Wills, Trusts & Estates Prof Blog

CLE on Gun Trusts

On Tuesday, March 19, 2013, The ABA is hosting a CLE entitled Gun Trusts and the Art of Protecting Your Client's Firearms for Future Generations. The CLE webinar is from 1:00 p.m. to 2:30 p.m. Eastern. Cun trust lawyer David Goldman will discuss: 

• The history of firearms regulation, federal and state firearm policy and control, and potential changes to firearm regulation
• An overview of enacted gun laws that affect your client's rights and options, and how Multigenerational Gun Trusts help solve some of the issues that may arise
• Ethical and malpractice issues an attorney should always consider when dealing with firearms

For more information or to register, please click here.

Potential Clarification of Fiduciary Duties

In 1978, Randy Curtis Bullock was named trustee of his father's trust.  The sole asset was a life insurance policy with a $1 million death benefit and accumulated cash value. Randy and his four siblings were the only beneficiaries. The trust terms indicated that Randy could only borrow from the trust to pay the insurance premiums and/or to satisfy a withdrawal request.  In contradiction of the trust terms, Randy borrowed from the trust to satisfy a debt on his father's business, to purchase certificates of deposit for him and his mother, and to purchase real estate for him and his mother--a mill in Ohio. The total value of these loans was $263,000.  Randy says that all of his loans were evidenced by notes to the trust, secured, and repaid with full interest. 

In 1999, Randy's two brothers filed suit alleging that Randy breached his fiduciary duties.  The court granted the brothers' motion for summary judgement and did find Randy's loans to be self-dealing.  The trial court entered judgment against Randy and placed the Ohio mill under constructive trust, which was awarded to BankChampaign. 

Randy maintains that the bank refuses to sell the mill, which he needs them to do to satisfy the judgment.  He filed for Chapter 7 bankruptcy to discharge the debt.  In response, BankChampaign said that the state court judgment was not a dischargeable debt because Randy incurred it as a misappropriation of funds while acting as a fiduciary.  In May 2010, the Bankruptcy Court held that Randy was estopped from challenging the state court judgment.  The court did question the bank's actions in holding the collateral hostage, but they stated it was not the issue before them. On appeal, the 11th circuit affirmed the Bankruptcy Court's judgment.  

Randy is now going for the U.S. Supreme Court, arguing that this case presents the Court with the opportunity to clarify the meaning of the Section 523(a)(4) phrase, "defalcation while acting in a fiduciary capacity."  The Supreme Court has grated Randy's petition for a writ of certiorari. 

See John T. Brooks and Samantha E. Weissbluth, A Reckless Act?, WealthManagement.com, Feb. 26, 2013. 

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

Three Strategies to Make Retirement Last

According to the Wall Street Journal, experts are criticizing the traditional 4% rule for retirement. The rule states that an individual can remove 4% from his savings his first year of retirement, and take that same amount with a little more added each year to counter inflation. The 4% rule does include both bond payments and dividends paid on stocks. The theory is dividends and bond payments are reinvested in the portfolio. Experts used to believe that following the old rule would likely yield roughly 30 years of living without running out of retirement money. Recently, Wall Street Journal's Investing in Funds offered these three alternatives to help make certain a person's retirement money lasts his entire life.

• Replacing the bonds in your portfolio with annuities.
• Using life-expectancy tables to determine each year's withdrawal amount.
• Pegging your initial withdrawal rate to stock valuations and withdrawing a lower percentage when stocks are pricey.

The ‘inflation adjusted annuity' is a basic annuity with a stipulation that provides an inflation protection offered through insurers. A head of retirement expert stated it is helpful to use the IRS life-expectancy tables versus other life-expectancy tables such as the Social Security of Administration table because you may run the risk of the necessary minimum withdrawals being low.

See Kelly Greene, Rethinking Retirement Withdrawal Rates, The Wall Street Journal, Mar. 6, 2013.

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

Article on Future Wealth Transfers

John A. Miller (Weldon Schimke Distinguished Professor of Law, University of Idaho College of Law) & Jeffrey A. Maine (Maine Law Foundation Professor of Law, University of Maine School of Law) recently published an article entitled, Wealth Transfer Tax Planning for 2013 and Beyond, (Feb. 9, 2013). Provided below is the abstract from SSRN:

On January 1, 2013 Congress avoided the tax part of the so called “fiscal cliff” when it passed the American Taxpayer Relief Act of 2012 (ATRA). Among its many impacts this law prevented the application of a number of sunset provisions that would have dramatically altered the operation of the federal wealth transfer taxes. Instead Congress made permanent two significant transfer tax provisions introduced as temporary measures in 2010: the indexed basic exclusion amount and the deceased spousal unused exclusion amount. The latter provisions are sometimes referred to as the portability rules. ATRA also introduced a new maximum transfer tax rate of 40%. In addition ATRA made permanent a deduction for state death taxes and prevented the return of the state death tax credit. Thus, the main transfer tax emphasis of the actions taken by Congress in ATRA was to stabilize the wealth transfer tax system in a fashion that eliminates or reduces its planning impact on most taxpayers while also permanently establishing a significant new planning tool for the wealthy, the deceased spousal unused exclusion (DSUE) amount.

In this article we summarize the operation of the federal wealth transfer taxes in the wake of ATRA and describe the basic tax planning techniques for wealth transmission. In doing so, we offer a thorough analysis of the operation of the portability rules and discuss their planning virtues and drawbacks. The overall design of this article is to bring the general practitioner into the current wealth transfer tax planning picture while providing references to more detailed treatments of particular topics within this broad field. 

65-Day Rule Valuable in 2013

The income tax election with regard to the timing of trust distributions for non-grantor trusts is commonly referred to as the "'65-day rule.'"  Distributions to a beneficiary are deemed to carry out the trust's taxable income to the beneficiaries, and the trust treats the distribution as a deduction, which reduces the trust's taxable income.  

Non-grantor trusts can use the 65-day rule to treat distributions made on or before the 65th day of the trust's tax year as if they had been made in the prior tax year.  March 6, 2013 was the deadline for making a trust distribution that could be treated as a 2012 distribution by employing the 65-day rule.

The 65-day rule was helpful for many earlier this year because 2013 has brought in some higher tax rates. The rule allowed distributions that were made by March 6, 2013 to be subject to the 2012 rates, which are lower than the current ones.  

See Trust Income Tax Election Just Became More Valuable, Lexology, Feb. 27, 2013.

Judge In Zsa Zsa Gabor Extends Conservatorship

As I have previously discussed, Zsa Zsa Gabor's daughter filed a conservatorship petition to gain control over her mother's assets after she accused Gabor's husband, Frederic von Anhalt, of mishandling the estate. A judge would grant Mr. von Anhalt the conservatorship but that it would have limitations and he would have to report to Gabor's daughter. Now, it appears that Judge Reva Goetz has issued a one-page order that would extend the Frederic von Anhalt's conservatorship over Zsa Zsa Gabor and her assets. The judge originally appointed von Anhalt to be Gabor's conservator this past summer. The new order would extend the conservatorship until August 21st.

See City News Service, Judge Extends Zsa Zsa Gabor Deal, MyDesert.com, Feb. 24, 2013.

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

Settlement Agreement Among Thibeault Heirs

As I have previously discussed, the heirs of Thibeault challenged the accounting of the estate by the former executor, the Mayor of Halifax, Peter Kelly. On March 6, 2013, a probate court was scheduled to hear testimony related to this matter at a hearing. Before that could happen, the Thibeault's heirs came to a settlement agreement. While the settlement must still be approved by Supreme Court Justice Peter Rosinski, there will not be a formal hearing on the matter. Justice Rosinki was suppose to approve the settlement agreement on March 6 as well but because both attorneys were late in filing their paperwork he will not render that decision until this upcoming Monday, March 11, 2013.

See Tim Bousquet, Peter Kelly and other Thibeault Heirs Come To Agreement, The Coast, Mar. 6, 2013.

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

The Earl of Cardigan's Life After Former Wife Excludes Him From Her Will

Over the last few years, the Earl of Cardigan has suffered a series of financial misfortunes.  He went through a costly divorce, a public stint in rehab, several legal confrontations with the trustees of his estate, and a series of prosecutions for assault and criminal damage.  

The divorce settlement reportedly cost the Earl about £2m, and it cost him even more to fight to keep some of the artwork that the trustees needed to sell to fulfill the divorce settlement.  Most recently, probate records revealed that when his former wife, Lady Cardigan, died, left all of her £1,520,582 estate to her two children, and excluded any mention of the Earl in her will.  Neither of the children have contact with the Earl.  

In stark contrast to his previous life of privilege, Lord Cardigan works as a delivery driver. He lives with his new wife in an unheated house and the pair takes showers in public baths in nearby Marlborough.  

Officially, the Earl still owns 49% of the estate, but the two trustees have overall control. The Earl will contest control of the estate in a High Court hearing that resumes later this year.

See Steve Anderson, Living on the Dole and Taking Showers at Public Baths Because He Has No Hot Water: The Life of the Earl of Cardigan After Ex-wife Leaves Fortune to Children, The Independent, Mar. 7, 2013. 

Vermont Sees a 700 Percent Growth in Organ Donor Registry

Since the start of 2012, the Vermont Organ Donor Registry has seen an almost 700 percent increase in registered donors.  

The registry started in 2010 and attributes the growth to several different factors.  First, Facebook spread the word about organ donation with an announcement this year of a partnership with Donate Life America. Second, the registry partnered with the DMV to register when getting an enhanced driver's license.  

See Vermont Organ Donor Registry Grows by 700 Percent, Jan. 23, 2013.

Attorney Arrest For Embezzlement

Warwick attorney, Janet Mastronardi, has been arrested for embezzling almost $150,000 from a client. She has been charged with embezzlement and unlawful appropriation. A review of her bank accounts revealed that she stole $144,989.21 of her client's money and, over a period of 11 months, wrote a series of 25 checks to herself. It is also alleged she closed two of her elderly client's investment accounts worth $224,058.57 and deposited her proceeds into two new bank accounts. The money was not listed on her client's probate account.

For the embezzlement charge, Mastronardi faces a maximum of 25 years in prison and up to $50,000 in fines.  The unlawful appropriation charge could add 20 years in prison and over $400,000 in fines. 

See Dee DeQuattro, Attorney Arrested For Embezzling More than 100K from Client, abc6.com, Mar. 6, 2013. 

Planning End of Life Decisions

Families should take the time to discuss end of life decision-making. Particularly when those decisions affect a patient's healthcare. This issue has been discussed both in private and public arenas. In 2009, congress proposed ‘death panels' to help counsel families with Medicare by providing information about wills and guidance to make difficult health care decisions such as terminating life support. Although the bill was not passed, some people agree that counseling is a good idea. It is estimated that 25% of Medicare payments are spent in a patient's last year alive.

Many people believe that in that last year of life the treatment patients receive is ineffective, does not typically reflect what the patient wants, and increases spending unnecessarily. The issue of too much spending centers on cases where doctors push unnecessary treatments on patients prolonging their distress and cases where the wishes of the patient are not known. This is one of the reasons a patient should share his goals and end of life wishes with his family. Nevertheless, even if you do not know the patients wishes clients might want to take their time to figure it out because the decision can only be made once. In fact, some experts encourage people to make the right decision for the patient even if it takes some time and assert it is not a waste of resources. Despite this perspective, others believe too much money is spent on health care treatments the last year of life.

See Charles Ornstein, I Thought I Understood Healthcare. Then My Mom Went to the ICU, Washington Post Opinions, Feb. 28, 2013.

Special thanks to Naomi Cahn (John Theodore Fey Research Professor of Law, George Washington University School of Law) for bringing this article to my attention.

Woman Leaves Her Estate To Charity That Helps Feral Cats

Gail Sheffield was a huge lover of feral cats. According to her friends, "they were her passion in life." During her life, Ms. Sheffield would trap, spay, and neuter feral cats. It appears from her estate planning documents, Ms. Sheffield continued her support of feral cats by bequeathing the vast majority of her estate to their care. She donated about $100,000 to the Feral Cat Consortium, and she donated her home, valued at about $300,000, to the Flathead Spay & Neuter Task Force. The executive director at Flathead Spay & Neuter Task Force, Mimi Beadles, stated that Ms. Sheffield's donation will go a long way in helping feral cats. She also dedicated a good amount of her time to helping the Feral Cat Consortium with their legal issues. The founder of Feral Cat Consortium, Wendy Guidry, also said the money will also go a long way towards helping to trap feral cats.

Ms. Sheffield was a first assistant district attorney in Tangipahoa Parish. She also left money for the own pets, three cats and Welsh corgi. Her pets have since been adopted by her friends and family.

See Sara Pagones, Woman Leaves Estate For Cats, The Advocate, Mar. 5, 2013.

Widow Gives Up Her Adopted Daughter and Cuts Her Out of the Estate

Christine Svennigsen, a wealthy widow from New York, adopted two Chinese babies. After their adoption, she attempted to place her adopted children up for re-adoption unsuccessfully. Now, Svenningsen has tried to cut her adopted daughter, Emily, out of her estate. Following the death of Svenningsen's husband, she sent her then 8-year-old adopted daughter "to live with another family and tried to cut her out of her out of the family's $250 million estate." The state appeals court rejected her attempts. The court ruled that Emily does deserve a portion of the estate. The son she adopted was re-adopted by another couple soon after she adopted him. Svennigsen claimed that the reason that she placed her adopted children up for adoption was because she could not handle more children. 

Now allegations have emerged that state that Svenningsen used "Draconian" techniques to disclipine her daughter. For example, she used to force her daughter to sleep in a tent if she broke the house rules and that she had behavioral issues. Emily's new mother, however, countered stating that there is no evidence that Emily had any behavior problems.

See Ashley Lutz, Wealthy Widow Tried Unsuccessfully To Cut Adopted Chinese Daughter Out of Her Estate, Business Insider, Mar. 4, 2013.

Special thanks to Laura Galvan (attorney, San Antonio, Texas) and to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

News on Georgetown Donor Case

Scott K. Ginsburg, a Dallas businessman, has brought suit against Georgetown University "for breach of contract, fraud, and fraud in the inducement" and is seeking $7.5 million in damages because the school failed to name the law school gym after himself. Ginsburg apparently agreed to make this donation in exchange for the school naming the gym after him. Ginsburg claims that Georgetown had originally planned to honor their agreement. In 2000, he argued the university formally announced the construction of the Scott K. Ginsburg Health and Fitness Center. However, after the SEC brought a suit against him the university began to waiver on its end of the agreement. Ginsburg asserted in his complaint that he was candid with the university about the issues that were involved in the lawsuit. It also stated that Georgetown did not express any concern about the lawsuit with the SEC. The school did ask him once to relinquish his naming rights but he refused. After this meeting, Georgetown told Ginsburg that they would honor the original contract. In other aspects, the university has always treated Ginsburg as an honored guest.

Now, a decade has passed from the creation of the original contract and the school has not honored its agreement. Thus, Ginsburg is also seeking specific performance. The complaint further states that "[i]t is now apparent that since 2002, Georgetown not only was not in fact committed to recognizing Ginsburg's generosity by naming the sports center for him, but each of the foregoing oral and written representations to him about its claimed commitment was false, made only to entice him to give Georgetown more money." In case here is Ginsburg v. Georgetown University.

See David Lee, Donor Sues Georgetown For $7.5 Million, Courthouse News Service, Mar. 6, 2013.

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

What is the Cost Basis For Inherited Stock?

With the following information, Kiplinger addresses a question about the cost basis of inherited stock: 

Even if the stock has increased or lost value over time, the cost basis for inherited stock is usually based on its value on the date of the original owner's death. You cannot claim a loss for losses incurred while the original owner was alive. 

Among a few exceptions, if an executor of a large estate has to file an estate-tax return, the executor can choose to set the basis at the value six months after the owner died rather than at the date of death. 

See Kimberly Lankford, Cost Basis For Inherited Stock, Kiplinger's Personal Finance, April 2013.

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

Estate Planning for Couples Without Children

If children are not involved in your estate plan, you don't have many of the financial obligations of other estates, and you also need to plan for a future that does not involve the helping hand of children. Whether you have children or not, estate planning is important. The Madison gives some tips to help ensure that your wishes can be fulfilled. 

• Assign decision makers: If you are a couple without children, you can each execute a power of attorney naming your spouse to act on your behalf.  A living will is also good to have because, in the event of an incapacitating illness,  it specifies your wishes and allows a designee to make decisions based on those wishes.
• Decide how you would like your assets to be distributed: Your estate plan could include strategies for giving financial gifts before or after your death.  
• Create avenues for charitable giving: If you don't plan to leave a large amount of your assets to family, you may want to give charitably to causes that inspire you.  You can do this while you're still alive to receive tax benefits as well. 
• Plan for the unexpected: Your estate should include adequate insurance coverage for unexpected events. Make sure you name the appropriate beneficiary on your policy.  Since living with children is not an option for couples without children, you may want to consider buying long-term care insurance policies to cover assisted living costs as needed later in life. 

As always, it is best to consult an estate planning attorney to create a comprehensive estate plan tailored to your needs. 

See Ronald Garver, Estate Planning When It's Just the Two of You, Mar. 6, 2013. 

For Those Fifty or Older, Mortality Index Helps Determine Odds of Death Within the Next Ten Years

Dr. Marisa Cruz is the lead author of a study that indicates a certain list of health questions can help to predict the chances of dying soon for those 50 and older.

San Francisco researchers developed a mortality index for people older than 50, but the results of this 12-item index are best interpreted by doctors.  The index is used primarily to help doctors decide whether the need for certain medical procedures outweighs the risk of performing them. 

The researchers developed this index with data they collected in 1998 for 20,000 Americans over 50.  Researchers tracked the participants over ten years and in that time, nearly 6,000 participants died. 

LifeHealthPro points out some signs that increase one's chances of dying in the next ten years.  Those signs include getting winded walking several blocks, smoking, and struggling with pushing a chair across a room.

See Lindsey Tanner, Your Chances of Dying by 2023? Test Offers a Clue, LifeHealthPro, Mar. 6, 2013.

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

App Allows You to Leave a Video Behind When You Die

"If I Die" is an app that allows you to create a video or text message to be published after you die. Please click here if you are interested in exploring the app further. 

 

Police Help Wealthy Woman Frame Her Lawyer

As I have previously discussed, Geraldine Webber endorsed a new will and trust she made that gave her entire estate to police officer, Sgt. Aaron Goodwin. I also discussed how her attorney, Jim Ritzo, accused Sgt. Goodwin of undue influence claiming that he was able to influence her because she suffers from Alzheimer's Disease. Now it appears as if the police are helping their brother in blue. Ritzo claims that he heard that the police "assisted Webber with making a state complaint against him." He also knows that he has not even seen the complaint. He only discovered the allegation when he called the state's elder affairs office. He has not been charged with any crime. The police do not deny their involvement but claim that it was Ms. Webber to made the complaint and that the police have not been directly involved in the investigation. Deputy Police Chief Corey MacDonald stated that a third party was conducting the investigation.

As Ms. Webber's case heads to trial, there are a number of items that are likely to be introduced in trial. Among these items of evidence, the court is likely to here the video recording of Ms. Webber's will execution. On the video, "she called Goodwin her 'second son,' made sexual advances toward her new lawyer, Gary Holmes, and alleged her old lawyer, Jim Ritzo, stole checks and money from her."

See Elizabeth Dinan, Police Helped Wealthy Woman Accuse Local Lawyer of Theft, Sea Coast Online, Feb. 25, 2013.

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

Estate of Nancy P. Young

The decedent, Nancy Young, died in 2008 and the executor of estate requested an extension of time to file the necessary estate tax return. The extensions the estate requested were granted and the estate paid their taxes within a timely manner. Because of the recession, the estate sought to have some of the estate's real estate assets to be re-appraised. The estate had two options at this point because the deadline to file the estate tax return was upon them. According to Proskauer Rose LLP, they could have "(1) file the estate tax return with the appraised values, and then file a supplemental return later when the real estate holdings were sold; or (2) wait until the real estate holdings were sold, and then file one estate tax return after the filing deadline." They chose the second option, to file the estate tax return after the deadline had passed. They believed that this would simplify the process and the estate would not be adversely affected. The IRS felt differently and accessed a penalty against the estate. 

In Nancy P. Young v. United States, the estate argued that it should not be penalized because it relied on expert advice. The district court disagreed with the estate and claimed that there was not reasonable cause here because the estate was well aware that it was legally required to file an estate tax return. The only advice that the estate relied on was that it would not be assessed a penalty. The court cited precedent that has already held that in this particular instances like this one, the reliance is not a reasonable cause.

See Proskauer Rose LLP, Estate of Nancy P. Young v. United States, Associate of Corporate Counsel - Lexology, Feb. 12, 2013.

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