Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Thursday, April 16, 2015

PLRs Approve Beneficiary of GST-Exempt Trust Transactions

Gavel2In four similar Private Letter Rulings, the Internal Revenue Service determined that the proposed sale by two trusts of farmland to a beneficiary would not cause either trust to lose its Generation Skipping Transfer Tax exempt status, nor would it trigger any gift tax or estate tax consequences.  The practical effect of these rulings would “secure a commitment from IRS in advance of closing that it would not later assert the farm had been undervalued.”

See Four More PLRs Approve Transaction with Beneficiary of GST-Exempt Trusts, Charitable Planning, Apr. 13, 2015.

April 16, 2015 in Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Iowa Case Explores Issues of Sex, Consent, Dementia

GavelOpening statements were heard last week in an Iowa criminal case that is exploring a question that is still unresolved in the scientific community of whether, when, or how dementia patients can consent to sex.  Henry Rayhons is charged with third-degree felony sexual abuse for allegedly having sex with his wife in her nursing home room last year. Rayhons' wife had severe Alzheimer's and doctors had recommended that Rayhorn no longer engage in sexual relations with her. Rayhorn denies having sex on the day charged and has said that his wife continued to ask for sexual contact.

Experts are split on the issue, with some saying that continued sexual relations is healthy for dementia patients and that safeguards can be put in place by nursing home staff to ensure the individual understands what is happening and is not being harmed. Other experts say that they are unable to consent and their desires are a primal response absent the understanding needed to give consent.

See Pam Belluck, Sex, Dementia and a Husband on Trial at Age 78, New York Times, Apr. 13, 2015.

Special thanks to Lewis Saret and Adam T. Uszynski (Meier, Bradicich & Moore, LLP, Victoria, Texas) for bringing this article to my attention.

April 16, 2015 in Elder Law, New Cases | Permalink | Comments (1) | TrackBack (0)

Social Media Accounts Included in Bankruptcy

FacebookIn a Chapter 11 reorganization of CTLI, LLC, social media accounts became the core of the dispute. CTLI had been doing business as Tactical Firearm and incurred a debt to purchase a building so the business could expand to include an indoor firing range in Katy, Texas. The Debtor was ordered to release a Facebook and Twitter account to the creditor, but the owner argued that the accounts were personal and not business property.

In In re: CTLI, LLC, Chapter 11, Debtor,the U.S. Bankruptcy Court, S.D. Texas, Houston Division held that the accounts in question were business property and that a business' social media accounts are included in the company's bankruptcy estate. The court further found that the required transfer of the accounts did not violate privacy rights.

Special thanks to Joseph Jacobson (Law Offices of Joseph Jacobson, Dallas, Texas) for bringing this case to my attention.

April 16, 2015 in Estate Planning - Generally, New Cases, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Saturday, April 11, 2015

Overturning Wills Created Under Suspect Circumstances

WillsAn incident from Florida offers excellent instruction on how to combat a will created when the testator suffered diminished capacity and was being unduly influenced. In this case, the Testator began to suffer from dementia but married a year later in spite of his worsening condition. Predictably, his new bride took action to change the will to leave the entire estate to herself and exclude the husband’s daughter. Using evidence such as recorded phone calls, mental history of the deceased, recent financial decisions and other documentation the family was able to have the will overturned. This goes to show that prudent action by the potentially wronged beneficiaries in suspect situations can pay off if a problem emerges at probate.

See Tom Nawrocki, Overturning a Suspect Will: A Case Study, Life Health Pro, Apr. 6, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

April 11, 2015 in Estate Planning - Generally, New Cases, Wills | Permalink | Comments (0) | TrackBack (0)

Friday, April 10, 2015

A Joint Trust Cautionary Tale

Trust3Joint trusts may fail in their purpose of being convenient, and create more headaches when the terms of each trust and assets segregated at the death of the first spouse is unclear. A private letter ruling illustrates possible problems that may occur, which involved the failure to segregate trust assets between the family trust and the survivor's trust based on erroneous advice from a previous estate attorney.  After the surviving spouse's death the estate was seeking to exclude the family trust assets from the estate.

In  PLR 201429009, the IRS allowed the family trust assets to be excluded, because the new attorney  backed up the correction of the problem through accounting and forensic financial review.

See John P. Dedon, Joint Trusts – Helping or Hurting? re: Estate Planning, The National Law Review, Apr. 9, 2015.

Special thanks to Jim Hillhouse for bringing this article to my attention.

April 10, 2015 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Thursday, April 9, 2015

Court Holds State Can Recover from SNT

Gavel2In Herting v. California Dep’t of Health Care Services, Cal.App.Ct., No. H040220 (6th Dist., March 27, 2015), a California appeals court held that the state can recover $400,000 from a first-party special needs trust established for a beneficiary under the age of 55. 

When Alexandria Pomianowski was injured in a car crash at age 19, she received a $1,424,019.39 settlement that was subsequently placed into a first-party special needs trust for her benefit. Alexandria died several years later, with over a million in the trust.  The Department of Health Care Services was quick to file a $417,812 claim for Medicaid reimbursement against the trust. 

Alexandria’s mother, overseer of the trust, petitioned the court to terminate the trust and deny the Department’s reimbursement claim.  The trial court granted the petition to settle the trust, yet also granted the Department’s claim.  In upholding the trial court’s decision, the Court of Appeals determined that the language in the state and federal laws preventing recovery for services provided to under 55-year-old Medicaid beneficiaries “apply to recovery from the aid recipient’s estate, whereas the Department’s claim was made pursuant to the statutes governing special needs trusts and the terms of the trust at issue.”

See State Can Recover From SNT Even Though Beneficiary is Under 55 Years Old, Elder Law Answers, 2015.   

April 9, 2015 in Estate Administration, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, April 8, 2015

Nevada Supreme Court's Fraudulent Transfer Ruling

Gavel 3The Supreme Court of Nevada recently held that the law firm, Woods & Erickson, LLP, was not liable for the fraudulent transfer of assets belonging to a debtor who was dodging a creditor judgment.  The court opinion noted that a “majority of jurisdictions do not recognize accessory liability for fraudulent transfers.”  The rationale is to protect attorneys who are not parties to the transfer but are instead acting as a “mere scrivener,” which contrasts with someone who knowingly assists with a fraudulent transfer and could be held liable. 

Attorneys should follow the principle of KYC (know your client), because litigating these types of cases can be costly and time consuming.  Even if not held liable, attorneys cannot recoup attorney fees for fighting these actions and malpractice insurers do not cover these types of cases.  Because clients often lie about themselves, attorneys should diligently research a potential client to avoid any problems that could arise. 

See Jay Adkisson, Nevada Supreme Court's Fraudulent Transfer Ruling Keeps Innocent Law Firm Out Of The Woods, Forbes, April 02, 2015. 

April 8, 2015 in Estate Planning - Generally, Malpractice, New Cases, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Rejection of (d)(4)(A) Trust Upheld

GavelThe 8th Circuit Court of Appeals recently reviewed a decision by the Social Security Administration to reject a (d)(4)(A) trust. These trust are created using a disabled individual's personal funds and require that parents, grandparents, guardians or courts create the trust. Here, an 18-year-old woman directed her parents as her agents to create the trust through a durable power of attorney, using funds from an automobile accident settlement involving a crash that left her with brain damage.

In Draper v. Colvin, the court sided with the SSA, and found that the parents were acting as agents and not parents when creating the trust, and an agent is not an approved person allowed to create a (d)(4)(A) trust.

See Karen B. Mariscal, Form Over Function: Court Decision Guts Special Needs Trust, Planning for Life, April 6, 2015.

April 8, 2015 in New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 7, 2015

Trust Amended Through Power of Attorney

TrustA recent case from the Georgia Court of Appeals illustrates how easy trust modification can be in the state, and provides a caution for settlors intending to put stricter requirements in place.

In Strange v. Towns, the settlor executing a General Durable Financial Power of Attorney naming her son as executor of her estate and trust was enough to modify her inter vivos trust.

See Luke Lantta, Power Of Attorney Amended Revocable Trust, Bryan Cave, Apr. 1, 2015.

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

April 7, 2015 in Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, April 3, 2015

POD Accounts and Its Associated Complexities

Gavel2Brown v. Brown, 149 So. 3d 108 (2014) is a recent Florida case illustrating some of the complex issues surrounding status and treatment of a decedent’s bank accounts when administering estates. 

Here, the curator of decedent’s estate filed a complaint seeking declaratory judgment that certain pay-on-death (POD) and joint accounts were assets of the estate.  The Circuit Court adopted the magistrate’s report and recommendation that all funds be deposited into the estate account.  Co-owner beneficiary of the accounts subsequently appealed.

The District Court of Appeal affirmed in part and reversed in part; holding that the statute governing POD accounts, rather than the statute governing joint accounts, applied to the decedent’s POD accounts.  The court further stated that the curator overcame the statutory presumption regarding title to joint deposit accounts, and therefore transfer of funds to the estate was warranted. 

See Jonathan Galler, Pay-on-Death Accounts Not Part of Estate, Wealth Management, Apr. 2, 2015.

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

April 3, 2015 in Estate Administration, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)