Nikolai Breaks the Bank!

Remember An Estate Treasure Named Nikolai? The Fabergé portrait of the personal bodyguard of the last Czarina of Russia proved to be precious indeed.

Estimated to sell for $500,00-$800,000, Nikolai did much, much better. He fetched $5.2 million!

You can read about the provenance that made him such a treasure here.

The Chamber-Cossack named Nikolai.
His eyes are sapphires. His beard is Siberian jasper.

The case of the Walking Dead Man

H/T to Randy Cassingham for calling attention to this probate court case. I'd somehow missed the story in The NY Times. The deadbeat dad has been "dead" so long he's finding it hard to come back to life.

Why U.S. Investors Go Global

Measuring America's Decline, in Three Charts

A Trust Ad From the Roaring Twenties

When this U.S. Trust ad bemoaned the reduced ranks of the very rich, it was looking back to the booming 1920s. The New Yorker has posted a series of ads from the era, including this message from Equitable Trust.

Sixty Years Ago: U.S. Trust Turns 100

Though this 1953 U.S. Trust ad looks antique (the spire depicted is Wall Street's Trinity Church) the copy holds up. "Money is better employed with more than one mind to guide it."

Still wincing from the blow Old Money suffered in the 1930s, the trust company strove to look on the bright side of the post-WWII boom: "While changing times have reduced the ranks of the very rich, they have enlarged the number of those with property enough to profit from trust services."

Perhaps those with "property enough" included the Dutchers of Darien, Connecticut, featured in this Pan Am ad found in the same issue of The New Yorker.

Update: Visited the U.S. Trust web site and read this:  

Understanding your goals is how we help you reach them. You’ll have a team of talented individuals dedicated to developing custom strategies to help meet your specific needs. It’s how we do business and it’s why generations of families have been putting their trust in us for more than 200 years.

More than 200 years? Wow! That second hundred must have been turbocharged.

Pre-IPO Estate Planning

After scanning Twitter's IPO documents, WSJ tax reporter Laura Saunders concludes that Jack Dorsey,Twitter's chairman, Evan Williams, largest shareholder, and CEO Richard Costolo did some serious gifting in trust while Twitter's share value was low. The eventual estate-tax savings, the WSJ guesstimates, could exceed $100 million.

Dorsey and Williams set up GRATS.  "In essence," Saunders explains, "GRATs are used to transfer asset appreciation from one taxpayer to another, virtually tax-free. The owner of the assets—in this case, pre-IPO Twitter shares—contributes them to the GRAT before the asset surges in value."

While the trust exists, the owner receives annual payments adding up to the value of the original contribution plus a return based on an interest rate set by the Internal Revenue Service. In the past few years, the rate has been low, around 2%. 

At the end of the trust's term—which the owner must outlive for the GRAT to work—the owner has an amount equal to the value of what he put into the trust, but most of the asset's growth is out of his possession.

Williams and Costolo apparently used family trusts to take advantage of 2012's $5 million gift-tax exemption. The exemption was widely, but wrongly, expected to decline in 2013.

Moral: the best time to do tax planning for great wealth is before it becomes still greater.

How to Invest For the Long Term

Investing for the long term means judging the distant future, judging how history will be made, how society will change, how the world economy will change.  Reaching decisions on such issues cannot proceed from analytical models alone; there has to be a major input of judgment that is essentially personal and intellectual in origin.

– Robert Shiller

Yale's Robert Shiller has received a share of the Nobel prize in economics, along with University of Chicago professors Eugene "Efficient Markets" Fama and Lars Peter Hansen.

Online: Graduate Course in Retirement Investing

Most Americans over 50 can't even remember simple arithmetic, so Stanford's graduate-level video lectures, described here, may be over the heads of many. Still, seems like a good idea.

Coming: The Worst of Times. The Best of Times. Take Your Pick

The other day I got downright depressed after reading a NY Times op-ed by the chief economist at HSBC':The golden age is over.

Today my IRA trustee cheered me up with a piece by the chief investment officer at Peoples United: get ready for the American Renaissance.

You can see why investors wonder if anybody really knows what's coming next.

An Estate Treasure Named Nikolai

IRS audits and feuding heirs can make estate settlement a thankless job. Once in a while, happily, some forgotten treasure turns up in a barn or attic to enliven the process – a Duesenberg perhaps, or a Picasso.

In the estate of an unidentified New Yorker, the attic treasure is a rare portrait statuette by Fabergé. 

Meet Nikolai Nikolaevich Pustynnikov, personal bodyguard to Alexandra, last Empress of Russia.

The Nikolai statuette –his eyes are cabochon sapphires – was part of the Czarist loot the Soviets exported in the 1930s to obtain hard currency. Brought to the United States by Armand Hammer, it was sold to the New Yorker's mother-in-law in 1934. Apparently Nikolai was exiled to the attic for so long that Fabergé historians assumed he was lost forever.

A similar bejeweled statuette, portraying the bodyguard of Alexandra's mother-in-law, the Dowager Empress, stands guard in a St. Petersburg museum. As for Nikolai, when he marches onto the auction block October 21, he is expected to earn the estate at least $500,000.

Update: The auction is scheduled for October 27-28.

A Nest Egg In Autumn

Much has changed in half a century – defective grantor trusts, for instance, have gone from income-tax boo-boo to popular gifting strategy – but the Fall foliage around our town looks much the same as seen in this 1963 Chase Manhattan nest-egg ad.

Related post: Getting a Man's Nest Egg With a Gun

The Federal Income Tax Turns 100

Happy Centennial, Federal Income Tax

Has the government shutdown forced the IRS to cancel the birthday party?

Update: Reminisce along with Eric Cherri in this birthday letter.