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This file contains:
Richard Ritzel to Rose Mary Woods re: Nixon Estate Plan, accompanying complete package of pertinent documents. 4 pgs. [Letter], 12/6/1973
Richard Ritzel to Rose Mary Woods re: providing copies of memos related to President's Estate Plan. Note indicating support for the President. 1 pg. [Letter], 10/25/1973
Revision of Estate Plan to include transfer of San Clemente Property to Federal Government. 10 pgs. [Financial Records], 10/23/1973
Revision of Estate Plan to include transfer of San Clemente Property to Federal Government. 8 pgs. [Financial Records], 10/23/1973
Richard Retzel to Ehrlichman re: providing copies of documents related to President's Estate Plan. 2 pgs. [Letter], 8/4/1972
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WHSF: Returned, 9-1
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WHSF: Returned, 9-1
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This file contains:
Richard Ritzel to Rose Mary Woods re: Nixon Estate Plan, accompanying complete package of pertinent documents. 4 pgs. [Letter], 12/6/1973
Richard Ritzel to Rose Mary Woods re: providing copies of memos related to President's Estate Plan. Note indicating support for the President. 1 pg. [Letter], 10/25/1973
Revision of Estate Plan to include transfer of San Clemente Property to Federal Government. 10 pgs. [Financial Records], 10/23/1973
Revision of Estate Plan to include transfer of San Clemente Property to Federal Government. 8 pgs. [Financial Records], 10/23/1973
Richard Retzel to Ehrlichman re: providing copies of documents related to President's Estate Plan. 2 pgs. [Letter], 8/4/1972
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Richard M. Nixon's Returned Materials Collection
Returned White House Special Files
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Richard Nixon Presidential Library
White House Special Files Collection
Folder List
Box Number
Folder Number
Document Date
Document Type
Document Description
9
1
12/06/1973
Letter
Richard Ritzel to Rose Mary Woods re:
Nixon Estate Plan, accompanying complete
package of pertinent documents. 4 pgs.
9
1
10/25/1973
Letter
Richard Ritzel to Rose Mary Woods re:
providing copies of memos related to
President's Estate Plan. Note indicating
support for the President. 1 pg.
9
1
10/23/1973
Financial Records
Revision of Estate Plan to include transfer of
San Clemente Property to Federal
Government. 10 pgs.
9
1
10/23/1973
Financial Records
Revision of Estate Plan to include transfer of
San Clemente Property to Federal
Government. 8 pgs.
9
1
08/04/1972
Letter
Richard Retzel to Ehrlichman re: providing
copies of documents related to President's
Estate Plan. 2 pgs.
Monday, June 22, 2009
Page 1 of 1
MUDGE ROSE GUTHRIE & ALEXANDER
20 BROAD STREET
JOHN H. ALEXANDER
JOHN T. TRIMBLE
GEORGE ANDEREGG, JR.
BLISS ANSNES
NEW YORK, N.Y. 10005
COUNSEL
PETER W. ASHER
ARTHUR BECKER
MILTON BLACK
WALTER E. BREEN
212-422-6767
1701 PENNSYLVANIA AVE., N.W.
H. RIDGELY BULLOCK
WILLIAM H. CANNON
WASHINGTON, D.C.
NICHOLAS J. CAPOZZOLI, JR.
202-298-5970
J. D.CLAYTON
THOMAS S. CURRIER
JOSEPH C. DALEY
GOLDTHWAITE H. DORR
THOMAS W. EVANS
12, RUE DE LA PAIX
RICHARD S. FARROW
ROBERT E. FERDON
December 6, 1973
75002,PARIS, FRANCE
JAMES G. FRANGOS
742-05-99
GERRIT GILLIS
GERALD B. GREENWALD
(D.C. BAR ONLY)
RANDOLPH H. GUTHRIE
MATTHEW G. HEROLD, JR.
CABLE ADDRESS
JOHN J. KIRBY, JR.
WILLIAM B. LANDIS
BALTUCHINS-NEW YORK
WILLIAM B. LAWLESS
FRANKLIN B. LINCOLN, JR.
WILLIAM A. MADISON
TELEX 127889
ARTHUR J. MAHON
FRANCIS X. MALONEY
RICHARD H. NICHOLLS
RICHARD S. RITZEL
MILTON C. ROSE
NORMAN M. SEGAL
HARRY G. SILLECK, JR.
HENRY ROOT STERN, JR.
JAMES P. TANNIAN
ARNOLD H. TRACY
DONALD J. ZOELLER
PERSONAL AND CONFIDENTIAL
Miss Rose Mary Woods
Executive Assistant and
Personal Secretary to
the President
The White House
Washington, D. C.
Dear Rose Mary:
In connection with the President's Estate
Plan and the Trust Agreements and Wills which were
executed in August of 1972, I gather you have been
unable to unearth the copies of many of the documents
which were sent down to Washington and that there is
a rather complete lack of knowledge as to the entire
affair on the part of those who are presently working
on the problem. While you have asked only for the
copy of the memorandum dated August 4, 1972, which
summarizes and outlines, in fairly full detail, the
Estate Plan upon which the Trust Agreements and Wills
were executed on August 8th, I thought it would be
helpful if I sent you, in one package, all of the
pertinent documents and, in a couple of instances,
copies of certain correspondence which will pull the
entire matter into focus. In that way, it seemed to
me that those who are presently concerned with the
matter could have everything in front of them which
seems, at least to me, to be of importance. Accordingly,
I am enclosing herewith the following:
Miss Rose Mary Woods
-2-
December 6, 1973
(1) Copy of letter dated August 4, 1972 to
John Ehrlichman listing a series of documents which were
sent to him with that letter. A copy of the Final Estate
Plan, which is the memorandum referred to in (1) of the
letter to Ehrlichman, is also enclosed. On August 13th,
I got a call from Ehrlichman in which he indicated that
the President and Mrs. Nixon had been over the matter
at Camp David the previous day, wanted to execute the
documents on August 14th, and requested that certain
changes be made in the documents referred to in (2), (3),
(4), (5) and (6) of letter of August 4th. This was
on a Sunday, and the changes were made on that day and
John Alexander and I went to Washington on Monday with
the originals of all of the documents. Minor changes were
made in Washington on Monday, and the documents were
executed that afternoon.
(2) Copy of the Family and Literary Properties
Trust, together with the Instrument Appointing Successor
Trustees referred to in (2) of the August 4th letter,
as finally executed.
(3) Copy of Agreement of Trust, together with
the Instrument Appointing Successor Trustee, known as
the Irrevocable Literary Trust and referred to in (3)
of the letter of August 4th.
(4) Copy of the Agreement of Trust, together
with the Instrument Appointing Successor Trustee, known
as the Patricia R. Nixon Trust and referred to in (4) of
the letter of August 4th.
(5) Copy of the President's Will, mentioned
in (5) of the August 4th letter.
(6) Copy of Mrs. Nixon's Will, referred to in
(6) of the August 4th letter.
(7) Copy of the memorandum describing the
administrative steps relating to the execution of the
above documents. This document pretty much lays out
the procedure which we recommended to be followed once
the Trust Agreements and Wills were executed. I have
no idea as to whether the steps recommended to be taken
subsequent to the execution of the Trust Agreements
and Wills were ever carried out. I did, however several
Miss Rose Mary Woods
-3-
December 6, 1973
times after the execution of the documents, call Dean
to inquire whether he was proceeding promptly, since the
job of arranging for the transfer of assets, etc., had
been assigned to him. I received assurances that he
was taking care of the matter but never received any
details.
(8) Copy of my letter to John Dean dated
September 29, 1972, enclosing four sets of copies of
the President's and Mrs. Nixon's Wills and the three
Trust Agreements referred to in (2), (3) and (4) above,
and also indicating that the originals of all of these
documents are in our Firm Vault. All of the steps
mentioned in that letter were carried out except that we
never did deliver one set of the copies to the attorney
who acted as our California counsel in connection with
the preparation of the final documents.
(9) Copy of the application for a ruling
that transfers to the Irrevocable Literary Trust are
deductible for income, estate and gift tax purposes.
(10) Copy of Power of Attorney given by
H. R. Haldeman, as Trustee under the Irrevocable Literary
Trust, to John Alexander and me in connection with the
application for such ruling.
(11) Copy of letter dated September 27, 1972,
from the Acting Chief, Rulings Section, Exempt Organiza-
tions Branch of the I.R.S., requesting additional informa-
tion with relation to the application for a ruling.
(12) Copy of John Alexander's letter to John
Dean dated October 11, 1972, suggesting a reply letter
by Haldeman to the Acting Chief. We received from Dean
the form of letter and sent it on to the Acting Chief.
(13) Copy of the ruling issued by the I.R.S.
to the effect that transfers to the Irrevocable Literary
Trust are deductible for income, estate and gift tax
purposes.
(14) Copy of John Alexander's letter dated
May 8, 1973, together with copy of the memorandum referred
to. I might say that we have never registered the Irrevocable
Literary Trust with the California Attorney General referred
Miss Rose Mary Woods
-4-
December 6, 1973
to in (b) of the memorandum sent to you in the letter
of May 8, 1973.
(15) Copy of letter dated May 14, 1973 addressed
to the Internal Revenue Service enclosing the Form 990 PF
for the calendar year 1972 for the Irrevocable Literary
Trust, together with a copy of the Form 990 PF.
(16) While I understand you have the two
copies of the memorandum dated October 23, 1973, with
relation to the transfer of the San Clemente property
to the Government, in order to make the enclosed package
complete, I am enclosing another copy of that memorandum.
The above enclosures will give to whoever is
working on the matter a set of the pertinent letters,
documents and other instruments which are in our files.
I do not believe that there is anything else in our
files which would throw any further light on what has
occurred to date.
Sincerely,
RSR: BM
Enclosures
HAND DELIVERY
P. S. The enclosed volume has a tab number on each
of the above referred to papers which tab
numbers correspond to the numbers in this
letter.
R. S. R.
Revision of Estate Plan To Include
Transfer of San Clemente Property
To Federal Government
Dated: October 23, 1973
MUDGE ROSE GUTHRIE & ALEXANDER
20 BROAD STREET, NEW YORK, N.Y.
SUMMARY
Revision of Estate Plan To Include
Transfer of San Clemente Property
To Federal Government
(1) Need for preservation of basic structure of plan.
The present estate plan is structured to take full advantage of
the interplay of the applicable rules dealing with California
community property and the estate tax marital and charitable
deductions. Because of this, the plan should result in a tax-
free transfer of all family assets and Presidential memorabilia,
papers, etc., upon the death of the first as between the President
and Mrs. Nixon to die. If the plan is to be modified and the
same tax result achieved, the modification should leave the basic
structure of the present plan intact. Also, because questions
involving California community property were involved, the
present plan was reviewed and approved by California counsel.
Approval of California counsel should likewise be obtained before
any proposed modification of the plan is implemented.
(2) The San Clemente property under the existing plan.
Upon the President's death, the San Clemente property will be
transferred to The Patricia R. Nixon Trust. If Mrs. Nixon sur-
vives the President, the property will be made available to her
for her exclusive use. All expenses relating to the property
will be paid by the trust. After the President's death, Mrs.
Nixon has the absolute power to direct a retention or sale of
the property and, upon a sale, the purchase of a replacement
residence. Mrs. Nixon also has the power to dispose of the prop-
erty by Will. If she does not exercise the latter power, or if
she does not survive the President, the property or the proceeds
of sale will be held in separate continuing trusts for the bene-
fit of Patricia and Julie. A minor amendment to the plan could
be made to provide that if Mrs. Nixon does not exercise her power
of appointment the San Clemente property would pass to the federal
government. If this were done, however, Mrs. Nixon could still
exercise her power and change the intended result.
(3) Alternate dispositions to include transfer to
federal government. Two alternate dispositions of the San
Clemente property to include a transfer to the federal government
appear possible:
(a) Transfer with retained life estate. Upon the
2
President's death, the San Clemente property would be trans-
ferred to the federal government, subject to Mrs. Nixon's
right to the exclusive use of the property during her life-
time. Mrs. Nixon or a family trust would remain responsible
for payment of all expenses related to the property. A
partial reduction in real estate taxes should result from
such a transfer, and the transfer should generate a personal
income tax deduction for Mrs. Nixon. Mrs. Nixon would,
under this arrangement, lose a great deal of flexibility in
her choice of a residence, in that if she abandoned her life
estate she would have to look to other family assets to
purchase a replacement residence. There are, however, his-
torical precedents for such a transfer - the Eisenhower farm,
the LBJ Ranch, and the Roosevelt residence in Hyde Park were
all transferred to the government subject to arrangements
to allow Mrs. Eisenhower, Mrs. Johnson and Mrs. Roosevelt
to live on the respective residences for the duration of
their lives.
(b) Option to purchase. The federal government would
be granted the right to purchase the San Clemente property upon
the death of the last survivor as between the President and
Mrs. Nixon, or prior thereto if it was offered for sale to
anyone. The purchase price would be set at an amount equal
to the family cash investment. The option would not, how-
ever, become firm until the President's death. The family
cash investment would thus be subject to eventual recovery
for use by family members. Also, if the government declined
to exercise the option, the full fair market value of the
property would become available to family members. In any
event, Mrs. Nixon would, under this arrangement, be provided
with some flexibility as to her choice of a residence, in
that if she decided that she no longer wished to live at San
Clemente she would be provided with the proceeds of sale re-
ceived from the federal government or, if the option was not
exercised, from others, to purchase a replacement residence.
John H. Alexander
Richard S. Ritzel
Revision of Estate Plan To Include
Transfer of San Clemente Property
To Federal Government
(1) Need for Preservation of Basic Structure of Plan
The estate plan adopted August 14, 1972 by the execu-
tion of Wills and three separate Trust Agreements creating
The Family and Literary Properties Trust, The Irrevocable
Literary Trust and The Patricia R. Nixon Trust is structured
to take full advantage of the interplay of the rules with
respect to California community property and the estate tax
marital and charitable deductions. Because of this, the
transfer of family assets and Presidential memorabilia,
papers, etc., upon the death of the first as between the
President and Mrs. Nixon to die should not be subject to
federal or California estate or inheritance taxes.
The essential elements of the plan are that (1) as to
community property, since a theoretical possibility exists
that the surviving spouse could reject the testamentary
arrangements made for his or her benefit and could claim
his or her community property outright, it is the surviving
spouse who is transferring his or her share of the community
property in trust, (2) as to property other than community
property passing to or for the benefit of the surviving
spouse, the same is received either outright or in trust
subject to a general testamentary power of appointment and
thus qualifies for the estate tax marital deduction, and
(3) as to any property not passing to or for the benefit of
the surviving spouse, the same passes for charitable pur-
poses and thus qualifies for the estate tax charitable
deduction. Therefore, under the plan, the family assets
and Presidential memorabilia, papers, etc., passing to or
for the benefit of the surviving spouse represent the sur-
viving spouse's share of the community property or qualify
for the estate tax marital deduction and the Presidential
memorabilia, papers, etc., passing for charitable purposes
represent the deceased spouse's community property and the
balance of his or her other property after allowance of the
estate tax marital deduction.
If the same tax result is to be sought upon any modifi-
cation of the present plan, the modification should be
2
structured so that the above described interplay of the
rules with respect to California community property and
the estate tax marital and charitable deductions is pre-
served.
Also, it should be noted that the present plan was
reviewed and approved by California counsel because of
the fact that questions with respect to California com-
munity property law were involved in its formulation.
Any proposed modification of the plan should likewise be
reviewed and approved by California counsel before that
modification is implemented.
(2) The San Clemente Property under the Existing Plan
Upon the President's death, the San Clemente property,
together with all other family assets except Presidential
memorabilia, papers, etc., will be transferred to The
Patricia R. Nixon Trust. The property so transferred,
representing a portion of Mrs. Nixon's share of the community
property and, possibly, assets qualifying for the estate tax
marital deduction, will be made available to Mrs. Nixon for
her exclusive use. All real estate taxes, insurance costs and
other expenses incurred in maintaining or improving the
property will be paid out of the income generated by other
trust assets, and, if necessary, out of the principal of
the trust.
If the income and principal of the trust does not pro-
vide adequately for Mrs. Nixon and at the same time cover
the San Clemente expenses, Mrs. Nixon can direct that a
sale of certain Presidential papers or memorabilia be
made and that the proceeds be used for such purposes. Cer-
tain nonsensitive Presidential memorabilia, papers, etc.,
also representing a portion of Mrs. Nixon's share of the
community property and, possibly, assets qualifying for the
estate tax marital deduction, will be retained in The Family
and Literary Properties Trust upon the President's death
for such purposes. Such sales will, however, be limited
to $100,000 per year and to an aggregate of $2,000,000.
Mrs. Nixon will have the exclusive power to direct the
retention or sale of the San Clemente property and, if a
sale is made, the purchase of a replacement residence.
Mrs. Nixon can also, in her Will, dispose of the San
Clemente property in any manner she may desire, including
a transfer to the federal government for public purposes.
3
If Mrs. Nixon does not exercise her power to dispose of
the San Clemente property by Will, or if she is not
living at the time of the President's death, the property
will either be held by the Trustee of The Patricia R.
Nixon Trust or be sold, with the property or the proceeds
of sale to be held in separate trusts for the benefit of
Patricia and Julie and their children. Federal and Cali-
fornia estate and inheritance taxes will be imposed on the
transfer of the property upon the death of the last survivor
as between the President and Mrs. Nixon.
It should be noted that by a minor amendment to the trust
agreement under which The Patricia R. Nixon Trust was created,
it could be directed that the San Clemente property would
pass to the federal government upon Mrs. Nixon's death if
she failed to exercise the general power of appointment
granted to her under that agreement. If this were done,
however, Mrs. Nixon could always, by exercising her power of
appointment, change the intended result. If Mrs. Nixon did
not exercise her power and the property did pass to the
federal government, no federal or California estate or inherit-
ance taxes would be imposed on the transfer at her death.
(3) Alternate Dispositions to Include Transfer to Federal
Government
(a) Transfer with Retained Life Estate.
Basic Plan. Upon the President's death, the
San Clemente property would be transferred to the
federal government, subject to Mrs. Nixon's right, if
she is then living, to the exclusive use of the prop-
erty during her lifetime. (It is assumed that if Mrs.
Nixon is the first to die, the President would want
to continue to exercise exclusive control over the
San Clemente property.)
Mrs. Nixon's Obligations Subsequent to the
Transfer. Absent any conditions in the instrument of
transfer to the contrary, Mrs. Nixon would remain
responsible for payment of real property taxes,
ordinary maintenance expenses, interest on any out-
standing mortgage, and a "just" proportion of any extra-
ordinary assessments. In addition, if there was a
mortgage on the property which had to be satisfied
by the federal government during the term of her life
estate, Mrs. Nixon would probably be required to re-
imburse the government, either by continuing to pay
4
interest on the amount of the mortgage satisfied or
by the payment of a lump sum based on the current
value to her of having been relieved of the obligation
to pay interest on the outstanding mortgage.
The instrument of transfer can provide that
the federal government, as remainderman, must assume
some or all of the obligations normally imposed on the
life beneficiary. Obviously, however, if too many
obligations are shifted to the federal government,
the cost of carrying the property would exceed the
value of the remainder interest in the property and
the gift might be rejected.
Impact on Real Estate Taxes. The California
Constitution and Revenue and Taxation Code specifically
exempt federal property used for public purposes from
taxation. The Revenue and Taxation Code also recog-
nizes that less than an entire interest in real prop-
erty, e.g., a life estate, can be subjected to real
property taxes. Accordingly, when real property is
transferred to the federal government subject to an
intervening life estate, the value of the remainder
interest should be exempt from local real property
taxes. (At Mrs. Nixon's current age, her life estate
in the property, determined actuarily, would be worth
approximately 61% of its current value. A 39% reduc-
tion in real property taxes should, therefore, result
if the remainder interest was vested in the federal
government.) This point will ultimately have to be
confirmed by California counsel.
Impact on Family. A transfer with a retained
life estate would have an adverse financial and per-
sonal impact on the family. Although Mrs. Nixon would
be entitled to use the property during her lifetime,
she would still be required to pay real estate taxes
(although possibly at a slightly reduced rate) and to
maintain the property. More importantly, she would
forfeit a considerable amount of flexibility with re-
spect to her choice of a residence. If she deter-
mined that she did not wish to continue to live at
San Clemente, she could, of course, abandon her life
estate, but she would receive no compensation for
doing so to enable her to purchase a replacement resi-
dence. Having abandoned her life estate, the property
5
would become the federal government's exclusively,
and Mrs. Nixon would have to look to other family
assets to provide her with a residence. Finally, upon
Mrs. Nixon's death, full ownership of the property
would pass to the federal government, and thus, no
portion of the family investment in the property, nor
any appreciation resulting subsequent to that invest-
ment, would ever be recovered for use by family
members.
Tax Considerations. The transfer should be
considered for tax purposes to have been made by Mrs.
Nixon. Thus, Mrs. Nixon should be entitled to a
current income tax deduction in the year of the transfer
and, to the extent not used in that year, for five years
thereafter. Also, since the transfer will theoretically
be made by Mrs. Nixon, it will have no bearing on the
President's estate tax return. (If a transfer was made
during the joint lives of the President and Mrs. Nixon,
with both of them retaining joint and survivor life
estates, a federal estate tax would be payable upon the
death of the first to die. For this reason, the possi-
bility of effecting a joint transfer has been rejected.)
The amount of the income tax deduction avail-
able to Mrs. Nixon would be the actuarial value of the
remainder interest passing to the federal government.
Thus, it would depend upon (1) the fair market value of
the property transferred, (2) Mrs. Nixon's age at the
time of the transfer, (3) the amount of any outstanding
mortgage affecting the property, and (4) the obligations
with respect to the property assumed by Mrs. Nixon and
the federal government. For example, if the property
had a fair market value of $500,000 exclusive of any
mortgage, if the normal rights and obligations were
assumed, and if Mrs. Nixon was 65 years of age at the
time of the transfer, the current income tax charitable
deduction available to her would be approximately
$221,000.
Historical Precedents. General and Mrs.
Eisenhower, after he left office, transferred their
Gettysburg farm to the Interior Department as a na-
tional park site. They retained the right to live on
the property transferred during their joint lives and
the survivor for six months after the death of the
6
first to die. After the transfer, no change in the
day-to-day operation of the farm occurred, and General
Eisenhower continued to pay all expenses of main-
tenance. The property was, however, removed from the
local tax rolls and no further real property taxes
were paid. (In light of the California law on this
subject, it would appear doubtful that a similar
result could be obtained for the San Clemente property.)
Subsequent to General Eisenhower's death, Mrs.
Eisenhower decided that she wanted to continue to live
on the property, and negotiations with the Interior
Department resulted in the granting of a "Use Permit"
permitting her to continue to occupy the residence
and some surrounding acreage. Under the terms of
the Use Permit, Mrs. Eisenhower pays all ordinary
expenses relating to maintaining the residence.
The balance of the property is maintained by the
Interior Department.
Mr. Johnson, after he left office, similarly
arranged for a transfer of the LBJ Ranch for eventual
use as a national park site, but with Mrs. Johnson
to have the right to live on the ranch for the term
of her life. The transfer of Mr. Roosevelt's Hyde
Park residence also was made during Mr. Roosevelt's
lifetime, with arrangements being made to permit
Mrs. Roosevelt to continue to occupy a cottage on
the premises for the duration of her life.
(b) Option to Purchase.
Basic Plan. The federal government would be
granted the right to purchase the San Clemente prop-
erty upon Mrs. Nixon's death or prior thereto, if it
is offered for sale to anyone. The option would not,
however, become firm until the President's death since
it is assumed that if Mrs. Nixon is the first to die,
the President would wish to retain exclusive control
over the property during his lifetime. The purchase
price to the federal government would equal the family
cash investment, including the cost of improvements
paid for by the family.
Impact on Family. During Mrs. Nixon's life,
assuming she is the survivor, real property taxes
would have to be paid and the property would have to
be maintained with family assets. Mrs. Nixon would,
7
however, be provided with much more flexibility with
respect to her choice of a personal residence after
the President's death than with a transfer with a
retained life estate. If she decided that she no
longer wished to live at San Clemente, she could
offer the property for sale, thus triggering the
option. Unlike the situation with the life estate,
however, the proceeds of sale would be available to
purchase a replacement residence. In any event, if
the government exercised its option upon Mrs. Nixon's
death, the cash investment in the property would be
recovered for use by family members. If the govern-
ment failed to exercise its option, the entire prop-
erty or its proceeds upon sale would become available
for use by family members.
Impact on Real Estate Taxes. The position
could possibly be taken with local tax authorities
that the option price established the fair market
value of the property for the family's purposes and
that the real property tax assessment on the prop-
erty should, accordingly, be based on that price.
Since the cash investment would presumably be lower
than the fair market value, a reduction, or at least
a stabilization, of real property taxes should follow
if this position was accepted.
Tax Considerations. The underlying testa-
mentary instruments would make it clear that the
entire San Clemente property represented a portion of
Mrs. Nixon's share of the community property and that
she was the one who was granting the option. Thus,
the grant of the option should have no effect on the
President's estate for federal estate tax purposes.
In Mrs. Nixon's estate, however, the property should
be subject to estate taxation, at least at the option
price. The option grant should also have no effect
on Mrs. Nixon's income tax liability unless she
offered the property for sale during her lifetime and
the option was exercised. At that time, an income
tax charitable deduction should become available to
her.
John H. Alexander
Richard S. Ritzel
THE PRESIDENT HAS SEEN
14
and
Permal
Revision of Estate Plan To Include
Transfer of San Clemente Property
To Federal Government
Dated: October 23, 1973
MUDGE ROSE GUTHRIE & ALEXANDER
20 BROAD STREET, NEW YORK, N.Y.
SUMMARY
Revision of Estate Plan To Include
Transfer of San Clemente Property
To Federal Government
(1) Need for preservation of basic structure of plan.
The present estate plan is structured to take full advantage of
the interplay of the applicable rules dealing with California
community property and the estate tax marital and charitable
deductions. Because of this, the plan should result in a tax-
free transfer of all family assets and Presidential memorabilia,
papers, etc., upon the death of the first as between the President
and Mrs. Nixon to die. If the plan is to be modified and the
same tax result achieved, the modification should leave the basic
structure of the present plan intact. Also, because questions
involving California community property were involved, the
present plan was reviewed and approved by California counsel.
Approval of California counsel should likewise be obtained before
any proposed modification of the plan is implemented.
(2) The San Clemente property under the existing plan.
Upon the President's death, the San Clemente property will be
transferred to The Patricia R. Nixon Trust. If Mrs. Nixon sur-
vives the President, the property will be made available to her
for her exclusive use. All expenses relating to the property
will be paid by the trust. After the President's death, Mrs.
Nixon has the absolute power to direct a retention or sale of
the property and, upon a sale, the purchase of a replacement
residence. Mrs. Nixon also has the power to dispose of the prop-
erty by Will. If she does not exercise the latter power, or if
she does not survive the President, the property or the proceeds
of sale will be held in separate continuing trusts for the bene-
fit of Patricia and Julie. A minor amendment to the plan could
be made to provide that if Mrs. Nixon does not exercise her power
of appointment the San Clemente property would pass to the federal
government. If this were done, however, Mrs. Nixon could still
exercise her power and change the intended result.
(3) Alternate dispositions to include transfer to
federal government. Two alternate dispositions of the San
Clemente property to include a transfer to the federal government
appear possible:
(a) Transfer with retained life estate. Upon the
2
President's death, the San Clemente property would be trans-
ferred to the federal government, subject to Mrs. Nixon's
right to the exclusive use of the property during her life-
time. Mrs. Nixon or a family trust would remain responsible
for payment of all expenses related to the property. A
partial reduction in real estate taxes should result from
such a transfer, and the transfer should generate a personal
income tax deduction for Mrs. Nixon. Mrs. Nixon would,
under this arrangement, lose a great deal of flexibility in
her choice of a residence, in that if she abandoned her life
estate she would have to look to other family assets to
purchase a replacement residence. There are, however, his-
torical precedents for such a transfer - the Eisenhower farm,
the LBJ Ranch, and the Roosevelt residence in Hyde Park were
all transferred to the government subject to arrangements
to allow Mrs. Eisenhower, Mrs. Johnson and Mrs. Roosevelt
to live on the respective residences for the duration of
their lives.
(b) Option to purchase. The federal government would
be granted the right to purchase the San Clemente property upon
the death of the last survivor as between the President and
Mrs. Nixon, or prior thereto if it was offered for sale to
anyone. The purchase price would be set at an amount equal
to the family cash investment. The option would not, how-
ever, become firm until the President's death. The family
cash investment would thus be subject to eventual recovery
for use by family members. Also, if the government declined
to exercise the option, the full fair market value of the
property would become available to family members. In any
event, Mrs. Nixon would, under this arrangement, be provided
with some flexibility as to her choice of a residence, in
that if she decided that she no longer wished to live at San
Clemente she would be provided with the proceeds of sale re-
ceived from the federal government or, if the option was not
exercised, from others, to purchase a replacement residence.
John H. Alexander
Richard S. Ritzel
Revision of Estate Plan To Include
Transfer of San Clemente Property
To Federal Government
(1)
Need for Preservation of Basic Structure of Plan
The estate plan adopted August 14, 1972 by the execu-
tion of Wills and three separate Trust Agreements creating
The Family and Literary Properties Trust, The Irrevocable
Literary Trust and The Patricia R. Nixon Trust is structured
to take full advantage of the interplay of the rules with
respect to California community property and the estate tax
marital and charitable deductions. Because of this, the
transfer of family assets and Presidential memorabilia,
papers, etc., upon the death of the first as between the
President and Mrs. Nixon to die should not be subject to
federal or California estate or inheritance taxes.
The essential elements of the plan are that (1) as to
community property, since a theoretical possibility exists
that the surviving spouse could reject the testamentary
arrangements made for his or her benefit and could claim
his or her community property outright, it is the surviving
spouse who is transferring his or her share of the community
property in trust, (2) as to property other than community
property passing to or for the benefit of the surviving
spouse, the same is received either outright or in trust
subject to a general testamentary power of appointment and
thus qualifies for the estate tax marital deduction, and
(3) as to any property not passing to or for the benefit of
the surviving spouse, the same passes for charitable pur-
poses and thus qualifies for the estate tax charitable
deduction. Therefore, under the plan, the family assets
and Presidential memorabilia, papers, etc., passing to or
for the benefit of the surviving spouse represent the sur-
viving spouse's share of the community property or qualify
for the estate tax marital deduction and the Presidential
memorabilia, papers, etc., passing for charitable purposes
represent the deceased spouse's community property and the
balance of his or her other property after allowance of the
estate tax marital deduction.
If the same tax result is to be sought upon any modifi-
cation of the present plan, the modification should be
2
structured so that the above described interplay of the
rules with respect to California community property and
the estate tax marital and charitable deductions is pre-
served.
Also, it should be noted that the present plan was
reviewed and approved by California counsel because of
the fact that questions with respect to California com-
munity property law were involved in its formulation.
Any proposed modification of the plan should likewise be
reviewed and approved by California counsel before that
modification is implemented.
(2) The San Clemente Property under the Existing Plan
Upon the President's death, the San Clemente property,
together with all other family assets except Presidential
memorabilia, papers, etc., will be transferred to The
Patricia R. Nixon Trust. The property so transferred,
representing a portion of Mrs. Nixon's share of the community
property and, possibly, assets qualifying for the estate tax
marital deduction, will be made available to Mrs. Nixon for
her exclusive use. All real estate taxes, insurance costs and
other expenses incurred in maintaining or improving the
property will be paid out of the income generated by other
trust assets, and, if necessary, out of the principal of
the trust.
If the income and principal of the trust does not pro-
vide adequately for Mrs. Nixon and at the same time cover
the San Clemente expenses, Mrs. Nixon can direct that a
sale of certain Presidential papers or memorabilia be
made and that the proceeds be used for such purposes. Cer-
tain nonsensitive Presidential memorabilia, papers, etc.,
also representing a portion of Mrs. Nixon's share of the
community property and, possibly, assets qualifying for the
estate tax marital deduction, will be retained in The Family
and Literary Properties Trust upon the President's death
for such purposes. Such sales will, however, be limited
to $100,000 per year and to an aggregate of $2,000,000.
Mrs. Nixon will have the exclusive power to direct the
retention or sale of the San Clemente property and, if a
sale is made, the purchase of a replacement residence.
Mrs. Nixon can also, in her Will, dispose of the San
Clemente property in any manner she may desire, including
a transfer to the federal government for public purposes.
3
If Mrs. Nixon does not exercise her power to dispose of
the San Clemente property by Will, or if she is not
living at the time of the President's death, the property
will either be held by the Trustee of The Patricia R.
Nixon Trust or be sold, with the property or the proceeds
of sale to be held in separate trusts for the benefit of
Patricia and Julie and their children. Federal and Cali-
fornia estate and inheritance taxes will be imposed on the
transfer of the property upon the death of the last survivor
as between the President and Mrs. Nixon.
It should be noted that by a minor amendment to the trust
agreement under which The Patricia R. Nixon Trust was created,
it could be directed that the San Clemente property would
pass to the federal government upon Mrs. Nixon's death if
she failed to exercise the general power of appointment
granted to her under that agreement. If this were done,
however, Mrs. Nixon could always, by exercising her power of
appointment, change the intended result. If Mrs. Nixon did
not exercise her power and the property did pass to the
federal government, no federal or California estate or inherit-
ance taxes would be imposed on the transfer at her death.
(3) Alternate Dispositions to Include Transfer to Federal
Government
(a) Transfer with Retained Life Estate.
Basic Plan. Upon the President's death, the
San Clemente property would be transferred to the
federal government, subject to Mrs. Nixon's right, if
she is then living, to the exclusive use of the prop-
erty during her lifetime. (It is assumed that if Mrs.
Nixon is the first to die, the President would want
to continue to exercise exclusive control over the
San Clemente property.)
Mrs. Nixon's Obligations Subsequent to the
Transfer. Absent any conditions in the instrument of
transfer to the contrary, Mrs. Nixon would remain
responsible for payment of real property taxes,
ordinary maintenance expenses, interest on any out-
standing mortgage, and a "just" proportion of any extra-
ordinary assessments. In addition, if there was a
mortgage on the property which had to be satisfied
by the federal government during the term of her life
estate, Mrs. Nixon would probably be required to re-
imburse the government, either by continuing to pay
4
interest on the amount of the mortgage satisfied or
by the payment of a lump sum based on the current
value to her of having been relieved of the obligation
to pay interest on the outstanding mortgage.
The instrument of transfer can provide that
the federal government, as remainderman, must assume
some or all of the obligations normally imposed on the
life beneficiary. Obviously, however, if too many
obligations are shifted to the federal government,
the cost of carrying the property would exceed the
value of the remainder interest in the property and
the gift might be rejected.
Impact on Real Estate Taxes. The California
Constitution and Revenue and Taxation Code specifically
exempt federal property used for public purposes from
taxation. The Revenue and Taxation Code also recog-
nizes that less than an entire interest in real prop-
erty, e.g., a life estate, can be subjected to real
property taxes. Accordingly, when real property is
transferred to the federal government subject to an
intervening life estate, the value of the remainder
interest should be exempt from local real property
taxes. (At Mrs. Nixon's current age, her life estate
in the property, determined actuarily, would be worth
approximately 61% of its current value. A 39% reduc-
tion in real property taxes should, therefore, result
if the remainder interest was vested in the federal
government.) This point will ultimately have to be
confirmed by California counsel.
Impact on Family. A transfer with a retained
life estate would have an adverse financial and per-
sonal impact on the family. Although Mrs. Nixon would
be entitled to use the property during her lifetime,
she would still be required to pay real estate taxes
(although possibly at a slightly reduced rate) and to
maintain the property. More importantly, she would
forfeit a considerable amount of flexibility with re-
spect to her choice of a residence. If she deter-
mined that she did not wish to continue to live at
San Clemente, she could, of course, abandon her life
estate, but she would receive no compensation for
doing so to enable her to purchase a replacement resi-
dence. Having abandoned her life estate, the property
would become the federal government's exclusively,
and Mrs. Nixon would have to look to other family
assets to provide her with a residence. Finally, upon
Mrs. Nixon's death, full ownership of the property
would pass to the federal government, and thus, no
portion of the family investment in the property, nor
any appreciation resulting subsequent to that invest-
ment, would ever be recovered for use by family
members.
Tax Considerations. The transfer should be
considered for tax purposes to have been made by Mrs.
Nixon. Thus, Mrs. Nixon should be entitled to a
current income tax deduction in the year of the transfer
and, to the extent not used in that year, for five years
thereafter. Also, since the transfer will theoretically
be made by Mrs. Nixon, it will have no bearing on the
President's estate tax return. (If a transfer was made
during the joint lives of the President and Mrs. Nixon,
with both of them retaining joint and survivor life
estates, a federal estate tax would be payable upon the
death of the first to die. For this reason, the possi-
bility of effecting a joint transfer has been rejected.)
The amount of the income tax deduction avail-
able to Mrs. Nixon would be the actuarial value of the
remainder interest passing to the federal government.
Thus, it would depend upon (1) the fair market value of
the property transferred, (2) Mrs. Nixon's age at the
time of the transfer, (3) the amount of any outstanding
mortgage affecting the property, and (4) the obligations
with respect to the property assumed by Mrs. Nixon and
the federal government. For example, if the property
had a fair market value of $500,000 exclusive of any
mortgage, if the normal rights and obligations were
assumed, and if Mrs. Nixon was 65 years of age at the
time of the transfer, the current income tax charitable
deduction available to her would be approximately
$221,000.
Historical Precedents. General and Mrs.
Eisenhower, after he left office, transferred their
Gettysburg farm to the Interior Department as a na-
tional park site. They retained the right to live on
the property transferred during their joint lives and
the survivor for six months after the death of the
6
first to die. After the transfer, no change in the
day-to-day operation of the farm occurred, and General
Eisenhower continued to pay all expenses of main-
tenance. The property was, however, removed from the
local tax rolls and no further real property taxes
were paid. (In light of the California law on this
subject, it would appear doubtful that a similar
result could be obtained for the San Clemente property.)
Subsequent to General Eisenhower's death, Mrs.
Eisenhower decided that she wanted to continue to live
on the property, and negotiations with the Interior
Department resulted in the granting of a "Use Permit"
permitting her to continue to occupy the residence
and some surrounding acreage. Under the terms of
the Use Permit, Mrs. Eisenhower pays all ordinary
expenses relating to maintaining the residence.
The balance of the property is maintained by the
Interior Department.
Mr. Johnson, after he left office, similarly
arranged for a transfer of the LBJ Ranch for eventual
use as a national park site, but with Mrs. Johnson
to have the right to live on the ranch for the term
of her life. The transfer of Mr. Roosevelt's Hyde
Park residence also was made during Mr. Roosevelt's
lifetime, with arrangements being made to permit
Mrs. Roosevelt to continue to occupy a cottage on
the premises for the duration of her life.
(b) Option to Purchase.
Basic Plan. The federal government would be
granted the right to purchase the San Clemente prop-
erty upon Mrs. Nixon's death or prior thereto, if it
is offered for sale to anyone. The option would not,
however, become firm until the President's death since
it is assumed that if Mrs. Nixon is the first to die,
the President would wish to retain exclusive control
over the property during his lifetime. The purchase
price to the federal government would equal the family
cash investment, including the cost of improvements
paid for by the family.
Impact on Family. During Mrs. Nixon's life,
assuming she is the survivor, real property taxes
would have to be paid and the property would have to
be maintained with family assets. Mrs. Nixon would,
7
however, be provided with much more flexibility with
respect to her choice of a personal residence after
the President's death than with a transfer with a
retained life estate. If she decided that she no
longer wished to live at San Clemente, she could
offer the property for sale, thus triggering the
option. Unlike the situation with the life estate,
however, the proceeds of sale would be available to
purchase a replacement residence. In any event, if
the government exercised its option upon Mrs. Nixon's
death, the cash investment in the property would be
recovered for use by family members. If the govern-
ment failed to exercise its option, the entire prop-
erty or its proceeds upon sale would become available
for use by family members.
Impact on Real Estate Taxes. The position
could possibly be taken with local tax authorities
that the option price established the fair market
value of the property for the family's purposes and
that the real property tax assessment on the prop-
erty should, accordingly, be based on that price.
Since the cash investment would presumably be lower
than the fair market value, a reduction, or at least
a stabilization, of real property taxes should follow
if this position was accepted.
Tax Considerations. The underlying testa-
mentary instruments would make it clear that the
entire San Clemente property represented a portion of
Mrs. Nixon's share of the community property and that
she was the one who was granting the option. Thus,
the grant of the option should have no effect on the
President's estate for federal estate tax purposes.
In Mrs. Nixon's estate, however, the property should
be subject to estate taxation, at least at the option
price. The option grant should also have no effect
on Mrs. Nixon's income tax liability unless she
offered the property for sale during her lifetime and
the option was exercised. At that time, an income
tax charitable deduction should become available to
her.
John H. Alexander
Richard S. Ritzel