Wills, Trusts & Estates Prof Blog

Inequalities in the Taxation System

Lester B. Snyder   (Professor of Law, University of San Diego School of Law) has recently posted on SSRN his article entitled Taxation of the New Era 'Family Unit'.

Here is an abstract of his article:

Virtually everyone in this country is directly affected by the material in this chapter. Whether you are single, married, cohabitating with someone of the opposite or same sex, a child, an elderly person, someone going through a divorce or separation, rich or poor, there are numerous tax issues and tax disparities that impact your daily lives. Over the past 90 or so years, the taxation of the family unit has undergone numerous changes, resulting in unequal treatment of significant numbers of citizens. The evolution of the tax law of the family unit provides us with an opportunity to view the constant interplay and conflict between federal and state laws. Keeping with the theme of this book, this chapter will focus on some of these major inequalities, many of which have received only sparse public attention and are generally unknown to the ordinary taxpayer.

Should the Rich Be Seeking More Guidance from Financial Advisers?

While investing is becoming increasingly complex, the rich are opting to manage their wealth themselves, without the assistance of brokers, financial planners or private bankers.

According to Why the Rich Don’t Trust Their Advisers, blogs.wsj.com, Nov. 28, 2007:

Why the loner mentality? Today’s rich are self-made — the survey points out that most of the $25 million plus group are business owners or corporate execs who didn’t inherit their fortunes. They’re used to building and managing their wealth themselves. ***

There is no “right” or “wrong” answer to whether the rich should be using their financial advisers more.***

So if the wealthy lose their shirt in the current market turmoil, they may have no one to blame but themselves.

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

Post-Mortem Information Transmission Now Available

There are many things that people may want to be handled a certain way after their death. Deathswitch.com, offers its clients an opportunity to do so.

Here is how it works:

Deathswitch is an automated system that regularly prompts its users for a password to make sure that they are still alive. If the user fails to respond for some time, the system assumes that he or she is dead or critically disabled and e-mails pre-scripted messages to the people the user selected. Customer can select the frequency of the prompts and also the length of time after non-response triggering transmission. These time-frames can range from one day to one year.

Some of the ways in which Deathswitch can be used include:

• Sending computer passwords to co-workers and family
• Providing loved ones with bank account and other financial information
• Making known one’s final wishes
• Sharing unspeakable secrets
• Leaving love notes
• Having the last word in an argument
• Providing the loved ones with funeral instructions

Neil Hendershot also discusses this service on his blog where he ponders the ramifications of a premature discharge of an intended postmortem email message.

A Mystery ----

Yesterday, this blog experienced its highest number of visitors in one day, 2,176.  This is a greater number of readers than even when we were discussing Anna Nicole Smith or Leona Helmsley on a regular basis.

I am really puzzled as to what triggered this tremendous increase in readership.  If you have any thoughts, please let me know.

And, as always, I greatly appreciate your readership and support.

Comment Reminder

Do you notice that when you post a Comment, it does not appear?  Do you post it again and again?  Then, after a while, do you notice that it suddenly appears?

This is not aberrant behavior. Instead, it is by design because comments on this blog, as well as all other blogs in the Law Professor Blog Network, are moderated.  This means that a comment will not appear until the blog editor approves the comment.  This requirement is imposed because the blog editor may be held liable for the publication of comments under the theory of publisher liability. Because of publisher liability concerns, the Law Professor Blogs Network does not allow automatic comment publishing.

I do not receive an automatic notice that someone has posted a comment.  I do check on a regular basis but if you want to get you comment posted faster, please send me an e-mail simply stating you have posted a comment.

Is Steve Fossett sufficiently missing to be deemed dead?

Steve Fossett, a famous American adventurer disappeared in September while taking a pleasure flight in rugged Western terrain.

Here are more details on this story from Mike Robinson, Court Asked to Declare Steve Fossett Dead, news.aol.com, Nov. 26, 2007:

The wife of millionaire adventurer Steve Fossett *** asked a court Monday to declare him legally dead.***

The request was a step toward resolving the legal status of Fossett's estate, which *** is "vast, surpassing eight figures in liquid assets, various entities and real estate[.]" ***

Fossett had become one of America's best-known adventurers in more than a decade of pouring his fabulous wealth - earned in Chicago's commodities markets - into chases for world records in sailing, ballooning and other rugged and sometimes dangerous outdoor activities. ***

While the wreckage of the plane has not been found, the petition said there was no chance that Fossett might somehow have survived. ***

Special thanks to Sara Hudman (J.D. Candidate, Texas Tech University School of Law) for bringing this article to my attention.

Hospices are Incurring Medicare Debt Because Their Patients are Living Longer

Hospices across the United States are facing hundreds of millions of dollars in Medicare debt because their patients are living longer than expected.

According to Kevin Sack, In Hospice Care, Longer Lives Mean Money Lost, NYTimes.com, Nov. 27, 2007:

In the early days of the Medicare hospice benefit, which was designed for those with less than six months to live, nearly all patients were cancer victims, who tended to die relatively quickly and predictably once curative efforts were abandoned.

But in the last five years, hospice use has skyrocketed among patients with less predictable trajectories, like those with Alzheimer’s disease and dementia.***

Medicare’s coverage of hospice, which began in 1983, has become one of the fastest growing components of the government’s fastest growing entitlement. Spending nearly tripled from 2000 to 2005, to $8.2 billion, and nearly 40 percent of Medicare recipients now use the service.***

A number of hospice providers said ethical and legal constraints would prevent them from discharging patients who outlived their profit potential. But some said they sometimes delayed admission for those patients with illnesses that might result in longer stays.***

Generation-Skipping Transfer Tax and Power of Appointment

The following is from Robert L. Moshman, Esq., GST Grandfathering Debated, Est. Analyst (Oct. 2007):

The Benjamin Gerson Trust became irrevocable when Mr. Gerson died in 1973. Mr. Gerson left a $22-million estate for which $7.16 million of estate tax was owed. Marital Trust A, containing $6.24 million, was subject to a power of appointment that Mrs. Gerson exercised in her will on behalf of five grandchildren. At her death in 2000, Trust A was distributed to two of the grandchildren outright and to three others in trust until they were to turn 40.

Since Mrs. Gerson held a general power of appointment over property at death, the value of such property was includible in her gross estate for Federal estate tax purposes under section 2041.

The IRS treated the transfer to the grandchildren as direct skip transfers coming from Mrs. Gerson and therefore assessed a tax deficiency of $1.14 million based on the GST tax.***

[T]he IRS*** found that the lapse of a general power of appointment resulted in a “constructive” addition to the trust and was therefore subject to GST tax.

The estate argued that the transfer was grandfathered as a transfer from a trust that was irrevocable prior to October 22, 1986, under section 1433(b)(2)(A) of the Tax Reform Act of 1986[.]***

[A] divided tax court sided with the IRS and noted that Congress used the transitional rule to apply to trusts involving a specific volitional generation-skipping transfer and not a general power of appointment. Also, there was congressional intent to provide uniformity in GST tax application.

Pavarotti’s Wife Files a Lawsuit to Defend Herself from "Unseemly Gossip"

Earlier on this blog, I discussed the controversy surrounding a legendary Italian singer Luciano Pavarotti’s will.

Here are some of the most recent reports regarding the aftermath of Pavarotti’s death from BBC News, Pavarotti's widow suing friends, news.bbc.co.uk, Nov. 27, 2007.

The move comes weeks after Ms Mantovani, 37, attacked the Italian media for reporting "unseemly gossip" about her marriage to the tenor.

"Since the comments did not cease - and were, in fact, reiterated - Mantovani had no choice but to file the lawsuit," said her lawyer, Anna Maria Bernini.***

The two people named in the legal case are Franca Corfini Strata, the wife of the late singer's dietician, and Lidia La Marca, who is married to conductor Leone Magiera.***

Ms Mantovani is seeking 15 million euros (£10.7m) in damages from each, and intends to donate any award to charity, Ms Benini said.***

She denied being left in debt or that she was squabbling with his three adult daughters over his will.***

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

Pennsylvania May Require eBay Sellers to Get Live Auctioneer Licenses

The state of Pennsylvania has begun to regulate sellers who sell other people’s items on eBay.

Ford Turner, Ebay sellers pushed to get auctioneer licenses, pennlive.com, Nov. 17, 2007 reports:

The state claims that people ***who accept things on consignment from other people and sell them using *** eBay — are auctioneers and must obtain traditional state auctioneers’ licenses.

The enforcement push means that online sellers would have to serve apprenticeships with traditional auctioneers or take college auctioneering courses.

At least two bills awaiting committee action in the Legislature were designed to deal with eBay auctioneering.***

Rob Wonderling, R-Montgomery, said there are more than 15,000 state residents who make most of their money by trading and selling on the Internet.

His bill would remove any requirement for licensing residents who use online trading platforms.***

Another bill in the state House of Representatives would require online sellers of other people’s items to register, pay a fee of about $100, and secure a bond that would cost about $50[.]***

Special thanks to Neil E. Hendershot, Esq. (Attorney at law, Goldberg Katzman, P.C., Adjunct Professor, Widener University School of Law) for bringing this article to my attention.  Neil concludes that "[i]f a fiduciary in Pennsylvania decides to consign tangible personal property for liquidation through an online listing agent, like an eBay selling service, check for its auctioneer's license."

Charitable Gifts -- What purposes are most popular?

According to Tracey Wongs Briggs & Karl Gelles, Where the philanthropic dollars go, USA Today, Nov. 26, 2007, at D1, the top six charitable purposes are as follows:

1. Education
2. Social services
3. International
4. Health
5. Donor-advised gift funds
6. Community foundations

Is Trouble in trouble?

As you may remember, Leona Helmsley left $12 million to an inter vivos trust which is reported to contain provisions for the benefit of her pet dog, Trouble.

According to CBSNews.com, Helmsley's Dog Getting Death Threats (Nov. 26, 2007):

It came as little surprise that there would be hostility towards the dog. But death and kidnapping threats seem a little extreme.

"I think the reaction was really quite bizarre," Helmsley's longtime friend John Codey told Early Show national correspondent Tracy Smith.

Codey is in charge of the pampered pooch and her trust fund. He said he was alarmed by the number of threats and estimates that Trouble received about 20 or 30.

"'I'm gonna kill the dog,'" he said people threatened. "'I'm gonna kidnap the dog. I need the $12 million.'" * * *

When you put it in perspective, the $12 million seems as tiny as the dog who received it. Perhaps Helmsley merely wanted to give something back to the dog who was truly her best friend. As soon as the dog dies, whatever is left of Trouble's inheritance goes back to the charitable trust.

"Trouble is very much alive and well taken care of," Codey said. "I can tell you that she's in this country and she's in a nice warm climate."

Special thanks to Jennifer Cocanougher (J.D. Candidate, Texas Tech University School of Law) for bringing this article to my attention.

Human cremains may have been scattered on a Disney ride

LOCAL6.com, Possible Scattering Of Human Remains On Disney Rides Reported, Nov. 15, 2007, reported that a woman may have scattered human ashes on the “Pirates of the Caribbean” ride at the Magic Kingdom in California.

Here are more details on this story:

Workers at the Anaheim theme park spotted the woman sprinkling an unidentified substance into the water on the "Pirates" ride. Anaheim police were notified of the incident.***

Some Disney watchers said park-goers tell them that people smuggling in the cremated remains of their loved ones and then sprinkling ashes on rides has been going on for a while.***

They said it started at the Haunted Mansion, but now the "Pirates of the Caribbean" ride is growing in popularity.***

Disney officials said they were unaware of any confirmed ash-scattering incidents in the park and didn't believe it to be a problem[.]***

Brook Astor Update

Earlier on this blog, I discussed an ongoing criminal investigation which put on hold the Surrogates Court proceedings concerning Brook Astor’s estate.

Here are some of the most recent developments on this story from Serge F. Kovaleski, Brooke Astor’s Son and Lawyer Face Criminal Charges, NYTimes.com, Nov. 27, 2007:

Brooke Astor’s son and one of her former lawyers have been indicted on criminal charges stemming from the stewardship of her financial affairs and the handling of her will[.]***

Her son, Anthony D. Marshall, 83, and the lawyer, Francis X. Morrissey Jr., have been told to surrender to authorities on Tuesday morning[.]*** A Manhattan grand jury has been hearing evidence from witnesses since early last month, following an investigation by the district attorney’s office into the management of Mrs. Astor’s fortune by Mr. Marshall and Mr. Morrissey’s role in the signing of the third amendment to her will.***

The possibility of forgery has been raised by a nationally known handwriting expert.***

JPMorgan Chase & Company, the court-appointed guardian of Mrs. Astor’s assets, raised questions about her mental competency in 2003. That was the year she signed documents transferring $3.4 million of her securities and her estate in Maine, which was valued at $5.5 million, to Mr. Marshall.

Illinois Law and POD Accounts

Helen W. Gunnarsson (Highland Park, Illinois attorney and writer) has recently published her article entitled POD and TOD accounts and your estate-planning arsenal, 95 Est. Plan. Ill. B.J. 510 (Oct. 2007).

Here is an excerpt from her article:

POD and TOD beneficiary designations, like joint tenancy and living trusts, are another tool for avoiding probate of property. It couldn't be easier to set up a bank or brokerage account, or a security registration, in POD or TOD status: bank and brokerage clerks understand what they are and, lawyers report, sometimes even suggest them to their clients. Those clerks will also happily help clients set up or convert their accounts at no cost to include POD or TOD beneficiaries.

Unlike joint tenancy, the designation of a POD or TOD beneficiary has no effect on ownership until the owner's death. 815 ILCS 10/6. Under the Trust and Payable on Death Accounts Act, any holder may at any time cancel or change the designation of beneficiary without the knowledge or consent of the other holders or the beneficiaries. 205 ILCS 625/4(a). Under the Uniform TOD Security Registration Act, the sole owner or all currently surviving owners of a security may cancel or change the property's registration in beneficiary form at any time without the beneficiary's knowledge or consent. 815 ILCS 10/6.

The Trust and Payable on Death Accounts Act applies to bank, savings and loan, and credit union accounts. 205 ILCS 625/2. The Uniform TOD Security Registration Act applies to securities and security accounts, both of which the statute defines.

Estate Planning – A Useful Tool for Everyone

Helen W. Gunnarsson (Highland Park, Illinois attorney and writer) has recently published her article entitled Estate Planning for the Rest of Us, 95 Ill. B.J. 520 (Oct. 2007).

Here is the introduction to her article:

Most people don't own enough to owe estate tax when they die. But they still need the kind of estate-planning advice you get from a competent lawyer.

Articles and presentations on estate planning usually focus on clients with substantial resources, as Bloomington attorney Paul Meints observes. "Wonderfully creative and complex arrangements are possible for [these] people.... Trust departments, attorneys, CPAs, CFPs, ChFCs and other professional advisers joyfully extend their services to clients with wealth." And historically, counseling wealthy clients on lawful methods of managing their estates so as to minimize or avoid federal estate taxes has been a prime reason for these services.

Most people today, however, have no need of estate-tax counseling because they don't own enough property to be subject to the federal estate tax. In fact, for most people, two million dollars - the current estate amount excluded from federal estate tax - would be riches almost beyond imagining.

With federal estate taxes of no concern, and with less money available for the expenses of estate planning and management, does it make any sense for attorneys to encourage clients in humbler circumstances to create estate plans? Or should lawyers abandon this market to the purveyors of do-it-yourself living-trust and will kits?

Estate planning isn't just minimizing federal estate taxes for rich people, say Meints and other experienced attorneys with estate planning practices, and lawyers should absolutely court and welcome the business of those of low to moderate wealth. Pretty much everyone, whatever their level of prosperity, wants to be able to remain independent and in their home as long as they wish, not to have their family members impoverished in the event that they must enter a nursing home, and to make sure that the persons of their choosing will receive their property on their death without costly and unpleasant disputes.

Those who have minor or disabled children also want to know that they've done what they can to ensure that those children will be cared for in the event that they are no longer able to do so. Too, everyone wants to achieve their goals while maintaining their privacy - and in as cost-effective a manner as possible.

Cremains as Breast Implant Filler

Although this is "old news," I just learned that the November 21, 2006 installment of the television series Nip/Tuck starred Catherine Deneuve in an episode entitled Diana Lubey.

The plot of this episode revolved around a patient, played by Ms. Deneuve, who wanted to have her deceased husband's cremains placed into her breast implants so she can always be close to him.

This time, at least, fiction may be stranger than truth.

Top SSRN Downloads

Here are the top downloads from September 27, 2007 to November 26, 2007 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days:

Rank	Downloads	Paper Title
1	175	Federal Tax Update: Important Developments in Federal Income, Estate & Gift Taxation Affecting Individuals - August, 2006 to August, 2007 Samuel A. Donaldson, University of Washington - School of Law, Date posted to database: October 19, 2007 Last Revised: October 19, 2007
2	73	The Trustee's Duty to Inform Thomas P. Gallanis, University of Minnesota Law School, Date posted to database: October 10, 2007 Last Revised: October 17, 2007
3	62	The Fiduciary Accountability of Ordinary Employees Robert Flannigan, University of Saskatchewan, Date posted to database: October 15, 2007 Last Revised: October 15, 2007
4	61	Introducing the Law of Nonprofit Organizations and Philanthropy David A. Brennen, University of Georgia School of Law, Date posted to database: October 3, 2007 Last Revised: October 26, 2007
5	60	Leaving More than Money: Mediation Clauses in Estate Planning Documents Lela P. Love, Stewart E. Sterk, Yeshiva University - Cardozo School of Law, Yeshiva University - Cardozo Law School, Date posted to database: September 25, 2007 Last Revised: September 25, 2007
6	51	The Section 67 Question: Are Fees for Investment Advice Fully or Partially Deductible by Trusts? James Loebl, Valparaiso University - School of Law, Date posted to database: October 16, 2007 Last Revised: November 6, 2007
7	49	The Uniform Acts' Loophole in Fraudulent Conveyance Law Adam J. Hirsch, Florida State University College of Law, Date posted to database: September 15, 2007 Last Revised: November 5, 2007
8	38	Tax Losses Lester B. Snyder, University of San Diego School of Law, Date posted to database: October 3, 2007 Last Revised: November 1, 2007
9	34	SRI-Shibboleth or Canard (Socially Responsible Investing, that is) Joel C. Dobris, University of California at Davis School of Law, Date posted to database: September 27, 2007 Last Revised: November 12, 2007
10	30	An Attempt to Legislate? Wendy C. Gerzog, University of Baltimore - School of Law, Date posted to database: October 3, 2007 Last Revised: October 26, 2007

Plan Now, While There is Still Time!

David A. Berek (Credit Suisse Family Wealth Management) has recently published his article entitled Year-End Planning for Trust-and-Estate Clients, 95 Ill. B.J. 606 (2007).  Here are some of his recommendations:

• Clients should be encouraged to make annual exclusion gifts early in the year to maximize the potential for appreciation of the gifted property.
• Year's end is also a good time to make a periodic review of your client's overall financial situation to confirm that the estate plan in place compliments the client's current net worth and is consistent with your client's estate planning goals and objectives.
• Making charitable contributions at the end of the year will maximize your client's use of funds during the year and still provide an income tax deduction for the tax year.
• The end of the year is also a good time to work with your client's accountant to discuss minimizing capital gains and harvesting capital losses.
• You may also recommend that your client consider giving appreciated property to children or grandchildren if they are in a lower tax bracket than your client.  * * *  While the newly enacted modifications to the Kiddie Tax are effective in 2008 and will reach children under age 19 and students under age 24, the current law (until December 31 of this year) is limited to children under age 18. Thus, there is a planning window of opportunity for all 18 to 23 year olds to be taxed at their own rate in 2007.

Medicaid Planning In Illinois

Kirsten Izatt (The Estate Planning Group of Wheaton, Illinois) has recently published her article entitled Medicaid Planning in Illinois: Are You Ready for the DRA?, 95 Ill. B.J. 589 (2007).

Here is a description of this article:

The federal Deficit Reduction Act of 2005 requires estate planners to devise new ways to protect the assets of clients who face long nursing-home stays.  Illinois hasn't implemented the law, but it will.  This article looks at what will and won't change when that happens.