Wills, Trusts & Estates Prof Blog

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

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Tuesday, January 27, 2015

The 1023-EZ for Smaller Charities

IRSAs I have previously discussed, the Form 1023-EZ released by the IRS in July offers a shorter and simplified three-page application form for smaller charities. The EZ form also offers a lower fee of $400, a quicker approval process, and requires less information, such as not requiring organizational documents and the organization's budget. The EZ form does require that it be filed electronically, a pre-requisite eligibility worksheet to be completed, and may result in a higher chance of the organization being audited.

See Jennifer M. Pagnillo, Form 1023-EZ--Simplification of the Application Process for Smaller Charities?, Lexology, Jan. 21, 2015.

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

January 27, 2015 in Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Elimination of Social Security Tax Being Considered in Minnesota

MinnesotaIn an attempt to keep retirees in their state, lawmakers in Minnesota are considering putting an end to their state's tax on social security income. Minnesota is currently one of 13 states that tax social security benefits.

See Jennifer Waters, States That Tax Social Security Benefits, The Wall Street Journal, Jan. 24, 2015.

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

January 27, 2015 in Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Monday, January 26, 2015

A Devastating Practice In Debt Collection

Lillian PalmeroWhen Lillian Palermo became incapacitated at age 80, her husband and power of attorney regularly rolls his wife’s wheelchair at a nursing home in Manhattan.  Yet last summer, after Mr. Palermo disputed nursing home bills that doubled Mrs. Palermo’s copays and complained about employees who dropped his wife on the floor, Mr. Palermo was shocked to find a guardianship petition filed by the nursing home, asking the court to give a stranger full legal power over Mrs. Palermo.

Few people are aware that a nursing home can take such a step.  However, the growing practice has become routine, illustrating the power nursing homes wield over residents and families amid changes in financing of long-term care. 

In a random sample of 700 guardianship cases filed in Manhattan over a decade, researchers found that more than 12 percent were brought by nursing homes.  Lawyers and others agree that nursing homes primarily use such petitions as a means of bill collection.  At least one judge has ruled that the tactic is an abuse of the law, but the petitions force families into costly legal ordeals. 

While it is a drastic measure, nursing home lawyers argue that using guardianship to secure payment for care is better than suing an incapacitated resident who cannot respond. 

See Nina Bernstein, To Collect Debts, Nursing Homes Are Seizing Control Over Patients, The New York Times, Jan. 25, 2015.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

Special thanks to Lewis J. Saret (Attorney, Washington D.C.)  for bringing this article to my attention.

January 26, 2015 in Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Estate Planning - Generally, Guardianship | Permalink | Comments (0) | TrackBack (0)

The American Sniper's Legal Quandary

Chris Kyle

The movie “American Sniper,” based on the life of ex-Navy SEAL Chris Kyle, has grossed more than $130 million in domestic ticket sales.  Yet, the SWAT team training business that Mr. Kyle founded after leaving the military is preparing to shut down.

In 2009, Mr. Kyle borrowed about $2.6 million from an investor group to start his business, Craft International LLC.  His Dallas-based company offered training for police officers, SWAT teams and military members, but struggled to turn a profit.  After Mr. Kyle was killed on a Texas shooting range in 2013, Ms. Kyle and Craft executives began fighting over who owned the company. 

Now, Ms. Kyle and Craft’s creditors have reached a settlement under which the company will shut down, the Kyle family can live rent-free until October 30 in their Texas home, and Ms. Kyle will get the rights to Craft’s skull-shaped logo.  The settlement still needs court approval and U.S. Bankruptcy Judge Barbara J. Houser has agreed to look over the settlement at a February 17 hearing.

See Katy Stech, Behind ‘American Sniper,’ A Lot of Legal Sniping, Market Watch, Jan. 24, 2015.

January 26, 2015 in Current Affairs, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Why Social Security Won't Cover Retirement

Social security 1

One of the most financially disastrous mistakes you can make is to assume that Social Security will cover your retirement.  This is particularly dangerous because if you do not realize that mistake early on, it may be too late.

While Social Security does play an important role in retirement plans for millions of Americans, the odds are high that it will not be enough to fund your retirement by itself.  Below are three key reasons why:

  1. Social Security is not designed to be your only source of retirement income.  Social Security’s benefit calculation is not designed to provide you much more than a buffer against abject poverty in your old age. 
  2. Social Security’s Trust Funds are emptying, which may cause benefits to decrease by 23%.  The $1,328 that a typical retiree receives today would become the inflation-adjusted equivalent of $1,022 in 2033, once the Trust Funds empty.  Even if Congress tries to remedy the problem, this has generally consisted of some combination of tax hikes or benefit cuts.
  3. The demographic tides are shifting against Social Security’s funding model.  Social Security is a “pay as you go” system in which your taxes pay for the current recipient’s benefits.  This works fairly well so long as there are enough people paying into the system.  However, as the population ages and a smaller portion participate in the workforce, Social Security’s funding is becoming stretched. 

Regardless of what happens to Social Security in the future, the reality has been that if you want a comfortable retirement, you need to save above and beyond.

See Chuck Saletta, 3 Reasons Social Security Won’t Cover Your Retirement, The Motley Fool, Jan. 24, 2015.

January 26, 2015 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Approaching Issues of Capacity

Writing 2

While capacity can be an issue at any age, it is statistically most common among the elderly.  Many people decline in mental and physical ability as they age and capacity becomes a concern.  However, it is a well-known pillar of capacity law that practitioners cannot assume that capacity is an issue.  It is the professional’s responsibility to probe and verify in order to confirm or dispel any concerns surrounding an assessment of capacity. 

An advisable way to approach extracting issues of capacity with an elderly individual is through delicate conversation and encouraging openness.  Though it is important to avoid offending clients who may be uncomfortable, this is a crucial issue to ensure proper estate planning.  Sometimes, apparent symptoms of incapacity can result from cultural differences between client and lawyer.  Other times, apparent cultural issues can mask signs of incapacity.  As a lawyer, information regarding capacity may govern whether or not you can take instructions or act for the person, or whether any will prepared will ultimately be valid. 

See Ian M. Hull, How Lawyers Should Approach Issues of Mental Capacity, The Huffington Post Canada, Jan. 24, 2015.

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

January 26, 2015 in Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Estate Planning - Generally, Professional Responsibility, Wills | Permalink | Comments (0) | TrackBack (0)

Addressing Mental Capacity Issues

ConvoPossible capacity issues of clients create a complicated situation for estate planning lawyers and can be difficult to catch. Many factors can complicate the issue, such as cultural differences, which can both falsely present as capacity issues that do not exist and mask capacity issues that do exist. It is important that lawyers are able to ask the questions necessary to flush out whether a capacity issue exist. Open communication with clients can assist the lawyer, as clients may be more comfortable discussing the issue if they understand the benefit to them, such as protecting them from possible challenges to their will in the future.

See Suzana Popovic-Montag & Ian M. Hull, How Lawyers Should Approach Issues of Mental Capacity, Huffington Post, Jan. 24, 2015.

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

January 26, 2015 in Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Questions Surrounding Obama's Tax Proposals

Tax QuestionsThe tax proposals from President Obama, including increased capital-gains tax rate for top earners and an end to step-up basis, and a White House fact sheet has raised questions. Here are some inquiries raised by the proposals:

  • Whether the person giving or receiving the gift would owe the capital gains tax?
  • Whether the new tax structure would include a provision directing executors how to handle property when they do not know how much they paid for it originally?
  • Will trust distributions trigger capital-gains tax?
  • Where is the line between which family heirlooms will be considered excluded?

See Laura Saunders, 5 Questions on Obama's 'Step Up' Tax Proposal, The Wall Street Journal, Jan. 22, 2015.

Special thanks to Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

January 26, 2015 in Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

IRS Allowed Division of IRA

IRAA recent private letter ruling addressed the consequences of a trustee dividing an IRA into separate IRAs for each of five beneficiaries.

In Private Letter Ruling 201503024, the IRS held that the division was permissible, the trustee-to-trustee transfers on behalf of the beneficiaries did not constitute a taxable distribution or attempted rollover, the IRAs retained their qualified status, and the five beneficiaries may still use the life expectancy of the oldest beneficiary for RMDs.

See Dawn S. Markowitz, Trustee's Actions Regarding Beneficiary IRAs, Wealth Management, Jan. 22, 2015.

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

January 26, 2015 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Article on Planning for a Digital Legacy

WirelessSasha A. Klein (Bessemer Trust) and Mark R. Parthemer (Bessemer Trust) recently published an article entitled, Planning for a Digital Legacy, 29 Probate & Property No. 1 (January/February 2015).  Provided below is the introduction to the article:

Every 60 seconds over 168 million e-mails are sent, 695,000 Facebook status updates are posted, 100 people join LinkedIn, 320 new Twitter accounts are created, 600 digital videos are added to YouTube, and 6,600 photos are added to Flickr.

Digital assets are part of our everyday lives and are here to stay. Recent studies have found that among Americans, 85% of adults and 95% of teenagers use the Internet. Of those Americans, 80% of them (more than 120 million) engage in social media such as Facebook, LinkedIn, or Twitter, which is more than 25% of all time spent on-line. More than 50% of American seniors are on-line. And a surprising 92% of children under the age of two have a digital presence.

The world of digital assets is broad, but planning for these assets is often overlooked. Further, digital assets have growning quickly, and perhaps too quickly because, unfortunately, the existing state and federal laws on digital assets are underdeveloped. Moreover, on-line service providers each have their own terms of service (TOS) agreements, and these agreements are not uniform. With the rapid growth of digital assets, lack of current legal guidance, and inconsistent service agreements, it is important for your clients to be aware of potential issues that can arise over their digital assets and plan accordingly. As a trusted and well-informed advisor, you should be well positioned to explore these issues with your clients and help them create an effective solution.

January 26, 2015 in Articles, Estate Planning - Generally, Web/Tech | Permalink | Comments (0) | TrackBack (0)