Question
From:(redacted)
Sent:Wednesday, April 28, 2004 4:26 PM
To:Verne, B. Michael
Subject: Following up our telephone call
Mike, Thank youfor clarifying that the retained annuity payment provided by a GRAT does notconstitute a "reversionary interest" of the settlor. However, withrespect to the power of the settlor to remove the trustee, because 1 feel thisis such a close call and the language of the GRAT that you and I discussedearlier this morning is not as clear as I would like, I thought I would setforth the provision itself. Although the provision only uses the word"replace", we interpret this language to mean that the settlor hasthe right to "remove and replace" the trustee, and thus he would bedeemed to "control" the trust. I just wanted to see if you agreedwith our conclusion based on the actual language of the trust document. Thelanguage reads as follows:
"[thesettlor] reserves the right to replace the Trustee and to designate one or moresuccessor trustees by instrument in writing; provided however, that the Settlormay not be named or qualified to serve as a successor trustee."
There are noother provisions specifying under what circumstances or by whom the Trustee maybe removed. The reason this is an issue is because the same individual is the settlorof two trusts (both with identical trust documents but for two differentbeneficiaries). Neither trust owns 50% or more of the outstanding votingsecurities of the entity that is a party to the transaction in question, but ifthe settlor were deemed to control both trusts and thus the holdings wereaggregated, the settlor would become my ultimate parent entity. It will notmake a difference in whether or not we file - we clearly meet the size of theperson test with just the entity, the stock of which is held by these trusts,it simply affects who my ultimate parent entity is.
Please let meknow what you think now that you have seen the specific trust language. Manythanks.