Wills, Trusts & Estates Prof Blog

Son Passes Away Before Parents Could Harvest Sperm

I previously blogged about two Roanoke parents who wanted to harvest their son's sperm so they could have grandchildren in the future if his condition did not improve.  

After their 19-year old son, Rufus Arthur McGill, was in a car accident that landed him in critical condition, parents Jerri and Rufus McGill were faced with deciding whether to end life support for their son.  They were also fighting against the law when they wanted to collect and harvest their son's sperm to keep his legacy going.  Since Rufus Arthur is considered an adult, his parents could not legally collect his sperm without his express consent, which he was unable to give in his condition.

Sadly, Mr. And Mrs. McGill's tough decisions and their legal battle were concluded last Thursday when Rufus Arthur McGill passed away. 

See Critically Injured Virginia Teen Dies Before Parents Can Harvest Sperm, Foxnews.com, Nov. 8, 2012.

Special thanks to Laura Galvan (attorney, San Antonio, Texas) for bringing this article to my attention. 

Lottery Winner That Was Scammed Filed For Bankruptcy

A maintenance worker, Robert Miles, and his wife recently won a $5 million scratch-off lottery ticket. Unfortunately, two brothers, Andy and Nayel Askhar from Syracuse, scammed them out of the ticket. When Miles won the jackpot, he took it to the market and was lied to by Andy Ashkar after he scanned the ticket. Ashkar told Miles that the ticket's true value was $5,000, and gave him $4,000 after assessing a $1,000 cash-in fee. Reportedly, Ashkar then took the ticket and immediately bolted out the door to cash the winning. Miles was confused about the tickets true value and failed to give chase. Furthermore, Miles admitted that he had used crack cocaine the night prior and did not feel well enough to chase after Ashkar. 

Even though he had a legitimate claim, Miles refused to go to the authorities because he claimed that would be his word against Askhar's word. He finally came forward after being persuaded by a police officer. Now, both Askhar brothers are charged with "attempted grand larceny and possession of stolen property." The Lottery Division has also taken measures against the store where the brother's worked. The store happened to belong to the brothers' parents. The Division has prohibited them from selling lottery tickets, at least until the investigation is completed.

See Associated Press, NY Man Who Claims $5M Lottery Scam Faced Debts, Yahoo!, Nov. 16, 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.

Annual Gift Tax Exemption Rises

At the beginning of 2013, the annual gift tax exemption will increase from $13,000 to $14,000. This is good news for spouses because they can combine their individual gift tax exemptions to double the amount that they can give tax-free. If a person makes a gift that exceeds the annual gift tax exemption then the exceeded amount goes towards the lifetime gift tax exemption. If a person exceeds both limitations, a person could be taxed up to 35% on the amount that exceeds both exemptions.

The easiest way that a person can take advantage of the annual tax exemption "is to give cash or other assets each year to each of as many individuals as you want." Another option that a taxpayer might want to use is to place the the annual amount in a Section 529 education savings plan. Under this option, a taxpayer can establish several different accounts for several different people. There is a benefit to this action. Any money placed within the accounts can appreciate and be withdrawn tax-free on the assumption that it is withdrawn for an educational puropse. 

See Deborah L. Jacobs, IRS Raises Yearly Limit For Tax-Free Gifts, Forbes, Oct. 18, 2012.

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

The ABLE Act

Disability advocates are pushing Congress to pass legislation before the year ends that would offer a new way to save money without jeopardizing government benefits. Currently, disabled individuals cannot have more than $2,000 to their name without sacrificing government benefits. The ABLE Act aims to change this  by allowing disabled individuals to create a special savings account where they can accrue up to $100,000 without losing access to social security or Medicaid. Three dozen national organizations are backing the effort to support the ABLE Act legislation. 

See Michelle Diament, Congress Urged To Create Tax-Free Disability Savings Accounts, disability scoop, Nov. 13, 2012.

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

Sherman Hemsley's Military Funeral

Sherman Hemsley was on ice in an El Paso funeral home for months while a man claiming to be his half-brother came forward to challenge the validity of his will. Now that a judge has ruled on the Sherman Hemsley case, he can finally be buried in a proper funeral.  Lawyers for Flora Enchinton have confirmed that a military funeral is now being planned for Hemsley, who served in the United States Air Force for four years before he began acting. The funeral should be held at Fort Bliss National Cemetary in El Paso.

See Hollie McKay, Military Funeral Planned for Sherman Hemsley, Months After Death, FoxNews.com, Nov. 14, 2012. 

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

Harvard Law Professor Writes Book about Same-Sex Marriage and the Courts

Michael Klarman wrote a new book entitled From the Closet to the Altar: Courts, Backlash, and the Struggle For Same-Sex Marriage.  In his latest book, the Harvard Law School professor explores his idea that political backlash follows when courts when courts get ahead of public opinion as it is applied to same-sex marriage.

Within the book, he also details the history of the gay rights movement, how gay marriage became a legal issue and the costs and benefits of related litigation over the past 20 years. Please click here for a more in depth coverage of the book.

See Emily Newburger, The Courts and Public Opinion: Klarman Examines Legal Fight for Same-Sex Marriage, Harvard Law School, Nov. 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.

Article on Professionals and Their Contribution to the Legislative Process

Adam S. Hofri-Winogradow (Faculty of Law, Hebrew University of Jerusalem) recently published his article entitled, Professionals' Contribution to the Legislative Process: Between Self, Client and the Public, Law and Social Inquiry (2013). The abstract available on SSRN is below: 

How may professionals be made to contribute to legislative processes so that their expertise redounds to the public interest, despite the legislative product being likely to have a negative impact on their clients’ wealth? Drawing on a case study of the legislative process which gave birth to Israel’s recent (2002-8) trusts taxation regime, based on five years of participant-observation among the trust professional community, I find that to obtain the benefit of private sector professionals' expertise under such circumstances, government should have legislation drafted in a dispassionate, exclusive environment of experts rather than in the political arena; it should build professionals’ trust in government by adopting an explicitly collegial approach; it should focus reform efforts on elements of the existing law so clearly inequitable as to make a refusal to contribute difficult to justify; and take care that the new regime creates a compliance practice lucrative enough to compensate for any loss to professionals consequent on its enactment. Once professionals’ interests are suitably safeguarded, their loyalty to clients appears surprisingly brittle, and government can successfully combine with them in the public interest.

Taxpayer Does Not Meet Early Distribution Rule

A tax court recently addressed whether a taxpayer should be subject to the 10% penalty on distributions he received from his qualified retirement plan.The taxpayer in that case owned several qualified retirement accounts. In 2009, he withdrew $52,600 from his retirement plans. For that tax year, he reported the income as he was required to do so, but the IRS still determined that he had a deficiency for that year. The IRS argued that the taxpayer was subject to the 10% penalty subject to IRC Section 72(t)(1), which created the deficiency. 

In Hartley v. Commissioner, the taxpayer tried to argued that he was not subject to the additional 10% penalty because his actions fell under the exception provided in IRC Section 72(t)(2)(c). In other words, the taxpayer alleged that he should not be subject to penalty because a court ordered him withdraw funds from his qualified retirement to pay alimony to his ex-wife. Under the exception, the taxpayer does not incur a penalty if the distribution is made to an "'alternative payee' pursuant to a qualified domestic relations order, as provided by IRC Section 414(p)." Section 414(p) does define that person to be a former spouse. The tax court rejected the taxpayers argument, claiming that he received the distribution directly and not the "alternative payee." The court further remarked that the provisions cited above did not apply because there was no formal domestic relations order. The court ordered the taxpayer to pay the additional 10% penalty.

See Andrea Zakko, Taxpayer Runs Afound of Early Distribution Rule, Wealth Management, Nov. 14, 2012.

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

Suicide Note Declared To Be A Valid Will

In Sydney, Australia, the Supreme Court heard a case where the testator made his mother the sole beneficiary of his estate through a note that he wrote before he committed suicide. Bradley John MacDonald wrote a note that apparently changed the will that he wrote two years earlier. Because of the sudden change, "his family had to go to a court for a ruling before his estate could be finalised." 

In its ruling, Judge Richard White held that probate could move forward because the note sufficiency showed that MacDonald intended several part of his suicide note to change his will. Judge White noted that MacDonald placed the paragraphs that were to form his will under the heading, "Instructions for distribution of my goods." It is important to note that suicide notes are not automatically considered valid wills, unless they are a clear expression of the testator's final wishes, signed by the testator, and witnessed. This ruling is important because had the court ruled against admission of note to probate, MacDonald would have died intestate and his estranged wife, Amy, would have received his estate. Luckily for the estate, Amy agreed with MacDonald's mother to forgo making a claim on the estate. 

See Vanda Carson, Suicide Note Declared A Valid Will By Court, The Telegraph, Nov. 15, 2012.

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

Ponzi Schemer Might Get Five Years In Federal Prison

Robert Telthorst, a Kansas attorney, pleaded guilty to wire fraud and money laundering. The attorney was accused of "stealing more than $460,000 from client trust funds in a Ponzi scheme." Telthorst admitted that he took money to cover up the fact that he was taking money from other clients' trust accounts. Telthorst began to take money from the clients' accounts after he was appointed to become the administrator the trusts. In one instance, he was appointed to administer the trust of man named "Otto K." Otto K. had a trust that was worth $463,344 for the benefit of his two daughters. The trust stated that he wanted to give his first daughter, Sherri T., a lump sum of money, while he wanted his second daughter, Marlene O., to receive monthly payments. Before he granted the lump sum to Sherri. T, Telthorst took $22,000 from the lump sum. In the case of the second daughter, Telthorst took more than $200,000 from her trust. He also took from the educational trusts of another client. There he depleted the three trusts that worth $10,000 each. He also drained the charitable trusts of two other clients worth $80,000. 

A court is ready to sentence Telthorst. The court will likely give him five years in federal prison, and order restitution in the amount of $460,000. 

See David Lee, Admitted Ponzi Schemer Could Get Five Years, Courthouse News Service, Nov. 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

Kansas City Lawyer Accused of Killing Her Father Loses Control Over His Will

As I have previously discussed, the state has accused Kansas City Lawyer, Susan Elizabeth Van Note, with forgery and first-degree murder of her father, William Van Note. More specifically, the state alleges that Susan murdered her father by forgery his medical power of attorney to give her the right to refuse him life sustaining treatment. Now, a Clay County Probate Court has removed her "as the personal representative of her father's estate." At the moment, Van Note is out on a $1 Million bond. 

See KC Lawyer Charged In Dad's Death Loses Will Fight, KFVS12, Nov. 15, 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 and Employee Accused of Fraudulently Making $30 Million

Lawyer Joseph Caramadre and his employee Raymour Radhakrishnan are charged with dozens of counts, including wire and mail fraud, identity theft, conspiracy and money laundering, stemming from a business they ran in which they took out variable annuities and so-called death-put bonds. They are accused of fraudulently making over $30 million by opening accounts in the names of terminally ill people.  One victim, Edwin Rodriguez, who was once told he had three months to live testified in federal court that he knew nothing about accounts created in his name by Joseph and Raymour. 

Edwin testified that a nurse who cared for him in hospice care informed him that there was a generous person giving out money to people in his situation.  About a month after that, he met Raymour.  During that meeting, Raymour gave him a $2,000 check.  Raymour also had him sign several blank documents, which he was told were to show the benefactor that he received the money.  

In reality, Joseph used the documents to open accounts with another person. Edwin testifies that Joseph was never at any of the meetings with Raymour. 

Jurors have heard from several family members of other alleged victims who fell prey to a similar scheme.  The trial is expected to last two to three months and is scheduled to continue Thursday with additional testimony from relatives of alleged victims. 

See Dying Man, Others Testify in Alleged $30M Fraud, CanadianBusiness.com, Nov. 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.

PBS Frontline Airs 'The Suicide Plan' Next Tuesday

On Tuesday, PBS's Frontline will air "The Suicide Plan," a look into the underground world of assisted suicide in the United States.  Filmmakers Miri Navasky and Karen O'Connor tell the story from the perspective of those who choose to end their lives, activists who put themselves in legal jeopardy to help others die, and the law enforcement officials who try to stop the practice that is still illegal in all states except for Washington and Oregon.

The film emphasizes that the issue is far from black and white and features many activists who provide assistance to those who are suffering, even though almost every state considers it illegal. 

To get a deeper look into the film, PBS NewsHour did a short interview with the filmmakers.  Please click here to view the interesting answers to the interview.  

See Jason Kane, In 'The Suicide Plan,' Frontline Explores Hidden World of Assisted Suicide, PBS NewsHour, Nov. 13, 2012.

Article on Gift Tax Exclusion

Bruce Givner (Parnter, Law Offices of Givner & Kaye, PC) and Owen Kaye (Partner, Law Offices of Givner & Kaye, PC) recently published an article entitled, Come For the Exclusion, Stay for the Interest Rate. An abstract of the article provided by Wealth Strategies Journal is available below: 

Much is being written about the opportunity to use the $5,120,000 per person gift tax exclusion before it is reduced to $1,000,000 on January 1, 2013.  The other time pressure to plan is the increase on that same date in the estate and gift tax rate from 35% to 55%.  Of  course, it is wonderful to have so many families come to our offices now wanting to engage in planning.  However, the reality is that for most families with modest size estates - and for this purpose we mean estates of $30,000,000 and less - the current estate tax exclusion is not the most significant factor in achieving their planning goals.

Same-Sex Marriage Cases Rescheduled

The Supreme Court of the United States had originally agreed to hear all of the same-sex marriage cases on November 20th. However, the court's electronic docket now states that the Supreme Court will hear those cases on November 30th. A majority of the cases that will be heard that day deal with the federal Defense of Marriage Act, one case involves an Arizona law that is similar to the defense of marriage act, and the last case is Hollingsworth v. Perry. This last case asks the court to determine whether "Proposition 8" in California that imposes a state-wide ban on same-sex marriage. It is likely that the recent change occurred because the Supreme Court needs more time to analyze the issues before hearing the case. According to SCOTUSblog, "[a]ll of the laws at issue had been struck down in lower courts."

See Lyle Denniston, Gay marriages cases re-set for Nov. 30, SCOTUSblog, Nov. 13, 2012.

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

Last Chance to Sign-Up for a CLE on Using Gift and GST Tax Exemption

The ALI-CLE is sponsoring a telephone seminar/audio website with The American College of Trust and Estate Counsel (ACTEC) entitled, Using Gift and GST Tax Exemptions Before Year-End, on Monday, November 19, 2012 from 12:00 - 1:00 p.m. EST. Provided below is description of the event:

Why You Should Attend?

This informative telephone seminar / audio webcast will give you an overview of the current gift and GST tax exemptionsand potential planning opportunities for clients who wish to make tax-free gifts before year-end.

What You Will Learn?

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (aka TRA 2010) created significant but temporary reductions in estate and gift taxes. The exclusion amount of $5,000,000 plus lower tax rates have created opportunities for individuals to transfer wealth and save thousands, or even millions of dollars in taxes—but only through December 31, 2012—absent further legislation.

Experienced practitioners Marya P. Robben, Partner, Lindquist & Vennum PLLP, Minneapolis, and Adam K. Sherman, Partner, McDermott Will & Emery LLP, Chicago, look at the status of gift and GST tax exemptions—and give a practical review of ways your client might use the increased exemptions and lower tax rates to transfer wealth while minimizing tax liabilities.

This program is a replay of a previously presented program. Questions may be submitted during the program and will be answered by email within 48 hours of the program ending. This program was originally presented on August 16, 2012.

Who Should Attend?

Trust and Estate Counsel, Wealth Managers and other legal professionals who could benefit from an overview of Gift and GST tax exemptions should attend this accredited continuing legal education program from ALI CLE.

Article on SATs

James G. Blase (Blase & Associates, LLC, Missouri) recently published an article entitled, How to Transfer More Than $5 Million to an Irrevocable Spousal Access Trust, Estateplanning.com, WealthCounsel (Oct. 3, 2012). Provided below is the summary of the article:

Use of the DSAT technique should be considered by any married couple who is contemplating making a gift of more than $5 million (or at least more than either spouse’s remaining lifetime gift tax exemption) before 2013, but who is hesitant to do so without maintaining access to all or most of the gifted assets. As described above, the only significant potential disadvantage of the DSAT which cannot be easily solved (in addition to the fact that the couple may divorce or the transferee spouse may die prematurely) concerns the ability of the Crummey withdrawal power holders to withdraw significant trust funds, at least for a limited period of time. If the couple views this as a significant concern in their particular family, they should either not employ the DSAT device or, if the couple nevertheless still desires to utilize the DSAT, they should eliminate or limit Crummey withdrawal rights in the case of any particular child or grandchild where there is a significant concern.

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

Davis From Perrin Trial Reportedly Not Suffering From Memory Problems

As I have previously discussed about this situation, Judge Heather Perrin stands accused attempting to deceive Thomas Davis, a former elderly client, into bequeathing a portion of his €1 million to her daughters. From our last discussion on this topic, Davis had taken the stand to provide his own side of the story and rebut the excuses presented by the defense. Now, it looks as if Dr. Michael Malone took the stand to address the mental cognizance of Mr. Davis. He testified that it did not appear that Mr. Davis suffered from any memory problems and concluded that Mr. Davis was "mentally fine." The prosecution hopes to use this testimony to rebut the allegations made by Judge Perrin that the mistake laid with Mr. Davis and that he had forgotten what had occurred. The doctor also stated that before Mr. Davis signed the will made by Judge Perrin, she contacted him to complete a form that attested to Mr. Davis' mental capacity. He conducted the examination and completed the form. He concluded by saying that any problems that were present occurred after the will was signed.

See Deception Trial: Elderly Man 'Not Suffering From Memory Problems', Breakingnews.ie, Nov. 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

Lease-back Strategy to Reduce Estate Taxes.

Many wealthy clients are nervous to give away liquid assets to reduce the size of their estates.  Another way to reduce estate taxes is to use a lease-back strategy to give a home to the next generation. The end result is that clients gift the property to heirs and then make lease payments directly to the heirs.  

This strategy can work for clients who have a highly taxable estate and a desire to hold onto their investment portfolio.  The residence in question has to be fully paid off and the clients must have the cash flow and reserve to make the rental payments. 

See Ann Marsh, When to Purposely 'Lose' Your Home to Reduce Estate Taxes, Financial Planning, Aug. 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.

Article on Federal Portability

Sharon L. Klein (Managing Director and Head of Wealth Advisory) recently published her article entitled Guidance Just Issued From New York Regarding Federal Portability...No "706 Lite" for New York Estates and IRS Posts Revised Draft 2012 Gift Tax Return. The abstract from the article is available below: 

The New York State Department of Taxation and Finance has just issued TSB-M-12(4)M - New York State Reporting Requirements for Certain Estates Making a Federal Portability Election, and the IRS has posted a revised draft Form 709.