real estate or traded stock interest) and the gifted asset increases to $10 million, the $5 million of appreciation is not includible in the donor’s taxable estate.

3. Retention of Control and Income From Gifted Assets: Some donors are concerned over the loss of control and loss of the income of gifted assets. It is possible to design a gift-giving program between spouses so both spouses continue to retain significant control over the gifted assets and simultaneously retain the economic benefits of the gifted assets. For instance, spouses may establish trusts for each other for their joint lives, and thereafter for family members, utilizing their available gift tax exemptions, ultimately permitting up to $10.24 million plus appreciation to pass to family members without estate tax consequences. The design of such trusts must carefully conform with case law and IRS rulings to achieve the intended result.

4. Retention of Control and Annuity Stream for Designated Period: Gifts can also be made to Grantor Retained Annuity Trusts (GRATs) in which the grantor retains control over the gifted asset and retains an annuity stream for a designated period of time, which may be many years or as short as two years. At the end of the designated period, the asset may pass to family members without gift or estate tax consequences, depending upon the duration of the trust and the amount of the annuity stream passing tothe grantor. To be successful, the grantor must survive the trust term.

5. Protection From Creditors and Spousal Claims: Gifts can be directed to pass to trusts for family members in a manner that protects the assets from the potential creditors of the donees and from matrimonial claims of spouses of donees.

Wednesday, January 11, 2012

Can the 2012 Jordanian Peace Talks Succeed Where Others Have Failed?

This article by David Makovsky director of the Project on the Middle East Peace Process at The Washington Institute finally gave clarity to the reasoning and positions behind the current negotiations occuring between political attaches of the Israeli government and Palestinian factions.

After 16 months of no negotiations, Israeli and Palestinian officials met in Amman last week and again this week. Yet, the question remains whether these talks represent a new opening or if they are merely a tactical instrument for each side to perpetuate recriminations?

If it is only about tactics, these talks will enable the Palestinians to rebut the Israeli claim regarding the Quartet's 90-day clock for both sides to present a map on borders and security because there are no direct meetings between Israel and the Palestinians. On the other hand, should the Palestinians walk away from the table, this will enable the Israelis to repeat what they have always said, namely that the Palestinians' refusal to stay at the negotiating table is the source of the impasse.

The idea of talks having only tactical value or something more meaningful depends on a deeper question. At the core, there are internal policy debates within both Israeli and Palestinian policy circles on the value of making any concessions to each other when each side is absolutely certain that no territorial breakthrough will occur during 2012. These quiet domestic debates occur within Palestinian and Israeli policy circles, and not just between them.

Whatever their differences, all sides have agreed upon two points: there will be no territorial breakthrough during an American election year, and the debates are for policymakers since the publics remain skeptical of the other side's sincerity for peace.

The debates have therefore shifted toward discussing measures that can be taken in the absence of a territorial breakthrough. On the Palestinian side, Prime Minister Salam Fayyad has publicly championed the idea that the best means of building a Palestinian state is to continue institution-building efforts on the ground in the West Bank that show steady progress towards this goal. Such measures range from increased Palestinian economic access in the West Bank, increasing Palestinian police stations outside of Palestinian urban areas to eliminating IDF incursions in Area A, which Hamas has continuously cited as proof the occupation continues despite Palestinian security cooperation with Israel.

The other side of the Palestinian policy debate, associated with Abbas's foreign policy negotiating team, argues the best way to insulate the Palestinian Authority from the wrath of the Arab Awakening is through continued defiance of Israel. The school of thought believes it may be able to persuade PA President Mahmoud Abbas that his domestic popularity reached an all-time high following his bid for UN statehood in September, and this path of resistance will help to obscure his close association with the unpopular Hosni Mubarak. Moreover, this school will probably seek to persuade Abbas that diplomatic defiance of Israel will also help Fatah to compete with Hamas after it becomes clear that Fatah lacks a strong candidate for the May elections, especially given the political boost that Hamas may get from the current Islamist electoral wave in the Arab world.

Furthermore, this school is seen as viewing Palestinian defiance as virtually cost-free internationally. The popular unaccommodating image of Prime Minister Binyamin Netanyahu makes him an easy target, and both the Europeans and Arabs often assume that he is therefore the cause of any impasse.

On the Israeli side, the policy debate in 2012 will center on whether there is any value in yielding to Palestinian demands on non-territorial issues if a full peace deal is out of reach. Foreign Minister Avigdor Lieberman identifies strongly with this view.

A contrasting view comes from key parts of the Israeli defense establishment, which views the threat of a nuclear Iran as strong motivation for credible progress between Israel and the Palestinians. Three points make up this line of reasoning: first, that progress between Israel and the Palestinians could eventually lead to negotiations that would help to insulate the PA against any Arab Awakening revolts. Second, progress on the peace process front could allow Israel to focus more of its policymaking efforts on combating the Iran nuclear threat. Third, progress with the Palestinians could only benefit Israel as it seeks to reach out to various regional Arabs on the Iranian issue, and as it seeks to salvage its relationship with the Egyptian military -- seen by Israel as key to preserving the bilateral peace treaty.

One might add a fourth reason as well. Any progress by Netanyahu in 2012 would serve to counter the prevalent notion that only US pressure can spur Israeli steps towards peace. Paralysis in 2012 would only strengthen this argument, which is certainly not in Netanyahu's interest.

Some ministers and officials close to Netanyahu suggest Israel could accept progress on the ground if the Palestinians provide a quid pro quo. In other words, only if the Palestinians suspend their diplomatic efforts at the UN and other international agencies will they win any reciprocal Israeli action. It is this tradeoff that could pit the different sides of the Palestinian debate: those favoring progress on the ground versus those who want to wage a diplomatic defiant approach against Israel at the UN and elsewhere.

The current concern for the peace process is not what will or will not happen this week in Amman, but rather how policy debates in Jerusalem and Ramallah will shape a year of zero expectations. On the more optimistic note, when there are no expectations, they can be easily exceeded. On the less hopeful note, zero expectations, however, does not mean zero consequences. Given the current turmoil in the region, 2012 could be a very consequential year.


David Makovsky is the Ziegler distinguished fellow and director of the Project on the Middle East Peace Process at The Washington Institute.


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