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Richard Covey Receives Inaugural ABA Award for Estate Law

Trusts and Estates senior counsel Richard B. Covey was selected to receive the inaugural Award of the American Bar Association Section of Real Property, Trust and Estate Law. The Award recognizes outstanding achievement, scholarship and volunteer leadership in the fields of real property and/or trust and estate law and will be presented annually at the RPTE Spring Symposia CLE Meeting. Mr. Covey received the award during the Capitol Steps Performance and Lunch on Thursday, April 30.
 
At the awards introduction, trusts and estates department co-chair Michael I. Frankel said:
 
“For over 40 years, Dick’s creativity and imagination have opened our eyes to a cascade of new and exciting estate planning techniques – techniques which have been adopted and used by thousands of estate planning lawyers and which have become a ubiquitous part of our estate planning toolbox.
 
Let me name just a few:
  • In 1982, Dick wrote in Practical Drafting about “hanging” Crummey powers, and a few years later he wrote about “cascading” Crummey powers. Hanging and cascading Crummey powers are used regularly in many types of trusts, particularly in insurance trusts.
  • In April of 1984, Dick wrote in Practical Drafting about a “New Planning Opportunity – Grantor Income Trust for Term of Years.” This technique became known by its acronym – GRIT. It occurred to Dick as a response to the change to 10% valuation tables (which increased the value of income interests and decreased the value of remainder interests) and the increase in the gift and estate tax credit amount. Eventually the GRIT became one of the most popular estate planning techniques throughout the country.
  • In response to the popularity of the GRIT, Congress enacted Code Section 2702, giving us grantor retained annuity trusts and unitrusts – GRATs and GRUTs. Dick immediately realized the enormous estate planning potential of GRATs. Early on, he wrote in Practical Drafting about the use of short term GRATs (to minimize the possibility that a bad year would cancel out good years), single asset GRATs (to avoid having an underperforming asset cancel out a successful asset) and fixed term, zeroed out GRATs.
  • In describing zeroed out and fixed term GRATs, in the early 90s, Dick was prescient. After discussing examples in the Treasury Regulations which valued a grantor’s retained interest based upon “the fixed term or the earlier death of the grantor,” Dick questioned whether the regulation was correct. He wrote: “A challenge to the regulatory position may be expected, particularly since a fixed period of years is a permissible term.”
  • A challenge did indeed arise, and some 7 years later Dick argued and won in the Tax Court the Walton case, which held that the regulation was invalid and that valuing the annuity for a fixed term of years was permissible – we had zeroed out GRATs.”
 
 

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