Wills, Trusts & Estates Prof Blog

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

Wednesday, June 21, 2017

A New Conflict-of-Interest Rule for Retirement Savers Is Causing a Lot of Confusion

Confused babyOn June 9, the long-awaited fiduciary rule finally became effective. The rule requires financial advisors to put their clients’ best interests first when offering advice about retirement accounts like a 401(k). There is substantial confusion on the part of both investors and planners in understanding the scope of the rule. Some investors are becoming concerned with the changes their planners insist are due to the new standard, but seem arbitrary or outside the scope of the new fiduciary rules. Barbara Roper, director of investor protection for the Consumer Federation of America, sat down to answer some common questions regarding the rule. Roper explained that the rule, “applies to advice regarding Individual Retirement Accounts (both Roth and traditional), including rollover recommendations. It also applies to workplace retirement plans, such as 401(k)s and SEP and SIMPLE IRAs. Some 403(b) plans are also covered, but others, such as K-12 403(b)s, unfortunately are not. It does not apply to non-retirement accounts.” Roper also discusses how the rule generally works, necessary and unnecessary changes taken by advisors, and gives specific advice about different accounts and options for investors facing stubborn or dishonest planners.

See Michelle Singletary, A New Conflict-of-Interest Rule for Retirement Savers Is Causing a Lot of Confusion, The Washington Post, June 19, 2017.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.  

June 21, 2017 in Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Wednesday, June 14, 2017

Trump Administration Calls for Overhaul of Wall Street Rules

Trump familyThe Trump administration laid out its highly anticipated plan to overhaul the banking system. The proposed changes urge federal agencies to rewrite regulations that have plagued bankers and banking institutions since the passage of Dodd-Frank. The goal of rolling back and easing regulation is to help cut administrative costs shouldered by banks, make regulation more efficient, and spur job and general economic growth. The House bill passed on June 8 is not expected to make it through the Senate in its current form. Democrats, whose support is required for passage, are critical of the bill. They argue that Wall Street must be held accountable and should not be directing the charge for deregulation and removal of these protective safety measures. Major regulations that would be changed by the bill are the Volcker Rule, capital requirements for banks, and the seemingly limitless powers of the Consumer Protection Financial Bureau. The banking report is one of several that will be released in response to Trump’s call for lighter regulation.

See Robert Schmidt & Elizabeth Dexheimer, Trump Administration Calls for Overhaul of Wall Street Rules, Wealth Management.com, June 13, 2017.

June 14, 2017 in Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

IRS Ruling Helps Surviving Spouses Who Face Estate Tax Trap

SuitcaseThe Internal Revenue Service has issued another round of relief for executors who mistakenly forget or fail to file an estate tax return that elects portability. One of the major misconceptions with the portability of the estate tax exemption for surviving spouses is the method of acquisition. Many executors believe the exemption is automatic, while the reality is that it must be requested and the IRS notified of the decedent’s death. As an example of applicability, say Harry dies with $5 million in his estate which he leaves to his spouse, Wanda. Wanda has $5 million in her own assets. At her death, Wanda dies with $10 million in assets and owes an estate tax. An executor may now use the updated procedures to elect portability and avoid estate taxes. He may also make a claim for a refund of estate taxes if the statute for filing the refund is open. The IRS has made a few exceptions and allowances in the past to aid executors who have missed the filing deadline to request portability. As it stands now, the deadline is set at a hard two years after death.

See Ashlea Ebeling, IRS Ruling Helps Surviving Spouses Who Face Estate Tax Trap, Forbes, June 12, 2017.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) & Joel Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

June 14, 2017 in Current Events, Estate Planning - Generally, Estate Tax, New Legislation, Wills | Permalink | Comments (0)

Tuesday, June 13, 2017

Fiduciary Rule Fight Brews While Bad Financial Advisors Multiply

LaborCurrent research has confirmed serious problems with the manner in which Americans receive their financial advice. The financial industry, despite great strides, is still struggling with large numbers unscrupulous advisors. The Fiduciary Rule, set to take effect earlier this year, was designed to alleviate some of these issues. Donald Trump, after taking the presidency, ordered the Department of Labor to reconsider the rule. Lack of support for more regulation and a general concern with potential side-effects by the President is also mirrored in Congress. Given the outlook of the new administration, the adoption of the rule, especially in its original form, is doubtful. Objectively, the rule is certainly not a fix-all solution and its passage does entail some possible negative repercussions. But, regardless of outcome, the financial field remains rife with malcontents and miscreants. The average firm employs around 8% of advisors that have a record of serious misconduct. Of this 8%, nearly half of them keep their jobs even after being caught. Even worse, nearly 38% of the misbehaving advisors go on to do more harm to other clients. Though the Fiduciary Rule may be controversial and uncertain, what is certain is that industry changes must be made in order to repair and sustain an image of professionalism and trust in financial advisors.

See Ben Steverman, Fiduciary Rule Fight Brews While Bad Financial Advisors Multiply, Wealth Management.com, June 7, 2017.

June 13, 2017 in Current Events, Estate Planning - Generally, New Legislation, Professional Responsibility | Permalink | Comments (0)

Monday, June 12, 2017

IRS Provides Simplified Method to Request an Extension of Time to Make a Portability Election

Irs shakedownOn Friday, the IRS issued taxpayer-friendly guidelines allowing certain estates to make a late portability election if they had previously failed to make a timely election (Rev. Proc. 2017-34). Portability elections allow surviving spouses to use a decedent’s unused exemption amount for estate and gift taxes purposes. Previously, the IRS provided a simplified method for obtaining an extension for filing, but that grieving-spouse-friendly method expired at the end of 2014. Since then, the regulations available for filing an extension have been onerous and time-consuming. The new method for filing an extension provided under Rev. Proc. 2017-34 demands much less time and effort.

See Sally P. Schreiber, IRS Provides Simplified Method to Request an Extension of Time to Make a Portability Election, Journal of Accountancy, June 9, 2017.

Special thanks to Jerome Borison (Professor at University of Denver Sturm College of Law) & Kevin Staker for bringing this article to my attention.

June 12, 2017 in Current Events, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Sunday, June 11, 2017

Republicans Take Knife to Post-Crisis Wall Street Reforms

JebHouse Republicans voted on Thursday to replace the 2010 Dodd-Frank Wall Street Reform Act. The CHOICE (Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs) Act is the farthest Republicans have progressed in undoing a number of recent banking-related regulations. The bill is expected to die in the Senate, but it may open the door to further deregulation and removal of many of the choking reforms brought about by Dodd-Frank. President Trump is currently calling for deregulation across the federal government. Ancillary to Trump’s policies, the Treasury Department is expected to release a report detailing the lightening of financial rules and a reinterpretation of Dodd-Frank provisions. Senate Banking Committee Chairman Mike Crapo, a Republican, lauded the passage of the bill saying, "The CHOICE Act makes a positive move away from government micromanagement, and returns to basic principles of safety and soundness and market-driven principles."

See Lisa Lambert, Republicans Take Knife to Post-Crisis Wall Street Reforms, Reuters, June 8, 2017.

June 11, 2017 in Current Events, New Legislation | Permalink | Comments (0)

Friday, June 9, 2017

Organ Donation Tax Credits: A Life or Death Proposal?

KidneyIn March, an unusual pair of bills were introduced to the New Jersey Assembly. These bills proposed to offer direct tax credits to those individuals donating blood or organs. If the legislation is passed, this would be the first time a state has provided a no-strings-attached tax credit for organ or blood donation. Seemingly a universal good, there is a nagging question as to whether the bill is legal. Under the National Organ Transplant Act, is it illegal to buy or sell organs. The direct tax credit veers dangerously close to violating this provision. States currently offering tax credits for organ or blood donors have typically drafted their legislative provisions as expense reimbursements, not dollar-for-dollar credits. The legality of the New Jersey plan remains unclear because the proposed credit may result in monetary gain for donors.

See Kari Jahnsen, Organ Donation Tax Credits: A Life or Death Proposal?, Tax Foundation, June 7, 2017.

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

June 9, 2017 in Current Events, New Legislation | Permalink | Comments (0)

Friday, June 2, 2017

District of Columbia Slashes Estate Tax

David GrossoShould an individual’s already-taxed estate be subject to more taxes at death? If yes, then at what rate? Many states are looking into these questions and responding by raising the exemptions for estate taxes or getting rid of the taxes entirely. The District of Columbia recently followed suit by increasing the estate tax exemption from $1 million to $2 million. The exemption is expected to increase to match the $5.49 million federal exemption by 2018. There was some outcry to halt the scheduled cuts but to no avail. Councilmember David Grosso claimed that the loss of the estate tax revenue was a burden on the poorest and most marginalized population in D.C. In spite of the familiar rhetoric, the general trend among the states has tended to be either a full repeal of their estate taxes or an increase in the allowable exemption.

See Ashlea Ebeling, District of Columbia Slashes Estate Tax, Forbes, May 31, 2017.

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

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

Minnesota Weakens Estate Tax

EstateCurrently, Minnesota is one of eighteen states that imposes state inheritance or estate taxes in addition to the federal estate tax. The Republican majority in the Minnesota legislature recently passed a budget that increased the estate tax exemption from the current $1.8 million level to $2.1 million for 2017. This change is retroactive to January 1, 2017. The budget calls for the exemptions to increase in increments, reaching $3 million by 2020. The Democrat Governor Mark Dayton expressed his concerns to the legislature in a letter to the Speaker of the House. Dayton noted that the budget affects only the wealthiest estates in Minnesota and argues that such a provision defeats the purpose of the progressive tax and relieves these affluent of their burden to pay their fair share of taxes. While Dayton is asking legislators to cancel the proposed increases, the possibility of acquiescence is unlikely.

See Ashlea Ebeling, Minnesota Weakens Estate Tax Retroactive to January 1, Forbes, May 31, 2017.

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

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

Thursday, May 25, 2017

The Estate Planning Enchiridion

NV-PeoplesBranchThe Estate Planning Enchiridion of Rushforth, Lee & Kiefer, LLP, contains up-to-date news on both trust and estate legislation in the great state of Nevada. Assembly Bill 314 passed both houses and is expected to be signed into law by the Governor shortly. This bill serves to clarify a number of Nevada laws relating to trusts and estates including clarifications in the probate code, court jurisdiction, and creditor’s claims against nonprobate assets. Assembly Bill 239 is expected to become effective in early October. This bill declares the law in respect to a decedent’s digital assets; this includes access to online financial sites and social media. Assembly Bill 413, if passed, would revise Nevada law dealing with certain electronic documents, including electronic wills. But, while not dead, Bill 413 has stalled in the Assembly and its passage is questionable.

See Layne T. Rushforth, Estate Planning News: Law Updates, Estate Planning Enchiridion of Rushforth, Lee & Kiefer, LLP, May 23, 2017.

May 25, 2017 in Current Events, Estate Administration, Estate Planning - Generally, New Legislation, Trusts, Wills | Permalink | Comments (0)