1. ACCOUNTABLE
ADVICE
J u l y / A u g u s t + 2 0 1 4
The Tax Magic of GRATs + PG2
“Do-It-Yourself”
Fails in Woman’s Estate Plan + PG4
F i n a n c i a l P l a n n i n g
I n v e s t m e n t M a n a g e m e n t
Tr u s t & E s t a t e S e r v i c e s
P r i v a t e B a n k i n g
R e t i re m e n t P l a n S e r v i c e s
Required
Minimum Distributions
The best way to prepare for retire-
ment is to save, early and often.
Generally, one should set aside 10% to
15% of one’s income each year. If the
habit takes hold early in one’s career,
a very meaningful nest egg should be
the result.
Saving is easier when there is a tax
deduction for it, which helps explain
the popularity of the traditional IRA.
However, the tax law includes a stipula-
tion that those who have developed the
savings habit will find disconcerting.
Once one reaches age 70 ½, a program
of required minimum IRA distribu-
tions must commence. Each year the
IRA must disburse an amount geared
to the life expectancy of its owner. The
reason for the requirement is to make
certain that the money saved for retire-
ment gets used for retirement—or, at
least, becomes subject to income taxes
during retirement.
How large are the payouts?
Required minimum distributions
from an IRA won’t exhaust the account
before the owner lives beyond age 100,
even if the account has poor investment
return. Accounts that enjoy even mod-
est returns will keep getting larger in the
early years of minimum distributions.
This table shows the projected size of a
required minimum distribution from a
$1 million IRA at various ages, for vari-
ous rates of return. It also shows total
distributions and the balance remaining
at age 100, if only required minimum
distributions are taken each year. If a 6%
annual rate of return can be achieved,
the account balance won’t dip below $1
million until age 92.
Ask a Trust Officer + PG3
Age 2% return 4% return 6% return 8% return
70 $36,496 $36,496 $36,496 $36,496
80 $42,255 $51,750 $63,124 $76,700
90 $42,859 $64,606 $96,587 $143,259
100 $28,394 $53,269 $98,650 $180,439
Total payments
through age 100
$1,233,056 $1,624,697 $2,387,026 $3,434,869
Remaining balance
at age 100
$154,067 $295,750 $560,139 $1,047,272
Source: M.A. Co.
Rates of return are for illustration only and do not represent any particular investment.

2. What do Facebook’s Mark Zuckerberg, casino magnate
Sheldon Adelson, and Lloyd Blankfein, the CEO of Goldman
Sachs, have in common? They, along with hundreds of other
highly compensated executives, have employed a Grantor
Retained Annuity Trust, or GRAT to estate planners, to move
wealth within the family at little or no gift tax cost. According to
a report from Bloomberg, Adelson may have passed some $7.9
billion through 30 different trusts to his heirs, saving about $2.8
billion in gift taxes. An estimated $100 billion in gift taxes has
been legally avoided since 2000.
How can the reporters know all this? Aren’t IRS filings
and trust documents private? Yes, they are, but the SEC
requires many disclosures from the major owners of publicly
traded companies. It is from the SEC filings that the report-
ers gleaned this information.
How does it work? The idea is that the grantor places an
asset in a trust for a term of years, receiving income from the
trust during its existence. At the end of the term, the trust
terminates, and the remaining assets pass to the heirs. When
the trust is created, there is a gift tax due on what the heirs
will receive, discounted to reflect the value that the grantor
retained for himself or herself.
The Tax Magic of GRATs
One of the Walton heirs pushed this strategy farther.
A GRAT was set up to last for just two years, funded with
Walmart stock. The annuity was set so high that essentially
the entire value of the transfer had to be returned to the
donor, so the value of the gift was “zeroed out,” and no gift
tax would be due. What’s the point? If the stock transferred
to such a trust zooms in value during the two years, the
excess appreciation passes to heirs entirely free of gift taxes,
and the asset has been remove from the estate of the donor.
Bloomberg reported that in 2009 Adelson placed about
$30.9 million worth of his Las Vegas Sands stock in a GRAT
for two years. In 2011, the trust terminated and distributed
$31.1 million, to him—the initial contribution plus interest.
During those two years, the price of the stock soared from
$2.58 per share to $46.87. The final result was that $518.8
million passed to Adelson’s heirs with no gift tax. That same
amount has been removed from his estate, and will be free
of estate taxes as well.
(June 2014) © 2014 M.A. Co. All rights reserved.
2

3. A S K A T R U S T O F F I C E R :
S T A T E O F T H E E C O N O M Y ,
P A R T 2
revenue bump in late 2012 and early 2013, as wealthy taxpay-
ers sought to lock in their gains before the big tax increases
took effect. That phenomenon is over now. Even though
stock prices have continued to rise, the incentive to realize
taxable gains has been reduced.
The contrary leading indicator is the stock market itself,
which has been powering to new highs this year. The S&P
500 grew 3% through May, following its 30% run-up last year.
The fact that the economy contracted in the first quarter
suggests that the Fed is unlikely to move toward higher inter-
est rates in the near term. I’m afraid that your CD rates are
not likely to improve.
Do you have a question concerning wealth management or
trusts? Send your inquiry to wealthmanagement@fnni.com.
(June 2014) © 2014 M.A. Co. All rights reserved.
3
DEAR TRUST OFFICER:
Is the economy doing better? Any chance that my CD rates
will go up this year?
—STILL WORRIED GRANDMA
DEAR STILL WORRIED: I’m afraid there isn’t much good
news to report. We had thought that the economy grew by
an anemic 0.1% in the first quarter, well below expectations.
At the time, some observers thought that figure might be
revised upward when more data became available. The data
are now in, and the growth rate was revised downward to a
loss of 1%. One more quarter like that and we might be back
in a recession.
As a parallel indicator, state tax revenues have been fall-
ing in many parts of the country, a total of 0.4% nationwide,
the first such contraction since 2009. California, for example,
took in 12.9% less in the first quarter of 2014 than in the
similar year-earlier period. To some extent, this is just a
return to normal. States that tax capital gains saw an unusual

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First National Bank of Omaha.
“Do-It-Yourself”
Fails in Woman’s Estate Plan
This is, unfortunately, a true story.
Anne Aldrich wrote her will on an
“E-Z Legal Form” on April 5, 2004.
Ms. Aldrich carefully inventoried all
of her property on the preprinted
form, and she left all of her posses-
sions to her sister. She also provided
that if the sister died before she did,
“I leave all listed [property] to James
Michael Aldrich,” her brother. The
will was duly signed and witnessed. It
was legal and unambiguous. However,
it did not contain a “residuary clause”
for disposing of any property not spe-
cifically mentioned in the will. Ms.
Aldrich may not have appreciated the
importance of that omission. Had she
died soon thereafter, it might not have
made any difference.
But as it happened, the sister died first. Ms. Aldrich inherited a considerable
amount of property from the sister. The property so acquired was not, of course,
mentioned in the will. Ms. Aldrich wrote an addendum to her will that acknowl-
edged her sister’s death and said, “I reiterate that all my worldly possessions pass to
my brother.” Alas, under local law the note could not be considered a valid will or
codicil, because it lacked the signature of a witness.
After Ms. Aldrich died, two nieces challenged the will. They argued that the
brother’s inheritance must be limited to the items named in the first will, and
that the balance of the estate must pass under the laws of intestacy (the rules that
govern inheritance in the absence of a will). The Courts, with some regret, sided
with the nieces, although they acknowledged that this was almost certainly not Ms.
Aldrich’s intention.
The Florida Supreme Court summed up the outcome with these words:
“Obviously, the cost of drafting a will through the use of a pre-printed form is likely
substantially lower than the cost of hiring a knowledgeable lawyer. However, as
illustrated by this case, the ultimate cost of utilizing such a form to draft one’s will
has the potential to far surpass the cost of hiring a lawyer at the outset.” The costs of
litigation, and having the estate tied up for years, as well as the possibility of failing
to have one’s intentions accurately carried out, make the investment in consulting
an estate planning attorney a wise one indeed.
(May 2014) © 2014 M.A. Co. All rights reserved.
(July, 2014) © 2013 M.A. Co. All rights reserved.
The general information in this publication is not intended to be nor should it be treated as tax, legal or accounting advice.
Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek
advice from an independent tax advisor based on their particular circumstances before acting on any information presented.
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