Wills, Trusts & Estates Prof Blog

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

Friday, June 9, 2017

Tax Refunds for Trusts With Minnesota Grantors? Minnesota Trust Income Tax Statute Ruled Unconstitutional

MinnesotaBased on a Minnesota Tax Court ruling, certain irrevocable trusts created by Minnesota residents after 1995 may be able to claim income tax refunds. Under Minnesota law, a resident trust pays taxes to Minnesota on 100% of its intangible assets. Minnesota’s definition of a resident trust is based solely on the settlor having a Minnesota domicile at the time the trust becomes irrevocable. The Minnesota Tax Court held this statute unconstitutional. The court looked at trusts that had beneficiaries located both inside and outside the state and trustees located outside the state. These facts were among a number of factors that influenced the court’s final decision. The tax court held that these trusts were not resident trusts and therefore, the intangible assets of the trusts were not taxable by the state. The Department of Revenue is expected to appeal the decision to the Minnesota Supreme Court.

See Laura S. Carlson & Walter A. Pickhardt, Tax Refunds for Trusts With Minnesota Grantors? Minnesota Trust Income Tax Statute Ruled Unconstitutional, Faegre Baker Daniels, June 7, 2017.

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

June 9, 2017 in Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Wednesday, June 7, 2017

Who Controls How Voluntary Payments to IRS Are Applied?

IRSIn Estate of Beckenfeld v. Commissioner, the Tax Court held that a taxpayer can force the IRS to apply voluntary payments according to the taxpayers instructions. In this case, the IRS credited a husband’s estate with a payment clearly intended to apply to the wife’s estate. Part of the issue was that the check provided to the IRS was for the husband’s liabilities and included his social security information. The executor’s representative tried to argue that the husband’s estate was offering payment to satisfy the obligations of the wife’s estate. The instructions indicated that a check from the husband’s estate could only satisfy obligations arising from that estate.

See Kevin A. Diehl, Who Controls How Voluntary Payments to IRS Are Applied?, Wealth Management.com, June 1, 2017.

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

June 7, 2017 in Estate Administration, Estate Planning - Generally, Gift Tax, New Cases | Permalink | Comments (0)

Monday, June 5, 2017

Article on Estate of Powell

Tax courtSteve R. Akers recently published an Article entitled, Estate of Powell v. Commissioner, 148 T.C. No. 18 (May 18, 2017), Bessemer Trust (June 2017). Provided below is an abstract of the Article:

This “reviewed” Tax Court decision may be the most important Tax Court case addressing FLPs and LLCs in the context of estate planning since the Bongard case (12 years ago). The Tax Court breaks new ground (1) in extending the application of §2036(a)(2) to decedents owing only limited partnership interests, and (2) in raising the risk of double inclusion of assets under §2036 and a partnership interest under §2033, which may (in the court’s own words) result in “duplicative transfer tax.”

The facts involve “aggressive deathbed tax planning,” and the fact that the taxpayer lost the case is no surprise. But the court’s extension of the application of §2036(a)(2) and the extensive discussion of possible double inclusion for assets contributed to an FLP or LLC are surprising (but whether a majority of the judges would apply the double inclusion analysis is not clear).

Special thanks to Scott M. Deke for bringing this article to my attention.

June 5, 2017 in Articles, Current Events, Estate Planning - Generally, Estate Tax, New Cases, Trusts, Wills | Permalink | Comments (0)

Friday, June 2, 2017

Unanswered Questions in Texas

Texas-State-Supreme-CourtTexas appellate courts have been split on the issue of whether “tortious interference with inheritance rights” is a recognized cause of action in the state. The Texas Supreme Court recently had an opportunity to provide a definitive answer to this question but passed on the opportunity in Kinsel v. Lindsey. Instead, the court held that the imposition of a constructive trust in cases of undue influence or fraud was a sufficient remedy. While no definitive answer was provided as to whether the cause of action exists, the case has a few important takeaways for fiduciaries, financial advisors, and estate planners. First, the court clarified that it had not implicitly recognized intentional interference with inheritance rights as an actionable tort in prior cases. Second, juries may find that a settlor lacked capacity despite an estate planner’s best efforts to insure that capacity was present. And finally, a small break for the estate planner, the courts may hold that the planner was not acting inappropriately even with a jury finding that a settlor did not have capacity.

See Tortious Interference with Inheritance Rights in Texas? Still an Unanswered Question, Lexology, June 1, 2017.

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

June 2, 2017 in Current Events, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Thursday, June 1, 2017

Article on a Journey Through the Briar Patch: The Legal Implications of the Supreme Court of Virginia's Holding at Com. ex rel. Bowyer v. Sweet Briar Institute

6e530d1b146046ea561fd88ce83e3f77Joel Francis recently published an Article entitled, A Journey Through the Briar Patch: the Legal Implications of the Supreme Court of Virginia's Holding at Com. Ex Rel. Bowyer V. Sweet Briar Institute, 11 Liberty U. L. Rev. 111 (2016). Provided below is an abstract of the Article:

This Note will advance four arguments to prove that the Court ruled on the legal status of Sweet Briar College. First, it will examine the background and history of Sweet Briar College’s formation and operation. Second, it will analyze the Virginia Uniform Trust Code and the Virginia Nonstock Corporation Act to illustrate the ways in which they are incompatible. Third, this Note will then apply the facts of Sweet Briar College’s formation and operation to the law. After these three steps, this Note will conclude that the Supreme Court of Virginia (1) knew that the two areas of law were incompatible and (2) essentially ruled upon the legal status of Sweet Briar College in its holding that “trust law can apply to a corporation.” Finally, this Note will provide an alternative theory that was not argued by either party to the litigation or considered by the Court, but which potentially solves Sweet Briar College’s legal conflicts.

June 1, 2017 in Articles, Current Events, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Wednesday, May 31, 2017

Stranger Than Strangi and Partially Fiction

IRS_auditThe U.S. Tax Court, in Estate of Powell, recently held that cash and marketable securities transferred into a family limited partnership (FLP) under a power of attorney were includable in the decedent’s gross estate. The transfer was made about one week prior to death. There were unusual circumstances that made the decision less surprising, but the decision remains notable. In their discussion, the majority outlined a new analytical framework to prevent double taxation on an FLP interest and its underlying assets when there is an inclusion under Internal Revenue Code Section 2036(a). Practitioners advising clients regarding new or existing FLPs should be cognizant of Powell and engage in a pointedly holistic analysis of the FLP and the estate plan.

See N. Todd Angkatavanich, James Dougherty & Eric Fischer, Estate of Powell: Stranger than Strangi and Partially Fiction, Wealth Management.com, May 25, 2017.

May 31, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, New Cases | Permalink | Comments (0)

Friday, May 26, 2017

Texas Supeme Court Refuses to Recongize Cause of Action for Tortious Interference with Inheritance Rights

TexasEarlier today, the Supreme Court of Texas declined to follow a long line of lower court cases when it refused to recognize a cause of action for tortious interference with inheritance rights.  However, the court did not preclude reconsidering the issue at a later time as the court indicated it was "not persuaded to consider it here." (emphasis added)

See Kinsel v. Lindsey, No. 15-0403 (Tex. May 26, 2017).

May 26, 2017 in New Cases | Permalink | Comments (0)

Friday, April 28, 2017

Tax Judge Rules Appraiser Placed Lowball Valuation on Estate's Painting

The youngerA Sotheby’s official appraised a painting by Pieter Bruegel the Younger back in 2005 at $500,000, but when the owner of the piece went to sell the painting, it drew more than four times that amount, selling for $2.1 million. So why such a wide gap between the estimated and actual value? The appraiser claimed that artwork prices spiked due to a large influx of Russian buyers who were eager to obtain old masters. However, the United States Tax Court took issue with this matter in a recent decision, ruling that the appraiser had most likely placed a lowball estimate on the piece to “curry favor” with the owner, an estate likely facing a substantial tax bill. With the IRS viewing valuations for artworks in income, estate, and gift tax returns as a potential area for abuse, it comes at no surprise that the IRS challenged the low value placed on the painting, seeking an additional $781,488 in taxes from the estate.

See Colin Moynihan, Don’t Blame the Russians, Tax Judge Tells Sotheby’s Expert, N.Y. Times, April 23, 2017.

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

April 28, 2017 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, Income Tax, New Cases | Permalink | Comments (0)

Monday, April 24, 2017

Second Circuit Declines to Reconsider Estate's Title VII Claim

Title viiThe Second Circuit declined to reconsider a Title VII claim from the estate of a deceased skydiver, Donald Zarda, against his former employer. Zarda originally filed the suit claiming that his employment was terminated because of his sexual orientation. The district court granted summary judgment for the employer, noting that Title VII does not prohibit sexual orientation discrimination.

See Douglas M. Oldham, Court Tells Skydiver’s Estate It Won’t Reconsider Title VII Claim, National Law Review, April 19, 2017.

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

April 24, 2017 in Current Events, Estate Planning - Generally, New Cases | Permalink | Comments (0)

Tuesday, April 11, 2017

Court Determines that Slayer Statute Is Not Applicable in Self-Defense Case

Slayer statute In Prudential Insurance Co. of America v. Harding, a Florida court refused to apply the state’s Slayer Statute to the partner of a decedent after a fight resulted in the decedent’s death. Maurice McGriff and Terry Rigby were involved in a physical altercation, in which Rigby passed away from his injuries. McGriff claimed self-defense but gave two conflicting statements when reporting the incident. After his death, McGriff, as the sole beneficiary of Rigby’s life insurance policy, and Rigby’s sister made claims to the $466,000 life insurance death benefit. However, Rigby’s sister claimed McGriff was ineligible to receive the benefit under Florida’s Slayer Statute because he was responsible for Rigby’s death. The statute provides that a final conviction of murder is conclusive evidence, but in the absence of such a conviction, the court can weigh the evidence to determine whether the killing was unlawful and intentional. Subsequently, there was no murder conviction, and the parties disputed about whether the killing was unlawful. Ultimately, the court concluded that McGriff did not act unlawfully and his claim of self-defense could have merit, preventing the use of the Slayer Statute and awarding McGriff’s estate the life insurance proceeds.

See Jonathan A. Galler, Slayer Statute Not Applicable, Says Florida Court, Wealth Management, April 10, 2017.

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

April 11, 2017 in Current Events, Estate Planning - Generally, New Cases | Permalink | Comments (0)