Educational FYI's
Educational FYI's are written on topics that effect various aspects of estate planning and the laws that govern it. They are published and posted to this site when news worthy events happen that we feel you should be made aware of. The purpose of an Estate Planning Update is to bring important information to the financial advisors in the community. Our hope is that this information better equips you to assist your clients.
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2010 May Be a Good Year to Die
The Economic Growth and Tax Relief Reconciliation Act of 2001 provides that in 2010 the estate tax is repealed and there is no estate tax. Therefore, from a tax perspective, 2010 may be a very good year to die. But, we don't know for sure, as many experts expect Congress to act to prevent the repeal of the estate tax. This article written by Steve Hartnett, Associate Director of the American Academy of Estate Planning Attorneys spells out the process for getting a new estate tax measure passed in Congress and the impact of the delays.
$250 Recovery Payments to go to SS and SSI beneficiaries in May 2009.
The Sunday, September 9, 2007 issue of Parade magazine contains an article by Gail Sheehy on family caregiving. It will recount some of her own experiences as a spousal caregiver to her husband.
Roy R. Trudel, a Technical Director at the Center for Medicare and Medicaid Services ("CMS") recently opined that a state agency has the option of imposing a transfer penalty on an institutionalized spouse if the community spouse transfers protected resources after the institutionalized spouse's eligibility has been determined. Mr. Trudel's opinion, which is a reversal from statements made by previous CMS (HCFA) officials, came about as the result of an email exchange between elder law attorney Robert Mason of North Carolina and himself.
New Study Finds Changes Needed to U.S. Health System to Accommodate Needs of Boomers
The aging baby boom generation is likely to increase the nation's disabled population, and a study says the United States needs a better system to provide care for them. More than 40 million Americans currently have some sort of disability, the Institute of Medicine reported Tuesday.Senate Resolution Freezes Estate Tax for Two Years
Senate Resolution 21, 110th Cong. 1st Session, passed the Senate by a vote of 91 - 1.Why Can't a NY Lawyer Counsel FL Residents on NY Law?
This article from the ABA Journal summarizes the case of a NY licensed attorney wanting to give advise to FL residents about NY matters. It does a good job of summarizing FL's position on unlicensed practice of law in FL.Georgetown University Study on Medicaid Financing of Long Term Care
This article summarizes the role of Medicaid in financing long term care costs. The article also touches on how DRA will affect the ability of portions of the elderly population to get access to long term care.Estate Tax Repeal Vote Fail in Senate
Late Thursday, August 3, 2006, the Senate voted on an estate tax reform proposal that was came to close to full repeal and the republicans did not get the 60 votes they needed to pass it. The vote was 56-42!Photocopy of Will is Not "Duplicate Original"
After a decedent's death, his original 1987 will could not be located. However, a photocopy of that will was in his personal papers. There was no indication of any intent to revoke the will other than the fact that the original was missing.Will Effectively Exercised Power of Appointment Even Though Not Admitted to Probate
Father (who died in 1981) established a living trust that divided into survivor's and family shares, with the former giving his surviving wife a general testamentary power of appointment and the latter giving her a power of appointment exercisable by will, deed, conveyance, bill of sale, gift or any other written instrument. If Mother did not exercise the powers of appointment, the survivor's trust would pour into the family trust, which would in turn be distributed unequally among daughter, granddaughter and grandson. Mother executed a will in 1985 purporting to appoint the entire trust corpus of both trusts; the survivor's trust was appointed outright to daughter and the family trust in equal shares among daughter, granddaughter and grandson; Mother died in 1997. Relying on advice of counsel, the trustee and family members decided not to seek probate of Mother's will.The plaintiff, who had been seeking to provide cash for his daughter to pay anticipated estate taxes, established an irrevocable life insurance trust in 1991 and paid $300,000 in premiums for a $4.2 million second-to-die policy. The insurance agent's projections, assuming a 10% return, showed no further premium payments would be required. The ILIT Trustee, a CPA, sought independent advice which indicated that the initial premium payment would need to earn a 24% return for 28 years to cover all premiums, but the settlor instructed him to follow the insurance agent's direction.
Testamentary Effect of Trust Provision Requires Compliance With Will Formalities - Arnold v. Davis
A decedent (the widow of country music recording artist Jim Reeves) had established a trust to hold her considerable assets, though her capacity to sign or approve of a trust was later called into question. When she died while conservatorship proceedings were pending, the court granted an interpleader request and ordered that all her trust assets and all income from sale of her late husband's music and real estate holdings be paid to an administrator while the validity of the trust was resolved.A victim that was vulnerable to exploitation made a videotaped statement to police officers two days before she died and a statement to a social work supervisor shortly before her death.
As the testatrix lay dying in a hospital bed, a lawyer relative contacted a long-time associate and asked him to visit her at the hospital to help her prepare a will. The relative also provided the lawyer with details about the testatrix' estate plan, including her intention to leave him (the lawyer relative) a significant bequest. The drafting lawyer, the lawyer relative and the testatrix all met together at the hospital, and the drafting lawyer prepared a will and supervised its execution. After the testatrix' death a will contest was filed, with the result that $620,000 was made unavailable to the residual beneficiaries (the opinion does not relate the particulars of the will contest or the identity of any contestant, or indicate how much of the $620,000 was attorney's fees incurred in defense of the will and how much a payment to contestants).
Legal Malpractice in Estate Planning Case Runs From Discovery - Watkins v. Hedman, Hielman & LaCosta
An attorney prepared a complicated estate plan for a married couple. The wife advised the attorney that they wanted to make sure their trusts were and remained revocable, that they minimized estate taxes, and that they avoided probate. The attorney never consulted with the husband, but sent documents home with wife and had her staff witness and notarize them upon return, even though they had never spoken with husband."Direct Lineal Descendants" in Old Trust Does Not Include Adopted Children - McGehee v. Edwards
Several trusts were established in 1929, 1930 and 1931. Each trust limited benefits to the "direct lineal descendants" of the settlor or the settlor's parents. Although state law was amended in 1978 to presumptively include adopted children in the terms "issue" or "descendant," the new law by its terms did not extend to prior trusts. The trustees of the trusts, concerned about potential liability for their determination of the approximately 142 trust beneficiaries, filed an action to determine "who are, or may be direct lineal descendants ... and specifically whether children born out of wedlock" would be beneficiaries. Counsel for one beneficiary answered, asking the court to also determine whether adopted children would qualify, whereupon the trial court appointed guardians ad litem for "persons adopted by lineal descendants, persons born out of wedlock to lineal descendants, persons born to lineal descendants through assisted conception, and legitimate minor beneficiaries and parties unknown."The guardian of person and estate filed a petition requesting compensation for services as guardian. The ward died before hearing on the petition, and guardian filed a second petition seeking additional compensation. Almost two years after the ward's death, the trial court summarily denied the compensation requests. The Florida Court of Appeals reverses the denials, noting that no one objected to the compensation requests, the guardian was not given notice of the pending denial of compensation, and the trial court did not conduct a hearing into the reasonableness or propriety of the fees. The summary denial "violated the guardian's right to due process of law."
Utah Tops List of Best Places to Die
Geography determines much about an individual's final days: the kind of care received, where he or she will get it, and how much a decedent can pass on to heirs. This Forbes article ranks the states top to bottom. On top: Utah. At the bottom: IllinoisIRS Wins Victory in Thompson FLP Case
The Third Circuit Court of Appeals has upheld the IRS Tax Court victory using an IRC 2036 attack. Unfortunately, bad facts (death bed FLP) make for bad case law. We will reconcile this case with the recent taxpayer victory in the appeal of the Kimbell case in an upcoming memo to members. In the meantime, we have attached a copy of the Third Circuit opinion. Finals briefs are due from the Department of Justice today on the appeal of the Strangi case, so we will see whether that court follows the logic of Kimbell or Thompson within a few months.Tax Fraud Promoters Associated with "We the People" Convicted
Seven individuals associated with a tax fraud group known as "We the People" were convicted May 4, 2004 on various federal charges related to the promotion of bogus tax shelters that falsely promised to limit exposure to federal income taxes.Law Firm Ordered to Comply with IRS Summonses
Jenkens and Gilchrist Ordered to Comply with IRS SummonsesFor purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2004-66 indicates the charitable federal midterm rate under section 7520 for July 2004 is 5.0%; up 0.4% from the June rate of 4.6% and up 1.2% from the May rate of 3.8%.
The Service has released the Applicable Federal Rates for June 2004. The 7520 rate, used to value life estates, remainder interests, etc., is 4.6%. This is a substantial increase from the 3.8% rate in effect in April and May 2004.
Proper Standard for Appointment of Conservator of Estate is "Management Competency Test"
Sisters disagreed over the management of their mother's finances and the operation of a family business, and one sister sought appointment of herself as conservator of the person and estate. After a three-day court trial, the other sister was appointed conservator of the person and a public conservator as conservator of the estate.Greenspan Congressional Testimony
Federal Reserve Chairman Alan Greenspan testified before the House Budget Committee today. In his remarks, he stressed the need to fix the Social Security system so that it survives the wave of retirements expected with the Baby Boom generation. Greenspan presented possible solutions including increasing the age at which retirees can draw social security and reducing the cost of living adjustment formula for benefits.Pension Benefit Guaranty Corporation Reports $11.2 Billion Deficit in 2003
The Pension Benefit Guaranty Corporation, the federal insurer of more than 31,000 private pension plans, yesterday reported a year-end deficit of $11.2 billion.IRS Wins Another FLP Tax Court Case
In Estate of Abraham, TC Memo 2004-39, the Tax Court denied any discount for three separate Family Limited Partnerships. It found the FLPS to be testamentary devices.Heritage Foundation Perspective on the Estate Tax
The Heritage Foundation published a 9-page "Backgrounder" by Gary Robbins entitled "Estate Taxes: An Historical Perspective". Whether or not you agree with its conclusions, the paper has a helpful, concise history of estate taxes and some interesting statistical analysis of historical FET exemptions and rates.More Options Hinder Use of 401-K Plans?
Although extensive choice seems appealing, research shows that it may hinder motivation to buy and decrease subsequent satisfaction with purchased goods. A paper by the Pension Research Council at Wharton School of Business examines whether these findings generalize to employees who are making decisions about whether to invest in 401-K retirement saving plans. Using data from nearly 800,000 employees, the authors tested the hypothesis that employee 401-K participation rates fall as the number of fund options increase. Their results confirm that participation in 401-K plans is higher in plans offering a handful of funds, as compared to plans offering ten or more options.Will Inheritance Bail Out Boomer Generation?
Will inheritances received by baby boomers play an important role in their financial security as they approach retirement? In this AARP Public Policy Institute (PPI) Data Digest, the authors use recent data from the Federal Reserve Board to explore whether boomers are going to inherit large amounts of wealth from their parents, the implications for retirement security, and how inheritances might influence decisions to work and retire.A Case for Reverse Discrimination (Gen. Dynamics v. Cline)
The Age Discrimination in Employment Act outlaws discrimination against employees because of their age. But is it illegal when the employee being discriminated against is younger than the worker receiving the favored treatment? On November 12, the U.S. Supreme Court heard arguments in General Dynamics Land Systems v. Cline, a major employment case examining whether the 1967 statute is intended exclusively to protect older workers, or whether it also authorizes so- called reverse-discrimination claims by younger workers. The case holds important implications for many retirement benefit plans and early-retirement packages. To the extent that such plans offer increasingly generous benefit levels triggered solely by age, they could become the litigation targets of younger employees complaining about illegal disparate treatment.
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