Wills, Trusts & Estates Prof Blog

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

Saturday, December 10, 2016

Article on Non-Charitable Purpose Trusts

Non charitable trustsRichard C. Ausness recently published an Article entitled, Non-Charitable Purpose Trusts: Past, Present, and Future, U. Oslo Faculty of Law Research (2016). Provided below is an abstract of the Article:

This Article focuses on non-charitable purpose trusts and how they enable estate planners to better carry out their clients’ objectives. Specifically, it explores the history of non-charitable purpose trusts and summarizes the differences between private trusts, charitable trusts, and non-charitable purpose trusts. This Article also examines the treatment of non-charitable purpose trusts in England and the United States prior to the promulgation of the Restatement of Trusts in 1935. This Article surveys the recent adoption of non-charitable purpose trust provisions in the Uniform Trust Code and various Restatements and gives advice on drafting the trust instruments. Lastly, this Article concludes with suggested revisions to the Uniform Trust Code.

December 10, 2016 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Thursday, December 8, 2016

Article on Future of Federal Estate Tax

Estate tax3Kevin T. Keen recently published an Article entitled, The Only Thing Is Uncertainty: The Future of Estate Planning Without the Federal Estate Tax, 51 Real Prop. Tr. & Est. L.J. 129 (2016). Provided below is a synopsis of the Article:

Given the current political environment, the possibility of a federal estate tax repeal has seemingly become more likely. The effect of a possible near-term repeal of the federal estate tax creates further uncertainty in a field that is constantly evolving. This uncertainty is nothing new. However, taking into consideration the substantial and cascading changes of the American Taxpayer Relief Act of 2012, focusing on current proposed legislation to repeal the estate tax is important to present estate planning efforts. With the 2016 presidential election looming on the horizon, it is not unrealistic to foresee significant changes to the existing income and transfer tax regime ahead.

This Article discusses the current happenings with respect to the most recent efforts to repeal the federal estate tax, offers a glimpse into the possible consequences to the federal income and wealth transfer taxes as a result of such repeal, and explores what considerations may drive future estate planning should one of two circumstances involving a repeal of the estate tax materialize. It behooves the estate planner to consider these potential outcomes and leverage the uncertainty in planning. In any case, income tax considerations will continue to have an increasingly meaningful role in sophisticated estate planning, regardless of the uncertainty that lies ahead.

December 8, 2016 in Articles, Current Events, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Wednesday, December 7, 2016

Article on Retained Rights Triggering IRC Section 2036

Irc 2036Leslie M. Levy recently published an Article entitled, Section 2036 of the Internal Revenue Code: A Practitioner’s Guide, 51 Real Prop. Tr. & Est. L.J. 75 (2016). Provided below is a synopsis of the Article:

This Article summarizes the current law and issues surrounding section 2036 of the Internal Revenue Code (Code). Specifically, this Article examines retained rights that trigger section 2036. It also addresses the issues surrounding the definition of a “bona fide sale” and the different tests employed by different courts. Lastly, this Article examines the definition of “adequate and full consideration in money or money's worth” and two highly debated issues in that area. It concludes that understanding the Internal Revenue Service's (Service) position on the issues involving section 2036 can reduce the likelihood of a Service audit and lead to substantial estate tax savings.

December 7, 2016 in Articles, Estate Planning - Generally | Permalink | Comments (0)

Article on Doctrines of Reimbursement, Contribution & Subrogation

Doctrine of reimbursementBrian D. Hulse recently published an Article entitled, After the Guarantor Pays: The Uncertain Equitable Doctrines of Reimbursement, Contribution, and Subrogation, 51 Real Prop. Tr. & Est. L.J. 41 (2016). Provided below is a synopsis of the Article:

This Article addresses the equitable doctrines of reimbursement, contribution, and subrogation as they apply to guarantors and other secondary obligors. Specifically, it explores in detail guarantors' and other secondary obligors' rights after they make payment under the guaranty or other secondary obligation and then seek to recover some or all of the amount paid from the borrower, other guarantors, or the collateral for the primary obligation. This article discusses the inconsistencies in the case law on these subjects, which can create unpredictable results. It concludes that, when multiple parties are liable on a common debt, in whatever capacity, they should enter into appropriate reimbursement and contribution agreements at the outset of the transaction to avoid litigation and unpredictable outcomes.

December 7, 2016 in Articles, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, December 6, 2016

Article on Intellectual Property Dimensions of Real Property

Intellectual propertyMichael N. Widener recently published an Article entitled, Brand: Modern Realty Transfers' Iconic Dimension, 51 Real Property, Trust & Estate L.J. 23 (2016). Provided below is an abstract of the Article:

Any real estate project branded "Trump [Product Type]" is better positioned in marketing circles than equivalent projects lacking that association.* The preceding sentence reminds you that real estate is a consumer product in one seminal respect. Brand, even in real property development, reflects upon the lifestyles of persons shopping, eating, working and sojourning in a unique place. Development projects today need branding to differentiate themselves from other places and to message to potential shoppers, consumers, tenants or buyers what it's like to engage in a dynamic environment or to enjoy the creative energy of fellow occupants or the surrounding neighborhood. Messaging has much to say about the image and reputation of a commercial property – and the expected momentum of the project's lease-out or unit sales. It creates an emotional, visceral connection with shoppers, travelers, workers or whomever is the target of the "experience" narrative. 

Such vital components of those images and messages that cumulatively constitute the "brand" of a real estate development must follow ownership or leasing of the project. This paper identifies all the critical branding elements, discusses how in this digital age they are registered (secured) in their creators, and how (and why) future use of those elements must be secured by the buyer or the ground tenant – whomever is the transferee of the physical project. As new means of expression such as Memes and GIFs, followed by emoticons, populate the branding realm, the practitioner must stay on her toes to advise transferees of their burdens of due diligence and securing rights in the brand. This paper suggests the proper path to transferees' ongoing rights to control the brand elements beyond closing on the concurrent real property transaction. 

*If you doubt this proposition, consult Donald Trump for his view. This abstract itself tests the power of the surname Trump to secure "views" and downloads of the accompanying paper.

December 6, 2016 in Articles, Estate Planning - Generally, Technology | Permalink | Comments (0)

Article on Wealth Transfer Tax Reform

Wealth transfer taxJoseph M. Dodge recently published an Article entitled, Three Whacks at Wealth Transfer Tax Reform: Retained-Interest Transfers, Generation-Skipping Trusts, and FLP Valuation Discounts, 57 B.C. L. Rev. 999 (2016). Provided below is an abstract of the Article:

This Article offers three sets of proposals to reform the existing federal wealth transfer tax system, the common theme being the link between the timing of the taxable transfer and valuation. Under the first set of proposals, transfers with retained interests would be taxed at the first to occur of the transferor's death or the date the interest expired. In addition, the term “retained interest” would be broadly construed to encompass the power to revoke and the possibility of receiving income or corpus under another person's power. The second set of proposals relates to the generation-skipping tax. To achieve accurate valuation, the tax would be imposed only on taxable distributions, and the exemptions would either be the unused gift/estate exemptions of deemed transferors or separate per-transferee exemptions. The third set of proposals relates to valuation discounts of interests in family-held entities, mostly family limited partnerships. The lack-of-marketability discount for family investment-holding entities should be ignored because the tax-motivated destructions of non-unique value are against public policy, and the removal of the value-depressing restrictions is likely to occur in the future. Minority-interest discounts should not be recognized where minority status exists by reason of marital property rights or arises by gift or bequest. As a transition rule (or as an alternate approach), the disappearance of value-depressing restrictions and the recombining of minority interests into a majority interest should, where valuation discounts were previously obtained, be subject to a recapture excise tax.

December 6, 2016 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax | Permalink | Comments (0)

Sunday, December 4, 2016

Article on the Uniform Partition of Heirs Property Act

UPHPAThomas W. Mitchell recently published an Article entitled, Restoring Hope for Heirs Property Owners: The Uniform Partition of Heirs Property Act, State & Local Law News 6 (2016). Provided below is an abstract of the Article:

This Article provides a summary of the legal problems a diverse group of common property owners have experienced with the law of partition as that law applies to tenancy-in-common properties. Many of these property owners refer to their ownership as heirs property, which is attributable to the fact that most of the fractional interests in such property are transferred by intestacy. A large number of heirs property owners have lost their property over the course of the past several decades as a result of courts that have ordered forced, partition sales of their property. The Article further provides an overview of the Uniform Partition of Heirs Property Act (UPHPA), a uniform act promulgated by the Uniform Law Commission in 2010 and approved by the American Bar Association for consideration by the states. The UPHPA represents the most significant reform of partition law in modern times and is designed to make heirs property ownership more secure and to better preserve the real estate wealth of heirs property owners in those instances in which a court does order a partition sale. The Article also provides an overview of the enactment record noting that the UPHPA has now been enacted into law by eight states -- in many different regions. This solid enactment record is quite surprising given that those most negatively impacted by the extant partition law have been poor and disadvantaged property owners, many of whom have been racial and ethnic minorities. The Article details the background of South Carolina's enactment in particular, in part because South Carolina has been considered for several decades to be ground zero for partition action abuses and because it was widely considered to be one of the states in which legislators would most fervently resist any effort to reform partition law. Finally, the Article identifies several additional state legislatures that may consider the UPHPA in the near future, including legislatures in Mississippi, New Mexico, Tennessee, Texas, and West Virginia.

December 4, 2016 in Articles, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Wednesday, November 30, 2016

Article on Property Conversion Clauses in Marital Trusts

Marital deductionPatrick J. Duffey recently published an Article entitled, Dude, Where’s My Income? Examining Property Conversion Clauses in Marital Trusts, 51 Real Prop. Tr. & Est. L.J. 1 (2016). Provided below is an abstract of the Article:

The “Marital Deduction” matters. As an instrument of public policy, it is a powerful statement by Congress that spouses are a single taxable unit. As a planning tool it is a flexible technique, subject to no dollar limitation, with few technical restrictions, and with relatively simple practical application. For these reasons and others, it is widely used both during life and at death. In fact, there is no single deduction that is more significant. It is, simply, the foundation of an estate plan for the quintessential married couple.

But there is a peculiar, technical, and inflexible requirement of the Marital Deduction that, though extraordinarily important, is often overlooked by planners who largely rely on form documents to provide the necessary “boilerplate” provisions required for modern trusts: spousal conversion of unproductive property. This required power, often effectuated by a trust provision (a Property Conversion Clause), operates to fulfill the substance behind the command found in the Treasury Regulations (Regulations) that trustees must distribute all income from trust property in order to qualify for the Marital Deduction. When a trust holds a significant amount of unproductive property, that rule is rendered toothless without a power, exercisable by the spouse, to force the trustee to sell that property and purchase income-producing property in its place.

The questions raised by the spousal conversion power are numerous. When, if ever, does underproductive property become “unproductive” for purposes of the Regulations? What timing requirements are associated with the spouse's right of conversion? When will local law suffice to fulfill this requirement? What portion of trust assets must be unproductive in order to trigger application of the conversion requirement? What portion of trust assets must be unproductive in order to trigger application of a given Property Conversion Clause? May the trustee use alternate methods to make adequate distributions to the spouse while preserving otherwise desirable (or unmarketable) trust property?

The Regulations, case law, and Internal Revenue Service (Service) provide guidance in this area that implicate these issues and more. All are worthy of comment. Although this Article does address those discrete issues, its central focus is the inexorably interrelated dichotomy between the role of Property Conversion Clauses as check-the-box requirements for a tax deduction and as substantive provisions in millions of trusts that hold billions of dollars in endlessly varying assets. This duality is examined both from the perspective of a planner looking to draft such a clause and the perspective of an administrator struggling with a flawed or missing provision. Towards that end, this Article includes sample provisions and practical suggestions drawn from analysis of state and federal law, including statutes, regulations, published guidance, and case law.

November 30, 2016 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Tuesday, November 29, 2016

Article on Third-Party Liability in Equity

Trustee2Sarah Worthington recently published an Article entitled, Exposing Third-Party Liability in Equity: Lessons from the Limitation Rules, Equity, Trusts and Commerce Ch. 14 (Forthcoming). Provided below is an abstract of the Article:

This article provides a re-examination of third-party liability in equity. The exercise was prompted by a difficult case on limitation periods in equity, but the conclusions – if correct – have far wider significance. Three major points are made. First, it has long been conceded that the language of constructive trusts and constructive trustees is confusing. It is suggested here that the language disguises a relatively straightforward search for situations where there are property splits (trusts) or property management responsibilities (fiduciary responsibilities). Secondly, accessory liability in equity looks to be something of a misnomer, since it appears that the drive is not to find individuals with particular associations with the wrongdoer and shared liability for the primary wrong, but instead to find individuals who are themselves trustees or fiduciaries because of their particular association with the original managed property. Liability follows accordingly, and is primary not secondary liability. Finally, where there are fiduciary responsibilities for property management, liability is in two forms: compensation for loss to the managed assets; and disgorgement of disloyal gains. The former is distinguishable from common law compensation in its focus on remedying loss to the property fund, not the loss to individuals interested in the fund. These insights – in particular the fiduciary characteristics of third parties in equity, and the workings of equitable compensation – have significant practical consequences.

November 29, 2016 in Articles, Estate Administration, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Monday, November 28, 2016

Article on Life Insurance Valuation for Seniors

Life insurance valuationJon B. Mendelsohn recently published an Article entitled, Rethinking Life Insurance Valuation for Seniors, Trusts & Estates (Nov. 2016). Provided below is a summary of the Article:

Life insurance has long been considered a hard to value asset. Practitioners and planners have dealt with a variety of definitions of fair market value (FMV), depending on the particular application that’s being addressed. Historically, standard valuation practices come with their own set of challenges. Similar to other asset classes, this topic is evolving, and there are current valuation methodologies that provide an independent market-based value for life insurance that accurately conforms to the Internal Revenue Service definition of FMV. This level of precision can influence planning scenarios and open up new options when dealing with complicated life insurance decisions involving senior clients.

November 28, 2016 in Articles, Elder Law, Estate Planning - Generally | Permalink | Comments (0)