<html><head><title>Wealth Planning & Preservation Update: Gifting Under "Current" Law</title>< <body topmargin="0" leftmargin="0" rightmargin="0"> <div id="rootDiv" align="center"> <table style="background-color:#006633;margin:0px 0px 0px 0px;" bgcolor="#006633" border="0" width="100%" cellspacing="0" cellpadding="0"> <tr> <td valign="top" rowspan="1" colspan="1" align="center"> <table style="width:600px;" border="0" width="600" cellspacing="0" cellpadding="1"> <tr> <td valign="top" width="100%" rowspan="1" colspan="1" align="left"> </td> </tr> <tr> <td style="background-color:#FFFFFF;padding:1px;" bgcolor="#FFFFFF" valign="top" rowspan="1" colspan="1" align="left"> <table border="0" width="100%" cellspacing="0" cellpadding="0"> <tr> <td style="background-color:#006633;" bgcolor="#006633" valign="top" width="100%" rowspan="1" colspan="2" align="left"> <table id="content_LETTER.BLOCK1" width="100%" border="0" hidefocus="true" tabindex="0" cellspacing="0" cols="0" cellpadding="0" contenteditable="inherit" datapagesize="0"> <tr> <td rowspan="1" colspan="1" align="left"><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4iZcO2J3_ijsEW06rUAs8H1Em5VFytbWAmDHjtr4aqpJYGJXp0cKlmCAzxGivXqGDGWrULHirjMJnkCJm4QyBjUY1k62Gu9g4c=" target="_blank"><img name="ACCOUNT.IMAGE.262" border="0" contenteditable="false" optionname="NEWSLETTER_MAGIC_HDR" alt="Wealth Planning & Wealth Preservation Update" src="http://ih.constantcontact.com/fs046/1101314360574/img/262.jpg" /></a></td></tr></table> </td> </tr> </table> <table border="0" width="100%" cellspacing="0" cellpadding="0"> <tr> <td style="background-color:#FFFFFF;width:450px;padding:5px;" bgcolor="#FFFFFF" valign="top" width="150" rowspan="1" colspan="1" align="left"> <table border="0" width="100%" cellspacing="0" cellpadding="0"> <tr> <td valign="top" width="100%" rowspan="1" colspan="1" align="left"> <table width="100%" id="content_LETTER.BLOCK2" aria-posinset="0" aria-setsize="0" border="0" hidefocus="true" tabindex="0" cellspacing="0" cols="0" cellpadding="5" aria-level="0" contenteditable="inherit" datapagesize="0"><tr><td style="color:#FFFFFF;font-family:Times New Roman,Times,serif;font-size:24pt;" styleclass="style_MainTitle" rowspan="1" colspan="1" align="left"><font color="#FFFFFF" size="6" face="Times New Roman,Times,serif" style="color:#FFFFFF;font-family:Times New Roman,Times,serif;font-size:24pt;"> <div align="right"><font face="Georgia,Times New Roman,Times,serif"><font style="FONT-SIZE: 10pt"><font color="#000000">May/June </font><font color="#000000"><font color="#000000">2010</font></font></font></font></div></font></td></tr></table> <table style="margin-bottom:5px;" width="100%" id="content_LETTER.BLOCK3" aria-posinset="0" aria-setsize="0" border="0" hidefocus="true" tabindex="0" cellspacing="0" cols="0" cellpadding="5" aria-level="0" contenteditable="inherit" datapagesize="0"><tr><td style="color:#000000;font-family:Arial,Helvetica,sans-serif;font-size:10pt;" styleclass="style_MainText" rowspan="1" colspan="1" align="left"><font color="#000000" size="2" face="Arial,Helvetica,sans-serif" style="color:#000000;font-family:Arial,Helvetica,sans-serif;font-size:10pt;"> <div align="justify"><a name="LETTER.BLOCK3" />Welcome to the&nbsp;May issue of the <span style="COLOR: rgb(0,102,51); FONT-WEIGHT: bold">Wealth Planning and Preservation Update</span>.&nbsp;Below you will find an in-depth examination&nbsp;of gift giving in&nbsp;2010 in light of the federal estate tax lapse. If you think any of these planning techniques&nbsp;might be&nbsp;&nbsp;right for you or your cilents but you have some questions, please feel free to contact us. </div> <div align="justify">&nbsp;</div> <div align="justify"><font color="#006633"><strong>Morris Law Group</strong></font>, a full-service&nbsp;Estate, Asset Protection and Business Planning boutique law firm,&nbsp;is dedicated to helping individuals, families and businesses&nbsp;preserve their wealth for future generations.&nbsp;We practice exclusively in the areas of:</div> <ul><li> <div align="justify"><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4iEyH65jHACA73pV7Hd4XK8RKQe03k61Yye747mLflCRr6ZT1Uug4lgEhnQh-OvBOFddbWXrl1uyue6DFv5pcKpYRlfs2SGBahztw8HtarpYpi8Ck5F9RolaiAIiMsS93M=" linktype="link" target="_blank">Wealth Preservation Planning</a>, including Asset Protection programs tailored to the needs of each client by employing extensive expertise in various areas of the law such as Real Property, Domestic and International Tax, Estate Planning, Pension, Trusts and Estates, Bankruptcy and Debtor-Creditor.<br /><br /></div> <li> <div align="justify"><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4hpM34EJ3M3vwo98AfvtdpMZrxXVLRvn5hXZxCSXFuK5ILUo0NI-eK0e4B9DmUbZsdYV1-TnaORpQsn_KJEMuPRYlpYtwb1_1TavqpC3qvW7l_66aBMUr98" linktype="link" target="_blank">Estate Planning</a> including the establishment of Trusts, gifting programs, entity freezes, private foundations and the commencement of Insurance Planning and Charitable Planning. <br /><br /></div> <li> <div align="justify">Wills and Trusts including two trusts developed by Morris Law Group, the <a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4jBwJoZ-T4zKpRJaEpTPr4Wx4JTG9JAFOw4FETc0ewYyXTmUS2kfTSat_cmneR9lmmO94MddcznitN_hapnOq60xg37lhK01dJMoa6IIJiFTbM9Dda2dURK" linktype="link" target="_blank">Opportunity Trust&trade;</a> and the <a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4hTa92UJerWfZ3q_dPnmrm7IS7g9gT6tDjR3ZrZasgWETJ6_Gv7NllLI15cpANGc9pruKIOlY1xiE96lC9aib-Pn45-vjOQNN4ag9RmBzKcbyENipzCbB5yTT3W7FzAeg8=" linktype="link" target="_blank">Generation Spanning Trust&trade;</a>.&nbsp;<br /><br /></div> <li> <div align="justify"><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103018832633&s=0&e=001mPn6Y3uXwAb3hKVmMSWjtTGbKVqh-FfV7M1yR3wgfRjQnbn-k3iE56Qx5wUce_NXIE4BeJh98c4mPEeNTPR_fRLjRBlPujb0MfVPfq68NNDHrRET_mJUwBjCx2qTQ671F4HGsbSCMDU=" linktype="link" target="_BLANK">Business Structuring and Succession Planning</a>&nbsp;for the transfer of ownership and control of a closely held business from one generation to the next with the intent of minimizing taxes and preserving corporate assets. This may include preparing restrictive shareholder and partnership agreements and corporate reorganization plans, solving liquidity issues for tax obligations, structuring stockholder buy-sell agreements, and&nbsp;working with clients who have accumulated balances in their 401(k) and profit-sharing plans, and IRAs.</div></li></li></li></li></ul> <ul><li> <div align="justify"><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103018832633&s=0&e=001mPn6Y3uXwAb3hKVmMSWjtTGbKVqh-FfV7M1yR3wgfRjQnbn-k3iE56Qx5wUce_NXIE4BeJh98c4mPEeNTPR_fapSWG2mBjp0EhJnc0fgWdwVl3BBdpi33Ow-P3w93i53" linktype="link" target="_BLANK">Probate and Trust Administration</a> including representing individual and professional fiduciaries, personal representatives, trustees and other fiduciaries in connection with the Administration of Probate Estates and Trusts;&nbsp;preparing federal and state estate, inheritance, generation-skipping transfer and gift tax returns for fiduciaries;&nbsp;and&nbsp;representing fiduciaries in tax audits and controversies.</div></li></ul> <ul><li> <div align="justify"><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103018832633&s=0&e=001mPn6Y3uXwAb3hKVmMSWjtTGbKVqh-FfV7M1yR3wgfRjQnbn-k3iE56Qx5wUce_NXIE4BeJh98c4mPEeNTPR_fca_NfMNZcnZ3BasGqbt5IZ2ijjRqT2umxQPl8S2nWloMpF5L2nYfc--gqF5h6dDPg==" linktype="link" target="_BLANK">Planning techniques for highly compensated and high net- worth individuals</a> including establishing charitable trusts and foundations; establishing international and domestic Trusts; developing gifting plans; implementing income timing techniques, such as the exercise of stock options; and structuring corporations and entities. </div></li></ul> <ul><li> <div align="justify">Domestic and International Tax Planning. </div></li></ul> <div align="justify">Don't let the daunting sound of "Wealth Preservation Planning" or "Estate Planning" get in your way! We help clients just like you get their affairs in order, painlessly and productively, everyday.&nbsp;One tool that we developed to assist in the process is <a style="COLOR: blue; TEXT-DECORATION: underline" track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4gMx5mOCwY3RbSYWf7Sy9C7O9R2LUr_XfTS8aHiGw6QGbwAr58KpvsnlNTkntBV0Mmza_g_O18Ll3M-xAuacz8LsJJuDJQ3FDgNVIdLWauvijiG2ndDqD1pEmq47uIDrmnd4pH7GmuFIQ==" linktype="link" target="_blank">The Wealth Preservation Solution©</a>. This consists of six steps to an estate plan that meets your goals and objectives, reduces your taxes and costs, and protects the interests of your beneficiaries. Check it out. Then,&nbsp;<a shape="rect" href="mailto:info@law-morris.com" target="_BLANK">click here to send us an email </a>letting us know that&nbsp;you would like to speak to one of our attorneys about&nbsp;your or one of your client's wealth preservation plan.</div></font></td></tr></table> <table style="background-color:#000000;margin-bottom:5px;" bgcolor="#000000" border="0" width="100%" cellspacing="0" cellpadding="0"> <tr> <td height="1" rowspan="1" colspan="1" align="left" /> </tr> </table><a name="LETTER.BLOCK22" /><table class="ArticleBorder" style="margin-bottom:5px;" width="100%" id="content_LETTER.BLOCK22" aria-posinset="0" aria-setsize="0" border="0" hidefocus="true" tabindex="0" cellspacing="0" cols="0" cellpadding="5" aria-level="0" contenteditable="inherit" datapagesize="0"><tr><td style="color:#000000;font-family:Arial,Helvetica,sans-serif;font-size:10pt;" rowspan="1" colspan="1" align="left"><font color="#000000" size="2" face="Arial,Helvetica,sans-serif" style="color:#000000;font-family:Arial,Helvetica,sans-serif;font-size:10pt;"> <div style="color:#006633;font-family:Georgia,Times New Roman,Times,serif;font-size:14pt;" align="left"><font color="#006633" size="4" face="Georgia,Times New Roman,Times,serif" style="color:#006633;font-family:Georgia,Times New Roman,Times,serif;font-size:14pt;"><strong>As Senate Deal Breaks Down, Probability of $1M Estate Tax Exemption Rises</strong>&nbsp;&nbsp;</font></div><span> <div align="justify" id="MainContent"> <p><font style="FONT-SIZE: 10pt" face="Arial">An agreement between Senate Democrats and Republicans on an estate tax proposal has broken down, according to one of the lead negotiators, Senate Minority Whip Jon Kyl (R-AZ). Observers say that with each passing day, estate tax legislation that would apply retroactively appears less and less likely, while the probability grows of a return to a 55 percent rate and $1 million exemption beginning January 1, 2011. </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">"I don't know what's going to happen," said Sen. Mary Landrieu (D-LA). "It just doesn't seem like there's enough votes to do anything." </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">Although details of the short-lived deal have not been made public,<a shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4hFZRZFaG5t7oHiVdE07A4ww4oHxlKXia02pIXT_JvaWkplX7PbEXmSWx4csJsbe5DhydS4SYOgFIBujzGarFjwa-dDkh0PiZMjkAVIMjVZj6zekqfRJ1cKUqwD_qauu6ByfC05dqln-CnSF9Hd2S7fmjJ9gIW_jRAg7Oum_A6uHgg0OIunm7MuqceTaQyr-78=" target="_blank"> <i>The Hill</i></a> reports that lawmakers were looking at a tax levy of 35 percent for those worth more than $3.5 million, with the exemption ultimately increasing over time to $5 million with no index for inflation. Taxpayers would reportedly have been given the option of prepaying their estate tax, with prepayment trusts paying a lower rate. </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">Kyl said the deal broke down because of Senate Democrats' unwillingness to allow any legislation to reach the floor that lacked the support of a majority of its members. </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">"We no longer have an agreement because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they're not going to allow it on the floor, at least not voluntarily," Kyle said. "So we have to find a way to get a reasonable permanent estate tax reform to the floor where members can vote on it." </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">This happening anytime soon seems unlikely, with GOP members holding firm for a $5 million exemption with a 35 percent tax rate, while "80 percent" of Senate Democrats oppose this plan, according to Sen. Bob Casey (D-PA). </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">"I think we're not yet at the point where we're drawing lines, but the idea that we're going to give an incredible economic advantage to less than 1 percent of our taxpaying population is really offensive to me, to understate it dramatically," Casey said. "Most of our caucus is very concerned about what will happen on the estate tax, and I think there are some who would probably be with Sen. Kyl, but I think it's a small number." </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">"My personal opinion remains that were not likely to see any estate tax legislation before the November elections, and that retroactive legislation is less likely with each passing day," writes Matthew Crider of the <a shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4ge4m6x2tdr8iYTyXW7JeCw0cNWWwE8V1zLPXizOoGnrytMFbYVbbw1uFrLHRI73y80jggImXS-CVZnes0VD9SEb3sMydzBDCSO9tEPUYvvtM6SIZz9cw4SxtQsil0eJ0Rz00k8hd8k4-0XE-8FiVr_7CvnJXOdrXLMzrH_bxJHFKo2swpOmQBQ-ek3-vuukth8ZX0RoGX7oA==" target="_blank">Sacramento Estate Planning Examiner</a>.</font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">For more details on the breakdown in negotiations, click <a shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4jQxCi2_eowyN2IP8ZIpQVNZGC6hz719n3U4v4x2FuqwBBzWFwCxD9zxzKhE7m86iih08yOkwioGLuisKxzFxtxMztFsrZguUZUaymyilxC2Ijfa9kp0a8Hmmx0vwdNUdEqILb_V2NFCY_pE8MiRxIa-xKr62o36TteudgLGwpExuywZqi3mb9_rSxNlqTU0jeAiGvuFHZaE73G1Dsh5LC64TfgYhDBqUWLYwE-wBYhNpEtiZGdtne28stNJA-vH1cZ-_p1LXK1MGa3DbZBiPkfwm-vIVEH4JE=" target="_blank">here</a> and <a shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4jWXaP1Syk_rL1dbldEwFZmlOMm0gMg88cEVl76HRbvPEnEd6m8z4MNOR0FGRXgwrXFN_Kr87IfDxC53CZ70TNfz3i31bm45Tcty-EX6721hD6e3SXZCybv3wCL0zx80QDFDvI-13OoYF-pP5rib21O" target="_blank">here</a>. </font></p> <p><font style="FONT-SIZE: 10pt" face="Arial">Meanwhile, two reports by the Center on Budget and Policy Priorities criticize the now-stalled proposal to cut the federal estate tax. For details from The Future of the Federal Estate Tax Blog, <a shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4jIjZJalSXhMaLenQh9OMNEVn0dn60P6O43WxRFH8BTPq0qkkzBLu7al7uJtYzZqMT1jfnMq3qjCy-1ppjTkXq_DE4lCSgOrA8DkivBGPJebMl_mjQao_m26WkQ-9Tkq7y325rw3nim_M-8ZGaBEQRfUMx1iKmS8rq-JBZ_Gda2TYmuIp5-VZOFYV3ujbSSLsKLBpNsil-t3gGKEN4We01guunL0UOJdzok2JyU97NHyZQByqINE9qdsFVet-24o3kVLatBKG41fIdwNUNyBBaB6eKVnUcwwDUdUYIwFpYppQ==" target="_blank">click here</a>.</font></p></div></span></font></td></tr></table><table style="background-color:#000000;margin-bottom:5px;" bgcolor="#000000" border="0" width="100%" cellspacing="0" cellpadding="0"> <tr> <td height="1" rowspan="1" colspan="1" align="left" /> </tr> </table><a name="LETTER.BLOCK20" /><table class="ArticleBorder" style="margin-bottom:5px;" width="100%" id="content_LETTER.BLOCK20" aria-posinset="0" aria-setsize="0" border="0" hidefocus="true" tabindex="0" cellspacing="0" cols="0" cellpadding="5" aria-level="0" contenteditable="inherit" datapagesize="0"><tr><td style="color:#000000;font-family:Arial,Helvetica,sans-serif;font-size:10pt;" styleclass="style_MainText" rowspan="1" colspan="1" align="left"><font color="#000000" size="2" face="Arial,Helvetica,sans-serif" style="color:#000000;font-family:Arial,Helvetica,sans-serif;font-size:10pt;"> <div style="color:#006633;font-family:Georgia,Times New Roman,Times,serif;font-size:14pt;" styleclass="style_ArticleHead" align="center"><font color="#006633" size="4" face="Georgia,Times New Roman,Times,serif" style="color:#006633;font-family:Georgia,Times New Roman,Times,serif;font-size:14pt;"><font color="#006633" face="Georgia, Times New Roman, Times, serif"><strong><font style="FONT-SIZE: 14pt"><img height="150" name="ACCOUNT.IMAGE.371" border="0" width="150" contenteditable="false" alt="Gift box" src="http://ih.constantcontact.com/fs046/1101314360574/img/371.jpg" align="left">Gifting Under</img></font></strong></font></font></div> <div style="color:#006633;font-family:Georgia,Times New Roman,Times,serif;font-size:14pt;" styleclass="style_ArticleHead" align="center"><font color="#006633" size="4" face="Georgia,Times New Roman,Times,serif" style="color:#006633;font-family:Georgia,Times New Roman,Times,serif;font-size:14pt;"><strong>&nbsp;"Current" Law </strong></font></div> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><font style="FONT-SIZE: 10pt"><br />Congressional failure to address the federal estate, gift and generation skipping transfer ("GST") tax prior to January 1, 2010 creates special gift planning opportunities in 2010 for clients who are in a position to make large gifts and are willing to take the risk that Congress will not enact retroactive changes to the law which will nullify the benefit of these gifts. As the law stands today, there is no federal estate tax for individuals who die in 2010, GST tax is not imposed for transfers made in 2010 and the gift tax rate for taxable gifts made in 2010 is relatively low.</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><font style="FONT-SIZE: 12pt">&nbsp;</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial; FONT-WEIGHT: normal; mso-bidi-font-weight: bold" align="left"><font style="FONT-SIZE: 14pt" color="#006633" face="Georgia, Times New Roman, Times, serif"><strong>Reducing Gift and Estate Tax through 2010 Gifting</strong></font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial; FONT-WEIGHT: normal; mso-bidi-font-weight: bold" align="justify"><font style="FONT-SIZE: 12pt">&nbsp;</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><font style="FONT-SIZE: 10pt">While Congress may act retroactively, there is presently no estate tax or GST tax in 2010; however, there is a gift tax on gifts made in excess of your lifetime gift tax exemption of $1 million. The rate of tax on gifts for 2010 is relatively low. The 2010 gift tax rate is 35%, as compared to a 45% rate in 2009 and a 55% maximum rate scheduled for 2011 and subsequent years. Therefore, 2010 gifting could be attractive if you are willing to pay gift tax on large gifts that are not covered by your remaining gift tax exemption.</font></p> <div>&nbsp;</div> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><font style="FONT-SIZE: 10pt">In addition to the lower rates, payment of gift tax is one method of potentially decreasing the overall transfer taxes incurred during your life and after your death if there is a federal estate tax due at your death.</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">This advantage is due to the gift tax being "tax exclusive" (i.e., the donor pays the tax on the amount the recipient actually receives) and the estate tax being "tax inclusive" (i.e., the estate pays the tax on the amount in the decedent's taxable estate at his or her death regardless of the amount the beneficiaries of the estate actually receive). </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">While the IRS includes the amount of gift tax you paid within the last three years of your life in your taxable estate, even if you die within three years of the gift, you could still be in a better tax position because any appreciation on the assets that were gifted as well as appreciation on the gift tax would escape estate taxation.</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">Before gifting, please note Congress may retroactively raise the gift tax rate for gifts made in 2010 which would require you to pay gift tax at a rate higher than 35%.</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><span style="FONT-FAMILY: Arial; FONT-WEIGHT: normal; mso-bidi-font-weight: bold"><font color="#006633" face="Georgia, Times New Roman, Times, serif"><strong><font style="FONT-SIZE: 14pt">Reducing GST Taxes through 2010 Gifting</font></strong></font></span></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">Currently, the GST tax does not apply to 2010 transfers, therefore, transfers made to your descendants, or to trusts for their benefit, can be made in 2010 without any GST tax being imposed or any GST exemption being used to shelter gifts from the GST tax. This makes this year a unique time to consider gifts that are intended to benefit multiple generations.</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">In years other than 2010,&nbsp;a&nbsp;gift which&nbsp;benefit grandchildren and more remote descendants would have been subject to an additional GST tax of 45%, or would have used a portion of your GST tax exemption. Since the current law provides that the GST tax does not apply in 2010, transfers made in 2010 to benefit multiple generations may never be subject to GST tax. </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">As with the gift tax, Congress could retroactively impose the GST tax to transfers made in 2010 when the tax did not apply. Due to this possibility, it usually makes sense to keep lifetime gifts under the GST tax exemptions of 2009 ($3.5 million) in order to avoid GST tax. If Congress does not retroactively reenact the GST tax, but allows the GST tax to return in 2011 as currently scheduled, it is not clear whether transfers made in 2010 will have permanently escaped GST taxation. </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">It is possible that the IRS could treat distributions from trusts as GST taxable transfers at the time the distributions were made (in 2011 and beyond) and would not treat the initial funding of those trusts as having carried permanent GST exempt status through to the distributions. Clients considering making gifts to multiple generation trusts may consider 2010 as a window of opportunity to attempt GST transfers, so long as they are comfortable that future trust distributions may not be protected from GST tax. </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="left"><br /><font face="Georgia, Times New Roman, Times, serif"><strong><font style="FONT-SIZE: 14pt" color="#006633">Distributions from Non-GST Exempt Trusts </font></strong></font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><font style="FONT-SIZE: 12pt">&nbsp;</font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><font style="FONT-SIZE: 10pt">2010 might be the right time for clients to make distributions from existing trusts, either for family members or for themselves, which would have been treated as GST distributions prior to January 1, 2010. Under prior law (2009), and as it is scheduled to exist in 2011, the distribution from trusts not otherwise exempt from GST tax to beneficiaries (including grandchildren or more remote descendants) are taxed at the GST rate (45% in 2009) when the distributions are made. In 2010, the GST tax does not apply so technically distributions from these trusts would not incur a GST tax if made in 2010. Again, the possibility that the GST tax might be retroactively reinstated requires careful consideration. </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="left"><br /><span style="FONT-FAMILY: Arial; FONT-WEIGHT: normal; mso-bidi-font-weight: bold"><font style="FONT-SIZE: 14pt" color="#006633" face="Georgia, Times New Roman, Times, serif"><strong>Outright Gifts to Grandchildren without GST Tax</strong></font></span></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">2010 could be an attractive time to make outright gifts to grandchildren and more remote descendants as the GST tax does not apply. These gifts can be structured to qualify for both the gift tax annual exclusion and the GST tax annual exclusion to protect yourself from any retroactive changes in the law. </font></p><a shape="rect" name="OLE_LINK1"><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"> <p style="MARGIN: 0in 0in 0pt" name="OLE_LINK2" align="left"><br /><span style="FONT-FAMILY: Arial; FONT-WEIGHT: normal; mso-bidi-font-weight: bold"><font color="#006633" face="Georgia, Times New Roman, Times, serif"><strong><font style="FONT-SIZE: 14pt">Grantor Retained Annuity Trusts ("GRATs")</font></strong></font></span></p></span></span></a><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="justify"><br /></p><font style="FONT-SIZE: 10pt"><font style="FONT-SIZE: 10pt"><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"><font style="FONT-SIZE: 10pt"> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="justify"><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"><font face="Arial, Helvetica, sans-serif"><span style="LETTER-SPACING: 0.35pt">A Grantor Retained Annuity Trust ("GRAT") is an irrevocable trust into which you transfer assets and retain the right to receive annual payments of a fixed dollar amount for a specified term of years. At the end of the trust term, the remaining trust assets pass to family members. <br /><br />The IRS assumes that a GRAT will grow at a rate equal to the 7520 rate at the time the trust is established (3.4% for May). Growth which exceeds the assumed rate passes to trust beneficiaries free of gift and estate tax. The lower the hurdle or interest rate, the larger the potential gift. GRATs are a preferred wealth transfer option in a low interest rate environment because it is relatively easier to outperform the hurdle rate than in a high interest rate environment. <br /><br />GRATs are also "grantor trusts" which means that the grantor (creator of the trust) is taxed on all of the income. Payment of these income taxes is effectively a tax-free gift to the trust beneficiaries since the trust assets can grow without reduction for income tax payments. <br /><br />In short, by using a GRAT, a client can transfer assets to a trust on a gift-tax-free basis, receive the assets back over a period of years with a rate of return and any excess growth is outside the client's estate.</span></font></span></span></p></font></span> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="justify"><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"><br /><font face="Arial, Helvetica, sans-serif">Although GRATs are popular and often successful trusts for transferring assets to family members, they are not typically good GST tax planning trusts because while there may be no gift tax imposed, for GST tax purposes the value of the gift is determined not at the beginning of the GRAT, but rather at the end when the GST tax to be imposed (or GST exemption used to shelter the gift from GST tax), is based on the value of assets actually received by the beneficiaries. For this reason, many people provide that only their children and not more remote descendants will be the beneficiaries of a GRAT to avoid GST tax. </font></span></span></p> <div>&nbsp;</div> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="justify" /></span></font></font></span></span><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"><font face="Arial, Helvetica, sans-serif">As previously discussed, in 2010, the GST tax does not apply. While retroactive application of the GST tax may apply to GRATs, presently, the GRAT can be structured so that it terminates in favor of grandchildren and thus avoids GST tax. GST exempt GRATs are attractive if you do not&nbsp;believe there is a possibility the GST tax will be retroactively imposed and you are willing to either incur the tax or have the GRAT assets pass to your children rather than your grandchildren if the tax is reinstated with retroactive application.</font></span></span> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="justify"><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"><font face="Arial, Helvetica, sans-serif">&nbsp;</font></span></span></p> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="justify"><span style="mso-bookmark: OLE_LINK2"><span style="FONT-FAMILY: Arial"><font face="Arial, Helvetica, sans-serif">It is important to note the House of Representatives has passed, and now the Senate is considering a bill that would dramatically curtail the use of shorter-term and zeroed-out GRATs. Specifically, the bill would require that: [1] GRATs have a minimum 10-year term; [2] Annuity payments not decline during the first 10 years of the trust; and [3] a GRAT's design at inception envisions a remainder. This means now is the time to consider, and act quickly, if creating GRATs might serve your estate planning needs.</font></span></span></p> <div>&nbsp;</div> <p style="MARGIN: 0in 0in 0pt; mso-bookmark: OLE_LINK1" align="left"><font face="Georgia, Times New Roman, Times, serif"><font color="#006633"><strong><font style="FONT-SIZE: 14pt">"QTIP" Trusts</font></strong></font></font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">A Qualified Terminable Interest Property ("QTIP") trust can be established during your lifetime for the benefit of your spouse to which you can transfer assets without gift tax because the trust qualifies for the marital deduction. Lifetime QTIP trusts allow you to take advantage of your GST exemption and allows your spouse to enjoy the assets while you are alive. With no GST tax, the transfer to a Lifetime QTIP can be an especially effective GST tax planning technique. </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">The Lifetime QTIP would initially be a trust for your spouse that would pay the income of the trust to your spouse at least annually and the Trustee could also make principal distributions to your spouse. This trust would last for your spouse's lifetime. At your spouse's death, the trust could continue on the same terms for your benefit, and at your later death (or at the death of your spouse if you predecease your spouse), the remaining trust property could be transferred to trusts for the benefit of multiple generations (which could include your children) which would be GST tax exempt. </font></p> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify"><br /><font style="FONT-SIZE: 10pt">Prior to 2010, you might have transferred assets to the trust that were equal in value to or less than your remaining GST exemption and you would have used that exemption to protect those assets from future GST taxation. This was an effective GST vehicle because creating the QTIP allowed the trust assets to grow so that the appreciated value of the trust upon the death of the surviving spouse would also be exempt from GST tax. In a 2010, when GST taxes do not apply to transfers, arguably the Lifetime QTIP trust would be exempt from GST tax without the use or allocation of any GST exemption. If the GST tax is retroactively applied to your transfer to the QTIP, you could either allocate GST tax exemption to the transfer to maintain the exempt status of the trust or the Trustee could decide to distribute the assets of the trust to your spouse, effectively ending the trust. In either event, there would be no current tax cost to you or your spouse and you would have created the possibility of taking advantage of GST tax savings during this period in which the GST tax does not apply.</font></p> <div>&nbsp;</div> <p style="MARGIN: 0in 0in 0pt; FONT-FAMILY: Arial" align="justify">In these times of tax uncertainty, which most of us never thought we would see, there are numerous opportunities for big tax savings. 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The firm has four offices strategically located throughout South Florida in Boca Raton, Aventura, Weston and West Palm Beach to provide convenient service to clients in Palm Beach, Broward and Dade counties and from across the country.<br /><br /><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4iL1fsEKya9_ho2RRiIg6_7Jkd0y4aQFcQt0mJiARiW36iZ8gAu-K6PZSUFgMVyWzFnxy9zqiGiXmUXWb9kawSHQc_0eGxYDPk6sXDv-ZBsaQ==" linktype="link" target="_blank">Read more about the Morris Law Group attorneys</a>. </font></div> <div>&nbsp;</div> <div><a shape="rect" href="mailto:smorris@law-morris.com" target="_blank"><strong>Click here </strong></a><font color="#000000"><strong>to&nbsp;email&nbsp;Stuart R. Morris, Esq.</strong></font></div> <div><a shape="rect" href="mailto:gbloshinsky@law-morris.com" target="_blank"><strong>Click here</strong></a><strong>&nbsp;<font color="#000000">to&nbsp;email&nbsp;Gregory S. 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Little,&nbsp;Esq.&nbsp;<br /></div></font></strong></div></div></font></td></tr></table> </td> </tr> </table> </td> <td style="background-color:#006633;width:150px;padding:5px;" bgcolor="#006633" valign="top" width="450" rowspan="1" colspan="1" align="left"> <table border="0" width="100%" cellspacing="1" cellpadding="0"> <tr> <td width="100%" rowspan="1" colspan="1" align="left"> <table style="margin-bottom:5px;" border="0" width="100%" cellspacing="1" cellpadding="5"> <tr> <td style="color:#FFCC66;font-family:Arial,Helvetica,sans-serif;font-size:12pt;" rowspan="1" colspan="1" align="left"><font color="#FFCC66" size="3" face="Arial,Helvetica,sans-serif" style="color:#FFCC66;font-family:Arial,Helvetica,sans-serif;font-size:12pt;"> <b>In This Issue</b> </font></td> </tr> <tr><td rowspan="1" colspan="1" align="left"> <a style="color:#FFFFFF;font-family:Arial,Helvetica,sans-serif;font-size:10pt;" shape="rect" href="#LETTER.BLOCK22"><font color="#FFFFFF" size="2" face="Arial,Helvetica,sans-serif" style="color:#FFFFFF;font-family:Arial,Helvetica,sans-serif;font-size:10pt;">As Senate Deal Breaks Down, Probability of $1M Estate Tax Exemption Rises</font></a> </td></tr><tr><td rowspan="1" colspan="1" align="left"> <a style="color:#FFFFFF;font-family:Arial,Helvetica,sans-serif;font-size:10pt;" shape="rect" href="#LETTER.BLOCK20"><font color="#FFFFFF" size="2" face="Arial,Helvetica,sans-serif" style="color:#FFFFFF;font-family:Arial,Helvetica,sans-serif;font-size:10pt;">Gifting Under "Current" Law</font></a> </td></tr> </table> <table style="margin-bottom:5px;" id="content_LETTER.BLOCK11" width="100%" border="0" hidefocus="true" tabindex="0" cellspacing="0" cols="0" cellpadding="10" contenteditable="inherit" datapagesize="0"> <tr> <td rowspan="1" colspan="1" align="left"> <div style="FONT-SIZE: 10pt; COLOR: #000000; FONT-FAMILY: Times New Roman,Times,serif" color="#df42f0"><strong><font color="#ffcc66" size="3" face="Arial,Helvetica,sans-serif">Quick Links</font> <div><font color="#ffffff" face="Arial,Helvetica,sans-serif">&nbsp;</font></div></strong></div> <div><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4iZcO2J3_ijsEW06rUAs8H1Em5VFytbWAmDHjtr4aqpJYGJXp0cKlmCAzxGivXqGDGWrULHirjMJnkCJm4QyBjUY1k62Gu9g4c=" linktype="link" target="_blank"><font color="#ffffff" size="2" face="Arial,Helvetica,sans-serif">Morris Law Group</font></a></div> <div>&nbsp;</div> <div><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4iL1fsEKya9_ho2RRiIg6_7Jkd0y4aQFcQt0mJiARiW36iZ8gAu-K6PZSUFgMVyWzFnxy9zqiGiXmUXWb9kawSHQc_0eGxYDPk6sXDv-ZBsaQ==" linktype="link" target="_blank"><font color="#ffffff" size="2" face="Arial,Helvetica,sans-serif">The Attorneys of Morris Law Group</font></a></div> <div>&nbsp;</div> <div><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4j2-7PitB8ico_nC_kYmo_ocmnVxVZhjhVTRpmAVjnI6gp76FjsmSoVNP51PwsYfXMWZDJHZ90742rRKxq6oEBzV4TtSifQcoy23Tj-lEjxZ2x3nf8MHNRd" linktype="link" target="_blank"><font color="#ffffff" size="2" face="Arial,Helvetica,sans-serif">Visit the Morris Law Group Blog</font></a><font size="2" face="Arial,Helvetica,sans-serif">&nbsp;</font></div> <div>&nbsp;</div> <div><a track="on" shape="rect" href="http://r20.rs6.net/tn.jsp?et=1103425980793&s=-1&e=0013tySx-saX4izo7kOHCorM3knwsXSn3ymd_P5B4uilIG_z49ItDGeR5_Q70wRPZx5chwcH6ZKz3sJW57bcCsbexsN-gXQlDHic5CHNsMClvL2a-ttGUYhgINxWX0G3zos" linktype="link" target="_blank"><font color="#ffffff" size="2" face="Arial,Helvetica,sans-serif">Office Locations</font></a></div></td></tr></table> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr> <td height="10" width="100%" rowspan="1" colspan="1" align="left"> </td> </tr> </table> </td> </tr> </table> </div> <div style="font-family:verdana,arial;font-size:8pt;color:#000000;background-color:#ffffff;padding-top: 20px;" align="left" id="LETTER.PHYSICALADDRESS"><font style="font-family:verdana,arial;font-size:8pt;color:#000000;" color="#000000" size="1" face="verdana,arial">Morris Law Group | 7000 W. 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