Wills, Trusts & Estates Prof Blog

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

Friday, January 20, 2017

Article on Gig Employees & Their Retirement Benefits

Gig economyPaul M. Secunda recently published an Article entitled, Uber Retirement, U. Chicago Legal Forum (2017). Provided below is an abstract of the Article:

The rise of the gig economy with its part-time, itinerant, independent workers, in conjunction with the employee-centric nature of occupational retirement benefits under ERISA, has led to gig employees largely lacking meaningful retirement benefits. Current proposals to provide portable benefits to gig workers as independent workers or independent contractors are unacceptable because such benefits would not be secured by the fiduciary consumer protections of ERISA. 

However, two developments with regard to the retirement security of the gig workers are promising. First, there is now increasing examples of gig workers being found to be common-law employees under tests like ERISA’s Darden test. As common law employees, gig workers are entitled to the reporting and disclosure, vesting, funding, and fiduciary protections of ERISA. Second, the use of an open MEP model, in which pooled employer plans (PEP) have a pooled plan provider (PPP) as the named fiduciary, are gaining growing bi-partisan acceptance. This article encourages Congress to promptly adopt the open MEP model, free of current regulatory restrictions, so that gig employees can enjoy retirement security with the peace of mind that ERISA fiduciary protections provide under industry-wide gig employee open MEPs.


January 20, 2017 in Articles, Current Events, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Thursday, January 19, 2017

Article on Why Hitting the Pause Button for Your Taxes May Not Be Optimal

Trump taxes2Jonathan G. Blattmachr & Martin M. Shenkman recently published an Article entitled, Planning in a Time of Uncertainty: Part I—Why Hitting the Pause Button May Not Be the Optimal Approach, Tr. & Est. 106 (Jan. 2017). Provided below is an abstract of the Article:

The election of Donald J. Trump as our 45th President was largely unexpected. While it’s difficult to forecast the specifics of what that will mean during his term, and, perhaps, his second term, predictions can be useful to evaluate current planning. President-elect Trump has proposed wide-ranging changes to the nation’s tax system that will affect virtually all Americans and their advisors. He appears to have made tax legislation a priority for his administration. He’s suggested substantial reductions in corporate and individual tax rates and the simplification of the tax system generally through elimination of many deductions and other complexities. Estate planners, in particular, are already facing a dramatic impact on their practices, as many clients have hit the pause button on planning in anticipation of a possible repeal of the estate tax. This may not be the optimal approach for clients, and this two-part article will explore why. 


January 19, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Article on Gift Tax Consequences Between American & Brazilian Spouses

American and brazilFlávia Allegro Gerola recently published an Article entitled, Gift Tax Consequences Between Spouses of Different Citizenships: A Comparative Analysis Between American and Brazilian Laws, 31 Probate & Property 54 (Jan/Feb 2017). Provided below is an abstract of the Article:

As globalization and immigration increase, the tax implications of marriages between citizens of different countries must be taken into consideration by practitioners designing an estate plan for such couples. In particular, gifts between spouses may have tax consequences in both countries. 

The United States has estate and gift tax treaties with 18 countries. These treaties minimize and avoid double taxation when two countries have the right to tax the transfers of a donor or decedent under the applicable domestic law. The treaties provide primary and secondary taxing rights, stius rules, and special rules dealing with credits, deductions, and exemptions. There is no tax treaty between Brazil and the United States, so the applicable law of both countries must be considered for gifts between American and Brazilian spouses. This article provides an overview of the most common gifting strategies and gift tax consequences for gifts made between American and Brazilian spouses.  


January 19, 2017 in Articles, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)

Wednesday, January 18, 2017

Article on ESOPs & EOTs

EsopChristopher Michael recently published an Article entitled, The Employee Ownership Trust, an ESOP Alternative, 31 Probate & Property 42 (Jan/Feb 2017). Provided below is an abstract of the Article:

For the last four decades, an employee stock ownership plan (ESOP) has been the optimal legal mechanism for transferring ownership of stock to employees in the company in which they work. A primary goal of ESOPs is often long-term employee ownership, as an ongoing employee reward program that leads to improvements in productivity and profitability and helps to ensure the longevity of the company. Unfortunately, the laws applicable to ESOPs have not kept pace with evolving trust law. In particular, legislators have not adapted ESOP policy to states’ widespread reform of the rule against perpetuities, the “exclusive benefit” rule imposed by federal law requires ESOPs to prioritize employees’ retirement income at the expense of employees’ continued ownership of their business and thus prohibits a perpetual ESOP trust. As such, ESOPs are an uncertain vehicle when it comes to safeguarding the ownership of a firm by its employees. The ESOP structure is also exceedingly complex, which warrants additional concern. This article discusses perpetuity and other related problems with ESOPs and introduces the employee ownership trust (EOT) as a viable alternative. 


January 18, 2017 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Trusts & Estate Law Updates

Trust and estate lawBenjamin Orzeske recently published an Article entitled, Uniform Law Updates, 31 Probate & Property 10 (Jan/Feb 2017). Provided below is an abstract of the Article:

Uniform Laws Update provides information on uniform and model state laws in development as they apply to property, trust, and estate matters. The editors of Probate & Property welcome information and suggestions from readers. 

Much of the 2016 legislative activity involved the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA). At press time, 20 states had enacted a version of RUFADAA. This innovative new law ensures that fiduciaries who manage the property of decedents and incapacitated persons will have access to on-line property and accounts as necessary. 


January 18, 2017 in Articles, Estate Planning - Generally, Guardianship, Technology, Trusts | Permalink | Comments (0)

Tuesday, January 17, 2017

Article on the Role of Trust Protectors

Trust protector2Andrew T. Huber recently published an Article entitled, Trust Protectors: The Role Continues to Evolve, 3 Probate & Property 28 (Jan/Feb 2017). Provided below is an abstract of the Article:

The trust protector’s role is relatively new in modern trusts. Generally, trust protectors provide oversight of certain decisions and allow for a degree of flexibility not easily accommodated by the traditional parties to a trust. Although the trust protector’s role can be very useful, its role is not precisely defined. For attorney-drafters, settlors, and trustees alike, ambiguity in defining the role can be a difficult challenge because statutes among the states are diverse, inconsistent, and, arguably, incomplete. There is a dearth of domestic case law interpreting state statutes, and identifying whether the trust protector is a fiduciary (or not) can be problematic. The purpose of this article is to provide a broad overview of the role and to identify some of the challenges and opportunities inherent with using trust protectors. 


January 17, 2017 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Where to Set Up a Domestic Asset Protection Trust

Dapt trustsMark Merric & Daniel G. Worthington recently published an Article entitled, Best DAPT Jurisdictions Based on Three Types of Statutes: Analysis of Where to Set Up a Domestic Asset Protection Trust, Tr. & Est. 92 (Jan. 2017). Provided below is an abstract of the Article:

Sixteen states, or over 30 percent of the states in the United States, now have domestic assets protection trusts (DAPT) statutes. Some commentators thought that DAPT statutes would be limited to less populous states, but Ohio, for example, which is a populous state and one with a major banking center, adopted DAPT legislation. Also, at the time of this writing, both of Michigan’s legislatures passed a DAPT statute, which is waiting for the governor’s signature. This adoption would create the 17th DAPT state. While the history of asset protection trusts (APTs) is fairly recent in the United States beginning with Alaska in 1996, we anticipate that many more jurisdictions will adopt DAPT statutes. 

DAPTs are a powerful tool to help clients legally shield assets from third-party liability, while at the same time permit clients to be discretionary beneficiaries of their own trusts. 

In past articles, we gave one ranking of all the DAPT jurisdictions using the factors from the following two major types of statutes: (1) a discretionary support trust statute; and (2) the DAPT statute, which in many states is known as a “qualified disposition statute.” We’ve now deviated from this approach. We’ve added an anti-alter ego statute, and we’re now separately ranking: (1) the discretionary support trust statute; (2) the anti-alter ego statute; and (3) the DAPT statute.  


January 17, 2017 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Monday, January 16, 2017

Article on Key State Tax Planning Developments

State taxesSharon L. Klein recently published an Article entitled, The State of the States: 2016—An Update of Key Planning Developments, Tr. & Est. 82 (Jan. 2017). Provided below is an abstract of the Article:

To be more competitive, some jurisdictions with separate estate taxes have been increasing the amount that’s exempt from state estate taxes or even phasing out their estate or inheritance taxes. President-elect Donald J. Trump campaigned on eliminating the federal estate tax. A repeal of the federal estate tax would have a significant trickle-down effect at the state level on a number of issues. In particular, some states peg their estate tax exemption amounts to the federal exemption amount and might need to take specific action to decouple. What happens at the federal level remains to be seen. In the meantime, here’s the latest state-level activity. 


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

Saturday, January 14, 2017

Article on Lifetime Transfers of Appreciating Assets

Lifetime transfersDavid A. Handler & Patricia Ring recently published an Article entitled, Lifetime Transfers of Appreciating Assets: When Does It Pay?, Tr. & Est. 74 (Jan. 2017). Provided below is a summary of the Article:

The American Taxpayer Relief Act of 2012 (ATRA) solidified the irrelevance of the federal estate tax for all but a tiny percentage of the American population by setting the federal estate tax exemption at $5 million, indexed for inflation. “Portability,” which allows a surviving spouse to use any unused portion of his last deceased spouse’s federal estate tax exemption, became permanent law. As a result, with minimal planning, a married couple can now transfer nearly $11 million to their children and/or other non-charitable beneficiaries at their deaths without incurring any federal estate tax. 

The basis of appreciated assets that are included in a taxpayer’s estate is stepped-up to fair market value (FMV), eliminating any built-in gains on these assets. This is true even if the taxpayer’s estate isn’t subject to estate tax (for example, the estate is less than the federal exemption or passes to a surviving spouse).

Given the higher tax rates for capital gains, this basis step-up is more valuable than ever. Even those few taxpayers who still have taxable estates should think carefully before making lifetime transfers of assets to their beneficiaries. Although such transfers would remove the transferred assets (and any post-transfer appreciation) from their estate for estate tax purposes, the basis of these assets wouldn’t be stepped-up at their deaths. As a result, substantial gains could be recognized and taxes on such gains payable when such assets are later sold by the transferees. 

It isn’t easy to determine whether the benefit of the estate tax savings that will be achieved by transferring an asset during a taxpayer’s life will likely outweigh the cost of subsequent capital gains taxes when the recipients later dispose of the asset. As we’ll discuss, the lower the asset’s basis as a percentage of its value, the more the asset must appreciate for a lifetime transfer of the asset to provide a net tax benefit.  


January 14, 2017 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, January 13, 2017

Article on Continuing Helping Clients Achieve Their Charitable Goals

Charitable goals Robert F. Sharpe, Jr. recently published an Article entitled, Adapting Longstanding Tools to Possible Changes: Continuing Helping Clients Achieve Their Charitable Goals, Tr. & Est. 62 (Jan. 2017). Provided below is a summary of the Article:

Insofar as philanthropic planning is concerned, 2016 was a year for debate on the future of charitable income tax incentives and the tax ramifications for private foundations, donor-advised funds (DAFs) and other charitable planning vehicles. 

During the lengthy presidential campaign, the major candidates proposed a number of tax reform plans that would serve to make charitable giving more or less attractive, depending on one’s income level, the amount and nature of their itemized deductions and other factors. Now that the dust has settled, here’s what we’re left with. 


January 13, 2017 in Articles, Current Events, Estate Planning - Generally, Gift Tax | Permalink | Comments (0)