Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Monday, September 26, 2016

Article on Irrevocable Wills

Irrevocable willAlex M. Johnson, Jr. recently published an Article entitled, Is It Time for Irrevocable Wills?, 53 U. Louisville L. Rev. 393 (2016). Provided below is a summary of the Article:

Almost everyone knows that inter vivos trusts can be made revocable or irrevocable. And the reference to “inter vivos” as opposed to “testamentary” trusts is intentional. Testamentary trusts become effective only upon the death of the settlor by establishing a valid trust in his or her will and, as a result, are by definition irrevocable upon creation (the testator cannot die again nor can he or she undo his or her death to somehow later repudiate the creation of the trust). Hence, it is more precise to say that inter vivos and testamentary trusts may be made irrevocable, but only inter vivos trusts may be made revocable.

Although at one time the default rule in most states was that an inter vivos trust was irrevocable unless the settlor expressly retained the right to later revoke the trust, the modern and current majority view is the opposite: That is, trusts are revocable unless explicitly made irrevocable. Whatever the default rule, it is important to emphasize that inter vivos trusts come in two flavors or varieties: revocable and irrevocable.

Compare, however, wills that become effective only upon the death ofthe testator. By definition and in every jurisdiction, wills are ambulatory documents and can always be revoked prior to death. Indeed, there is no way for a putative testator to make an irrevocable will, meaning that there is no legal method by which an individual can commit to execute a will that is going to be effective upon that individual's death. In a legal regime that has as one of its primary goals the validation of the will maker's freedom of testation or disposition, it is somewhat surprising that individuals have no option to commit their future selves to a will executed by their present self.

 

September 26, 2016 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0)

Sunday, September 25, 2016

Drafting a Bulletproof Will

Bulletproof willWith the potential of dissatisfied heirs and will contests, it is important to make your will bulletproof. One thing you can draft in your will is a no-contest clause, which discourages people from disputing your will, especially beneficiaries. Also, if you plan on doing something dramatic with your bequests, announce these wishes to your loved ones while you are still alive, giving clarity to those who might feel blindsided otherwise. Along those same lines, you should have a doctor verify your mental health at the time you plan to draft your will. Additionally, if you do not want your will to become public record in the probate process, you should consider a living trust, which can satisfy your asset transfer without inviting unwanted attention and further challenges. 

See Alex Glenn, 5 Ways to Make a Bulletproof Will, USA Today, September 24, 2016. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

 

September 25, 2016 in Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Hillary Clinton's Proposed 65% Estate Tax Rate

ClintonHillary Clinton is proposing a 65% tax on the richest estates, making it harder for the wealthy to pass appreciated assets on to their heirs without paying taxes. This increase will generate $260 billion over the next decade, allowing her to pay for plans to simplify small business taxes and expansion on the child tax credit. Further, she is adopting a plan that would impose a 50% tax rate on estates over $10 million a person, a 55% rate starting at $50 million a person, and the top rate of 65%, affecting those with assets exceeding $500 million or $1 billion for married couples. Clinton would also like to repeal the step-up in basis rule, which will carry high capital gains taxes for particular assets inherited. Overall, Clinton would increase taxes by approximately $1.5 trillion in the next decade, which would increase the federal revenue by 4%. 

See Richard Rubin, Hillary Clinton Proposes 65% Top Rate for Estate Tax, Wall Street Journal, September 22, 2016. 

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

 

September 25, 2016 in Current Events, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Saturday, September 24, 2016

Article on Generation-Inflation Index for Taxation

Generation skipping transfer taxAlyssa A. DiRusso recently published an Article entitled, The Generation-Skipping Transfer Tax and Sociological Shifts in Generational Length: Proposing a Generation-Inflation Index for Taxation, 41 Am. C. Tr. & Est. Couns. L.J. 307 (Fall 2015/Winter 2016). Provided below is a summary of the Article:

Having begun with an introduction, Part II of the article gives an overview of the GST tax and its history. Part III notes sociological changes relevant to generational length such as childbearing age and life expectancy. Part IV notes the effective use of inflation indices throughout the Code to use as a model for generation inflation. Part V formally proposes an inflation index for generational length for GST tax purposes. Part VI concludes the article. 

 

September 24, 2016 in Articles, Estate Planning - Generally, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Appointing a Conservator

ConservatorshipWe often hear about estate-planning proceedings dealing with probates and guardianships, but what about conservatorships? A conservatorship is available to deal with the property of an absentee or to address judgments that involve the absentee’s family. A person who would have an interest in a deceased absentee’s estate or is dependent on the absentee’s maintenance and support has standing to petition the court for the appointment of a conservator. After notifying all interested persons, having an evidentiary hearing, and meeting all the requirements, a court can appoint a conservator to take over the absentee’s estate. 

See Anya Van Veen, Florida Conservatorships for Property of Missing Persons and Absentees, Florida Probate Lawyers, September 23, 2016. 

 

September 24, 2016 in Estate Planning - Generally | Permalink | Comments (0)

Friday, September 23, 2016

Article on the Limits of the Federal Arbitration Act

Arbitration1David Horton recently published an Article entitled, The Limits of Testamentary Arbitration, 58 Fla. L. Rev. Forum (2016). Provided below is an abstract of the Article:

This is an invited reply to Professor E. Gary Spitko's provocative and creative article, The Will as an Implied Unilateral Arbitration Contract. Professor Spitko argues that arbitration clauses in wills are enforceable because there is a "donative freedom contract" between the state and property owners. As a result, Professor Spitko concludes that all parties -- including omitted heirs who allege that a will is invalid -- are compelled to arbitrate any claim relating to the estate. 

Conversely, I explain why the Federal Arbitration Act and its state analogues are narrower. In my view, they exclude lawsuits filed by individuals who have not accepted money or property under the terms of the instrument. In addition, I contend that this carve out is necessary to prevent opportunists from using testamentary arbitration to insulate their conduct from judicial review.

 

September 23, 2016 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0)

Unintended Consequences of the § 2704 Proposed Regulations

Income tax reductionThe estate-planning world is still buzzing over the § 2704 proposed regulations released last month. These regulations restrict discounts that may result in a net loss of revenue to the Treasury with higher transfer tax values, leading to higher bases for transferees. Seemingly, increases in the estate tax that result from higher valuations would offset the income tax losses on later dispositions of the inheritance. However, this valuation also applies to estates that are not large enough to incur an estate tax, further binding them to the reductions in discounts from the new proposals. Additionally, the IRS is also bound. It can potentially foresee a diminishment in income tax revenues when heirs sell those inheritances for a smaller gain. Consequently, businesses that have been successful but not lavishly so can benefit from passing inheritances to those with higher bases, creating the diminishment of future income tax liabilities and no estate tax burden.   

See Dominick Schirripa, The Law of Unintended Consequences Meets the §2704 Proposed Regulations: Will Estate Tax Increases Cause Income Tax Reductions?, Bloomber Estate Tax Blog, September 15, 2016. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

 

September 23, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Stranger Originated Life Insurance Withstands Challenge

STOLIStranger-originated life insurance (STOLI) is a scheme where someone purchases life insurance on the life of someone that they do not have an insurable interest on. One specific variant of this scheme sees the insured setting up a trust and owning the policy for a period of time while the premiums are paid for by a third-party lender. After a few years, the policy is sold to the lender with a substantial payment to the person on who the insurance was taken out. Now, STOLI arrangements are illegal in most states.

In Wells Fargo Bank v. Pruco Life Insurance Company, the court dealt with a policy that was issued pursuant to a STOLI arrangement. Florida law requires that an insurance company contest a life insurance policy within two years. The particular STOLI policy the court dealt with was contested after the two-year period. Accordingly, the question for the court was whether an illegal policy could nevertheless not be challenged after the two-year window. Ultimately, the court upheld the validity of the law, disallowing the insurance company to contest the policy after the two-year statute of limitations.  

See Jeffrey Skatoff, Stranger Originated Life Insurance Survives Challenge in Florida, Florida Probate Lawyers, September 22, 2016. 

 

September 23, 2016 in Elder Law, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Blowing Inheritance in the Great Wealth Transfer

Wealth transfer2Darren T. Case recently published an Article entitled, Blown Inheritance: An Alarming Issue During the Great Wealth Transfer, Arizona Attorney 38 (July/August 2016). Provided below is a summary of the Article:

It’s been estimated that $30+ trillion in wealth will transfer to the next generation over the next few decades. Some forecast that just under 20 percent of that wealth is already in motion, as it is being held by families with life expectancies of seven years or less. While practicing law in the estate planning, probate, and trust areas during the “greatest wealth transfer in human history” certainly will be intriguing, it will arguably be one of the most challenging times, as well. Of the trillions of dollars set to transfer to the next generation, recent studies show that 50 percent of the inheritances will be blown—and most will be blown quickly. 

Many families may cringe when learning such a staggering statistic, but the question is what, if anything, can attorneys do to combat the loss or dissipation of estates? 

 

September 23, 2016 in Articles, Current Events, Estate Planning - Generally | Permalink | Comments (0)

Thursday, September 22, 2016

How Delaware Benefits Trusts

DelawareDelaware has long-been known as a jurisdiction that benefits the grantors of trusts. Specifically, Delaware has built a trust-friendly body of legislation and supported these laws with an effective court structure. Another benefit allows trusts established in Delaware to be free from state income tax if the trust beneficiaries are not state residents. This is especially valuable for those who anticipate large taxable transactions through trust assets, like the sale of a business.   

See Mark Gudaitis, What Does Delaware Have to Do with Estate Planning?, Atlantic Trust Blog, September 14, 2016. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

 

September 22, 2016 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)