Wills, Trusts & Estates Prof Blog

Same-Sex Couples Face Challenges in Determining Whether Spouses Qualify as Trust Beneficiaries

Spouses often use trusts to pass monetary benefits to the other spouse, but the law is often unclear on whether same-sex spouses can become the beneficiary of their partner’s trust. 

If the Supreme Court finds the Defense Against Marriage Act constitutional, states will not have to recognize the relationship laws of other states and will be left on their own to determine the definition of spouse.  As a general rule, states will recognize marriages from other states unless it is contrary to the state’s public policy. 

If the trust document is ambiguous on the definition of spouse and the grantor’s intent is unclear, “trustees and fiduciaries often turn to the courts to help resolve the issue.”  Absent a Supreme Court ruling providing some clarity on this issue, attorneys will continue to rely on complex and unclear state laws to guide same-sex couples on this issue.

See States Decide: Can Same-Sex Spouses Become the Beneficiary of Their Partners’ Trust?, ABA Now, May 8, 2013.

Special thanks to Margaret Ryznar (Associate Professor of Law, Indiana University Robert H. McKinney School of Law) for bringing this article to my attention.

Senator Coburn Supports Death Master File

Senator Tom Coburn from Oklahoma recently stated that he would be in support of a proposal that would provide "federal agencies greater access to the Social Security Administration Death Master File (DMF)." The proposal, which was introduced by the Obama Administration, would hopefully help the government "prevent stolen identity refund fraud crimes."

See William Hoffman, Coburn Pledges Support for Administration Proposal on Death Master File, 2013 TNT 90-5, May 8, 2013; see also, Senator Coburn Supports Death Master File Proposal, Wealth Strategies Journal, May 9, 2013.

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

Governor Signs Indiana Budget

As I have previously discussed, the Indiana Legislature passed their budget, which contained a provision that would eliminate the state inheritance tax. Now, Governor Mike Pence signed the budget, which would make that provision the law in the State of Indiana.

See Dan Carden, Pence Signs Two-Year Indiana Budget, NWI Politics, May 8, 2013.

Special thanks to Sean J. Fahey (Hall Render Killian Heath & Lyman, P.C.) for bringing this article to my attention.

PLR Reinvigorates Incomplete Gift Non-Grantor Trusts

Recently, a Private Letter Ruling has allowed taxpayers to reduce state tax liability without compromising the benefits from their assets. Taxpayers receiving stable income from their stock portfolio or with unrealized capital gains can take full advantage of this Private Letter Ruling (PLR).

PLR 201310002 holds that the incomplete gift non-grantor trusts with a lifetime special power of appointment for a heath, education, maintenance, and support purpose is now permitted. In essence, the trust makes a transfer incomplete in two ways; through the remainder interest and the major interest without the hassle of the grantor trust status. Additionally, the ruling held the distribution committee does not have powers of appointment. As a result, the PLR should make using incomplete gift non- grantor trusts more useful to avoid state income tax for the upper middle class. The preferred jurisdiction to create these trusts is Nevada.

See Peter Meicher and Steven J. Oshins, New Private Letter Ruling Breathes Life Into Nevada Incomplete Gift Non-Grantor Trusts, Wealthmanagment.com, Apr. 16, 2013.

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

Article on UPC's Reformation of Wills

Wayne M. Gazur (Professor of Law, University of Colorado School of Law) recently published an article entitled, Coming To Terms With the Uniform Probate Code's Reformation of Wills, 64 S.C. L. Rev. 403 (Winter, 2012). Provided below is an introduction to his article:

With little fanfare, the 2008 amendments to the Uniform Probate Code (UPC) adopted the doctrine of reformation in the context of wills, as well as other kindred donative instruments, on account of mistake. This Essay focuses on the reformation of wills and the impact that this little-heralded provision may carry.

While the introduction of reformation to the UPC is largely an improvement, it raises a number of concerns. This Essay proposes that reformation of wills is not only doctrinally distinct from the interpretation of ambiguous wills but also a more troubling measure that has the potential to create more, possibly unfounded, will contests. Further, while the closely related doctrine governing the interpretation of ambiguous wills needs to be clarified and made uniform by the UPC, the new reformation measure fails to meet these needs.

Part II of the Essay briefly discusses the plain meaning rule and its role in addressing and reforming ambiguities in instruments, while Part III describes the companion no reformation rule. The origin and operation of the new UPC reformation rule is discussed in Part IV of the Essay, and Parts V and VI assess its impact in the overall context of the UPC. In Part VII, the Essay proposes a clarification of the rule to address the longstanding, but unevenly applied, doctrine of ambiguity. With those substantive interpretative issues addressed, the remainder of the Essay adopts a cautionary tone: Part VIII questions the impact of the new rule on estate litigation and estate planning practice. In Part IX the Essay accordingly proposes clear limits on the role of juries in reformation proceedings. With Part X the Essay concludes by recommending safeguards that might be desirable for some testators to avoid unforeseen complications arising from the UPC’s adoption of reformation.

Alabama Elder Care Bill

The Alabama House of Representatives recently passed a new elder abuse bill that will add sections to the Criminal Code "for elder abuse, neglect and financial exploitation." This move will expand the number of tools that prosecutors have to combat abuse among those that are most at risk. At the most, the only protection that is afforded to elder abuse victims are those that found within the Adult Protective Services Act. Unfortunately, the Act only covers victims who can be classified as a "protected person." The proposed change would protect people who over the age of 60, which would expand the category of people protected by the law. 

The elder abuse and neglect section states that this crime can be punished as a first degree, second degree, and third degree felony. The aggregation of the crime depends on the type of harm and the amount of harm that a victim receives. The maximum penalty that a person can receive for a first degree is 10 year to life. The financial exploitation section is different. This section was designed to protect those over the age of 60 from exploitation by "deception, intimidation, undue influence, force, or [the] threat of force." This section would also punish agents who exploit those that they are suppose to protect. Because the version that the House was different the version the Senate passed, the bill will return to that chamber for approval.

See Danielle Deavours, Elder Abuse Bill Passes House, Alabama 13, Apr. 10, 2013.

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

Wills, Estates and Succession Act

The Wills, Estates and Succession Act and the new probate rules will come into effect on March 31, 2014. This act is "a major overhaul of succession of law and procedure in British Columbia." In addition to the act, the government in British Columbia released the new probate foms that will be used when the act comes into effect. The forms and a more detailed explanation of the new rules and regulations are available here.

See Stan Rule, Wills, Estates and Succession Act Coming Into Force on March 31, 2014, Rule of Law, Mar. 28, 2013.

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

Another State Rides the Digital Assets Bill Wave

As I have previous discussed, several states have brought forward bills in their respective legislatures that would provide access to the personal representative of a decedent's estate to his or her digital accounts. The most recent were Oregon and North Carolina. Well, now you can add Nevada to the growing list of states with this type of legislation. Provided below is a link to the original text of Senate Bill No 131.

See Senate Bill No. 131, Senate and Assembly of Nevada, Feb. 18, 2013.

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

North Carolina Digital Assets Bill

As I have previously discussed, several states have brought forward bills in their respective legislatures that would provide access to the personal representative of a decedent's estate to his or her digital accounts. Now, it looks like North Carolina has become one of the newest states to introduce legislation to change whether the personal representative of an estate should have access to the digital accounts of the decedent. Provided below is a link to Senate Bill 279.

See Senate Bill 279, General Assembly of North Carolina, Session 2013.

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

Virginia Slayer Statute Includes Persons With Mental Illness

Michael Osman has had mental health issues since childhood. One of these issues includes paranoid schizophrenia. He took medication to help his paranoid schizophrenia. In December of 2009, Michael strangled his 73-year-old mother, Carolyn Osman. He was not on his medication at the time.

In Osman v. Osman, the Virginia supreme court ruled a man who killed his mother due to mental illness cannot collect the inheritance she left him. A judge ruled that due to Osman's mental impairment he was not responsible for his actions. The court determined Michael belonged in a state mental hospital. The law in Virginia defines "'slayers'" "as murderers, voluntary manslaughter convicts and people who evidence shows have committed one of those offenses -- cannot collect an inheritance from their victim." The law does not mention or provide any exceptions for people who suffer from mental illness and are found by a court not to be responsible for their actions.

See U.S. News Va. Court Rules Against Inheritance, UPI.com, Mar. 18, 2013.

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

Oregon Digital Assets Bill

As I have previously discussed, several states have brought forward bills in their respective legislatures that would provide access to the personal representative of a decedent's estate to his or her digital accounts. Now, it appears that Oregon has joined this expanding group. The 77th Oregon Legislative Assembly has introduced Senate Bill 54, which also provides access to the personal representative of a decedent's estate to his or her digital accounts. Provided below is a link to the original text of Senate Bill 54.

See Senate Bill 54, 77th Oregon Legislature Assembly, 2013 Regular Session.

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

Can The Rich Fix The Social Security Program?

Recently, senators proposed new legislation that imposes a 6.2% Social Security tax on wages and self-employment income exceeding $250,000. This tax is in addition to the already existing 6.2% Social Security tax on wages or self-employment income up to the Social Security wage base. Senators, Bernie Sanders from Vermont, Harry Reid from Nevada, and Pete Defazio from Oregon proposed the legislation. If passed, the legislation would become effective in 2014. The additional Social Security tax on income exceeding $250,000 will not be capped. As a result, the tax obligation of people with high income would increase dramatically. According to Forbes, if the legislation passes, a taxpayer earning $400,000 dollars a year would end up paying out $9,300 more per year in employment taxes. Many believe the legislation, is forcing affluent taxpayers to mend the broken Social Security program.

See Tony Nitti, Congress Looks To The Wealthy To Bail Out Social Security, Forbes, Mar. 7, 2013.

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

Health Insurers Can No Longer Use Genetic Testing For Underwriting

The Genetic Information Nondiscrimination Act of 2008 (GINA) affects health insurers. The statute and its amendment explicitly outline acceptable and unacceptable uses of genetic testing in health insurers underwriting. GINA contains both an employment module that restricts employers from using, asking for, or compelling genetic testing information, and a module that does not allow health insurance to use the genetic testing information in deciding cost and eligibility. The GINA amendments help define key terms more clearly and will become effective on March 26, 2013.

According to GINA, health insurers may not generally use genetic information to disqualify individuals for health plans, to set the cost of monthly payments, or to rule out a preexisting condition. Despite the new rule, health insurers may use the genetic information to find suitable medical treatments for the plan holder as well as to meet his medical needs. Among the factors that health insurers may not use to increase premiums or disqualify candidates are: family medical history (including family by marriage), genetic testing and counseling information, and anything related to genetic education asked for by a plan holder. Additionally, health insurers may not use any of the information belonging to any other person on the plan. Health insurers are also prohibited from disqualifying diseases or disorders detected through genetic information. On the other hand, health insurers can use information about an illness established by a physical examination and corroborated with genetic testing. Moreover, an illness established by a physical examination that results in the examination of proteins or metabolites is not considered a genetic test.

See,Harry R. Silver and Lisa W. Clark, United States: New HIPAA Rules Regarding Genetic Information Affect Employers, Group Health Plans, Health Insurers And Healthcare Providers, Mondaq.com, Mar. 4, 2013.

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

New Ohio Asset Protection Trust Act

In a little more than a month, the Ohio Legacy Trust Act will go into effect on March 27, 2013. With this new piece of legislation, the State of Ohio will join only 13 other states that allow its citizens to create domestic asset protection trusts. A domestic asset protection trust is an "irrevocable trust into which people transfer assets so the assets can be protected from creditors' claims if the statutory requirement are fulfilled." Some experts believe that the Ohio law will likely be one of the best in the nation. For a complete client alert on this subject, please visit their website here.

See Gary L. Dinner, Peter A. Igel, Erica E. McGregor, Susan L. Racey, Rennie C. Rutman, and Jeffry L. Weiler, New Ohio Asset Protection Trust Offers Shield From Creditors, Tucker Ellis, LLP, Feb. 2013.

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

Book on American Taxpayer Relief Act of 2012

The CCH Editorial Staff (A provider of tax, accounting, and audit information, Riverwoods, Ill.) recently published a book entitled, Estate, Gift, and Generation-Skipping Provisions Explained American Taxpayer Relief Act of 2012,(2013). Provided below is a short synopsis from the book: 

This book includes explanations of the transfer tax provisions of the American Taxpayer Relief Act of 2012 (P.L. 112-240), as excerpted from Law, Explanation and Analysis of the American Taxpayer Relief Act of 2012 (CCH Book 05824501). For furtherdevelopments, see www.CCHGroup.com/TaxUpdates.

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

Article on ATRA and its Effects on Elder Law

Robert L. Moshman (Attorney, New York and New Jersey) recently published his article entitled, Elder Law Planning After ATRA, An Interview with Bernard A. Krooks ,The Estate Analyst (Feb. 2013). As its title suggests, the aritcle focuses on the recent changes in tax law and the effect that it will likely have on elder law planning. An excerpt from the article is below:

The arrival of ATRA represents an official new non-transfer tax paradigm in which planning is focused on capital gains, asset protection, state tax issues, income taxation, and Medicaid planning. All of these areas fall under the elder law umbrella.

Elder law has unique rules, and planners must also be cognizant of the new ATRA context. Most fortuitously, one of the nation’s foremost elder law practitioners has come to our assistance. Let’s review the new planning dimensions with attorney Bernard A. Krooks.

Virginia Senate Passes HB 1752

As I have previously discussed, the Virginia piece of legislation that would provide personal representatives access to the decedent's electronic accounts passed the Virginia House of Representatives by a vote of 96-0 with 4 abstentions. Now, the most recent news out of Virginia is that the Senate has also chosen to pass the bill. The Senate passed the bill unanimously by a vote of 40-0. This comes as a surprise because almost did not make it out of committee, where the vote was only 8-6. A person can continue to follow the progress of the bill here.

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

Update On Virginia Digital Assets Bill and Others Around the Country

As I have previously discussed, the House of Delegates in Virginia recently passed a bill that would provide access to a testator's personal electronic accounts to the personal representative of the estate. Now, it is the Senate's turn to debate the merits of this bill. Provided here an amendment that the Senate proposed that provides a substitute to the original bill. While I have not discussed these particular bills before, the State of Maryland and North Dakota have also introduced similar legislation. Maryland Senate Bill 29 can be found here. North Dakota House Bill No. 1455 can be found here. 

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

Study on Access To Electronic Accounts by The Executor or Administrator of Estate

As I have previously discussed, there are only a number of states that have passed laws that provide administrators of an estate access to the electronic accounts of the decedent. This group includes Connecticut. Now, the General Assembly of Connecticut has introduced an act that would study the effects of allowing the public administrator of an estate to have access to the testator's electronic accounts following their death. Provided here a copy of Proposed Bill No. 5227.

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

Text of Legislative Bill 37, An Act Relating To Decedent's Estates

Here is a copy of Legislative Bill 37, which was recently introduced in the Nebraska Legislature. Introduction to the bill is provided below:

FOR AN ACT relating to decedents' estates; to amend section 30-2476, Revised Statutes Cumulative Supplement, 2012; to change provisions relating to powers of personal representatives with respect to a decedent's Internet sites; to provide an operative date; and to repeal the original section.