Wills, Trusts & Estates Prof Blog

Sherman Hemsley Can Finally Be Buried

As I previously discussed, On Friday, the judge ruled that Sherman Hemsley's longtime friend, Flora Enchinton Bernal can proceed to bury Sherman and Administer his estate.

Even though DNA results showed that Richard Thornton is Hemsley's half brother, Judge Patricia B. Chew declared Hemsley's will, which named Enchinton as executor of his estate and left her all his possessions, to be valid.  The attorney and notary who did Hemsley's will testified that he never suspected Hemsley lacked capacity at any point when drafting and signing the will.  The witnesses for the will signing also testified that Hemsley had full use of his facilities when he signed the will.

Both Thornton and Enchinton agree to give Hemsley a military burial.

See Judge: 'Jeffersons' Actor Sherman Hemsley's Will Valid, Actor Can Be Buried, accesshollywood, Nov. 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.

Governing Law Does Not Determine A Trust's State Income Tax Liability

While it is well-established that if a trustee wants to know what law governs the trust he or she should look to the choice of law provision in the applicable trust instrument. However, if the trustee wants to know whether the trust must pay a state income tax on the ordinary and capital gains earned on the principal of the trust, the trustee must look to a few different factors. In particular, a trustee might want to answer the following questions because these are crucial to determining whether he must pay a state income tax.

1. "Where does the testator reside?"
2. "Where does the [settlor] reside?"
3. "Where will the trustee administer the trust?"
4. "Where does the trustee reside?"
5. "Where do current and future beneficiaries reside?"

It is important to note that there are also a few states that follow the governing law of the trust, such as Louisiana, Idaho, and North Dakota.

See Richard W. Nenno, Governing Law Matters Not When Assessing Whether a Trustee Must Pay a State's Income Tax, Bloomberg, BNA, Nov. 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.

Lawyer, Philanthropist, Defrauder

Joseph Caramadre is the first two and perhaps the latter. He is accused of using the identities of terminally ill people on annuities. The annuities that he used had death benefits. These benefits allow the owner of the annuity to collect the profits or receive the initial investment if the stocks were to fall. Caramadre and other investors allegedly used these annuities to make millions of dollars. The United States Attorney General's Office has charged Caramadre with several crimes, including "wire fraud, identity fraud, identity theft and money laundering." If convicted, Caramadre could be sentenced to more than 100 years in prison.

See Jim Taricani, Philanthropist's Fraud Trial to Begin Next Week, NBC, Nov. 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.

Supreme Court to Consider Cert Petitions Involving Gay Marriage

At a private conference on November 20, the U.S. Supreme Court will consider several cert petitions involving gay marriage. The justices will consider 10 petitions and it is almost certain that the court will agree to hear at least one case on the subject.

The Obama administration recommends that the court hear Windsor v. United States. In Windsor, the 2nd Circuit Court of Appeals struck down a provision of the Defense of Marriage Act that bars the federal government from giving benefits to married gay couples. House Republicans argue that this case presents standing issues because it is not even clear if plaintiff Edith Windsor's Canadian marriage would have been accepted by New York because it was performed before New York allowed same sex marriage.

House republicans would like for the court to review what is now known as Gill v. Office of Personnel Management. In this case, the 1st Circuit Court of Appeals also struck down DOMA. If this case is heard, Justice Elena Kagan could recuse herself because of her work as Solicitor General on the litigation.

See Debra Cassens Weiss, Supreme Court to Consider Gay-Marriage Cert Petitions Before Thanksgiving, ABAJournal, Nov. 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.

Ten Tips For Military Families

Kiplinger lists ten financial tips for military families. They are as follows: 

1. Take advantage of low-cost investments. Servicemembers have access to the thrift savings plan and the Roth TSP which is a Roth IRA without the income restrictions. 

2. Get 10% on your savings, guaranteed. The military Savings Deposit Program lets deployed servicemembers invest up to $10,000 in the program and receive 10% annual interest, compounded quarterly, for up to three months after their return.  

3. Benefit from tax-free in, tax-free out. If you're receiving tax-free combat-zone pay, your money goes into the Roth tax-free and your contributions and your earnings come out tax-free. 

4. Transfer your education benefits. If you have served at least 36 months since September 11, 2001, you have access to the Post-9/11 GI Bill which can cover up to four academic years at a public college or up to $17,500 per year for a private college or foreign school. 

5. Sign up for inexpensive life insurance. Servicemembers have access to one of the lowest-cost life insurance programs available.

6. Maximize your tax breaks. As long as they are in the military, servicemembers can maintain legal residence in one state even if they are transferred to another state.  

7. Take advantage of low loan rates. The Servicemembers Civil Relief Act provides special legal benefits for servicemembers, including an interest-rate cap of 6% on any loans you took out before you were called to active duty. 

8. Make the most of housing breaks. Take advantage of the perks, including tax-free housing allowance and access to Veterans Administration loans. 

9. Calculate a comparable salary. When thinking about leaving the military, make careful calculations to figure out how your new job compares to your military career. Be sure to consider the military benefits that you're giving up as well. 

10. Make the most of resources for finding a new job. When you're ready to leave the military, if you have trouble translating your military skills to the civilian job market, you can get help from the military community-service office on your base. 

See Kimberly Lankford, 10 Financial Tips for Military Families, Kiplinger, Nov. 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.

Judge Deceives Former Client

A District Court judge in Malahide, Dublin is set to go to trial for deceiving a former client of hers by writing a will for him that did not do what he intended. The judge here, Heather Perrin, was once the head solicitor at her firm in Dublin. One of her clients, Thomas Davis, came to her so that she could write a will for him that would bequeath his property to his wife's nieces. Mr. Davis did not inspect the document because he trusted Ms. Perrin. When Ms. Perrin became a judge, a new solicitor took over her cases and informed Mr. Davis that his will, in fact, gave about half of his estate to the children of Judge Perrin. At trial, Judge Perrin claimed in her defense that she did what Mr. Davis wanted. She claimed that the reason for this change was that Mr. Davis stated that he was not happy with how his nieces were irresponsible with their money.

See District Court Judge's Deception Trial Opens, BreakingNews.ie, Nov. 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.

New Haven Funeral Home Director Blamed Ex-Wife For Mishandling Funeral Home Funds

John Olszewski, an ex-Michigan Funeral Home Director, has pleaded guilty to mishandling $13,000 in prepaid burial expenses in a plea bargain agreement with prosecutors. He was recently sentenced by a judge and ordered to return the funds to the six customers that were affected.  As a result of these events, Olszewski had to close his funeral home in New Haven, Michigan. Mr. Olszewski blames his wife for actually misappropriating the funds because he alleges that she failed to place the funds he received in escrow.

See Former New Haven Funeral Director Blames Ex For Burial Foul-Up, Click On Detroit, Nov. 8, 2012.

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

Tom Hanks and Other Celebrities Defrauded By Insurance Broker

An insurance broker from Southern California, Jerry B. Goldman, has been arrested and charged with defrauding Tom Hanks and other celebrity clients. The broker allegedly overcharged Tom Hanks, musician Andy Summers, and others on their insurance premiums. He would collect the inflated insurance premiums, send the company the correct amount, and keep the surplus that he charged. Goldman was quite thorough in his criminal actions. When his clients would ask for their policies, Goldman would alter the document so that it did not disclose their actual premiums. Goldman did this "'to lull his clients into a false sense of security.'" On October 30, 2012, a federal grand jury indicted him for overcharging the victims over $800,000 on their insurance policies.

See Robert Jablon, Insurance Broker Charged With Defrauding Tom Hanks, Kypost.com, Nov. 7, 2012.

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

Congress Won't Likely Address Estate Tax

Congress probably will not act soon enough to stop the $5 million estate and gift tax exemption from going back to $1 million in the new year.  However, this does not necessarily mean that clients only have 7 more weeks to take advantage of this planning opportunity.  

Thomas Pauloski, national managing director of Alliance Bernstein's Wealth Management Group, predicts that Congress will come up with less dramatic increases to the estate and gift tax provisions in the first nine months and make them retroactive to Jan. 1, 2013.

With this in mind, Mr. Pauloski recommends setting up an irrevocable grantor trust before the end of the year and funding it with the maximum $5 million for an individual or $10 million for a couple.  Ideally, the trust should be funded with assets that are easy to value, such as cash and stock. Next year the trust can buy assets that are more difficult to value.

See Liz Skinner, Estate Department: Inheritance Tax Changes Likely to Be Retroactive, InvestmentNews, Nov. 8, 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 on 2012 Transfer Tax Exemptions And Spousal Lifetime Access Trusts

Parker F. Taylor (Associate, Greenberg Traurig) and Jason A. Lederman (Associate, Greenberg Traurig recently published their article entitled Cashing In on 2012 Transfer Tax Exemptions Using Spousal Lifetime Access Trusts.  The abstract is available below: 

Unless the law is changed, at the end of 2012, the favorable estate and generation-skipping transfer (GST) tax rates and the amounts sheltered from those taxes under the Tax Relief Act of 2010 will end and less favorable ones will be reinstated. In view of the potential increases in rates and reduction in shelters, clients should consider strategies to use their shelters during the remaining days of 2012 before up to $8,240,000 of transfer tax shelter potentially is lost forever.

Minnesota Says No to a Constitution Rewrite that Redefines Marriage

Minnesota's proposal to amend its constitution to define marriage between a man and a woman was rejected by popular vote yesterday.  Minnesota is the first state to successfully defeat such an attempt to redefine marriage in the constitution.  

See Erin Fuchs, Minnesota Rejects Anti-Gay Marriage Amendment, Business Insider, Nov. 7, 2012.

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

 

Who Watches What the IRS Watches?

A government report by the Treasury Inspector General for Tax Administration (TIGTA) has revealed that employees of the Internal Revenue Service have inappropriately accessed taxpayer data. The Inspector General argued that the IRS should improve the processes in its audit trials that ensure that it can identify employees who are inappropriately accessing taxpayer information. TIGTA did indicate in its report that the IRS is working at this moment to correct the problems that it has had with this and noted that the IRS could do more in this area.

TIGTA offered several solutions to the IRS, but its officials disagreed to collect more information than it already collects on matters related to the audit trials. Officials at the IRS also disagreed that "validation should be completed before final approval has been granted of audit plans by the IRS's Employee Security Audit Trail (ESAT) office."

See Michael Cohn, Unauthorized IRS Employees Snoop Taxpayer Data, AccountingToday, Nov. 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.

No Charges Against the Candidate for the Plainfield Township Supervisor

The Kent County Prosecutor's Office in Michigan has decided to not press charges against a man running for the Plainfield Township Supervisor. The man, Jay Spencer, is the trustee of his family trust and was under investigation for reportedly mishandling his family's trust. In his position, he reportedly loaned $28,000 from the trust's principal to several of his businesses. The prosecutor's office has cleared Mr. Spencer because there was nothing criminal about his actions. The trust document allows the trustee to loan money to any member of the family, including himself through marriage. Mr. Spencer is married to granddaughter of the settlor of the trust, Norman Boike. Additionally, Mr. Spencer did pay the money back to the trust. 

See Henry Erb, No Charges Against Plfld Twp Candidate, WoodTV, Nov. 5, 2012.

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

Americans Elect Two Dead Politicians

"Florida Democrat Earl K. Wood and Alabama Republican Charles Beasley" have a good amount on in common now. They "both won their respective elections but...will not take office" considering that both passed away before the vote was even taken in their races.

Democrat Wood passed away form natural causes at the age 96 weeks before the general election. Wood was seeking re-election in his office, Orange County Tax Collector, but had decided to step down after criticism was levied against him. He decided to run for re-election when he learned that a past political adversary had entered the race. Even though he passed away, he still won the general election after winning 56% of the vote. 

Republican Beasley passed away from what is likely an aneurysm. He ran for re-election "on the Bibb County Commission in central Alabama." He won a little more than half of the vote. 

See Barbara Liston and Verna Gates, Dead Candidates Win Elections in Florida, Alabama, Reuters, Nov. 7, 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.

Book on Disclaimers

Christopher P. Cline (Attorney, Wells Fargo Bank's Regional Wealth Management Director) recently published a book entitled, Disclaimers in Estate Planning (2d ed., 2012). Below is a description of the book provided by the publisher, the American Bar Association:

Disclaimers are governed by both state and federal law. Section 2518 introduced the term "qualified disclaimer" for federal transfer tax purposes, but has little impact on the state law of disclaimers, and does not apply to disclaimers made before 1977. For those earlier disclaimers (which will be fairly rare) the tax law that applies involves a tangle of historical decisions, rulings and regulations. All of   this requires that the first thing a practitioner must do when determining whether a disclaimer is appropriate is to determine which federal law applies and how state law will affect it. 

Disclaimers in Estate Planning by Christopher P. Cline assists the estate planner in making those determinations, understanding the applicable Uniform Acts involved and the specific issues raised by Section 2518, and creating the best strategies and techniques for effectively utilizing disclaimers.

        Topics covered include:

• State disclaimer laws
• Federal tax law of pre-1977 transfers
• Federal tax law of the qualified disclaimer (Section 2518)
• General transfer tax uses of disclaimer
• Using disclaimers for credit shelter drafting and repairs
• More sophisticated tax disclaimer techniques
• Disclaimer planning with generation-skipping transfers
• Disclaimer for income tax planning and creditor avoidance
• Potential disclaimer problems 

Four States Vote In Favor of Gay Marriage

Yesterday, voters in Maine, Maryland and Washington approved same-sex marriage. And in Minnesota, they defeated a proposed constitutional amendment that would have banned same-sex marriage in the state. Now a total of nine states have approved same-sex marriage.  Another 12 states allow domestic partnerships, giving same-sex couples varying degrees of rights. 

Despite these victories, those who want to achieve marriage equality for same-sex couples still have a long road ahead.  DOMA is a particularly large hurdle, barring federal recognition of all same-sex marriages. The Supreme Court will likely consider the constitutionality of DOMA this term. 

See Deborah L. Jacobs, Gay Marriage Scores Victories in All Four States That Considered It,  But Tough Road Lies Ahead, Forbes, Nov. 7, 2012. 

Australia Can Claim An Income Tax Deduction for Certain Donations to Sandy

The Australian government declared Hurricane Sandy a disaster for tax purposes. As a result, Australian taxpayers can claim an income tax deduction for donations they make to the relief effort.  

To get formal endorsement, Australian funds need to apply to the Australian Tax Office. Taxpayers are advised to retain a receipt for their donation.  Notably, the opportunity to deduct is somewhat limited because only certain types of gifts are tax deductible. 

See Mary Swire, Australia Declares Sandy A Disaster for Tax Purposes, USA-Tax-News.com, Nov. 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.

Article on Recent Developments In Various Areas

Sharon L. Klein (Head of wealth advisory at Lazard Wealth Management LLC) recently published her article entitled A Potpurri of Developments: Wandry Appeal Dismissed, Same-Sex Marriage Developments & 2013 Inflation Adjustments (Including $14,000 Annual Gift Tax Exclusion).  The abstract of the article is below: 

The article presents some of the latest developments in the estate planning world: 

           Wandry Parties Agree to Dismiss Appeal to 10th Circuit with Prejudice

On March 26, 2012, the Tax Court issued what has been heralded as a ground breaking decision in Wandry v. Commissioner, T.C. Memo 2012-88. The Court upheld a stated dollar value defined value clause of gifts of LLC interests, in which no charity was involved in the formula allocation. A Notice of Appeal to the 10th Circuit was filed on August 28.

          Same-Sex Marriage Developments

•         Rhode Island Allows Marital Deduction for Same-Sex Spouses and Civil Union Partners 
•     New Jersey Introduces Bill Allowing Executor to File Joint Tax Returns With Surviving         Same-Sex Partner 
•         IRS has posted questions and answers to provide information to same-sex partners whose         marriage/union is recognized by state law.

 2013 Inflation/Cost of Living Adjustments

 On October 18, the IRS announced (1) 2013 annual inflation adjustments for more than two dozen tax provisions and (2) 2013 cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items.

Italian Woman Leaves Entire Estate To Her Dog

An elderly Italian woman has bequeathed 2 million euros worth of property to her beloved dog.  Under her will, her dog Kikko will inherit, two apartments, several land estates, and bank accounts.  Italian law does not give recognize the legal concept of bequeathing property to domestic animals, so persons who want to do so have to appoint an executor of their will.  That executor then ensures a worthy life-long existence of the domestic animal after receiving the access to all bequeathed valuables.  In the present case, the woman has appointed her lawyer as the executor of her will. 

See Old Italian Lady Bequeaths $2.5 Mln To Her Beloved Dog, RiaNovosti, Oct. 21, 2012. 

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

Same-Sex Initiatives Pass In Several States

Last night was a historic general election day for advocates of same-sex rights. Two states, Maryland and Maine voted to give same-sex couples the right to marry. In addition to this, the voters of Minnesota voted to reject a proposition that would have changed the definition of marriage to prohibit same-sex marriage. On a related note, "Wisconsin elected America's first openly lesbian senator, Democrat Tammy Baldwin, and President Obama became the first president to openly support same-sex marriage and get re-elected." Pollsters argue that the reason for this shift is the changing attitudes of Americans towards same-sex marriage. Both provisions are different but accomplish the same goals. In addition, both statutes have a provision that provide an exception that would allow a member of the clergy to refuse to marry a homosexual couple if it is against their religious convictions. 

Of the states that permit same-sex marriage, these two states are the only states that have permitted same-sex marriage based upon a voter initiate. The other six states allow same-sex marriage because of the actions of judges or their state's legislature.

See Ben Brumfield, Voters Approve Same-sex Marriage For The First Time, CNN, Nov. 7, 2012.