Wills, Trusts & Estates Prof Blog

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

Monday, February 20, 2017

The Michael Jackson Estate Tax Case

JacksonThe executors of Michael Jackson’s estate filed an estate tax return with a value of $7 million, but the IRS issued a deficiency that reported a value of $1.32 billion, further demanding additional estate taxes of $505.1 million coupled with $196.9 million in penalties and interest. As is the problem for many celebrities, valuing Jackson’s name and likeness after his death proved controversial—his estate valued this asset at $2,105 due to his tainted reputation, while the IRS pegged the value at $434 million, as the singer was rehearsing for his comeback tour when he passed. The valuation of a celebrity’s name and likeness at death is not supposed to consider post-death events, but these can inevitably inform a court’s judgment. The Jackson estate did an excellent job of exploiting the late singer’s name and likeness after his death. As the case proceeds, all eyes will certainly be on Jackson’s name and likeness.  

See Michael Jackson Estate Tax Case Moving Forward, Rubin on Tax, February 19, 2017. 

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


February 20, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Music, New Cases | Permalink | Comments (0)

How Will We Make Up for the Estate Tax Repeal?

Estate tax repealAs we all know, President Trump has promised to repeal the estate tax, claiming that the tax is just plain wrong. It is easy to say that our country should repeal the estate tax, considering so few families actually pay the tax, but other tax areas will have to give in order to make up for the loss. The estate tax has two siblings—the gift tax and the generation-skipping tax. As of now, it is unclear how President Trump will balance the three taxes. His campaign website sketched out a plan that involved replacing the estate tax with a tax on all capital gains and no mention of the other two taxes. Ultimately, with the estate tax only generating 0.005% of annual tax collections, the tax incites more of a political debate than a federal revenue one. 

See Brian J. O’Connor, Once Again, the Estate Tax May Die, N.Y. Times, February 18, 2017. 

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


February 20, 2017 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0)

Friday, February 17, 2017

Articles in the ACTEC Law Journal

Actec ljSeveral authors recently published Articles in the American College of Trust and Estate Counsel (ACTEC) L.J., Volume 42 (2016). Provided below are the Articles’ titles and authors:

Foreword – The Supreme Court’s Estate Planning Jurisprudence by Bridget J. Crawford

The Four Horsemen and Estate Taxation by Jasper L. Cummings, Jr. 

The U.S. Supreme Court and the Law of Trusts and Estates: A Law Reformer’s Perspective by Thomas P. Gallanis

Irwin v. Gavit: Income Is (Sometimes) in the Eye of the Beholder by William P. LaPiana

Taft v. Bowers: The Foundation for Non-Recognition Provisions in the Income Tax by James R. Repetti

Helvering v. Clifford: The Supreme Court Spoils the Broth by Mark L. Ascher 

Helvering v. Horst: Gifts of Income from Property by Jerome M. Hesch & David J. Herzig

Helvering v. Safe Deposit & Trust Co.: Underestimating the Power of a Power of Appointment by Samuel A. Donaldson

Oklahoma Tax Commission v. United States: Death Taxes on Restricted Indian Personalty by Thomas E. Simmons 

Smith v. Shaughnessy: Slippery Remainder Interests and the Intersection of Gift and Estate Taxes by Ann-Marie Rhodes & Erica E. Lord 

Robinette v. Helvering: Valuation of Gifts to Split-Interest Trusts by Stephanie E. Heilborn & Cindy Zhou

Merril v. Fahs: Release of Marital Rights Is Insufficient Consideration for Transfer Tax Purposes by Kevin E. Packman 

Fidelity-Philadelphia Trust Co. v. Smith: Form over Substance? by Deborah V. Dunn & Domingo P. Such, III

Commissioner v. Estate of Noel: The Double Life of Life Insurance by John McGown, Jr. & Jason Melville 

Commissioner v. Estate of Bosch: 50 Years of Relevance by Jonathan G. Blattmachr & Madeline J. Rivlin 

United States v. Estate of Grace: Seeking a More Objective Test for the Application of the Reciprocal Trust Doctrine by Dennis I. Belcher & Kristen Frances Hager 

United States v. Byrum: Too Good to Be True? by Ronni G. Davidowitz & Jonathan C. Byer

Dickman v. Commissioner: Loans as Property Transfers by Carlyn S. McCaffrey & John C. McCaffrey

Commissioner v. Estate of Hubert: How the I.R.S. Stole Hubert’s Blessing by Kristen E. Caverly

United States v. Windsor: The Marital Deduction that Changed Marriage by Lee-ford Tritt


February 17, 2017 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Tuesday, February 7, 2017

What Is Charitable Inheritance?

DafBecause most Americans do not have to worry about the estate tax, they should begin to focus on who should receive their wealth, how much they should receive, and the reasons why. Clients are often worried about letting their children inherit too much to the point it could keep them from developing their own lives. In addition to this concern, Americans are also strongly supporting charitable organizations and experiencing the joys of gift giving; as a result, more clients are providing for charitable contributions in their estate plans. Charitable giving, however, reduces taxes, which means leaving more to their heirs. So, where does the balance lie? “Charitable inheritance” assesses the inheritance plan and sets up a donor-advisor fund for clients to set aside inheritance assets that will allow heirs to continue their parents’ legacies and build their own.  

See Charlie Jordan, Charitable Inheritance Dilemmas, Financial Advisor, February 1, 2017. 


February 7, 2017 in Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Friday, February 3, 2017

Top Estate Disputes of 2016

Estate disputesThroughout 2016, the public witnessed several high-profile estate disputes, but which ones truly captivated our attention? First and foremost, Prince died in April 2016 without a will, which has left the probate judge fighting off several self-proclaimed heirs. Prince’s death highlights the most basic estate-planning lesson of all time—create an estate plan! Another interesting estate dispute was that of Frank Sinatra, Jr., who passed away in March 2016. At the time of his death, Sinatra, Jr. and his then-ex-wife were not married, but she was under the impression they were in a common law marriage; it was not until he stopped paying her alimony payments that she decided to file for divorce a second time. After appealing the lower court’s decision, Sinatra, Jr. passed away, which presents the next lesson—ensure careful planning to mitigate any frivolous claims. The passing of Jose Fernandez evinces another estate-planning misfortune. Fernandez’s girlfriend was pregnant at the time of his death but was not indicated as a beneficiary of his trust. Now, his girlfriend is left to rely on any hopes she has of the child being ruled as a pretermitted child under state law. And finally, Tom Clancy passed away in 2013, but 2016 saw significant litigation for his estate. Essentially, Clancy set up several trusts and signed a codicil that unintentionally shifted the entire tax burden to his four children’s trusts, as to maximize the estate tax amount under the marital exemption, leaving his children with an $11.8 million tax bill. Estate planners should beware of drafting language that can be construed as ambiguous. Hopefully, the planners of 2017 will learn from these public estate-planning blunders.    

See Will Sleeth, Top Four Estate Disputes of 2016, Wealth Management, January 31, 2017. 

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


February 3, 2017 in Estate Planning - Generally, Estate Tax, Intestate Succession, Trusts | Permalink | Comments (0)

Sunday, January 29, 2017

Section 1022 Lives On After 2010

Section 1022In 2010, those who died got significant tax breaks. The Economic Growth and Tax Relief Reconciliation Act of 2001 eliminated the estate tax for Americans dying in 2010. The Act also enacted IRC § 1022, which modified the carryover basis system, offsetting the tax benefits of the estate tax elimination. However, another act quickly reinstated the estate tax for those dying in 2010, but the decedent could still elect for the modified basis rule of § 1022 in that year only. Recently, on January 19, 2017, the IRS released new regulations for repealed § 1022, noting that this section will still be relevant until all the property bequeathed from a decedent in 2010 is sold or disposed of. The new regulations include references to § 1022 whenever basis is referenced and conform to its mandate when necessary.   

See Beth L. Fox, Dead, but Not Forgotten, Wealth Management, January 27, 2017. 

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


January 29, 2017 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Saturday, January 28, 2017

Will the Estate Tax Really Be Repealed This Year?

Estate tax eliminationA top estate tax attorney predicts that the estate tax will not be repealed this year, despite promises of its demise from President Trump. Ending or altering a tax brings great complexity, and many Trump voters are not rich enough to care about the estate tax. Further, Trump’s new leadership in the Treasury Department and IRS will not significantly impact estate planning because career IRS employees, who are not political appointees, write most of those laws.   

See Ted Knutson, Estate Tax Won’t Be Repealed This Year, Predicts Top Estate Tax Attorney, Financial Advisor, January 26, 2017. 

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


January 28, 2017 in Current Events, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Friday, January 27, 2017

Book on Law & Taxation of Charitable Gift Planning

VpgRussell James III recently published a book entitled, Visual Planned Giving: An Introduction to the Law & Taxation of Charitable Gift Planning (2017). Provided below is a summary of the book:

This book provides an introductory overview of the wide range of charitable gift planning topics with implications for income, capital gain, gift, estate and generation skipping transfer taxation, including elements of a gift, documentation requirements, valuation rules, income limitations, bargain sales, charitable gift annuities, charitable remainder trusts, charitable lead trusts, remainder interest deeds with retained life estate in homes and farms, life insurance, gifts of retirement assets, private foundations, and donor advised funds.


January 27, 2017 in Books, Books - For Practitioners, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Wednesday, January 25, 2017

How Prince Will Lose the Control He Once Had over His Music

Prince estate tax billDuring Prince’s longstanding career, we saw him part with his record label, change his name, and yank his songs off popular streaming services all to prove a point—no one could tell him what to do. Although his desire to control his music inspired other artists, this limited exposure could hurt the value of the late singer’s music. Without a will, Prince’s wishes will take a backseat because his estate administrators are under a court mandate to get the most for his 1,000-song catalog. The estate administrators have a legal responsibility to maximize the return on his music, which most likely goes against his wishes, in order to pay the looming estate tax bill.  

See Lucas Shaw, With No Will, Prince Loses the Control He Zealously Guarded, Wealth Management, January 18, 2017. 


January 25, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Intestate Succession, Music | Permalink | Comments (0)

Tuesday, January 24, 2017

Article on State Constitution Perpetuities Provision

RapLes Raatz recently published an Article entitled, State Constitution Perpetuities Provision: Derivation, Meaning, and Application, 48 Ariz. St. L.J. 803 (2016). Provided below is an abstract of the Article:

The Rule Against Perpetuities, over the last decade or so, has attracted greater attention within areas of the estate planning bar. There are interrelated factors that are the primary reasons for this attention. One is the marketing of trusts that are designed to better protect against the ability of creditors of the beneficiaries of a trust to reach assets of the trust to satisfy their claims. Lengthening the period that such assets may remain unvested in beneficiaries in the trusts is touted as enhancing their value and usefulness. The longer period to defer vesting also has beneficial estate tax consequences. If trust property can be held for generations in a trust not subject to the common-law rule requiring the vesting of interests of the trust in the beneficiaries of the trust within a period ending twenty-one years after the death of the last to survive of those living when the trust became irrevocable, then inclusion of trust assets in the gross estates of beneficiaries for federal estate tax purposes is avoided to a greater extent. 

Another less considered estate and income tax consequence is the ability to cause inclusion of trust property in the gross estate of a decedent by means of the decedent springing the Delaware Tax Trap (“DTT”) in order to cause the basis of the property to be “stepped up” to its fair market value at the date of the decedent’s death when no estate tax would arise. The DTT occurs when a person holding a power of appointment over property in trust appoints the property in further trust effective upon the person’s death and grants another a power to thereafter appoint the property, which second power may be exercised to postpone vesting over a perpetuities period determined from a different date than the date of the perpetuities period applicable to the first power. The intentional triggering of the DTT is a new planning device that arose from the substantial increase in the federal estate tax exemption. If the beginning date applicable to the perpetuities period in which the property must vest pursuant to exercise of the second power would otherwise violate the common-law rule, then state legislation must permit the variance.

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