Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Wednesday, January 30, 2013

Father Steals Money Intended For His Daughter

Unknown-6Willie Edward Lockridge intercepted a check intended to go to his brother for the benefit of Willie's daughter. The court appointed Willie's brother as the plenary guardian for Willie's daughter when the young girl's mother died on October 30. 2011.  She left her daughter $58,866.61, proceeds from a 401(k) from Costco.  

On May 15, T. Rowe Price sent the check for $58,866.61 payable to a specific guardianship account at Comerica Bank. Willie, the girl's father, got Christopher Lockridge to cash the check, claiming that he needed the money for his daughter.  However, he used $28,088.14 to buy a Jaguar, and used other amounts to purchase a TV, plane tickets for his girlfriend, shoes, jewelry and other items. Lockridge was arrested on January 8 in Nashville and he was charged with larceny over $20,000 and fraud.

See Brett Clarkson, Dad Squandered Daughter's $58,000 Inheritance on Car, Flight for Girlfriend, Say Deputies, SunSentinel, Jan. 29,2013.

January 30, 2013 in Current Events, Estate Planning - Generally | Permalink | Comments (1) | TrackBack (0)

Trust Termination Due To Unforeseen Circumstances

TrustsFern Stafford established a trust for her daughter Kathy Buckalew in 1997. Upon the death of settlor, the assets of the trust were suppose to transfer into a Buckalew's trust, then Anderson, named the Kathy Anderson Trust. At the time, she was the trustee of the trust and "authorized to distribute income and principal of the Anderson Trust for her own health, education, maintenance and support." The trust allowed her to withdraw assets from the trust at any time. The remainder of the trust was set to be distributed to Buckalew's estate. Two years later, Stafford amended the trust instrument to change where the remainder would go upon termination of the trust. Stafford stated that upon her death, "the Fern Trust would terminate and its assets would be conveyed to Arvest Trust Company as trustee of the Anderson Trust." This trust stated that Buckalew would not receive any of the trust until he reached the age of 60. The distribution would be based upon her income from the three years prior to her 60th birthday. The remainder of the trust would go to Buckalew's aunt. The trust also contained a spendthrift clause that prevented "Buckalew from receiving distributions other than the annual payment."

In Buckalew v. Arvest Trust Company, N.A., Buckalew argued that unforeseen circumstances warranted termination of the amended trust. Buckalew argued that these changes frustrated the purpose of the trust, which was to provide for her care. She claimed that the trust was over-funded and the amended trust placed an arbitrary limit on distributions that were made to her. Furthermore she claimed that it was an unforeseen circumstance that her mother died before Buckalew turned 60, and that her employment was interfered by Stafford's care. All of this limited Buckalew's ability to draw from the trust. The court disagreed and held that none of these were considered to be unforeseen circumstances.

See Luke Lantta, What Is An "Unforeseen Circumstance" That Might Permit Trust Termination?, BryanCaveFiduiciaryLitigation.com, Jan. 29, 2013.

January 30, 2013 in Trusts | Permalink | Comments (0) | TrackBack (0)

401(k) 'Leakage'

IRAAccording to the Wall Street Journal, "one in four 401(k) participants has, at some point, raided his or her 401(k) savings to cover non-retirement expenses, including mortgages, college tuition, and credit card bills." This finding came from a study that was released in January. Of these participants that reportedly withdrew money from their accounts, they withdrew about $70 billion from their qualified plans. This is actually a significant leak when compared to how much owners placed into their plans.

Some argue that leakage occurs in three different forms: loans, hardship withdrawals, and cash-outs. One of these forms of leakage is worse than the others. Some argue that the worse kind of leakage is cash-outs. The reason that this is the worse kind of leakage is because account holders often are subject to penalties for cashing out too early. If the account holder is below the age of 59 1/2 and does not roll the amount into another qualified retirement plan, then they are likely to owe income tax and a 10% penalty on the cash-out sum. This is an unacceptable outcome considering that the reason that most people receive cash-out sums is because of poor money management problems. 

See Anne Tergesen, One in Four Savers Has 401(k) 'Leakage', MarketWatch: The Wall Street Journal, Jan. 15, 2013.

January 30, 2013 in Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Avoid Giving Improper Tax Advice

MoneyTax advice is sought and rendered regularly is an unprofessional setting. This can be problem for professionals who give that advice because it could lead to liability. To avoid this problem, CPAs and other professionals should take it upon themselves to inform the person that they are talking to that they should not rely on anything that they say to the person. In addition, they might want to consider informing the person that they are not a client of the professional. This can also apply when the client-relationship is just beginning. The most important consideration of all of this is that the CPA should probably just remain from giving tax advice to someone who is not the client. 

This problem can also arise within the scope of a current existing client relationship. This is more likely to happen because the client would be more likely to rely upon the advice of their CPA. Therefore, it is important for a professional to let their client know the limitation of their expertise. Professionals might want to document all the correspondence between the professional and the client. Furthermore, professionals might want to consider declining to respond to requests for a second opinion after another CPA gives his opinion. The reason for this is because the second professional might not have the information that he needs to make a good determination.

See Deborah K. Rood, Avoiding Allegations of Improper Tax Advice, Journal of Accountancy, Jan. 2013.

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

January 30, 2013 in Current Affairs, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Digital Disasters After Death

Digital Assets After DeathAs I have previously discussed, some states have addressed the difficulties with digital asset management after death. Communication has evolved, gradually making some important asset information only available online. As a result, if the decedent does not enact a plan for his digital assets, then the passwords, security questions, and other web safety assurances may delay or prevent someone from carrying out the decedent's wishes. Now, many estate planners are faced with digital disasters after their clients pass.

While some states are addressing the after death digital management difficulties, other states are addressing the privacy issues by enacting anti-hacking laws restricting access to online accounts for privacy protection. Consequently, families and representatives of a decedent in these states are left with fewer options. There is no uniform body of law, state or federal, concentrating on the digital asset management issue; however, there are some solutions available to help with the problem. Some are as simple as keeping an updated paper list of online accounts, passwords, and security question answers in a safe place, or including a provision in a will or trust. Some solutions are more complex. Consumers can buy software for password management or hire companies that secure your accounts. These options usually make private information available after death. Digital asset management will depend on the individual, but as time goes on, it is becoming more necessary for both estate planners and families to discuss the topic.

See Kenneth P. Brier and Julia A. Rossetti, Death In The Digital Age, Private Wealth Magazine, Jan. 4, 2013.

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

January 30, 2013 in Current Affairs, Estate Administration, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 29, 2013

PTIN System Down Due to a Litigation Stay

Unknown-5Federal tax professional preparer requirements are now in flux since the IRS's Tax Professionals system is currently "'down'" due to a litigation stay. In 2012, individual plaintiffs filed federal litigation regarding the annual fees the IRS charged professional tax preparers and the Federal Appeals Court upheld those fees. On January 18, 2013, the stay was issued by the trial court in Loving v. Internal Revenue Service, filed in the U.S. District Court for the District of Columbia. With the IRS PTIN system "'down,'" it is not clear how a professional tax preparer who is not currently registered can register anew or re-register with the IRS for the 2013 year. 

Neil E. Hendershot, IRS PTIN Registration System is "Down", PA Elder, Estate & Fiduciary Law Blog, Jan. 28, 2013. 

Special thanks to Neil E. Hendershot (Esquire, Serratelli, Schiffman & Brown, P.C.) for bringing this article to my attention. 

January 29, 2013 in Current Events | Permalink | Comments (0) | TrackBack (0)

Gold to be Auctioned in Carson City, Nevada

Unknown-4Walter Samasko Jr. died in Nevada without a will last year and left some complications for a Carson City court to deal with.  Even though he only had $200 in the bank and lived modestly on income from less than $200,000 of stock investments, $7.4 million worth of coins were found in his garage.  

Aside from the $800,000 of that total that will go towards estate tax, a Carson City judge approved a plan to have much of that gold auctioned at the local courthouse.  A reserve will be set based on the market price of gold on the day of the auction, February 26.   

Carson City Clerk, Alan Glover is the administrator of the estate. When the coins were found last year, he used a wheelbarrow to get the gold coins to his truck so they could be safely deposited. 

See Martha Neil, $7M in Gold Coins Found in Intestate Man's Garage Will be Auctioned at Courthouse, ABAJournal, Jan. 29, 2013.

January 29, 2013 in Current Events | Permalink | Comments (0) | TrackBack (0)

Second Edition of Estate Planning for Same Sex Couples

6a00d8341bfae553ef016302487689970d-100wiThe ABA recently released a new reference to use when providing services to LGBT clients. The second edition of Estate Planning for Same Sex Couples is now available. The abstract from the book’s website is below:

Estate planning is more than post-death planning. It is also life planning. Drafting well-considered legal documents for clients gives them piece of mind. The myriad legal issues facing LGBT individuals and couples remain volatile. LGBT clients are the only ones whose legal status and legal rights are dependent on where they live, visit, or travel. Additionally, there are challenges facing the community, including basic rights concerning their children or property.

With so many legal issues to consider, lawyers must look past appearances to be sure they have all of the information needed to help these clients. The Second Edition to the Benjamin Franklin Award recipient, Estate Planning for Same-Sex Couples, serves as a vital reference to provide services to this client base. Lawyers can use this book as a complete resource tool to handle LGBT legal issues and the array of variables among the states. Chapters include information on wills and trusts, children, estate planning, and dealing with senior LGBT clients. A companion CD holds forms and documents to aid in the estate planning process.

Please click here to purchase the book.

January 29, 2013 in Books - For Practitioners, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Ray Charles' Children Say Hit the Road Jack to his Foundation

Ray CharlesAs I have previously discussed, Ray Charles' children breached a condition that was placed upon them when they accepted a $500,000 irrevocable trust. As a result, the Ray Charles Foundation brought suit against seven of Charles' children. Recently, a U.S. District Court judge found that the Foundation lacked standing to bring their claims.The 1976 revision of the Copyright Act provided authors and their heirs the right to reclaim their works after a period of years, excluding works "for hire." However, the judge did not rule on if Charles' work was considered work made for hire. According to Variety,"[the judge] wrote that 'because the foundation is not a grantee of the rights to be terminated or its successor, Congress did not even require the statutory heirs provide it with statutory notice of the termination, let alone give it a seat at the table during the termination process."' 

The judge also struck down the Foundation's breach of contract and breach of covenant of good faith and fair dealing claims. However, the court stated that the children's filing of termination notices could not be brought as claims against their father's estate because they failed to file the termination notices before the probate of his estate closed in 2006. The court in this case also rejected the Foundation anti-SLAPP claim. At this time, his children have recovered several of their father's songs, including "Come Back Baby," This Little Girl of Mine," and "I've Got a Sweetie."

See Ted Johnson, Ray Charles' Children Win Copyright Dispute, Variety, Jan. 28, 2013.

January 29, 2013 in Estate Administration, Music, Trusts | Permalink | Comments (0) | TrackBack (0)

Effects of Prenuptial Agreements on Long-Term Care

MarriageWith the rise in second marriages, the use of prenuptial agreements has also increased. The use of prenuptial agreements can have a number of effects on long-term estate planning especially when it comes to the right of election and its affects on Medicaid eligibility. 

Generally speaking, "a surviving spouse's right of election can be exercised whether or not the decedent left a will." How much a spouse can inherit automatically from the estate depends on the applicable state statute. These right of election laws protect a spouse in the event that the entire estate passes to other people. There are only a few ways that a spouse can successfully waive the spouse's right of election and this is one of them. However, according to New York Law Journal, "people often do not realize that this waiver can be treated as a transfer of property for Medical Assistance (Medicaid) eligibility purposes." Unfortunately, Medicaid rules state that any uncompensated transfers of property could subject the applicant to a penalty, which could well affect the applicant's eligibility. This situation can often produce unfair results for those to choose to elect against their spouse's estate. 

See Ann-Margaret Carrozza, Surprising Effects of Prenuptial Agreements on Long-Term Care, New York Law Journal, Jan. 28, 2013.

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

January 29, 2013 in Estate Planning - Generally, Intestate Succession | Permalink | Comments (0) | TrackBack (0)