Trusts and Estates

Ca. Trs. & Estates Quarterly Volume 9, Issue 1, Spring 2003


By Diana Hastings Temple, Esq.* and Nicholas Unkovic, Esq.**


While the grantor retained annuity trust ("GRAT") may have found its place in the sun with the volatile market for technology stocks, its actual administration in the same environment presents quite a few issues the planner needs to address while drafting the instrument. This article presents some of these issues under the federal securities laws.1 While this article does not discuss issues under any state’s "Blue Sky" laws, it is important for the practitioner to review those laws.2

Assume your client is the founder and president of a company that had its initial public offering ("IPO") more than two years ago. The stock is traded on a national securities exchange. All the "lock-up agreements" required by the underwriters of the IPO, which otherwise may have prohibited transfers to a greater extent than securities laws preventing transfer, have now expired but all of the client’s share certificates include a restrictive legend because the client is an "affiliate." The client owns less than ten percent, but more than five percent, of the company. He has not acquired or disposed of any shares which, when aggregated with other shares acquired or disposed of over the past twelve months, would exceed one percent of the company’s outstanding stock. The significance of these particular facts will become apparent in the discussion below.

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