Wills, Trusts & Estates Prof Blog

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

Friday, February 24, 2017

Article on Estate & Gift Tax Valuation Outlook for 2017

Estate and gift taWilliam H. Frazier recently published an Article entitled, Estate and Gift Tax Valuation Outlook for 2017: Hearing on Proposed Regs and Other Developments, Tr. & Est. 48 (Feb. 2017). Provided below is an abstract of the Article:

Since the release of the proposed changes to Internal Revenue Code Section 2704 on Aug. 2, 2016 (the proposed regs) and until the election of Donald J. Trump on Nov. 8, 2016, wealth taxpayers, family businesses, estate planners and business appraisers thought and talked about little else other than the possible valuation ramifications of these changes to the regulations. Many read the complicated and confusing document as a thinly disguised proscription of valuation discounts. Some interpreted the document as relatively benign. Others simply weren’t sure what the Internal Revenue Service was driving at and why this was even needed. 

Unexpectedly, the proposed regs didn’t exempt U.S. farms and family businesses. This was a great surprise to taxpayers and the estate-planning community. It was well known that the proposed regs might be forthcoming, but it was generally understood that any regulatory change would exempt family businesses. That it didn’t was a huge miscalculation by the Treasury, as this allowed the opponents of the proposed regs to tap into the same populism that swept Trump into office. Many perceived the proposed regs as a message that the IRS was unfairly targeting U.S. farms and family businesses, which were already challenged by foreign competitors and beleaguered by government regulations. The IRS received over 10,000 comment letters, an unprecedented amount. Almost all of the letters were negative, and almost all cited the attack on the family business as justification for the nullification of the proposed regs. 

Also contributing to the strong reaction from taxpayers and their advisors were two terms appearing in the document that, on even a relatively careful reading, indicated that the IRS was unleashing a novel and malevolent valuation construct that would eviscerate almost all forms of estate and succession planning. “Minimum value” was a new term coined by the IRS that essentially meant “enterprise value” for (the equity of) an operating business or net asset value for an investment or holding entity. “Disregarded restriction” meant any restriction that limited the ability of the holder of the interest to liquidate at less than minimum value in less than six months for cash. So, the first impression of the proposed regs was that it eliminated all valuation discounts. This belief was made more widespread by the publication of articles by well-known estate planners and appraisers stating that, under the proposed regs, the valuation of an equity interest of any member of a family control group must be made as if it had a “deemed” put right at minimum value. 


February 24, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Thursday, February 23, 2017

Article on the Future of the Estate Tax

Estate taxJonathan G. Blattmachr & Martin M. Shenkman recently published an Article entitled, Planning in a Time of Uncertainty: Part II, Tr. & Est. 38 (Feb. 2017). Provided below is an abstract of the Article:

The election of Donald J. Trump as President, along with a Republican-controlled House and Senate, may lead to the most radical changes to the estate tax since it was first enacted. In Part I of this two-part article, we discussed the general background practitioners should consider in evaluating the potential changes that might occur so that they can better advise their clients. That article also suggested that while the initial reaction of many clients and practitioners has been to hit the planning “pause” button and adopt a wait-and-see approach, that may not be the most optimal option. Now, we’ll further explore planning considerations. 


February 23, 2017 in Articles, Current Events, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Article on Common Law Trusts in Civil Law Systems

Common law trustTibor Tajti & Robert Whitman recently published an Article entitled, Common Law Trusts in Hungary and Other Continental European Civil Law Systems, 49 John Marshall L. Rev. (2016). Provided below is an abstract of the Article:

The increased intensity of global rapprochement of laws is a signature feature of the 21st century. Until the mid-20th century, very little cross-fertilization between common law and civilian systems was the rule. That has now radically changed. The latest example of common law concepts being embraced by the legal systems of Civil Law European countries is the introduction of major aspects of the common law of trusts (“CLT”). Originally CLT were considered to be a non-transplantable idiosyncratic legal institution. Later, however, a discourse began on the versatility and the economic usefulness of CLT in many settings. Starting out, discussions concerning CLT were limited to pointing out that conditional functional equivalents are offered by some European countries, such as the Germanic “Treuhand.” 

Today, the prevailing view is that CLT are not just needed by European countries, but that CLT doctrine can be made compatible with the requirements of the civilian legal tradition. The new approach is best expressed by the Draft Common Frame of Reference, Book X – which is devoted entirely to trusts. A growing number of European national laws now embrace the concept of CLT (e.g., the French “fiducie” or its Romanian replica). 

Hungary is an interesting example of a European country that has adopted major concepts of CLT doctrine, not just because it is the newest member of European countries to embrace provisions of CLT, but because it has specifically chosen to be inspired only by CLT law in spite of otherwise belonging to the Germanic legal tradition. 

CLT will undoubtedly continue to be of great interest to much of Europe. Recognition must be made that both in the United States (U.S.), and in other common law nations, there are variations in CLT, although there is agreement on its basic tenets. Given that in Hungary the gates for professional trustees were recently opened and separate licensing and prudential regulations created, that may place Hungary as a leader in expansion of the use of CLT in Europe, both for personal estate planning and for business done with the United States.


February 23, 2017 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Wednesday, February 22, 2017

Article on Effects of Panama Papers on New Zealand Foreign Trusts Regime

Panama papersMark J. Bennett published an Article entitled, Implications of the Panama Papers for the New Zealand Foreign Trusts Regime, 21 NZ Assoc. Comparative L. Yearbook 27 (2015). Provided below is an abstract of the Article:

This article discusses the implications of the Panama Papers for the legal requirements concerning the disclosure of information and documents relating to offshore financial planning under the New Zealand foreign trust regime. It first identifies the nature of New Zealand foreign trusts (NZFTs) through an outline of our laws of trusts and foreign taxation. It then focusses on the current requirements for disclosure of information relating to NZFTs to authorities in New Zealand and in foreign jurisdictions, the reasoning of the Inquiry into NZFTs, and the Government's response to the Inquiry's recommendations. Finally, it briefly places the Report's conclusions in the context of the submissions it received and the wider international shift to greater transparency of financial information.


February 22, 2017 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Hindu Succession Act 2005

Hindu succession lawShital Prakash Kharat recently published an Article entitled, Effect of Hindu Succession (Amendment) Act 2005 – Judicial Response (2017). Provided below is an abstract of the Article:

Women, since the vedic times were dominated because of the she is women. She can only live life under her husband, father, sons etc. but after certain changes in law women get various rights & privileges for living with dignity under Article 21 of the Indian Constitution. In ancient time women does not having any kind of share or ownership in fathers property because the domination of male in succession e.g. male is the head of the joint family & therefore he holds the rights to ancestral property. Hindu Succession Act 1956 originally did not gave inheritance rights in ancestral property but ask for a right to sustained/maintain from Hindu Joint family. Most effect was done in status of women in his father’s property after the Hindu Succession Act 2005 this amendment try to maintain Article 14, 15, & 21 of the constitution of India. There are certain provisions of Hindu Succession Act 1956 amended by Hindu Succession Act 2005 after this amendment various issues raised regarding interest of women in ancestral property and whether this amendment Act having a Prospective effect or Retrospective effect upon this issue Judiciary Court gave excellent interpretation or explanation for prospective effect.


February 22, 2017 in Articles, Estate Planning - Generally, Religion | Permalink | Comments (0)

Tuesday, February 21, 2017

Article on Probate Lending

Probate lendingDavid Horton & Andrea Cann Chandrasekher recently published an Article entitled, Probate Lending, 126 Yale L.J. 102 (2016). Provided below is an abstract of the Article:

One of the most controversial trends in American civil justice is litigation lending: corporations paying plaintiffs a lump sum in return for a stake in a pending lawsuit. Although causes of action were once inalienable, many jurisdictions have abandoned this bright-line prohibition, opening the door for businesses to invest in other parties' claims. Some courts, lawmakers, and scholars applaud litigation lenders for helping wronged individuals obtain relief, but others accuse them of exploiting low-income plaintiffs and increasing court congestion.

This Article reveals that a similar phenomenon has quietly emerged in the probate system. Recently, companies have started to make “probate loans”: advancing funds to heirs or beneficiaries to be repaid from their interest in a court-supervised estate. The Article sheds light on this shadowy practice by analyzing 594 probate administrations from a major California county. It finds that probate lending is a lucrative business. It also concludes that some of the strongest rationales for banning the sale of causes of action--concerns about abusive transactions and the corrosive effect of outsiders on the judicial processes--apply to transfers of inheritance rights. The Article thus suggests several ways to regulate this nascent industry.


February 21, 2017 in Articles, Estate Planning - Generally | Permalink | Comments (0)

Article on Consideration for Inter Vivos & Testamentary Gift Transfers

Gift considerationAlex M. Johnson, Jr. published an Article entitled, Contracts and the Requirement of Consideration: Positing a Unified Normative Theory of Contracts, Inter Vivos and Testamentary Gift Transfers, 91 N.D. L. Rev. 547 (2015). Provided below is an abstract of the Article:

This Article addresses a subject that has mystified generations of Contracts students: the normative basis for “consideration.” Instead of attempting to define consideration, which can be largely tautological, the focus is on the normative basis for its use in deciding which contracts are enforceable. After examining the four major normative theories that have been put forth to date to explain the requirement of consideration: functional, realist, moral, and efficiency, the Article conclude that functional is the best normative theory mandating the use of consideration in enforceable contracts.

The Article compares enforceable contracts in which consideration is found with transactions in other legal areas, that is, valid inter vivos gifts and Wills (Property and Trusts and Estates), to determine what requirements are necessary to validate those transfers. With respect to both of these latter transfers, functional formalities are required that satisfy evidentiary, channeling, ritualistic, and protective functions--the same functions that are satisfied by the consideration doctrine in Contracts.

The Article then details why these formalities are so important and cut across these transactions in different areas of the law. By expanding the analysis to the adjudication phase of the legal process, the critical role these functions play ex post allows the court or other arbiter to make a determination regarding the enforceability of a transaction with low administrative costs and with little attendant error costs. In two of the three transactions, inter vivos gifts and testamentary (Will) transfers, inevitably one of the parties (the putative donor) to the transaction is deceased. In the third, arms-length contracts, the two parties to the putative contract have two different stories regarding the formation of that contract which, in the absence of the functional formalities, would be indeterminate. The functional formalities thus provide the arbiter with reliable and crucial information ex post to guide the decision-maker's resolution of the question of enforceability.

Finally, the outlier transaction that has bedeviled Contract scholars for generations and which requires no consideration--promises enforced as a result of the use of the doctrine of promissory estoppel--is addressed and analyzed. It is theorized that these cases actually represent three different types of transactions--failed gift cases, promissory fraud cases, and pre-contractual promise cases (based on fact patterns similar to those employing the doctrine of culpa en contrahendo in Civil Law countries). Disaggregating these cases, it is demonstrated that only the latter, pre-contractual promise cases, are true contract cases calling for the imposition of the same normative basis as contract cases supported by consideration. Hence, the article concludes by demonstrating that the contract cases that are enforceable per the doctrine of estoppel or reliance supply the courts with the same functional formalities as consideration-based agreements. These enforceable reliance cases provide the courts with an efficient and effective way to make an adjudication with low error costs.



February 21, 2017 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0)

Monday, February 20, 2017

Article on Helping Clients Plan Their Funeral Arrangements

Funeral arrangementAmy F. Altman recently published an Article entitled, Preventing Morbid Litigation: Ask Clients About Their Funeral Arrangements, Tr. & Est. 16 (Feb. 2017). Provided below is an abstract of the Article:

As estate planners, we’re accustomed to asking our clients for personal information, such as their finances and family dynamics, to obtain a good grasp of their estate-planning goals. Without such questions and forthright answers, a planner would be at a loss in terms of how to appropriately plan for their clients. The result of this dialogue is the foundation of any well thought-out estate plan. One of a planner’s ultimate objectives is to create a plan that works under any set of circumstances, from natural disaster to unborn children. However, how often are we as planners asking our clients about their funeral arrangements? Practitioners should always ask clients a simple series of questions, such as: (1) who they want to be in charge of their final disposition, (2) whether they prefer burial over cremation, and (3) where they wish to be buried or interred. Practitioners may be reluctant to ask such questions possibly because the questions raise the issue of the client’s mortality. The same may be said about the client’s willingness to answer. 


February 20, 2017 in Articles, Death Event Planning, Estate Planning - Generally | Permalink | Comments (0)

Article on Domestic Partnerships for the Elderly After Obergefell

Domestic partnershipHeidi Brady & Robin Fretwell Wilson recently published an Article entitled, The Precarious Status of Domestic Partnerships for the Elderly in a Post-Obergefell World, 24 Elder L.J. (2016). Provided below is an abstract of the Article:

The Supreme Court’s landmark decision in Obergefell v. Hodges gave same-sex couples the right to marry in all fifty states, correcting the injustice that non-marital legal statuses like domestic partnerships were intended to remedy. Now that same-sex couples can marry nationwide, the federal government and states that created domestic partnerships are considering how to treat couples in those statuses — specifically, whether to treat domestic partners like spouses and whether to continue to offer non-marital legal statuses at all. Three states face a particularly thorny question post-Obergefell: what should be done with domestic partnerships made available to elderly same-sex and straight couples at a time when same-sex couples could not marry. This Article examines why California, New Jersey, and Washington opened domestic partnerships to elderly couples. Although domestic partnerships in these states primarily responded to the needs of gay couples who could not marry, legislators also saw the elderly as sympathetic: unfairly prevented from remarrying for fear of losing benefits from a previous marriage. This Article drills down on three specific obligations and benefits tied to marriage — receipt of alimony, Social Security spousal benefits, and duties to support a partner who needs long-term care under the Medicaid program — and shows that entering a domestic partnership rather than marrying does not benefit all elderly couples; rather, the value of avoiding marriage varies by wealth and benefit. The Article concludes that as pressure mounts to fold domestic partners into marriage after Obergefell, legislators should examine whether domestic partnerships have become a province of the wealthy, undercutting the impetus for maintaining a second, collateral status.

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.


February 20, 2017 in Articles, Current Events, Elder Law, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Sunday, February 19, 2017

Article on New DOL Fiduciary Rule & Estate Planners

Fiduciary estate planningJamie P. Hopkins recently published an Article entitled, Be Wary When Giving Investment Advice to Clients: Estate Planners May Run Afoul of the Department of Labor’s New Rule, Tr. & Est. (Feb. 2017). Provided below is an abstract of the Article:

In April 2016, the Department of Labor (DOL) finalized its long-awaited conflict of interest rule and related prohibited transaction exemptions, expanding the definition of fiduciary “investment advice” under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. While the new rules were primarily developed in an attempt to further regulate the advice provided by professionals in the financial services industry with respect to individual retirement accounts, the newly expanded definition of “investment advice” will inevitably cover advice commonly by estate planners. As a result, estate-planning attorneys, who already owe their clients a high standard of care and duty of loyalty under most state laws, could be subject to more stringent fiduciary requirements under federal law, creating new liability concerns. 


February 19, 2017 in Articles, Current Events, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)