Using A Liquidating Trust

I am reading a case where the IRS wanted taxes of almost $1.5 million.

I am not surprised to read that it involved a real estate developer.

Part of tax practice is working within someone’s risk tolerance (including mine, by the way). Some clients are so risk adverse that an IRS notice – on any matter for any reason – can be interpreted as a mistake by the tax practitioner. Then you have the gunslingers at the other end of the spectrum. These are the clients you have to rope-in, for their own as well as your sake.

My experience has been that real estate developers seem to cluster around the gunslinger end of the spectrum. We have one who recently explained to me that “paying taxes means that the tax advisor made a mistake.” That, folks, is a lot of pressure … on my partner.

Jason Sage is a developer in Oregon. He represented several companies, including JLS Customs Homes. You may recall that 2008 – 2009 was a rough time for real estate, and JLS took it in the teeth. It had three projects, dragging behind approximately $18 million in debt.

Eventually the real estate market collapsed. Sage had to do something. He and his advisors decided to utilize liquidating trusts. The idea is that one transfers everything one has into a trust, which might be owned by one’s creditors; then again, it might not. The creditors might accept the settling of the trust (a fancy term for putting money and assets into a trust) as discharge of the underlying debt; then again, they might not. Each deal is its own story, and the tax consequences can vary depending on the telling.

Our story involves the transfer of three projects to three liquidating trusts. Since real estate had tanked, these transfers – treated for tax purposes as sales - threw off huge losses. These losses were so big they created overall losses - called “net operating losses” (NOLs). Tax law at the time allowed the net operating losses to travel back in time, meaning that Sage could recoup taxes previously paid.

COMMENT: I see nothing wrong with this. If the government wants to participate in one’s profits, then it can also participate in one’s losses. To do otherwise smacks more of robbery than taxation.

The IRS took a look at this arrangement and immediately called foul.

Trust taxation looks carefully at whether the trust is a separate tax entity from the person establishing the trust, funding the trust or benefiting from the trust.  There is a type called a “grantor trust” which is disregarded as a separate tax entity altogether. The most common type of grantor trust is probably the “living trust,” which has gained popularity as a probate-mitigating tool. The idea behind the grantor trust is that the grantor – say me, for example – is allowed to put money in, take money out, change beneficiaries, even terminate the trust altogether without anyone being able to gainsay my decision.

Tax law considers this to be too much control over the trust, so the trust and I are considered to be the same person for tax purposes. I would have a grantor trust. Its tax return is combined with mine.

How do I avoid this result? Well, I have to start with limiting my otherwise unrestricted control over the trust. Yield enough control and the IRS will respect the trust as separate from me.

The IRS argued that Sage’s liquidating trusts were grantor trusts. They were not separate tax entities, and one cannot sell and create a loss by selling to oneself. Without that loss, there was no NOL carryover and therefore no tax refund.

Sage had to persuade the Court that the trusts were in fact separate from him and his companies.

After all, the trusts were for the benefit of his creditors. One has to concede that creditors are an adverse party, and the existence of an adverse party is an indicator that the trust is a separate tax entity. Extrapolating, the existence of creditors means that someone with interests adverse to Sage’s own had sway over the trusts. It was that sway that made these non-grantor trusts.

Persuasive, except for one thing.

Sage had never involved the creditors when setting up the trusts.

It was hard for them to be adverse when they did not even know the trusts were there.

Our case this time was Sage v Commissioner.

Grantor Retained Annuity Trusts In 2020

I was glancing over selected IRS interest rates and one caught my attention.

The Section 7520 rate for June, 2020 is 0.6%.

There are certain tax tools that work well in times of low interest rates. One is a grantor retained annuity trust, commonly referred to as a “GRAT.” One associates them with the fancy-pants rich, but I am thinking they can have broader appeal when the triggering interest rate is 0.6%.

Let’s talk about it. We will keep the discussion general as otherwise we would be going into a math class. Our purpose today is to understand what makes this tax tool work and why 2020 – with low interest rates and declining stock prices – are a perfect setup for a GRAT.

First, a GRAT is an irrevocable trust. Irrevocable means no take-backs.

A trust generally has three main players:

(a)  The settlor; that is, the moneybags who funds the trust. Let’s say that is me (CTG)

(b)  The trustee. That will be you.

(c)  The beneficiaries., There are two types:

a.    Income. For now, that will be me (CTG) as I receive the annuity.

b.    Remainder. That will be my grandkids (mini-CTGs), because they receive what is left over.

This trust will be taxed to me personally rather than pay taxes on its own. The nerd term for this is “grantor’ trust.

I fund the trust. Say that I put in $50 grand.

The trust will then pay me a certain amount of money for a period of time. Let’s say the amount is $10,000, and the trust will pay me for two years. I am retaining an annuity from the trust.

COMMENT: Truthfully, I think it would take at least 2 years to even qualify as an “annuity.” One payment does not an annuity make.

When the trust runs its course (two years in our example), whatever is left in the trust goes to the mini-CTGs.

If you sweep aside the details, you can see that I am making a gift to my grandkids. The GRAT is just a vehicle to get there.

Why bother?

Say that I just give $50 grand to my grandkids or to a trust on their behalf.

I made a gift.

Granted, I am not worried about gift tax on $50 grand given the current lifetime gift tax exemption of $11.5 million, but if someone moves enough money there can be gift tax.

Let’s say you can move enough money.

Congrats, by the way.

Is there a way for you to gift and also minimize the amount of gift tax?

Yep. One way is the GRAT.

Here is how the magic happens:

(1)  The tax Code backs into the amount of the gift. It does this by placing a value on the annuity. It then subtracts that value from the amount transferred into the trust ($50 grand in our example). The difference is the gift.

(2)  How can I maximize the value of the annuity?

a.    I want $10 grand. If I could get 5% interest, I would need $200,000 grand to generate that $10 grand.

b.    But I cannot get 5% in today’s economy. I might get lucky and get 1.5%. To get $10 grand, I would have to put in $666,667, which is a whole lot more than $200,000.

c.    This example is far from perfect, as I what I am describing is closer to an endowment than to an annuity. The takeaway however is valid: I have to put more money into an annuity as interest rates go down if I want to keep the payment steady.  

(3)  How does this affect the gift?

a.    Had I created the GRAT in June, 2018, I would have used a Section 7520 rate of 3.4%.

b.    It would require less money in 2018 to fund a $10,000 payment, as the money would be earning 3.4% rather than 0.6%.

c.    Flipping (b), it would require more money in 2020 to fund a $10,000 payment at 0.6% rather than 3.4%.

d.    As the value of the annuity goes up, the value of the gift goes down.

Let’s express this as a formula:

Gift = initial funding – value of annuity

e.    As the value of the annuity increased in 2020, the gift correspondingly decreased.

f.     That is how low interest rates power the GRAT as a gifting technique.

How do declining stock prices play into this?

Let’s look at Boeing stock.

Around March 1^st Boeing was trading at approximately $275.

As I write this Boeing trades around $120.

Now, I do not want to get into Boeing’s story, other than this: let’s say you believe that Boeing will bounce back and bounce much sooner than eternity. If you believe that, you could fund the GRAT with Boeing stock. The mathematics will be driven-off that $120 stock price and Section 7520 rate of 0.6%.

What happens if you are right and the stock returns to $275?

Your annuity is unchanged, your gift is unchanged, but the value of Boeing stock just skyrocketed. Your beneficiaries will do very well, and there was ZERO added gift tax to you.

Another way to say this is that you want to fund that GRAT with assets appreciating at more than 0.6%.

Folks, that is a low bar.

There however be dragons in this area.

You could fund the trust and the assets could go down in value. It happens.

Or you could die when the trust is still in existence. That would pull the trust back into your estate.

Or the trust becomes illiquid and you start pulling back assets rather than cash. That is a problem, as the assets appreciating is part of what powers this thing.

Then there are variations on the payment. One could specify a percentage rather than a dollar amount, that way the dollar amount of the annuity would increase as the assets in the trust increase.

There is a technique where one uses the annuity to fund yet another GRAT. It is called a “rolling” GRAT, and it worked when interest rates were much higher.

BTW, there is a twist on a GRAT, and it involves working the math so that the gift comes out to exactly zero. One might want to do this if one has run out of lifetime exemption, for example. The tax nerds refer to it as a “Walton” GRAT, in honor of Audrey Walton, wife of Wal-Mart cofounder Bud Walton. It took a court case to get there, but the technique has thereafter assumed the family name.

Trust Fund Penalty When Your Boss Is The U.S. Government

You may be aware that bad things can happen if an employer fails to remit payroll taxes withheld from employees’ paychecks. There are generally three federal payroll taxes involved when discussing payroll and withholding:

(1)  Federal income taxes withheld

(2)  FICA taxes withheld

(3)  Employer’s share of FICA taxes

The first two are considered “trust fund” taxes. They are paid by the employee, and the employer is merely acting as agent in their eventual remittance to the IRS. The third is the employer’s own money, so it is not considered “trust fund.”

Let’s say that the employer is having a temporary (hopefully) cash crunch. It can be tempting to borrow these monies for more urgent needs, like meeting next week’s payroll (sans the taxes), paying rent and keeping the lights on.  Hopefully the company can catch-up before too long and that any damage is minimal.

I get it.

The IRS does not.

There is an excellent reason: the trust fund money does not belong to the employer. It is the employees’ money.  The IRS considers it theft.

Triggering one the biggest penalties in the Code: the trust fund penalty.

We have in the past referred to it as the “big boy” penalty, and you want nothing to do with it. It brings two nasty traits:

(1)  The rate is 100%. Yep, the penalty is equal to the trust fund taxes themselves.

(2)  The IRS can go after whoever is responsible, jointly or severally.

Let’s expand on the second point. Let’s say that there are three people at the company who can sign checks and decide who gets paid. The IRS will – as a generalization – consider all three responsible persons for purposes of the penalty. The IRS can go after one, two, or all three. Whoever they go after can be held responsible for all of the trust fund taxes – 100% - not just their 1/3 share. The IRS wants its money, and the person who just ponied 100% is going to have to separately sue the other two for their share. The IRS does not care about that part of the story.

How do you defend against this penalty?

It is tough if you have check-signing authority and can prioritize who gets paid. The IRS will want to know why you did not prioritize them, and there are very few acceptable responses to that question.

Let’s take a look at the Myers case.

Steven Myers was the CFO and co-president of two companies. The two were in turn owned by another company which was licensed by the Small Business Administration as a Small Business Investment Company (SBIC).  The downside to this structure is that the SBA can place the SBIC into receivership (think bankruptcy). The SBA did just that.

In 2009 the two companies Myers worked for failed to remit payroll taxes.

Oh oh.

However, it was an SBA representative – remember, the SBA is running the parent company – who told Myers to prioritize vendors other than the IRS.

Meyers did so.

And the IRS slapped him with the big boy penalty.

QUESTION: Do you think Myers has an escape, especially since he was following the orders of the SBA?

At first it seems that there is an argument, since it wasn’t just any boss who was telling him not to pay. It was a government agency.

However, precedence is a mile long where the Court has slapped down the my-boss-told-me-not-to-pay argument. Could there be a different answer when the boss is the government itself?

The Court did not take long in reaching its decision:

So, the narrow question before us is whether …. applies with equal force when a government agency receiver tells a taxpayer not to pay trust fund taxes. We hold that it does. We cannot apply different substantive law simply because the receiver in this case was the SBA."

Myers owed the penalty.

What do you do if you are in this position?

One possibility is to terminate your check-signing authority and relinquish decision-making authority over who gets paid.

And if you cannot?

You have to quit.

I am not being flippant. You really have to quit. Unless you are making crazy money, you are not making enough to take on the big-boy penalty.

The Kiddie Tax Problem

You may have heard that there are issues with the new kiddie tax.

There are.

The kiddie tax has been around for decades.

Standard tax planning includes carving out highly-taxed parental or grandparental income and dropping it down to a child/young adult. The income of choice is investment income: interest, dividends, royalties and the like. The child starts his/her own tax bracket climb, providing tax savings because the parents or grandparents had presumably maxed out their own brackets.

Congress thought this was an imminent threat to the Union.

Which beggars the question of how many trust fund babies are out there anyway. I have met a few over the decades – not enough to create a tax just for them, mind you - but I am only a tax CPA. It is not like I would run into them at work or anything.

The rules used to be relatively straightforward but hard to work with in practice.

(1)  The rules would apply to unearned income. They did not apply if your child starred in a Hollywood movie. It would apply to the stocks and bonds that you purchased for the child with the paycheck from that movie.

(2)  The rules applied to a dependent child under 19.

(3)  The rules applied to dependents age 19 to 23 if they were in college.

(4)  The child’s first $1,050 of taxable unearned income was tax-free.

(5)  The child’s next $1,050 of taxable unearned income was taxed at the child’s tax rate.

(6)  Unearned income above that threshold was taxed at the parent’s tax rate.

It was a pain for practitioners because it required one to have all the returns prepared except for the tax because of the interdependency of the calculation.

For example, let’s say that you combined the parents and child’s income, resulting in $185,000 of combined taxable income. The child had $3,500 of taxable interest. The joint marginal tax rate (let’s assume the parents were married) at $185,000 was 28%. The $3,500 interest income times 28% tax rate meant the child owed $980.

Not as good as the child having his/her own tax rates, but there was some rationale. As a family unit, little had been accomplished by shifting the investment income to the child or children.

Then Congress decided that the kiddie tax would stop using this piggy-back arithmetic and use trust tax rates instead.

Problem: have you seen the trust tax rates? 

Here they are for 2018:

          Taxable Income                         The Tax Is

Not over $2,550                         10%

$2,551 to $9,150         $ 255 plus 24% of excess

$9,151 to $12,500       $1,839 plus 35% of excess

Over $12,500              $3,011.50 plus 37% of excess

Egad.

Ahh, but it is just rich kids, right?

Not quite.

How much of a college scholarship is taxable, as an example?

None of it, you say.

Wrong, padawan. To the extent not used for tuition, fees and books, that scholarship is taxable.

So you have a kid from a limited-means background who gets a full ride to a school. To the extent the ride includes room and board, Congress thinks that they should pay tax. At trust tax rates.

Where is that kid supposed to come up with the money?

What about a child receiving benefits because he/she lost a parent serving in the military? These are the “Gold Star” kids, and the issue arises because the surviving parent cannot receive both Department of Defense and Department of Veteran Affairs benefits. It is common to assign one to the child or children.

Bam! Trust tax rates.

Can Congress fix this?

Sure. They caused the problem.

What sets up the kiddie tax is “unearned” income. Congress can pass a law that says that college room and board is not unearned income or that Gold Star family benefits are not unearned income.

However, Congress would have started a list, and someone has to remember to update the list. Is this a reasonable expectation from the same crew who forgot to link leasehold improvements to the new depreciation rules? Talk to the fast food industry. They will burn your ear off on that topic.

Congress should have just left the kiddie tax alone.

Ducking Taxes With A Dynasty Trust

Dynasty trust are back in the news. Dynasty trusts are the province of the ultrawealthy, and are not likely to impact you or me much.

However, allow one or two favorable turns of fate and you or I might find ourselves interested in such things. Let’s hope for the best.

What sets up the discussion is three main issues:

(1)  Estate taxes

(2)  Generation-skipping taxes

(3)  The rule against perpetuities

Estate taxes are also called death taxes and apply to your net worth (everything you own less everything you owe) at death. If you own too much, you owe estate tax – short and sweet. Granted, it is getting harder and harder too own too much. The threshold for 2017 is $5.49 million per person, or almost $11 million per married couple.

I would say that – if you have accumulated $11 million – you have done well.

The estate tax intends for every generation to pay tax.

Let’s say that you are worth $15 million. The estate tax will apply. Your assets go to your child. Let’s presume that the assets inherited bounce back to $15 million (remember: there were taxes at your death) and the exemption remains at $5.49 million. The estate tax presumes that your child will pay tax again, repeating a virtuous cycle.

Well, an advisor can break that cycle pretty quickly: have some of the assets go to the grandkids. That skips the estate tax on (at least some of) the assets upon your child’s death.

Congress figured this out too and introduced the generation-skipping tax (GST). Its purpose was straightforward: to tax the assets that skipped tax when your child died. Those assets would otherwise have “skipped” a generation of estate tax.

A favored and common way to transfer assets across multiple generations is through use of a trust. There are more varieties of trusts than there are flavors of  Baskin Robbins ice cream. We however are looking at one trust and one only: the shy and elusive dynasty trust, which has rarely been captured on camera.

Tax archeologists believe that the dynasty trust evolved in response to state liberalization of the rule against perpetuities. Trusts themselves are created under state law, and all 50 states used to prohibit a trust from existing more than 21 years after the death of the last beneficiary who was alive when the trust was created.

To rephrase: the law (1) looked at the beneficiaries born when the trust was created; (2) took the youngest beneficiary; (3) waited until his/her death; and (4) said “All right, boys and girls, you have 21 years to finish this”

The point is that the trust had to eventually wrap up its affairs. It could not be “perpetual.”

In that context, the estate tax – GST tax value meal worked relatively well in identifying and taxing transfers of intergeneration wealth. No matter how complex, trusts simply had to give up the ghost eventually.

However, several states have since either modified or abolished their rule against perpetuities (Alaska and Nevada come to mind). A trust created in one of these jurisdictions can last for … who knows how long.

This has tax implications.

Because the trust is not required to terminate, tax planners can more easily get around the estate and GST combo that worked well enough in an earlier, simpler era.

It is relatively easy to avoid the estate tax issue: the planner simply does not give the beneficiary so much authority that the trust would be pulled into the beneficiary’s estate at death. While a minefield, it is a relatively well-trod minefield.

The GST is a bit more complicated.

I now go where many tax nerds would refuse to go: to give a quick overview of how a dynasty trust and the GST interact. We are venturing to the Mordor of tax practice.

Here goes:

(1)  You have a GST exemption equal to your estate tax exemption. Therefore, if the estate exemption is $5.49 million, your GST exemption is the same amount.

(2)  Meaning you can transfer $5.49 million across as many generations as you like without triggering the GST.

(3)  Rule (2) is not interpreted the way you expect when using a trust.

a.     One would think that trust distributions over $5.49 million to a skip beneficiary would trigger the GST tax.

b.    But not necessarily. The planner instead applies the $5.49 million test at a different point in time. Instead of waiting until the trust actually writes checks to a grandkid or great-grandkid decades from now (that is, the distribution date), the planner measures at the moment the settlor puts money into the trust.

c.     Here is an example. Say your great-grandkid is 15 months old, and you put $5.49 million into a dynasty trust. You next burn your $5.49 million GST exemption on the trust.

d.    We calculate a ratio: GST Exemption Used/Total Gift. Let’s give the ratio a name. We will call it “Jackson.” In our example, Jackson is $5.49 million/$5.49 million or “1.0.”  

e.    We next calculate a second ratio: 1.0 – Jackson. We will call this the “inclusion ratio.” Our inclusion ratio is 1.0 – 1.0 or zero (-0-).

f.      Tax nirvana is an inclusion ratio of zero (-0-).

                                                              i.     The magic to an inclusion ration of zero (-0-) is that future distributions from this trust are exempt from any more GST. That happens because you are multiplying [it doesn’t matter the number] by zero.

                                                            ii.     If the inclusion ratio was 45%, then 45% of future distributions from the trust would be subject to GST.

g.     To press the point, if the trust is worth a quantazillion dollars decades from now but has an inclusion ratio of zero (-0-), it is still exempt from GST.

                                                              i.     There are of course ways to ruin this outcome. One way is to put more money into the trust. The result would be to increase the denominator with no increase in the numerator. The resulting inclusion ratio would not be zero. A tax planner would tell you to NOT DO THAT.

To recap, the change in some states concerning the rule against perpetuities allowed planners to devise near-immortal trusts.

And the estate, gift and GST exemptions have been increasing every year and are now at $5.49 million per person. A married couple can of course double that.

Take the near-immortal trusts, stir in the big-bucks exemption, add a few spices (like family limited partnerships or remainder annuities) and you have a very nice tax tool for keeping wealth within the family across generations.

Marty McFly and Future Interests In A Trust

Let’s talk about gift taxes.

Someone: What is an annual gift tax exclusion?

Me: The tax law allows you to gift any person on the planet up to $14,000 a year for any reason without having to report the gift to the IRS. If you are married, your spouse can do the same – meaning you can team-up and gift up to $28,000 to anybody.

Someone: What if you go over $14,000 per person?

Me: It is not as bad as it used to be. The reason starts with the estate tax, meaning that you die with “too many” assets. This used to be more of an issue a few years back, but the exclusion is now north of $5.4 million. There are very few who die with more than $5.4 million, so the estate tax is not likely to impact ordinary people.

Someone: What does the gift tax have to do with this $5 million?

Me: Congress and the IRS saw gifting as the flip side of the coin to the estate tax, so the two are combined when calculating the $5.4 million. Standard tax planning is to gift assets while alive. You may as well (if you can) because you are otherwise going to be taxed at death. Gifting while alive at least saves you tax on any further appreciation of the asset.

Someone: Meaning what?

Me: You will not owe tax until your gifts while alive plus your assets at death exceed $5.4 million.

Someone losing interest: What are we talking about again?

Me: Riddle me this, Batman: you transfer a gaztrillion dollars to your irrevocable trust. It has 100 beneficiaries. Do you get to automatically exclude $1,400,000 ($14,000 times 100 beneficiaries) as your annual gift tax exclusion?

Someone yawning: Why are we talking about this?

Me: Well, because it landed on my desk.

Someone: Do you make friends easily?

Me: Look at what I do for a living. I should post warnings so that others do not follow.

Someone looking around: How about hobbies? Do you need to go home to watch a game or anything?

Me: There is a tax concept that becomes important when gifting to a trust. A transfer has to be a “present interest” to qualify for that $14,000 annual exclusion.

Someone resigned: And a “present interest” is?

Me: Think cash. You can take it, frame it, spend it, make it rain. You can fold it into a big wad, wrap a hundred-dollar bill around it and pull the wad out every occasion you can.

Someone: What is wrong with you?

Me: Maybe it’s just me that would do that.

Me: I tell you what a “present interest” is not: cash in a trust that can only be paid to you when some big, bad, mean trustee decides to pay. You cannot party this weekend with that. You may get cash, but only someday … and in the future.

Someone: Hence the “future?”

Me: Exactly, Marty McFly.

Someone surprised: Hey, there’s no need ….

Me: Have you ever heard of a Crummey power?

Someone scowling: Good name for it. Fits the conversation.

Me: That is the key to getting a gift to a trust to qualify as a present interest.

Someone humoring: What makes it crummy?

Me: Crummey. That’s the name of the guy who took the case to court. Like a disease, the technique got named after him.

Someone looking at watch: I would consider a disease right about now.

Me: The idea is that you give the trust beneficiary the right to withdraw the gift, or at least as much of the gift as qualifies for the annual exclusion. You also put a time limit on it – usually 30 days. That means – at least hypothetically – that the beneficiary can get his/her hands on the $14 grand, making it a present interest.

Someone: I stopped being interested ….

Me: Have you heard of a “in terrorem” provision?

Someone: Sounds terrifying.

Me: Yea, it’s a great name, isn’t it? The idea is that – if you behave like a jerk – the trustee can just cut you out. Hence the “terror.”

Someone: I cannot see a movie coming out of this.

Me: Let’s wait and see what Ben Affleck can do with it.

Me: I was looking at a case called Mikel, where the IRS said that the “in terrorem” provision was so strong that it overpowered the Crummey power. That meant that there was no present interest.

Someone: Can you speed this up?

Me: The transfer to the trust was over $3.2 million ….

Someone: I wish I could meet these people.

Me: The trust also had around 60 beneficiaries.

Someone: 60 kids? Who is this guy – Mick Jagger?

Me: Nah, his name is Mikel.

Someone: I was being sarcastic.

Me: Mikel was Jewish, and he put a provision in the trust that beneficiary challenges to a trustee’s decision would go to a panel of 3 persons of Orthodox Jewish faith, called a beth din.

Me: I suppose if the beth din sides with the trustees, the beneficiary could go to state court, but then the in terorrem provision would kick-in. The beneficiary would lose all rights to the trust.

Someone: So some rich person gets cut-off at the knees. Who cares?

Me: The IRS said that the in terrorem provision was strong enough to make the gift a future interest rather than a present interest. That meant there was no $14,000 annual exclusion per beneficiary. Remember that there were around 60 beneficiaries, so the IRS was after taxes on about $800 grand. Not a bad payday for the tax man.

Someone: Sounds like they can afford it.

Me: No, no. The Court disagreed with the IRS. The taxpayer won.

Someone backing away: What was the court’s hesitation?

Me: The Court felt the IRS was making too many assumptions. If the beneficiaries disagreed with the trustees, they could go to the beth din. The beth din did not trigger the in terrorem. The beneficiaries would have to go to court to trigger the in terrorem. The Court said there was no reason to believe the beth din would not decide appropriately, so it was unwilling to assume that the beneficiaries were automatically bound for state court, thereby triggering the in terrorem provision.

Someone leaving: Later Doc.