Case Studies on Jeopardy Investments
Lucky Lucy Lindstrom's Unitrust :
Lucy Lindstrom finished college and headed west. She started as a financial analyst with a large company in Seattle. After just four years, she became a Registered Investment Advisor and began advising clients. Lucy also managed her own investments. With her keen insight into financial markets, Lucy soon began to move from traditional stocks and bonds into futures and commodities markets. Lucy realized that "shorting" financial stocks was going to be a bonanza. She was so successful in the down market that she now only manages her own large personal portfolio.
Somewhat late in life, Lucy discovered the wonderful world of philanthropy. She volunteered at her favorite charity and has learned that giving a helping hand to someone in need is even more gratifying than making another million in the futures market. After reading in a charity's weekly enewsletter about a charitable remainder trust, Lucy called Clara Johnson, a gift planner at her favorite charity.
Lucy suggested that she would transfer $5,000,000 of securities to a 5% net plus makeup unitrust (NIMCRUT). She would serve as trustee, make the investments and the charity would be the remainder recipient. Since Lucy normally earns 18% per year on her futures and commodities investments, she feels that it would be easy to make the unitrust grow to $10,000,000 or more.
Would this plan work? May Lucy serve as trustee? Is it permissible to invest unitrust assets in the futures market?
Lucky Lucy Lindstrom's Long Shot Unitrust:
Lucy Lindstrom finished college and headed west. She started as a financial analyst with a large company in Seattle. After just four years, she became a Registered Investment Advisor and began advising clients. Lucy also managed her own investments. With her keen insight into financial markets, Lucy began to move from traditional stocks and bonds into futures and commodities markets. Lucy was so successful in these markets that she now only manages her own large personal portfolio.
Somewhat late in life, Lucy discovered the wonderful world of philanthropy. She volunteered at her favorite charity and has learned that giving a helping hand to someone in need is even more gratifying than making another million in the futures market. After reading in a charity's weekly enewsletter about a charitable remainder trust, Lucy called Clara Johnson, the gift planner for her favorite charity.
Lucy recently invested $1,000,000 in stock in a Canadian oil "wildcatter" with the name Northern Long Shot, Inc. This company has been drilling new exploratory wells in the far north. Recently, its stock rose from the $1 per share that Lucy paid to over $3 per share. Lucy thinks that the stock could move much higher next year, but she would like a charitable deduction this year. She asked Clara if she could use the stock to fund a unitrust, serve as trustee and hold the stock for another two years.
Would this plan work? May Lucy serve as trustee? Is it permissible to hold the highly speculative stock in the unitrust?
Lucky Lucy Lindstrom's Flood Recovery Plan:
Lucky Lucy Lindstrom finished college and headed west. She started as a financial analyst with a large company in Seattle. After just four years, she became a Registered Investment Advisor (RIA) and began advising clients. Lucy also managed her own investments. With her keen insight into financial markets, Lucy soon began to move from traditional stocks and bonds into futures and commodities markets. Lucy was so successful in these markets that she now only manages her own large personal portfolio. Somewhat late in life, Lucy discovered the wonderful world of philanthropy. She volunteered at her favorite charity and has learned that giving someone in need a helping hand is even more gratifying than making another million in the futures market. After reading in her favorite charity's weekly enewsletter about the need for housing in a low-income area that had been destroyed by a flood, Lucy called Clara Johnson, the charity's gift planner.
Lucy had invested $1,000,000 in stock in a renewable energy company with the name Northern Long Shot, Inc. This company designs and manufactures energy solutions for companies across the far north. Recently, the stock rose from the $1 per share that she paid to over $5 per share. Lucy thinks that this stock should be sold as soon as possible, but she would like to receive a deduction this year. In addition, she thought that the $5,000,000 could be placed in a private foundation to make loans to low-income individuals who otherwise could not afford to rebuild their homes. Since she wanted to have direct influence over the program, Lucy called her attorney Susan White to discuss a potential major gift to a private foundation for low-income housing loans.
Would this plan work? Can the private foundation receive the gift and sell the Northern Long Shot, Inc. stock? May the funds be used to offer housing loans to low-income individuals? Is there a better plan?
