Wills, Trusts & Estates Prof Blog

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

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Monday, February 2, 2015

Oswald Casket to be Returned to His Family

GavelAs I have previously discussed, the brother of Lee Harvey Oswald sued Baumgardner Funeral Home after the funeral home attempted to sale Oswald's original casket through an auction. In a Friday ruling, a Tarrant County judge ruled that the casket must be returned, at the funeral home's expense, to Oswald's brother Robert Oswald, who plans to destroy it, and pay him damages of $87,468. The funeral home is considering an appeal, and maintains that the casket purchased by Robert was a gift to his brother, and thus not his property to reclaim.

See Associated Press, Judge: Funeral Home Wrongly Sold Lee Harvey Oswald's Casket, Fox News, Jan. 31, 2015.

February 2, 2015 in Current Affairs, Current Events, New Cases | Permalink | Comments (0) | TrackBack (0)

Trust Adviser Held Liable for Breach of Fiduciary Duty

Gavel BWIn 1970 George S. Mennen created a trust with his son John Mennen and John's four children as beneficiaries. The beneficiaries sued the co-trustees Wilmington Trust Company and John's brother Jeffrey Mennen in connection with the trust reducing in value from $100 million to $25 million over the course of 20 years, alleging that Jeff had directed investment decisions based on personal interest that resulted in the lost assets.

In Mennen v. Wilmington Trust Company, the Delaware Court of Chancery found that Jeff breached his fiduciary duty and held him liable for the loss as an "adviser." The ruling is a Draft Master's Report, and exceptions have been filed.

See Morris Nichols Trusts, Estates & Tax Group, Mennen v. Wilmington Trust Company, George Jeffrey Mennen and Owen J. Roberts as Trustees, Trusts, Estates & Tax Alert, Jan. 30, 2015.

 

February 2, 2015 in New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Sunday, February 1, 2015

How Trust Creation Barred a Fraudulent Transfer Claim

GavelA recent decision involving a lending bank and a defaulting borrower shows the importance of lenders taking prompt action when signs of the borrower transferring assets and possible fraudelent transfers arise. TrustCo Bank loaned StoreSmart the funds for a construction project in 2006, and Susan Mathews personally guaranteed the loan. Mathews began transferring assets to trusts in 2007, StoreSmart defaulted on the loan in 2011, and TrustCo sued Mathews in 2013 for fraudulent transfers. The case involved  complicated choice of law issues and argument over which state's statute of limitations should be used in the case to help direct whether the claim was barred by laches.

In TrustCo Bank v. Mathews, the Delaware Court of Chancery found that the banks' claims were barred by laches because the transfers to the trust began in 2007, which was more than six years prior to the filing of the suit and the longest statute of limitations being argued in the case was New York's six years limitations period.

See Jay Adkisson, Lenders Beware! Notice of the Borrower's Trust Planning Can Start A Statute of Limitations Running, Forbes, Jan. 28, 2015.

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

February 1, 2015 in New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, January 30, 2015

New Case: In re Matheny Family Trust

Law

In a recent case decided by the South Dakota Supreme Court, a sister and brother were co-trustees of a family trust established by the siblings’ parents.  Before their mother died, she entered into a contract for deed with brother for the sale of 480 acres of trust farmland.  After the mother died, the siblings stipulated for court supervision of the trust.  Subsequently, sister sued brother and his wife for undue influence on his contract for deed with their mother.  The circuit court granted summary judgment for Brother, concluding that Sister’s claim of undue influence was barred by the statute of limitations and that any oral agreement associated with the contract for deed was barred by the statute of frauds. The Supreme Court affirmed, holding (1) because Sister did not timely bring her claim for undue influence, the circuit court correctly ruled that the claim was barred by the statute of limitations; and (2) because Sister sought to enforce her asserted interest in the sale of real estate, the circuit court correctly ruled that any oral agreement regarding the real estate was barred by the statute of frauds.

See In re Matheny Family Trust (2015), Justia US Law. 

January 30, 2015 in Estate Administration, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Thursday, January 29, 2015

Importance of Knowing Line Between Individual and Representative Capacity

Gavel BWAfter the death of her mother, Kathleen Kozinski, who was named as both trustee of a trust created by her mother and personal representative of her mother's estate, filed a notice of trust and a petition for administration of the estate in two separate actions, which were then consolidated. Two beneficiaries filed a petition for review of Kozinski's compensation as trustee and representative, but did not name or serve her personally.

In Kozinski v. Stabenow, a Florida appellate court held that Kozinski should have been served in her individual capacity and reversed the trial court's denial of her motion to dismiss.

See Luke Lantta, Representative Versus Individual Capacity: It Can Make A Difference, Bryan Cave, Jan. 28, 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 29, 2015 in New Cases, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Trust Beneficiaries Seek $4.5 Million From UBS Financial Services

Gavel2Trust beneficiaries have brought suit against UBS Financial Services alleging that the company mismanaged trust funds, which was a breach of fiduciary duty. The beneficiaries are seeking a judgment of $4.5 million. One beneficiary bringing suit is Sanchez Carmona, who claims that in addition to mismanagement of the trust the company also failed to notify her that she was a beneficiary of the trust after her husband died in 2003, falsely listed her husband as a resident of Puerto Rico, and claimed in a 2010 government filing that he was still alive.

 See Brian Mahany, UBS Financial Services Accused of Trust Fraud, The National law Review, Jan. 28, 2015.

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

January 29, 2015 in New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, January 26, 2015

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)

Friday, January 23, 2015

Tax Court Holds Payments to Egg Donors Are Taxable Income

Egg donation

Many women who are actively trying to become pregnant are unable to do so; fortunately, there is no shortage of available alternatives for these women.  Often, however, these are typically intrusive and expensive.  One option is “egg donation,” whereby a female donor is supplied with hormones that increase her egg production.  The eggs are subsequently removed, fertilized in a laboratory, and ultimately implanted in the intended recipient. 

The term “donation” is somewhat of a misnomer, as the donor is typically compensated.  This has led to a tax conundrum: do the amounts received by the donor in exchange for her eggs constitute taxable income?  The Tax Court recently held in Perez v. Commissioner, 144 T.C. 4, (2015) that amounts received by a donor represented taxable compensation income.

Nichelle Perez, contracted with several donor companies to sell her eggs to women who struggled to conceive on their own.  Perez was compensated, not for selling her eggs, but for her physical pain and suffering during the egg donation process.  Perez argued that the $20,000 she earned from the contracts was not taxable income.  The Tax Court concluded that because the pain and injuries she would incur were anticipated and consensual, was within the scope of the medical procedures to which she consented contractually.  The payments were to compensate her for services rendered, thus, the amounts paid to her represented taxable income. 

See Tony Nitti, New Ruling: IRS Can Tax Payments To Egg Donors As Income, Forbes, Jan. 22, 2015.

January 23, 2015 in Estate Planning - Generally, Income Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Article on Cavallaro v. Commissioner

Kerry Ryan

Kerry A. Ryan (Saint Louis University School of Law) recently published an article entitled, Merger is Indirect Gift in Cavallaro, Tax Notes, Vol. 146, No. 1 (2015).  Provided below is the article’s abstract from SSRN:

In Cavallaro v. Commissioner, the Tax Court held that a merger of two family-owned businesses resulted in a substantial taxable gift. The taxpayers avoided penalties by demonstrating that they relied in good faith on the mistaken advice of competent tax advisers.

January 23, 2015 in Articles, Estate Planning - Generally, Gift Tax, New Cases | Permalink | Comments (0) | TrackBack (0)

Monday, January 19, 2015

Wyly Widow Facing $280 Million Tax Bill, Says IRS

Gavel2Caroline Dee Wyly, the widow of Charles Wyly, filed a motion in December in a Texas bankruptcy court for a ruling on the estate of Charles Wyly's tax liability.  Last year, Wyly's estate was ordered to pay $64 million in disgorgement for an offshore trust scheme that he and his brother were found to be involved in. The IRS has argued to the bankruptcy court that the motion cannot be granted because the court lacks jurisdiction over the estate in the case, and also noted that Caroline Dee Wyly's currently outstanding tax bill is over $280 million.

See Jimmy Hoover, IRS Says Wyly Widow's Tax Liability Will Far Surpass $280M, Law 360, Jan. 14, 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 19, 2015 in Estate Administration, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)