Wills, Trusts & Estates Prof Blog

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

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Sunday, January 25, 2015

Trusts That Are Trimming Taxes

Trust Despite the funny-sounding names, incomplete grantor trusts are serious tax-minimization tools.  These trusts are often formed in Delaware, Nevada and sometimes Wyoming (hence the acronym, “DING,” “NING” and “WING”) because these states do not tax the income of trusts established there, even by people who live elsewhere, or have favorable tax rules. 

Advisers say this strategy is especially in demand with residents of California and New Jersey, where top marginal income-tax rates are 13.3% and 9.97%.  New York, another high-tax state, came down on the practice last year and no longer allows residents to use the trusts to avoid state taxes.  

One risk is that additional states could negate the tax benefits for their residents.  Moreover, people contemplating the creation of such trusts should think about timing.  If an asset put into a trust is immediately sold and the money distributed back to the person forming it, which is likely to raise red flags with state tax authorities as a sham. Yet by creating a trust, selling the assets years down the line then distributing them some time thereafter is less likely to raise negative attention.

See Liz Moyer, Trusts That Can Trim State Income Tax, The Wall Street Journal, Jan. 23, 2015.

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

 

January 25, 2015 in Current Affairs, Estate Administration, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Battle Continues Over Louisiana's Largest Fortune

Tom Benson

Two days after Tom Benson announced a drastic shift in his succession plan, experts say that a newly launched court battle could come down to the trusts that Benson has created over the years. 

This includes a key document, which was drawn up in 2009, when Benson named his now-estranged daughter and grandchildren as the majority beneficiaries to his sports empire in an irrevocable trust.  “An irrevocable trust is a trust generally created during someone’s lifetime that is exactly what it says—it can’t be revoked.” 

Now, Benson will leave his billion-dollar-plus fortune to his current wife of ten years, Gayle Benson.  However, due to the irrevocable trust, this will not be easy.  “A lot of what’s going to play out is what’s actually in that trust itself.  Especially when you’re trying to divest a beneficiary of their interests in the underlying assets, it’s especially difficult to do.”    

Attorneys in the suit will return to court February 10th for procedural matters.

See Fight Over Louisiana’s Largest Fortune Continues, WDSU News, Jan. 23, 2015.

January 25, 2015 in Current Affairs, Disability Planning - Property Management, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Proposed Elimination of Step-Up Basis May Increase Trust Popularity

Trust2Included in President Obama's proposed tax law changes during his State of the Union Address was the elimination of "step-up" basis. The purpose of the proposal is to close the "trust fund loophole." However, the end of step-up basis may create a rise in the popularity of trusts by adding additional tax advantages for the use of trusts, which declined with the increase of the Federal estate tax exemption and addition of portability.

See Janet Novack, Obama Attack On "Trust Fund Loophole" Could Increase Tax Advantage of Trusts, Forbes, Jan. 20, 2015.

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

January 25, 2015 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Article on RPTE's In-Person and Virtual Offerings

MeetDavid J. Dietrich (Dietrich & Associates, Billings, Montana) recently published an article entitled, RPTE's In-Person and Virtual Offerings Enhance "Flyover State" Lawyers' Trusts and Estates Transition and Career, 29 Probate & Property No. 1 (January/February 2015).  Provided below is an excerpt from the article:

As a small firm lawyer from Montana, the in-person and virtual offerings of the RPTE Section of the ABA have greatly enhanced my trusts and estates law career since I became active 15 years ago. RPTE currently consists of nearly 22,000 domestic and international lawyers, paralegals, real estate and financial service professionals, and legal educators; it is command central for our two disciplines in estate planning and real estate law in the entire 400,000 lawyer ABA. My focus in this article is on the Trust and Estate Division of the Section.

January 25, 2015 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Saturday, January 24, 2015

No Bad Blood Here: Turning the Clock Back With Parabiosis

Blood

Parabiosis is a 150-year-old surgical technique that unites the vasculature of two living animals; it mimics natural instances of shared blood supply, such as conjoined twins or animals that share a placenta in the womb.  Experiments with parabiotic rodent pairs have led to breakthroughs in endocrinology, tumor biology and immunology. 

More recently, parabiosis has been used in the field of ageing research.  By joining the circulatory system of an old mouse to that of a young mouse, scientists have produced remarkable results.  The blood of the young mice seems to be making the old mice stronger, smarter and healthier.  Last September, a clinical trial in California became the first to start testing the benefits of young blood in older people with Alzheimer’s disease.  “I think it is rejuvenation,” says Tony Wyss-Coray, a neurologist at Stanford University in California who founded a company that is running the trial.  “We are restarting the ageing clock.” 

Yet, given the history of dashed hopes in the anti-ageing field, any caution over young blood is justified.  Further testing is expected to initiate as researchers learn more about parabiosis.

See Megan Scudellari, Ageing Research Blood to Blood, Nature, Jan. 21, 2015.

Special thanks to Lewis Saret for bringing this article to my attention.  

January 24, 2015 in Estate Planning - Generally, Technology | Permalink | Comments (0) | TrackBack (0)

Family Seeks to Access Son's Digital Data

Computer 2

When Bill and Kristi Anderson lost their son Jake in December 2013 from hypothermia, they were surprised to discover that without a search warrant, the law does not permit them access to Jake’s final text messages, phone calls or pictures.  “Was he abducted? Did he get lost? We don’t know,” Kristi Anderson testified before lawmakers Tuesday morning, “but we think his cell phone could possibly contain some of those answers.” 

Jake’s parents want answers surrounding his death.  Fortunately, Representative Debra Hilstrom wants to help them.  “Imagine if your bank chose to treat your assets in the same way and said, ‘oh, no, you died, so no one can get access to your assets.  We’d all be outraged.”  Hilstrom authored a bill that would allow account holders or a personal representative of the deceased get access to digital assets, as long as the deceased does not prohibit access in their will. The Minnesota Legislature will hold additional hearings to vote on the bill.

See Tom Hauser, Family Fights to Access Late Son’s Digital Data, ABC Eyewitness News, Jan. 21, 2015.

January 24, 2015 in Estate Planning - Generally, Technology, Web/Tech | Permalink | Comments (0) | TrackBack (0)

The Outdated QPRT

HouseQualified personal residence trusts (QPRTs) may have outlived their usefulness and cause more damage to an estate plan than they are worth. QPRTs were popular in the 1980s when the Federal estate tax exemption was $600,000. The increase of the exemption to the current $5.43 million takes away the advantage of QPRTs for most individuals, but leaves the downside, which is a stagnate basis when the ownership of the residence is transferred resulting in a larger gain and higher capital gains tax. Possible solutions for existing QPRTs vary based on state law.

See Michael Ide, How QPRTs Went From Effective Estate Planning to Time Bomb, Value Walk, Jan. 21, 2015.

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

January 24, 2015 in Estate Planning - Generally, Estate Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Article on Building Your Practice and Developing Skills Locally and Nationally

Jason HavensJason E. Havens (Senior counsel in the Jacksonville and Tallahassee, Florida, offices of Holland & Knight) recently published an article entitled, Building Your Practice and Developing Skills Locally and Nationally, 29 Probate & Property No. 1 (January/February 2015).  Provided below is an excerpt from the article:

The now ubiquitous phrase "all politics is local" might be adapted to proclaim that "all estate and tax planning is local." To be sure, the ABA and specifically our RPTE Section provide opportunities to interact with and work alongside attorneys across the country, learn via superb educational programming, and participate in and hopefully lead substantive or other committees. Through local estate planning councils, such as those affiliated with NAEPC, however, you can meet and work with other trust and estate attorneys whom you will likely see more often in your practice. If you are a younger or transitioning practitioner, those other local attorneys will probably evaluate you for purposes of your Martindale-Hubbell rating and also might serve as references for your board certification application.

January 24, 2015 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Friday, January 23, 2015

Tax Court Holds Payments to Egg Donors Are Taxable Income

Egg donation

Many women who are actively trying to become pregnant are unable to do so; fortunately, there is no shortage of available alternatives for these women.  Often, however, these are typically intrusive and expensive.  One option is “egg donation,” whereby a female donor is supplied with hormones that increase her egg production.  The eggs are subsequently removed, fertilized in a laboratory, and ultimately implanted in the intended recipient. 

The term “donation” is somewhat of a misnomer, as the donor is typically compensated.  This has led to a tax conundrum: do the amounts received by the donor in exchange for her eggs constitute taxable income?  The Tax Court recently held in Perez v. Commissioner, 144 T.C. 4, (2015) that amounts received by a donor represented taxable compensation income.

Nichelle Perez, contracted with several donor companies to sell her eggs to women who struggled to conceive on their own.  Perez was compensated, not for selling her eggs, but for her physical pain and suffering during the egg donation process.  Perez argued that the $20,000 she earned from the contracts was not taxable income.  The Tax Court concluded that because the pain and injuries she would incur were anticipated and consensual, was within the scope of the medical procedures to which she consented contractually.  The payments were to compensate her for services rendered, thus, the amounts paid to her represented taxable income. 

See Tony Nitti, New Ruling: IRS Can Tax Payments To Egg Donors As Income, Forbes, Jan. 22, 2015.

January 23, 2015 in Estate Planning - Generally, Income Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Family Files Suit Claiming Tom Benson Incompetent to Control New Orleans Saints, Pelicans

Tom Benson

The struggle for control of the New Orleans Saints and Pelicans escalated Thursday when family members associated with Rita Benson LeBlanc filed a lawsuit claiming that the teams’ owner and family patriarch Tom Benson is incompetent and is being directed by a manipulative wife and her allies of the sports empire. 

The suit was filed one day after Tom Benson unexpectedly announced plans to transfer future ownership of the clubs to his wife, Gayle, cutting off his daughter, Renee LeBlanc and his two grandchildren, Ryan and Rita LeBlanc.  The lawsuit seeks to block the succession change and presents numerous claims that Benson is mentally and physically unfit to manage his personal or business affairs.  The petitioners (named as Renee, Rita and Ryan LeBlanc) are also requesting an independent board-certified geriatric psychiatrist to examine Benson. 

The suit attempts to paint Gayle Benson as a “gold-digging opportunist who has taken advantage of her husband’s unfit state of health and ostracized family members in grasping for power and riches.”  Petitioners are asking the court to appoint Renee LeBlanc as executor of Benson’s sports and business ventures, with Rita LeBlanc in a secondary position.

See Jeff Duncan and Manuel Torres, Rita Benson LeBlanc, Family File Suit Claiming Tom Benson Incompetent to Control New Orleans Saints, Pelicans, The Times Picayune, Jan. 22, 2015.

See also Jeff Duncan, New Orleans Saints, Pelicans Ownership Shocker: Wife Gayle, Not Granddaughter Rita, Will Control Empire After Tom Benson Dies, The Times Picayune, Jan. 21, 2015.

Special thanks to Sarah Elizabeth Gelfand (George Washington University Law School) for bringing these articles to my attention.   

January 23, 2015 in Disability Planning - Property Management, Elder Law, Estate Administration, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)