Trust & Estate Services - Proposed Repurchase

Stout was engaged to determine the fair market value of the remainder interest in a charitable remainder annuity trust (CRAT), which had an equitable ownership interest in a company that owned a collection of rural newspapers, for the purpose of purchasing the remainder interest from the charitable organization currently benefiting from the CRAT.

The fair market value of the remainder interest derives from the future value of the assets held by the CRAT (namely, the equity interest in the newspaper company).

First, we determined the current fair market value of the newspaper company. Then, we needed to project the future fair market value of the assets held by the CRAT (the newspaper business) in every year until its scheduled termination and the probability that the CRAT would terminate early. We determined the possible future values of the assets equitably owned by the CRAT by simulating up to 1 million possible scenarios using Monte Carlo simulation.

At the conclusion of the assignment, Stout was asked to answer questions by the president of the charity about our appraisal and participate in the charity’s board meeting where the proposed repurchase was voted on.

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