Wills, Trusts & Estates Prof Blog

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

Tuesday, August 22, 2017

Are Trusts Still Useful If the Estate Tax Is Repealed?

Trust imageSpeculation and rumor have been running amok regarding Congressional action aimed at obliterating the estate tax. In the current year, the tax only affects estates with a value over $5.49 million. This means the tax is applicable to only a very small, less than 1%, part of the American population. But, given the hefty penalty for individuals with estates that exceed the threshold exemption, trusts are commonly used to spare these estate from the 40% tax. Some have questioned the necessity of the use of trusts if the estate tax was successfully repealed. While trusts do serve a unique purpose in this particular niche of estate planning, they have a number of valuable uses elsewhere.

Very simply, a trust is a split of legal and equitable title. A settlor (you) will move assets to a trust and appoint a trustee and a beneficiary. The trustee manages the assets for the benefit of the beneficiaries. The settlor may remain both trustee and beneficiary if he or she so chooses.

Among the most common reasons for individuals to use a trust is to avoid probate. Assets kept in a trust do not have to go through the lengthy and costly probate process and may pass immediately to beneficiaries upon the demise of the settlor. Trusts may also provide protection for the settlor in case of incapacity. If the trustee is a separate entity from the settlor/beneficiary, they may continue to manage trust assets without a court-appointed guardian or conservatorship. Finally, a well-structured trust can ensure trust assets are safe from creditors. This is especially helpful for beneficiaries that are unable or unwilling to responsibly manage their finances.

See Are Trusts Still Useful If the Estate Tax Is Repealed?, Elder Law Answers, June 30, 2017.

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

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

The Biggest Estate Planning Mistake People Make

Big-mistake-jason-bateman-15284961-485-322There are a few key documents needed for near-complete estate planning. First, the Advanced Health Care Directive, or Medical Power of Attorney, designates someone to make medical decisions for you if become injured or too sick to make these decisions for yourself. The individual chosen through this document is referred to as your health care agent. Next, a Living Will provides you the ability to specifically dictate what types of medical treatment you may or may not want in an emergency or near-death situation. This document will allow the previously designated health care agent to act in your stead to make these decisions on your behalf.

Third, a Durable Power of Attorney provides for some trusted individual to make decisions on your behalf in case you become incapacitated. This person, your agent, may pay bills, write checks, make deposits, and take money from checking accounts. Finally, a Revocable Living Trust may be set up to avoid some issues inherent with the durable power of attorney. As settlor, you may place assets into a trust and act as both the trustee and the beneficiary. Upon incapacity, a named successor-trustee may take the reins and run the trust for your benefit until recovery or death.

Each of these steps can be extremely complicated and legal assistance should be sought to accomplish these estate-planning necessities.

See Brad Wiewel, The Biggest Estate Planning Mistake People Make, Forbes, August 16, 2017.

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

August 22, 2017 in Estate Planning - Generally, Travel, Wills | Permalink | Comments (0)

Financial Fraud: Lengthy Prison Term for Estate Planner Who Betrayed Clients

ScroogeJulie Kronhaus enjoyed a model life as an estate planner. She was highly regarding by professionals in the field and was often recommended for her breadth of knowledge and trustworthiness. Personally, Kronhaus spent lavishly on clothing, took numerous vacations, and reveled in regular trips to New York and Europe.

Unfortunately for her clients, Kronhaus was funding this extravagant lifestyle with monies taken from their trust accounts. A particularly troublesome victim of Kronhaus’s theft was a mother with a child who had been awarded a settlement resulting from a medical malpractice suit. Kronhaus failed to make payments to the client and may have delayed a number of payments due to her spending. An out-of-state lawyer, another  victim, grew suspicious of Kronhaus’s activities and reported her to law enforcement. The report led to Kronhaus’s 2016 arrest, an eventual 10-year prison sentence, and an order to repay $3 million in restitution.

See Financial Fraud: Lengthy Prison Term for Estate Planner Who Betrayed Clients, FBI, August15, 2017.

Special thanks to Victoria Sutton, Paul Whitfield Horn Professor, for bringing this article to my attention. 

August 22, 2017 in Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Is F.S. §732.703 Susceptible to a Constitutional Challenge by a Former Spouse Whose Claim for Benefits is Denied?

FreedomIt is common practice for spouses to take out life insurance policies and to then name their partner the beneficiary of the policy. As the majority of marriages now end in divorce, many states had to answer the question of whether the named spouse-beneficiary would still receive the insurance benefits upon the death of the spouse that took out the policy. Some states, Florida for example, answered the question with a hard statutory “no”. This simple answer is coming under fire from Constitutional attack as opponents to such statutes claim that it violates individuals’ freedom to contract. The Supreme Court is scheduled to hear a petition in Sveen v. Melin regarding this exact issue.

See Donna L. Eng and Scott Konopka, Is F.S. §732.703 Susceptible to a Constitutional Challenge by a Former Spouse Whose Claim for Benefits is Denied?, The Florida Bar Journal, August 7, 2017.

Special thanks to Paul M. Cathcart, Jr. for bringing this article to my attention.

August 22, 2017 in Current Events, Estate Planning - Generally, New Cases | Permalink | Comments (0)

Monday, August 21, 2017

Article on Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts

ArbSteven D. Baker recently published an Article entitled, Rachal v. Reitz and the Efficacy and Implementation of Mandatory Arbitration Provisions in Trusts, 9 Est. Plan. & Community Prop. L.J. 191 (2017). Provided below is an abstract of the Article:

With the recent decision in Rachal v. Reitz, the Supreme Court of Texas enforced a trust provision requiring binding arbitration of disputes between a trustee and a beneficiary, joining Florida and Arizona in explicitly recognizing the validity of such clauses. Settlors and testators who seek to minimize the delays and costs of potential conflict between beneficiaries will enjoy the favorable decision. But while the Rachal court answered, at least in part, the question of whether the settlor of a Texas trust can impose arbitration on the trustee and beneficiaries, the conscientious estate planning practitioner must also consider whether a client should do so in its will and trust instruments.

Accordingly, the first part of this article discusses the advantages and disadvantages of arbitration—a vehicle for avoiding litigation developed for the commercial world—in the realm of settling trust controversies. The second part of this article considers the impact of the Rachal opinion, as well as statutes in other jurisdictions that have recognized the use of such provisions. The third part addresses the particular limitations of mandatory arbitration in the context of resolving trust disputes. And the last part discusses the implementation of trust arbitration, both in terms of the summarizing the procedures set forth in the Texas Arbitration Act (TAA) and the drafting of the clause itself.

August 21, 2017 in Articles, Estate Administration, Estate Planning - Generally, New Cases, Professional Responsibility, Trusts | Permalink | Comments (0)

Article on Don’t Pull the Plug on Bioethics Mediation: The Use of Mediation in  Health Care Settings and End of Life Situations

TerryAmy Moorkamp recently published an Article entitled, Don’t Pull the Plug on Bioethics Mediation: The Use of Mediation in  Health Care Settings and End of Life Situations, J. Disp. Resol. (2017). Provided below is an abstract of the Article:

Theresa Marie “Terri” Schiavo was a woman who suffered cardiac arrest in 1990 which left her in a persistent vegetative state.1 Terri Schaivo’s case made headlines in 2005 in a well-publicized right-to-die case. The controversy festered in the clashing of opinions voiced from both Schaivo’s husband (her legal guardian) and Schaivo’s parents. Schaivo’s husband argued that his wife would not have wanted prolonged artificial life support without the prospect of recovery, and advocated for removal of her feeding tube. Conversely, Terri Schaivo’s parents advocated for a continuation of artificial nutrition and hydration for their daughter. This well-documented conflict amounted to an array of legal challenges, ultimately involving state and federal politicians alike, including President George W. Bush. The result was a seven-year delay before eventual removal of Terri Schaivo’s feeding tube.

A hefty decision, such as the life or death of a loved one, requires more than a few minutes of deliberation and a handful of outside consultations. Delicate, emotional, and potentially contentious medical decisions compel a structured, compassionate approach to produce quality and well-informed results. Due to the magnitude of the decision being made, as well as the abundance of other considerations, (emotional, religious, historic, financial, etc.) the case for a creative, problem-solving process of dispute resolution, such as mediation, is ripe.

This Comment will explore the use of mediation in bioethical disputes. In Part II, the Comment will give an overview of bioethics and examine its inherent nuances and complexities. Part III will examine mediation and its application in healthcare settings. Finally, Part IV will advocate for increased use of mediation in bioethics disputes in recent, applicable scenarios and cases.

Special thanks to Stacie Strong, Manley O. Hudson Professor of Law, for bringing this article to my attention.

August 21, 2017 in Current Affairs, Disability Planning - Health Care, Estate Planning - Generally | Permalink | Comments (0)

Revised Uniform Fiduciary Access to Digital Assets Act -- Explanation and Forms

DigitalGerry W. Beyer and Kerri Nipp have just posted on SSRN their article entitled Cyber Estate Planning and Administration.

This article aims to educate estate planning professionals on the importance of planning for the disposition and administration of digital assets so that fiduciaries can locate, access, protect, and properly dispose of them. The operation of the Revised Uniform Fiduciary Access to Digital Assets Act now enacted in at least thirty-six states is explained in detail. Several planning techniques that may be employed are discussed and the appendices include sample forms clients may use to organize their digital assets and sample language that can be used in estate planning documents, court orders, and in request letters to digital asset custodians.

August 21, 2017 in Estate Administration, Estate Planning - Generally, New Legislation, Technology, Wills | Permalink | Comments (0)

Reverse Veil Piercing Given New Life in California Against a Delaware LLC In Curci

VeilJames P. Baldwin, a California real estate developer, formed a Delaware LLC called JPBI. Baldwin owned 99% of the company and his wife owned the other 1%. Baldwin, as manager and CEO, made all distribution decisions, i.e. he decided when and how much JPBI would pay out to him and his wife.

In 2006, Baldwin individually received a $5.5 million loan that was eventually purchased by Curci Investments. The loan terms required repayment by 2009 with interest. When January 2009 came and went with no repayment, Curci filed suit against Baldwin and won a $7.2 million judgment. Curci was granted a number of liens on Baldwin’s interests that gave it precedent over distributions. Despite $178 million in distributions between 2006 and 2012, this revenue suddenly dried up post-judgment.

A possible solution for Curci, California law allows a creditor to include an alter ego of the debtor along with the judgment; Curci recently took the required steps needed to add JPBI to the judgement against Baldwin.

See Jay D. Adkisson, Reverse Veil Piercing Given New Life in California Against a Delaware LLC In Curci, Forber, August 13, 2017.

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

August 21, 2017 in Estate Planning - Generally, Trusts | Permalink | Comments (0)

Jerry Lewis May Leave Shockingly Modest Estate Behind

Nutty-prof-lewis1The world-renowned comedic actor, Jerry Lewis, died yesterday at the age of 91. Lewis played in such classic films as “The Nutty Professor”, “The Bellboy”, and “The Ladies Man”. His acting acumen was seemingly paired with some business savvy as Lewis owned the rights, from the negatives to the script, to many of his most iconic films. Somewhat underwhelming though is the final value of his estate: a mere $2 million. Considering his global footprint, this is substantially less than most might expect.

There has been some speculation that the hoard of intellectual property Lewis owned may yet be worth substantial sums. A real estate deal in 2002 saw Lewis buy his home back from a trust he created years earlier. This is an unusual transaction, and it may be the case that the repurchase of the home was designed to cover a transfer of Lewis’s intellectual property to the trust. Unfortunately, unless Lewis provided for a successor to take over his rights to the films, the chance for a remake of his classic films is nonexistent.

See Scott Martin, Jerry Lewis May Leave Shockingly Modest Estate Behind, Wealth Advisor, August 20, 2017.

August 21, 2017 in Current Events, Death Event Planning, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, August 20, 2017

These Are the 10 Biggest Tax Havens on the Planet

TaxWhile many industrialized nations burden their citizens with exorbitant taxes, a number of countries around the world still have extremely low income tax rates. Some nations exercise jaw-dropping rates as low as 0%. Interestingly, a concentration of these nations are in the Middle East: Saudi Arabia, Qatar, Oman, and the UAE all have no income tax. Some of this is accomplished through oil and gas operations, where businesses in the industry suffer under taxes as high as 35%.  But, while these nations’ citizens do enjoy low income tax, the GDP per capita remains relatively low.

Bermuda actually turns out to be the territory with the lowest income tax rate with the highest GDP per capita. The income tax rate rests comfortably at 0% while GDP per capita is $91,479. Comparatively, Saudi Arabia’s GDP per capita is only $17, 820 and Oman is an even lower $12,472. Bermuda does make up some of the difference through employer payroll taxes and high customs duties that can reach up to 25%.

See Catey Hill, These Are the 10 Biggest Tax Havens on the Planet, Market Watch, July 23, 2017.

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

August 20, 2017 in Estate Planning - Generally, Income Tax | Permalink | Comments (0)