Wills, Trusts & Estates Prof Blog

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

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Thursday, July 10, 2014

Some Gifts to Those Holding Power of Attorney Are OK, Says Vermont Court

Gift BoxFiduciaries that receive gifts from those that they hold that special relationship with are under heightened suspicion. This includes those that have power of attorney. This is complicated by the fact that many that hold power of attorney are family members, and the gift may just be a gift.

In Shaffer v. Kaplan, the United States District Court for theDistrict of Vermont held that some gifts from the principal to the person holding power of attorney are allowed. The court found that only gifts that involve undue influence will be considered self dealing and thus be presumed invalid.

See Luke Lantta, Holding Power of Attorney Doesn’t Prohibit All Gifts From Principal to Agent, Bryan Cave Fiduciary Litigation, July 8, 2014.

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

July 10, 2014 in Disability Planning - Property Management, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Donald Sterling’s Emotional Trial Testimony

SterlingAs I have previously discussed, Donald and Shelly Sterling are currently in court battling over the sale of the Clippers and the decision by doctors on Donald’s mental fitness. When Donald took the stand on Tuesday, he was anything but a cooperate witness for opposing counsel. He berated the 85-year-old attorney, asking him about is legal experience and criticizing his questions. He also went after the doctors involved in him being declared mentally unfit and the NBA. His angry outbursts were interrupted at least once with crying, but after regaining his composer he continued his angry rant, which lasted nearly an hour.

See Nathan Fenno, Donald Sterling Verbally Attacks NBA, Lawyer in Trial Testimony, Los Angeles Times, July 8, 2014.

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

July 10, 2014 in Current Affairs, Current Events, Disability Planning - Property Management, Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Article on Clark v. Rameker

IRARobert L. Moshman, recently published an article entitled, Clark v. Rameker, 573 U.S. __ (2014) No Bankruptcy Exemption for Inherited IRA, The Estate Analyst, July 4, 2014. Provided below is the introduction to the article:

It is not often that the Supreme Court provides a clear rule on any aspect of financial planning (or even graces our niche with a passing reference), so these occasions call for special attention.

On June 12, 2014, the Supreme Court’s decision in Clark v. Rameker clarified that an inherited IRA is not a protected retirement fund for bankruptcy purposes.

Here, we analyze the decision and its impact on planning issues and review the applicable rules and caveats that apply to inherited IRAs.

July 10, 2014 in Articles, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 9, 2014

Why You Shouldn’t Upset Your Tax Court Witness

MissingThe personal representative in a case, which involved a value dispute between the estate and the IRS, made a game changing mistake when he failed to pay the appraiser. The fee dispute resulted in the appraiser being unwilling to testify in court, which is required.

In Estate of Tanenblatt v.Comm’r, the United States Tax Court did not allow the appraisal that favored the personal representative into evidence, and instead valued the property according to the IRS’s higher figures since they produced an expert witness.

See Kathy Sherby & Stephanie Moll, Life (and Litigation) Lesson of the Day: Don’t Bite the Hand That Feeds You, Bryan Cave, July 3, 2014.

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

July 9, 2014 in Estate Administration, New Cases | Permalink | Comments (1) | TrackBack (0)

Tuesday, July 8, 2014

LLC Attorney-Client Privilege

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The recent decision in Carpenters Pension Trust v. Lindquist Family LLC, has led courts to acknowledge that “[t]he application of attorney-client privilege to members of an LLC is a relatively unchartered area of law.”  Because limited liability corporations combine characteristics of corporations and partnerships, questions as to whether privilege applies to these business entities remains open.

The court applied the privilege principles to applicable corporations and after reviewing withheld documents, the court concluded that despite the LLC’s designation of one person to be the “sole manager,” several other LLC members “communicated with each other and with the LLC’s attorneys about legal advice.”  Because these members served as the LLC’s daily managing members, “disclosure of confidential information received by one managing member of the LLC to another managing member does not, by itself, defeat the attorney-client privilege.” 

See Thomas Spahn, How Do Courts Treat LLCs for Privilege Purposes? Mondaq, July 7, 2014. 

July 8, 2014 in Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Monday, July 7, 2014

Caring for Fiancé’s Children Does Not Earn Head of Household Status

FamilyThe United State Tax Court recently heard a case where a man supported his fiancé and her two children that he lived with and claimed head of household status. In Frank Baker v. Commissioner, the court found he did not qualify for the claimed status because the children were not his adoptive or biological children and he was not yet married to the children’s mother.

See Theodore H. Waggner, Tax Court Holds Fiancé’s Children Are Not Qualifying Children, Wealth Strategies Journal, July 6, 2014.

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

July 7, 2014 in Estate Planning - Generally, Income Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

GRAT Remainder Interest is Property in Colorado

GavelThe Colorado Court of Appeals recently heard a case between a divorcing couple, to decide whether the husband’s remainder interest in a grantor retained annuity trust (GRAT) constituted a “property interests” and thus could be divided as marital property. The trial court found that it was a property interest.

In Malias v. Malias, the appeals court affirmed the trial court that the remainder interest from the GRAT was a property interest, because it was set at a fixed amount. The court further affirmed the lower court’s valuation of the property based on reported gift tax. However, the court also noted that gift tax was the only available way of valuing the property in this case.

See Michelle St. Pierre, Colorado Court Leaves Valuation Questions Unanswered When Valueing GRAT Appreciation, JD Supra, July 2, 2014.

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

July 7, 2014 in New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Saturday, July 5, 2014

Court Finds Rockefeller Heirs Not Responsible for Environmental Cleanup Bill

RockefellerOver a hundred years ago John D. Rockefeller was the head of the American Smelting and Refining Company (Asarco). Asarco has agreed to pay $50.2 million in a cleanup effort to remove hazourdous substances from two sites in Washington state, and wanted Rockefeller’s heirs to pay a share of the cost. The case was dismissed in district court for being time-barred.

In Asarco LLC v.Goodwin, the US Court of Appeals for the Second Circuit held that the case was properly dismissed because more than three years passed between the company’s agreement to pay the cleanup cost and the date the suit was filed, and thus the statute of limitations had run. No decision on liability of the heirs was made.

See Adam Klasfeld, Rockefeller Heirs Duck Superfund Payments, Courthouse News Service, June 26, 2014.

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

July 5, 2014 in Estate Planning - Generally, New Cases | Permalink | Comments (0) | TrackBack (0)

Friday, July 4, 2014

Article on Clark v. Rameker

GavelEd Morrow recently published an article entitled, Supreme Court Holds that Inherited IRAs Are Not Protected in Bankruptcy, Are Spousal Inherited IRAs and Even Rollover IRAs Threatened As Well?, Asset Protection Planning Newsletter #248 (June 16, 2014). Provided below is the executive summary of the article:

On June 12, 2014, Justice Sotomayor, writing for a unanimous Supreme Court, resolved a split among circuits as to the protection afforded under the Bankruptcy Code for inherited IRAs.  The Court affirmed the underlying 7th Circuit decision and held that once such accounts are inherited, they lose their character as “retirement funds” in the hands of the inheriting party within the meaning of 11 U.S.C. §522(b)(3)(C). 

The ramifications of the Court’s decision are broader than you think – it may threaten creditor protection for surviving spouses as well as other beneficiaries.  While inherited spousal IRAs might be protected in bankruptcy under the Supreme Court’s interpretation once they are rolled over, they may not be protected until that time and any spousal rollover may be subject to avoidance under fraudulent transfer law.

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

July 4, 2014 in Articles, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Thursday, July 3, 2014

The Gift of Goodwill

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The recent tax court holding in Bross Trucking, Inc. v. Commissioner, T.C., No. 7710-11, T.C. Memo 2014-107, highlights that personal goodwill is an item of property having economic value and may be inadvertently transferred to younger generations. 

In the aforementioned case, Chester Bross formed a solely owned trucking company known as Bross Trucking in 1982.  The company was later investigated by government agencies overseeing the trucking business.  Fearing he would be forced to shut down, Chester and his three sons met with an attorney to plan a new course of action.  Chesters sons subsequently formed a new trucking agency, LWK Trucking, which provided a broad range of services to Bross Trucking.  According to the IRS, Bross Trucking distributed intangible assets, principally in the form of goodwill, to Chester, and Chester in made a gift of goodwill to his three sons, who then used the intangible asset in their new company.  The IRS assessed gift taxes and penalties on Chester for $1.7 million for the 2004 tax year. 

The Tax Court found there was no substantial corporate goodwill to be distributed to Chester.  The Court said the business was the “antithesis of goodwill” due to its regulatory infractions, impending suspension, and negative attention.  Chester’s personal goodwill persisted as a personal asset separate from the corporation.  The Court found that LWK Trucking’s employees created their own goodwill.

See Debra Doyle, Gift of Personal Goodwill, Wealth Management, July 2, 2014.

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

July 3, 2014 in Estate Planning - Generally, Income Tax, New Cases | Permalink | Comments (0) | TrackBack (0)