Wills, Trusts & Estates Prof Blog

Reminder: CLE on Medicaid Planning

On Wednesday, October 17, 2012, the ALI-ABA is hosting a CLE entitled Practical Medicaid Planning: Advising Your Clients.  The CLE will be from 1:00 p.m. to 2:30 p.m. Eastern and is offered via telephone seminar or audio webcast.  You will learn the following: 

This 90 minute audio-only program will explore various topics related to Medicaid and planning for Medicaid, including (but not limited to):

• Significance of payment of debts and expenses
• The community spouse resource allowance
• Transfer rules
• Distributions from inter-vivos trusts
• Tax issues in elder law
• Why you must read Medicaid not as a trust and estates lawyer but from the point of view of public benefits.

Though primarily designed for estate planning attorneys, tax lawyers and other professionals handling Medicaid issues will benefit from this program, which is co-chaired by Mark Levin of the Law Office of Mark Levin in Roseland, New Jersey, and Leonard Pasculli of Hollander, Strelzik, Pasculli, et al. in Newton, New Jersey.

Please click here for more information. 

Women in Botswana Now Have the Right To Inherit

Judge Key Dingake of the Botswana High Court recently ruled that women are entitled to equal inheritance rights with men.  This landmark ruling paves the way for challenging the other unfair laws in the region that favor men. The judge reasoned that  it is time for the law to reflect modern times and for justices to assist in ridding the modern-day society of discrimination against gender.  

Human rights campaigners said that this ruling would prompt challenges to other customary laws that similarly discriminate against women.  Botswana is an example for the region and has produced some of Africa's most celebrated women.  However, it still has a dual legal system that many people have been reluctant to tamper with.

See Women Granted Inheritance Rights, The Sydney Morning Herald, Oct. 14, 2012.  

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention. 

Six Things To Complete Before You Die

In ode to Estate Planning Awareness Week, which occurs this upcoming week from October 15 to October 22, let's review the top six things that person might want to consider doing before he or she passes away.

1. A person might want to take some time out of each day to enjoy his or her life. In other words, a person might want to live each day like it is his or her last. 
2. A person might want to make a "bucket list" to determine what that person wants to do before he or she dies.
3. In terms of estate planning documents, a person might want to consider talking to a lawyer about signing a health care proxy even if that person is young. In fact, most young people who have just turned 18-years-old might want to strongly consider signing the document to ensure that the person they want is able to make health care decisions on his or her behalf. This also applies to a durable power of attorney.
4. Contrary to popular belief, it is a good idea for every person to have will or a revocable trust, even if the estate is not that large. If a person dies without one of these documents, then that person's property will be distributed based upon the intestacy laws of the state where the person lived. A person might have no problems with this system, or they might completely disagree with the distribution system. Even if that person has no problem with the system, a person might still want a will to distribute his or her property to someone else who might need their property. For example, the intestacy laws might want to give all of a person's property to his son. Now a person might not have any problems with this, but he might want to give his car to his mother instead. A person would need a will to do this. There are other reasons why a person might want to draft a will. For example, if the person has minor children then that person might want to consider using a will to appoint a guardian.
5. A person might also want to consider reviewing and possibly updating his or her beneficiary designation forms.
6. While I believe that this could be an annex of the first principle, it probably deserves its own spot. A person should always tell their friends and family how much they care about them. A person should do this before they cannot do it anymore.

See Deborah Jacobs, Six Things To Do Before You Die, Forbes, Oct. 12, 2012.

Change at the IRS

Recently, the Commissioner of the IRS has decided to step down this coming November. On November 9, 2012, Commissioner Doug Shulman will leave his position on the last day of his term. Deputy Commissioner for Service and Enforcement Steven T. Miller, a 25-year veteran of the IRS, will replace the old commissioner.

For Miller, the period following his entry into the commissioner's position will be challenging. The new commissioner is entering in a period of uncertainty about the estate tax and will be the person that will lead the IRS in its implementation of the taxes created by Obamacare. In fact, Obamacare has 47 new provisions. Some of these provisions have already come into effect, and some of these provisions will come into effect in the next 18 months. This might become a problem because it might divert resources that the IRS would have used for other efforts and focus them on implementing the health care law taxes. Regardless of the difficulty, Commissioner Shulman stated that it has been his privilege to serve the American people in the capacity of the Commissioner of the IRS.

See Leroy Baker, Change At The Top For Embattled IRS, LowTax: Global Tax & Business Portal, Oct. 11, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Janet Jackson's Lawyer Responds to Vanity Fair Allegations

I previously blogged about an article in Vanity Fair that alleged Janet Jackson held up her brother's burial until the $40,000 deposit she put down to secure a place for him at Forest Lawn Memorial Park was repaid.

Recently, her lawyer has responded to that story, claiming that the article was "'false and defamatory.'"  Her lawyer, Blair G. Brown, says Jackson never delayed the funeral and actually even paid for the funeral. Brown also demands that Vanity Fair retract its statement.  

Vanity Fair responded that it stands by its original story aside from the minor detail that the amount of the deposit was actually $49,000 as opposed to $40,000.  Vanity Fair plans to make that adjustment. 

See Seth Abramovitch, Janet Jackson's Lawyer Responds to Vanity Fair Claims She Delayed Her Brother's Funeral, The Hollywood Reporter, Oct. 9. 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.   

Man Pleads Guilty To Two Felony Counts For Allegedly Falsifying Tax Returns of the Deceased

On Wednesday, Adrian Espiridion Lugo pleaded guilty to two felony counts, including conspiracy to defraud the government through false claims and aggravated identity theft.  

A federal Grand Jury in Phoenix indicted him of 104 counts in January.  He operated a tax preparation business called Uncle Sams Tax Service.  He allegedly used stolen names and Social Security numbers of deceased individuals from California and then filed false tax returns fraudulently claiming tax refunds in the name of the deceased.  Prosecutors posit that Lugo would have the fraudulent refunds delivered to him or deposited into accounts he controlled.  Lugo allegedly filed approximately 34 income tax returns and claimed over $279,000 in feeral tax refund payments.  

Lugo faces up to five years in prison for the false claims count and two years for the identity theft count. If convicted, he is also subject to fine and mandatory restitution.  Sentencing is scheduled for January in Phoenix.  

See Michael Cohn, Uncle Sams Tax Service Founder Pleads Guilty to Identity Theft, Oct. 11, 2012.  

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Michigan Is Soon to Be Among the Best 10 States For Raising an Autistic Child

Michigan's Lt. Gov. Brian Calley signed a bipartisan package of bills in April that requires insurers to offer coverage for autism treatment and diagnosis. The insurance mandate takes effect on Monday, but there is a grace period that allows insurers to start programs at the start of their next plan year.

State regulators launched a website for the Autism Coverage Reimbursement Program.  The fund received a $15 million appropriation for its first year and will reimburse eligible health insurance companies and third-party administrators for paid claims related to autism treatment and diagnosis. Future funding will depend on annual appropriations. 

The Program will accept claims for services provided on or after Oct. 15.  The fund will reimburse insurers in the order that their claims are approved, and reimbursements may not be paid if the fund runs out of money.  

See Melissa Anders, Michigan's Autism Insurance Mandate Kicks in On Monday, MLive, Oct. 12, 2012. 

For more information on planning for autistic children, please see Katherine Owen's article referenced here. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Disbarred Attorney Set to go to Jail For Stealing From an Estate

Roger J. Niemel, a disbarred North Tonawanda attorney, has accepted a two-year sentence for "third-degree grand larceny and second-degree criminal possession of a forged instrument." Mr. Niemel agreed to the sentence through a plea bargain that he accepted. He committed the alleged thefts from 2005 to 2008 by stealing from the estate of Chester Kawalec. However, this was not the first time that Mr. Niemel has committed such an act. In 2011, he previously lost his law license for this exact crime. In March of that year, he misappropriated $20,500 from a Grand Island woman. In the course of the act, Niemel also violated a number of rules from the code of professional conduct.

In this instance, Mr. Niemel wrote a number of checks to himself that range from as little as $500 to as much as $5000. When confronted about why he committed this offense, Mr. Niemel tried to blame his co-executor and one of the beneficiaries, Marcia Poirer-DeNapoli. Mr. Niemel claimed that she would freely give him the money for the estate. He further claimed that he needed to pay the bills of the estate. The assistant district attorney working the case argued that even if we were to accept Mr. Niemel's argument the estate did not have that many bills to equal the amount that was taken from the estate.

See Thomas Prohaska, Disbarred NT Lawyer Headed to Jail For Looting Estate, The Buffalo News, Oct. 6, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Illinois -- How to Conduct a Will Execution Ceremony

Gerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University) and Eugene Kozob (Illinois attorney) have recently posted on SSRN their article entitled How to Conduct an Illinois Will Execution, Trusts & Estates (Illinois State Bar Association), Oct. 2012, at 1.  Here is the abstract of their article:

One of the most crucial stages of a client’s estate plan is the will execution ceremony — the point at which the client memorializes his or her desires regarding at-death distribution of property. Unfortunately, attorneys may handle this key event in a casual or sloppy fashion. There are even reports of attorneys mailing or hand-delivering unsigned wills to clients along with will execution instructions. Some attorneys allow law clerks or paralegals to supervise a will execution ceremony. This practice is questionable not only because it raises the likelihood of error, but also because the delegation of responsibility may violate the rules of professional conduct proscribing the aiding of a non-lawyer in the practice of law. An unprofessional or unsupervised ceremony may provide the necessary ammunition for a will contestant successfully to challenge a will.

Since the earliest recognition of the power of testation, some type of ceremony has accompanied the exercise of that power. Will ceremonies help demonstrate that the testator was not acting in a casual, haphazard, whimsical, or capricious manner by furnishing proof that the testator deliberated about testamentary desires and had a fixed purpose in mind when making the will. The ceremonies also provide evidence that the will was actually made by the testator, by impressing the act on the minds of witnesses.

A proper ceremony, coupled with sensitive and tactful counseling by the attorney during the entire estate planning process, may make it easier for clients to cope with the inevitability of death. Unfortunately, attorneys have been accused of showing “little concern about the therapeutic counseling that goes on in an ‘estate planning’ client’s experience.” Thomas Shaffer, The “Estate Planning” Counselor and Values Destroyed by Death, 55 Iowa L. Rev. 376, 376 (1969). You need to remember that many clients make only one will during the client’s entire life and that the psychological effects of confronting death are strong. Even if you conduct scores of will ceremonies each year, you must not lose sight of the client’s emotions and the psychological benefits that may be obtained through client interviews and will ceremonies.

One commentator has somewhat humorously summarized the psychological benefits of the ceremony as follows:

When a client comes in to do something about his estate planning problem, he wants a lot of things. He wants solace because he is thinking about the day when he will not be here. He wants approval of what he has done and what he proposes to do. And he wants something else he almost never gets — a ceremony. Now, life offers very few opportunities for high ceremony. Birth is not a very good time. It is too laborious. Marriage is handled in rather a spectacular style. Nobody has been able to do much with divorce on the ceremonial side. For death, there is a ceremony, but it is hard for a decedent to be there to enjoy it. He is the principal.

The estate planning process . . . ought to be a high ceremonial occasion because a client should be getting great intangible satisfactions about these significant decisions that he has made that were embodied in the instruments he leaves behind. Estate Planning for Human Beings, 3 U. Miami Inst. on Est. Plan. § 69.1902 (P. Heckerling ed. 1969) (statement of Dean Willard H. Pedrick, panelist).

This article suggests a comprehensive step-by-step format for a proper will execution ceremony under Illinois law that can provide economical “will insurance” for every testator.

Bomb Squad Called to Attorney's Office

A bomb squad was called to an attorney's office in Florida, after someone at the firm called the sheriff's office to learn what should be done about the two grenades they found in a client's home. One of the firm's clients was a World War II veteran and owned two grenades. A person who worked at the office found the grenades in the clients homes after he passed away. He decided to bring the grenades to the firm in Lake Worth, Florida. The sheriff's office contends that if anyone has a military-grade explosive device in their possession, like a grenade, then that person should contact their local authorities for help to dispose of the device.

See Martha Neil, South Florida Law Firm Calls Bomb Squad to Office to Deal With Deceased Client's Hand Grenades, ABA Journal, Oct. 10, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

2011 Estate and Gift Tax Statistics

The IRS recently posted the Statistics of the Estate and Gift Tax for the past year. The top spreadsheet "shows income, deduction, and tax computation data, classified by taxability of estate tax return and size of estate. The bottom spreadsheet shows "data from a sample of returns filed during 2011, including information regarding total gifts, deductions, credits, and net tax amounts. The data are presented by tax status and size of total taxable gifts.  Below is an excerpt from this spreadsheet showing the number and amount of total gifts and annual exclusions classified by tax status and size of taxable gift." For a more detailed explanation, please visit Adam Reid blog about this the IRS releasing these tax statistics. I have provided a link below.

Table 1. Estate Tax Returns Filed in 2011, by Tax Status and Size of Gross Estate [Money amounts are in thousands of dollars.] Tax status and size of gross estate	Gross estate for tax purposes
	Number	Money Amount   (in thousands)
All Returns	4,588	48,009,811
Under $3.5 million	601	1,427,959
$3.5 million < $5.0 million	990	4,129,975
$5.0 million < $10.0 million	2,110	13,874,974
$10.0 million < $20.0 million	563	7,531,234
$20.0 million or more	324	21,045,670
All Taxable Returns	1,480	19,832,684
Under $3.5 million	174	428,126
$3.5 million < $5.0 million	278	1,181,171
$5.0 million < $10.0 million	654	4,443,130
$10.0 million < $20.0 million	218	2,967,290
$20.0 million or more	156	10,812,968
All Nontaxable Returns	3,108	28,177,127
Under $3.5 million	427	999,833
$3.5 million < $5.0 million	712	2,948,804
$5.0 million < $10.0 million	1,456	9,431,844
$10.0 million < $20.0 million	345	4,563,945
$20.0 million or more	168	10,232,702

Gift Tax Returns Filed in 2011: Total Gifts of Donor, Deductions, Credits, and Net Tax on Current Period Gifts, by Tax Status and Size of Taxable Gifts  [All figures are estimates based on a sample-- money amounts are in whole dollars.] Tax status and size of taxable gifts, current period	Total gifts		Total annual exclusions
	Number	Amount [in whole dollars]	Number	Amount  [in whole dollars]
All returns, taxable and nontaxable	219,544	50,949,668,470	209,107	9,289,355,706
$0	78,475	5,846,235,587	78,026	3,688,130,146
Less than $2,500	10,251	785,823,777	8,315	371,842,290
$2,500 under $5,000	6,970	366,805,586	6,947	286,915,844
$5,000 under $10,000	8,324	635,855,597	7,618	360,724,363
$10,000 under $25,000	24,975	1,695,285,728	23,889	872,302,122
$25,000 under $50,000	18,940	1,737,947,570	17,516	707,042,300
$50,000 under $75,000	12,041	1,366,767,680	11,848	530,816,527
$75,000 under $100,000	9,432	1,224,191,247	9,241	282,976,395
$100,000 under $250,000	25,115	5,553,271,637	23,365	954,234,979
$250,000 under $500,000	12,780	5,426,118,527	11,496	529,835,653
$500,000 under $1 million	9,201	7,343,893,148	8,133	390,199,219
$1 million or more	3,040	18,967,472,386	2,712	314,335,867
Nontaxable returns	208,562	29,067,470,991	198,851	8,234,949,491
$0	78,475	5,846,235,587	78,026	3,688,130,146
Less than $2,500	**16,264	**974,660,464	**14,374	**563,579,918
$2,500 under $5,000	**	**	**	**
$5,000 under $10,000	7,942	501,557,270	7,248	301,599,048
$10,000 under $25,000	24,011	1,510,128,793	22,981	792,085,547
$25,000 under $50,000	17,833	1,392,787,860	16,465	611,713,985
$50,000 under $75,000	11,327	1,203,627,397	11,144	467,461,200
$75,000 under $100,000	8,912	1,087,396,855	8,732	239,038,055
$100,000 under $250,000	23,522	4,935,192,366	21,976	821,925,013
$250,000 under $500,000	11,664	4,755,865,011	10,447	430,674,604
$500,000 under $1 million	8,177	6,386,592,900	7,157	299,823,572
$1 million or more	434	473,426,487	300	18,918,402
Taxable returns	10,982	21,882,197,479	10,256	1,054,406,215
$0	0	0	0	0
Less than $2,500	**958	**177,968,900	**888	**95,178,217
$2,500 under $5,000	**	**	**	**
$5,000 under $10,000	382	134,298,327	371	59,125,315
$10,000 under $25,000	964	185,156,934	908	80,216,576
$25,000 under $50,000	1,107	345,159,711	1,051	95,328,316
$50,000 under $75,000	715	163,140,283	703	63,355,327
$75,000 under $100,000	520	136,794,391	509	43,938,340
$100,000 under $250,000	1,592	618,079,271	1,389	132,309,965
$250,000 under $500,000	1,115	670,253,516	1,049	99,161,048
$500,000 under $1 million	1,024	957,300,247	976	90,375,647
$1 million or more	2,606	18,494,045,898	2,412	295,417,465

See Adam D. Reid, IRS Release 2011 Tax Stats - Estate Tax and Gift Statistics, Arkansas Tax & Estate Planning Blog, Oct. 11, 2012.

Special thanks to Adam D. Reid (Tax and Estate Planning Practice Group, Barber Law Firm) for bringing this article to my attention. 

Judge Approves Dewey & LeBouef Partner Settlement

US bankruptcy judge Martin Glenn recently approved the US firm Dewey & LeBoeuf's settlement with former partners.  The settlement involved a Partner Contribution Plan that asked ex-partners for a contribution to the estate in exchange for being absolved of future liability. The settlement raised over $70 million for the estate, and partners who contributed were ranted a broad release from liability.  That release does not include claims made under the unfinished business doctrine or against claims made by third parties against partners who have signed up or the firm's insurance policies. 

The process to approve this plan has been going on since the firm went under at the end of May 2012.  Comparatively, however, the resolution has been a speedy one. 

See Joshua Freedman, Dewey Finally Gets Go-ahead for Partner Settlement, The Lawyer, Oct. 10, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

New Wealth Advisor App

ACTEC recently released its free Wealth Advisor App for your iPad. Davis Brown Law Firm did a feature on the app that indicates you can use the app for the following purposes: 

• Search for ACTEC Fellows, the leading trust and estate practitioners in the U.S. and abroad (ACTEC Roster 2012-2013)
• Access frequently-cited estate planning statutes presented in state-by-state summaries (Death Tax Tables, Domestic Asset Protection Trust Statutes, No Contest Clauses, Rule Against Perpetuities, UPIA and Modern Portfolio Trust Investment Statutes, States with Decanting Statutes Passed or Proposed, Bases of State Income Taxation of Nongrantor Trusts)
• Reference AFR ("Applicable Federal Interest Rate") and 7520 Rates (Includes the applicable federal interest rates, the adjusted federal short-term, mid-term and long-term rate, the adjusted federal long-term tax-exempt rate, and the Section 7520 rate. Rates as prescribed by section 1274 of the Internal Revenue Code.)
• Calculate "GRATs" (Grantor Retained Annuity Trusts)
• Monitor trust and estate developments in Washington, D.C., and across the country (Capital Letters by Ronald D. Aucutt and Musings on Current Events by Stephen R. Akers)

See Davis, Brown, Koehn, Shors & Roberts, P.C., ACTEC Wealth Advisor: A New App For Your iPad, JDSupra, Oct. 10, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Article Recommending Certain Changes To Life Insurance Policy Disclosures

Michael A. Barrese (University of Connecticut School of Law, J.D. 2012) recently published his article entitled Not in the Fine Print: Recommended Changes to Life Insurance Policy Disclosures Regarding Retained Asset Accounts, 18 Conn. Ins. L.J. 533 (2012).  The introduction to the article is below:  

Tom is the primary breadwinner of his family. In order to protect his wife and children financially in the event that he passes away, he goes online and researches life insurance policies. After becoming familiar with the different forms of life insurance, Tom purchases a $250,000 life insurance policy from a large insurance company. When he purchases the policy, he makes his wife, Melissa, the primary beneficiary. Under the policy, in the event that Tom dies, Melissa is entitled to a lump-sum $250,000 payment.

Six months after purchasing the policy Tom dies in a car accident. Melissa, as beneficiary, is entitled to a lump sum $250,000 payment per the terms of the policy. In the past, this would have been no problem, the insurance company would merely write the $250,000 check to Melissa. However, in 1984, something changed.  Some large insurance companies rolled out a new form of payment, the Retained Asset Account.

Retained Asset Accounts (“RAAs”) are created when life insurance carriers provide the beneficiary of a life insurance policy with a pseudo-checkbook instead of a single lump sum check. Instead of being paid out with a check for the entire amount of the life insurance policy, the proceeds are placed into the insurer's general corporate account from which the beneficiary can draft funds with the use of the pseudo-checkbook.

Because of this change, Melissa does not receive a lump-sum payment; rather she receives a pseudo-checkbook from the insurance company that appears to be drawn from Bank A. Confused by this, Melissa reads the policy disclosure and learns that this pseudo-checkbook entitles her to write checks against the Retained Asset Account up to the value of the insurance policy. With this knowledge, Melissa realizes that she has some options. She can write a pseudo-check for the full amount of the policy and deposit it into her own bank account or she can leave the funds, in whole or in part, in the Retained Asset Account until she has an immediate need for them.

As it turns out, the insurance company has not deposited any of Melissa's funds into an account at Bank A. Instead, the funds were deposited in the insurance company's corporate account at Bank C. When Melissa attempts to deposit a pseudo-check at her bank, Bank B, there is a delay. The delay is caused by the clearing process that the pseudo-check has to go through in order to be deposited. Instead of Bank B drawing the funds directly from Bank A, Bank B must go to the insurance company who then requests the release of funds from Bank C to Bank B. At the end of the day, Melissa still gets the money she is owed, it just takes longer than it would have if she had received an ordinary check for the full amount of the policy from the start.

The practice of providing Retained Asset Accounts in lieu of a lump-sum check was critically described in the article “Fallen Soldiers' Families Denied Cash as Insurers Profit,” by Bloomberg journalist, David Evans. The issue made its way into other media outlets and eventually lawsuits were filed in Federal District Court regarding the policy disclosures and administration of the Retained Asset Accounts.

This note expands upon the discussion in the mainstream media by presenting a description of both benefits and criticisms of Retained Asset Accounts as well as recommendations for changes to policy disclosures that would improve the image of this type of account. In Section II, the paper discusses the benefits and criticisms of Retained Asset Accounts. In Section III, disclosure issues are identified and solutions are presented. The note concludes that there are benefits to both the beneficiaries and to the insurance companies but there are also components of Retained Asset Accounts that are questionable and need to change. Because of these questionable components of Retained Asset Accounts, it would be wise for insurance companies to improve their disclosure statements regarding Retained Asset Accounts in order to avoid both bad publicity and potential litigation. 

Gift-Tax Exclusion and Other Ways to Avoid Federal Gift Tax

Generally, each year, individuals can receive up to $13,000 as a gift without being hit by a federal gift tax.  Because of cumulative indexing, this amount should rise to $14,000 per person in 2013.  In addition to these annual amounts, there are two kinds of exempt, tax-free gifts that do not have a cap on the amount that can be gifted: gifts for tuition and medical expenses.   

Gifts for Tuition: 

The Internal Revenue Code (IRC) provides that amounts paid on behalf of an individual as tuition to educational organizations are excluded from gift-tax calculations.  This exception applies regardless of the relationship between the donor and the donee.  The exclusion applies to tuition costs, but not to costs for books, dorms or boarding.  In order for the exclusion to apply, two requirements have to be met: 

1. Tuition must be paid directly to the qualifying educational institution.  It does not apply to tuition expenses that the donee pays to the educational institution that the donor reimburses. Transfers to trusts that then go to the educational organization do not count either. 

2. The school the donor pays the tuition to must be a qualified educational organization, which is defined in part as one that maintains a regular faculty and curriculum and has students that attend where its educational activities are carried.  The primary function of the educational institution must be offering formal instruction, and it does not include organizations engaged in both educational and non-educational activities unless the non-educational activities are just incidental to the educational ones. 

Medical Expenses:

Section 2503(e) of the IRC allows for an unlimited gift-tax exclusion for amounts that a donor pays directly to a provider for qualified medical expenses. The IRC lays out some limitations to this allowance.  

See Ray Martin, Gift-tax Limits To Rise in 2013, CBSnews, Oct. 10, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

English Woman Cleared of Fraud Charges

Marlene Howes, a woman from Gloucester, was found not guilty of benefits fraud. She was accused of committing fraud for concealing an inheritance that she received from her mother. She cleared of all charges when it was discovered that she only used her inheritance to take of her mother's cats. Her mother, Barbara Sutton, specifically left the inheritance to Howes so that her cats "could have 'the best of everything.'" The Magistrate Judge stated that she was free to go because she was only carrying out the wishes of her mother. 

Upon her mother's death, Ms. Howes sold her mother's house and brought her cats to live with her. She took the funds from the sale of her mother's house and placed them in an account for her cats. Howes also stated that she was unaware that she needed to inform the Department of Work and Pensions. 

See Telegraph Reporters, Woman Who Spent £50,000 on Cats Cleared of Benefits Fraud, The Telegraph, Oct. 9, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Woman With Parkinson's Disease Loses Her Parking Spot in Manhattan

A 93-year-old woman Virginia Rubio had her parking spot in Manhattan taken from her by her co-op board. Her son, Richard Rubio, is now trying to help his mother get her spot back. The co-op board reportedly took her spot because she abandoned it and was not paying for the spot. Richard, however, contends that the co-op board wrongfully took her spot because she did not abandon the spot and the money for her spot was suppose to be paid with funds from his bank account. Richard contends that the reasons that his mother did not abandon the spot was because he took her car to get some repairs performed on the car.

Now, Virginia Rubio is fighting the decision of the co-op board and has brought suit against them. Richard claimed that his mother needs the spot for several reasons. First, she has Parkinson's Disease and needs the car to get to the doctor's office. Her son apparently drives her because she has lost the ability to do so. Second, she has a limited income and she owned the spot at a good monthly rental price.

See Caroline Fairchild, Virginia Rubino, 93-Year-Old New York Woman, Loses Parking Spot To Co-Op Board, The Huffington Post, Oct. 8, 2012.

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.

The Times Did Not Defame the Sir Elton John

The High Court in England and Wales recently held that The Times newspaper did not defame Sir Elton John with the two articles that it published about the singer's taxes. More specifically, The Times wrote two articles divulging tax secrets that famous tax avoiders have allegedly used. The articles claimed that John used the services of an infamous accoutant Patrick McKenna in a tax avoidance scheme. 

The High Court ruled that the articles were not defamatory or had a defamatory meaning. Thus, the court rejected John's argument that the articles were "'severely damaging'" to his reputation. The court further reasoned that the assertions by The Times were "'so lacking any possible basis that it is obviously to be rejected.'" He concluded that this was the case because the readership of The Times is more educated and the "'hypothetical reasonable reader'" would not conclude that John was actually involved in a tax avoidance scheme.

See Josh Halliday, Elton John 'Not Libelled by Times Tax Avoidance Article', The Guardian, Oct. 10, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Fight Over Italian Tycoon's Estate

The niece and nephew of Piero Curati and his sister are at odds over which of his two wills should control the disposition of his estate. The two wills at dispute are one that he created in 1980 while Mr. Curati was in United Kingdom and the 1994 will that he created in his native country of Italy. If the 1980 will is valid, then his niece and nephew, Sylvana and Roberto Perdoni, will inherit about £1.8 million after taxes. However, if the Italian will is valid, then his sister, Carmen Curati, will inherit the entire £4 million estate.

At court, his sister testified that Mr. Curati never considered himself to be an English citizen even though he made his fortune in United Kingdom. She stated that while he lived in United Kingdom he continued to speak his native language. The barrister who represented the sister claimed that Mr. Curati would have likely wanted his English will destroyed and his nephew and niece disinherited. While an english court heard the dispute over the will, the hearing divulged into a discussion of the character of the deceased. His niece testified that Mr. Curati was a cruel man who enjoyed the company of prostitutes. Even with his deplorable character, Sylvana claimed that Mr. Curati always considered home to be where his wife Emilia lived. She argued that because Emilia was British, Mr. Curati must have believed that his home was in the United Kingdom. The court agreed with the niece and nephew because Mr. Curati considered "England as his home and considered himself to be British." His sister is challenging the decision.

See Telegraph Reporters, Family At War Over Legacy of Italian Tycoon, The Telegraph, Oct. 10, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Even if Upheld Occastionallly, Holographic Wills Are Risky

Recently, against the odds, the court upheld a holographic will.  A man wrote a will on a paper towel leaving his estate to his girlfriend and his ex-wife and three children contested the will.  The court upheld the will despite the objections.

Even though holographic wills are successful on occasion, it is not advisable to leave your estate plan to a holographic will.  Many people have unique circumstances that complicate their estate planning  Furthermore, the validity of the holographic will may have ended well, but it took a long drawn out court battle to get there. Ultimately, the fees to pay for that attorney in the afore-mentioned holographic will battle likely cost more than it would have to get an attorney to draft a proper will.  

See Rania Combs, A Holographic Will That Worked...But At What Cost?, Texas Wills and Trusts Online, Sept. 17, 2012.

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