Wills, Trusts & Estates Prof Blog

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

Wednesday, May 24, 2017

Article on the Prudent Investor Rule and Market Risk: An Empirical Analysis

Crazy-Wall-Street-InvestorMax M. Schanzenbach & Robert H. Sitkoff recently published an Article entitled, The Prudent Investor Rule and Market Risk: An Empirical Analysis, 14 J. Empirical Legal Stud. 129 (2017). Provided below is an abstract of the Article:

The prudent investor rule, enacted in every state over the last 30 years, is the centerpiece of trust investment law. Repudiating the prior law's emphasis on avoiding risk, the rule reorients trust investment toward risk management in accordance with modern portfolio theory. The rule directs a trustee to implement an overall investment strategy having risk and return objectives reasonably suited to the trust. Using data from reports of bank trust holdings and fiduciary income tax returns, we examine asset allocation and management of market risk before and after the reform. First, we find that the reform increased stockholdings, but not among banks with average trust account sizes below the 25th percentile. This result is consistent with sensitivity in asset allocation to trust risk tolerance. Second, we present evidence consistent with increased portfolio rebalancing after the reform. We conclude that the move toward additional stockholdings was correlated with trust risk tolerance, and that the increased market risk exposure from additional stockholdings was more actively managed.

May 24, 2017 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Farmers Looking to Take Back What's Theirs

FarmBrody Swanson recently published an Article entitled, Allowing Farmers to "Take Back" What's Theirs: Adoption of the Revocable Life Estate Deed, 21 Drake J. Agri. L. 409 (2016). Provided below is an abstract of the Article:

Deeds come in many different shapes and sizes. They are generally used to transfer one’s interest in real property but may also be a useful tool to transfer interest in personal property. This Note singles out one type of deed, the life estate deed, and proposes that Iowa, along with similar farm states, joins in adopting the revocable life estate deed. Superficially, carrying out a successful deed seems relatively simple, but in order for a deed to go into effect, there are certain prerequisites that must be met to satisfy the deeds validity. Typically, a valid deed must include: (1) a detailed description of the property being transferred, (2) the name of the party who receives the property, and (3) the signature of the transferring party signed in the presence of the notary. A deed is used as an instrument to convey ownership of real property and has been defined as “[a] written instrument, which has been signed and delivered, by which one individual, the grantor, conveys title to real property to another individual, the grantee; a conveyance of land, tenements, or hereditaments, from one individual to another.” In Iowa, a grantor “includes but is not limited to, a seller, mortgagor, borrower, assignor, lessor, or affiant,” and a grantee “includes but is not limited to a buyer, mortgagee, lender, assignee, lessee, or party to an affidavit who is not the affiant.” To understand the necessity for adopting the revocable life estate deed, this Note will provide a thorough explanation of the present life estate deed, the problems regarding the transfer of property, and the advantages and disadvantages of adopting the deed.

May 24, 2017 in Articles, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, May 23, 2017

Article on Transfer to Limited Partnership Includible in Estate

LLP1Lewis J. Saret recently posted an Abstract entitled, Est. of Nancy H. Powell: Transfer to Limited Partnership Includible in Estate, Wealth Strategies Journal (2017). Provided below is the abstract:

On August 8, 2008, D’s son, J, acting on her behalf, transferred cash and securities to LP, a limited partnership, in exchange for a 99% limited partner interest. LP’s partnership agreement allowed for the entity’s dissolution with the written consent of all partners. Also on August 8, 2008, J, purportedly acting under a power of attorney, transferred D’s LP interest to T, a charitable lead annuity trust, the terms of which provided an annuity to a charitable organization for the rest of D’s life. Upon D’s death, T’s corpus was to be divided equally between D’s two sons. D died on August 15, 2008.
Held: D’s ability, acting with LP’s other partners, to dissolve the partnership was a right “to designate the persons who shall possess or enjoy” the cash and securities transferred to LP “or the income therefrom”, within the meaning of I.R.C. sec. 2036(a)(2).

Held, further, because D’s LP interest was transferred, if at all, less than three years before her death, the value of the cash and securities transferred to LP is includible in the value of her gross estate to the extent required by either I.R.C. sec. 2036(a)(2) or I.R.C. sec. 2035(a).

Held, further, neither I.R.C. sec. 2036(a)(2) nor I.R.C. sec. 2035(a) (whichever applies) requires inclusion in the value of D’s gross estate of the full date-of-death value of the cash and securities transferred to LP; only the excess of that value over the value of the limited partner interest D received in return is includible in the value of D’s gross estate. I.R.C. sec. 2043(a).

Held, further, J’s transfer of D’s LP interest to T was either void or revocable under applicable State law because D’s power of attorney did not authorize J to make gifts in excess of the annual Federal gift tax exclusion; consequently, the value of the 99% limited partner interest in LP, as of the date of D’s death, is includible in the value of her gross estate under I.R.C. sec. 2033 or I.R.C. sec. 2038(a).

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

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

Saturday, May 20, 2017

Article on Dealing with Digital Property in Civil Litigation

MatrixJeremy de Beer & Tracey Doyle recently published an Article entitled, Dealing with Digital Property in Civil Litigation, Wills, Trusts, & Estates eJournal (May 2017). Provided below is an abstract of the Article:

This article aims to shed light on the conceptual, doctrinal and practical issues regarding digital property law by weaving together several facets of the subject. Legislative schemes for the digital environment have emerged to cover some issues but not others. The debate about further statutory reform to deal with digital property is ongoing. Litigated cases in Canada are becoming increasingly common, and those that arise tend to be complex and significant. With this article, we facilitate better understanding of digital property issues among the bench and the bar, and offer a principled approach to legal policymakers grappling with law reform in this context. The approach we put forward is one based on technological neutrality, in the substantive functional sense not the minimalist notion of media neutrality.

We begin by providing important historical perspective on the debate about digital property rights, tracing its evolution over the past 20 years. We then canvass six distinct areas of law where digital property issues are engaged: the legal definition of digital assets as property; the protection of digital property against damage; dealing with digital property in life and on death; digital property and privacy rights; jurisdiction over cyberspace; and the technological regulation of digital property.

After discussing the most significant legal developments during the past two decades, we conclude with strategic insights for judges, practitioners and others faced with digital property issues in the future. We show how substantive technological neutrality can serve as a guiding principle connecting each of the digital property doctrines we review.

May 20, 2017 in Articles, Current Events, Estate Administration, Technology | Permalink | Comments (0)

Wednesday, May 17, 2017

Article on Biologically Biased Beneficence

Last-Will-and-Testament-Attorney-LakelandJeffrey Evans Stake recently published an Article entitled, Biologically Biased Beneficence, 48 Ariz. St. L.J. 1101 (2016). Provided below is an abstract of the Article:

After death and after taxes, the laws relating to wills, trusts, and intestate succession determine what to do with a decedent’s assets. Much of that body of law is built upon the assumption that the law should help the decedent reach her goals if she has expressed them, or mimic her probable goals if she has not. As put by Daniel Kelly, “The organizing principle of succession law is testamentary freedom.” While the wishes of decedents are certainly relevant, as a normative matter there are other concerns deserving attention. This Paper discusses some biological reasons to worry about the behavior of benefactors. Various potential bio-biases in the hearts of donors will be identified, followed in each case by ideas for reforming the law. My main message is that testamentary freedom should be demoted from the organizing principle to an important consideration in the design of the law of succession.

May 17, 2017 in Articles, Estate Planning - Generally, Intestate Succession, Trusts, Wills | Permalink | Comments (0)

Tuesday, May 16, 2017

Article on Deducting Attorney's Fees

Deduct attorney's feesWesley L. Bowers recently published an Article entitled, Decoding the Deduction: What’s the Right Form to Use for Professional Fees?, Tr. & Est. 30 (Apr. 2017). Provided below is an abstract of the Article:

Given our current tax environment, more and more estate planning and administration professionals are diving (often times, reluctantly) into the abyss of the income tax world. One of the more frequent questions asked by attorneys, CPAs and other professionals during an estate administration is: “Where should we deduct professional fees (attorney, CPA, appraisal, etc.): on Form 706 or Form 1041?” What seems like a simple question at first blush is often extremely complicated and takes you through a labyrinth of decision trees, regulations and case law.

The traditional answer of where to deduct professional fees was often to deduct them on Form 706, simply because more estates were subject to the estate tax in prior years when the exemptions were significantly lower, and the estate tax rate was traditionally much higher than an estate’s income tax rate. Now, however, this question has become even more complicated to answer due in large part to the proximity between the effective estate tax rate (currently, 40 percent) and an estate’s income tax rate (currently, a top bracket of 39.6 percent, with a potential 3.8 percent net investment income tax). In addition, the introduction of portability has changed the traditional estate-planning model, and more estate tax returns are now filed when not otherwise required to take advantage of the portability features. With so many recent changes and a myriad of possible planning structures, it’s no wonder many are confused as to how to answer a seemingly simple question: “Where should I deduct attorney’s fees?”

May 16, 2017 in Articles, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0)

Article on 30 Estate Planning Tips After 30 Years in the Business

Estate plannerJeffrey A. Zaluda recently published an Article entitled, 30 Things I’ve Learned After 30 Years as an Estate Planner, 31 Probate & Property 52 (May/June 2017). Provided below is an abstract of the Article:

I began practicing estate planning in the spring of 1987. I had been out of law school for less than a year, practicing in litigation at a large, prestigious firm in Chicago, meaning that I largely spent my days looking at documents in cases in which one faceless corporation was suing another. As I remember the story (facts do get fuzzy over time), a partner came to me and said that he had a small piece of probate litigation that he didn’t want to be bothered with. I think the case revolved around whether life insurance proceeds needed to be paid because there was a suspicion that the decedent had committed suicide. I don’t remember the result but I do remember that I was intrigued that the practice of law actually involved living, breathing (or dead!) human beings and human emotion, something I had not encountered as a commercial litigation associate before that. I spoke with a couple of the partners in the firm’s Trusts and Estates Group and asked if I could do some work with them and they kindly agreed to take me on. My only encounter with anything having to do with estates up to that time had been one morning session in my Bar-Bri class preparing for the bar exam.

I ended up leaving that firm later that year and joined the firm that I’m still with now, over 29 years later. That alone feels very good. In that time I have gone from as green as green can be, eagerly chasing after any small matter I could get, to an ACTEC Fellow with a successful and sophisticated practice and what I believe is a nice reputation within Chicago’s estate planning community, if not beyond. I think I’ve learned a thing or two in that time and this article is my effort to put some of that down on paper. I assume many readers will nod their heads in agreement at some items and shake their heads in disagreement at others. So be it. Hopefully, there is at least something of interest to each of you.

May 16, 2017 in Articles, Estate Planning - Generally, Teaching | Permalink | Comments (0)

Monday, May 15, 2017

Article on ABLE Account Information for Estate Planning Lawyers

Able georgiaBernard A. Krooks & Benjamin A. Rubin recently published an Article entitled, ABLE Accounts: What Trusts and Estates Lawyers Need to Know, 31 Probate & Property 40 (May/June 2017). Provided below is an abstract of the Article:

Individuals with special needs and their families and advisors are now able to set up ABLE (Achieving a Better Life Experience) accounts under Internal Revenue Code § 529A. These tax-free accounts do not affect an individual’s eligibility for Supplemental Security Income (SSI) or Medicaid so long as certain requirements are met. Currently, at least 19 states are operating ABLE accounts and several more have announced plans to launch ABLE accounts in 2017. Most states allow out-of-state residents to open accounts. Thus, it is generally not necessary for clients to wait until their home state offers ABLE accounts to establish one. When first enacted, the ABLE law prohibited out-of-state residents from setting up accounts. In 2015, however, Congress removed this provision.

Although ABLE accounts offer many benefits, it is important to understand the applicable limitations and how they compare to special needs trusts. In some cases, it may be appropriate for an individual to have both an ABLE account and a special needs trust (SNT). Keep in mind that the individual with disabilities is generally considered the owner of the ABLE account even if a third party (parent, grandparent, among others) contributes funds to the account. There are two kinds of SNTs: first-party SNTs and third-party SNTs. First-party SNTs are funded with the assets of the individual with disabilities. By contrast, third-party SNTs are created by someone other than the beneficiary with disabilities and are a common estate planning tool used to improve the quality of life of an individual with disabilities while allowing that person to maintain his government benefits. A major characteristic that distinguishes a third-party SNT from a first-party SNT is that, on th death of the beneficiary, funds remaining in the first-party SNT must be used first to repay the states’ Medicaid programs the beneficiary received services from for expenses incurred; whereas, in a third-party SNT there is no such requirement. Thus, at the death of the beneficiary of a third-party SNT, any remaining funds may be distributed to other family members or beneficiaries. This distinguishes third-party SNTs substantially from ABLE accounts as will be discussed further later in this article.

May 15, 2017 in Articles, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Wills Act Compliance

Wills actPeter T. Wendel recently published an Article entitled, Wills Act Compliance—Strict Compliance vs. Substantial Compliance/Harmless Error: Flawed Narrative = Flawed Analysis?, 31 Probate & Property 22 (May/June 2017). Provided below is an abstract of the Article:

One of the more heated issues in the field of wills, trusts, and estates is what degree of compliance the courts should insist on when applying a state’s Wills Act formalities to a document and analyzing whether the document has been properly executed. The prevailing narrative is that there are only two options. In one corner is the traditional strict compliance approach: an old and tired combatant, but one that keeps hanging in there and can still put up a good fight. Strict compliance focuses on the formalities, insisting on absolute strict compliance with the Wills Act requirements, such that any defect, any failing in the execution ceremony, always and absolutely invalidates the instrument, thereby frustrating the decedent’s intent. In the other corner are Prof. Langbein’s substantial compliance/harmless error proposals: the young, up-and-coming combatant, who slowly but surely is winning bouts and many argue is the heir apparent to the crown. The substantial compliance/harmless error proposals focus on intent. So long as there is clear and convincing evidence that the decedent intended the document to be his will, the court should overlook any failings in the execution ceremony in the interest of promoting testamentary intent. The lines have been drawn, the states must decide: should they promote testamentary intent or the Wills Act formalities? Phrased that way, it seems like a rather simple choice. With apologies to Eddie Izzard, it is a bit like asking which you prefer: “cake or death?”

The problem is, the narrative is flawed and has been from the start. There has always been a third option: a formality-based, court-created, flexible strict compliance approach.

May 15, 2017 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0)

Saturday, May 13, 2017

Article on Optimal Terms for QPRTs

QprtsTerence Condren recently published an Article entitled, Selecting the Optimal Term for a QPRT: Maximize the Retained Interest and Minimize the Risk of Dying, Tr. & Est. 24 (Apr. 2017). Provided below is an abstract of the Article:

A qualified personal residence trust (QPRT) can be a tax-efficient way of transferring a primary residence or vacation home to the next generation. Designing an effective QPRT involves making many important and complex decisions, but selecting the initial term of the QPRT may be the most critical. The longer the term, the greater the risk the grantor will die during the term, and the QPRT won’t achieve any estate tax savings. If the term is too short, then the QPRT will generate lower estate tax savings than it could have delivered had the term been longer. Here’s one method for calculating the mathematically optimal term of a QPRT.

May 13, 2017 in Articles, Estate Planning - Generally, Estate Tax, Trusts | Permalink | Comments (0)