Wills, Trusts & Estates Prof Blog

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

Monday, August 14, 2017

IRS Rules on Tax Ramifications of Incomplete Non-Grantor Trust

Farm-Agriculture-Cartoon-059The Internal Revenue Service (IRS) addressed income and gift-tax consequences relating to an incomplete non-grantor trust in PLR 201729009. In the case at issue, the settlor created an irrevocable trust in order to benefit himself, his wife, charitable organizations, siblings, and children. The trust instrument provided for a Distribution Committee to disperse income and principal from the trust to named beneficiaries for their health, education, maintenance, and support (HEMS).

After a request for rulings, the IRS concluded that the settlor’s contributions to the trust did not qualify as a gift for federal gift-tax purposes. This characterization entails that distributions from the trust will be treated as a return of the settlor’s property and, as such, will be included in the settlor’s gross estate upon death.

The IRS ruling also held that the powers maintained by the Distribution Committee were such that transfers to the trust were not complete with respect to the trust’s income interest; the relationship between the settlor and the committee allowed the settlor to retain too much power over distributions of income and principal.

See Jillian Merns, IRS Rules on Tax Ramifications of Incomplete Non-Grantor Trust, Wealth Management.com, August 2, 2017.

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

August 14, 2017 in Current Events, Estate Planning - Generally, Gift Tax, Income Tax, New Legislation, Trusts | Permalink | Comments (0)

Friday, August 11, 2017

Article on 2017 Texas Estates & Trust Codes with Commentary

Beyer_TeachingGerry W. Beyer recently published an Article entitled, 2017 Texas Estates & Trust Codes with Commentary, Wills, Trusts, & Estate Law eJournal (2017). Provided below is an abstract of the Article:

This document contains the Texas Estates Code and the Texas Trusts Code (and related Property Code provisions) showing all changes made by the Regular Session of the 2017 Texas Legislature. The changes, most of which take effect on September 1, 2017, are shown in red-lined format for easy comparison of the prior and new versions of the statutes. Also included are charts converting Probate Code to Estates Code sections and Estates Code to Probate Code sections.

Caveat: This document was prepared before the conclusion of the 2017 Special Session. Thus, readers need to check to see if any of the statutes were impacted by the Special Session.

I have included commentary entitled Statutes in Context to many sections. These annotations provide background information, explanations, and citations to key cases which should assist you in identifying the significance of the statutes and how they operate.

Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.

August 11, 2017 in Articles, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Wednesday, July 26, 2017

The Ethics of Adjusting Your Assets to Qualify for Medicaid

Tumblr_m44fzypxpc1qbr0g2o1_1280Medicaid qualifications tend to vary from state to state. Generally, there exist some asset thresholds that may not be exceeded in order to qualify for aid. With Republicans in Congress seeking legislation aimed at reducing Medicaid benefits, ethical concerns regarding hiding wealth in order to achieve qualification have been forced back into the limelight.

There are two well-defined perspectives when it comes to hiding assets: those that refuse to do it, and those who are perfectly willing to hide their property in order to qualify for Medicaid. Janet Kinzer offered a poignant rebuke to those hiding assets: “People who engage in such planning are privileged enough to be aware of it and can afford the legal fees. Shouldn’t tax dollars only go toward the care of people who lack such access?”

While a fair point, there are a number of rebuttals, including the general unavailability of benefits for those suffering from dementia and other degenerative diseases; maladies that often require highly skilled care and constant supervision for extended periods of time. When faced with the very real possibility of exhausting every penny of saved wealth and leaving nothing to children in order to pay for long-term care, this ethical consideration becomes a bit less black-and-white for many. 

A quick warning, if you are ethically comfortable hiding assets to gain Medicaid benefits, be sure to hire a qualified attorney to help with the process. The intricacies of hiding assets is extremely convoluted, complex, and may have unintended consequences if undertaken without competent legal assistance.

See Ron Liber, The Ethics of Adjusting Your Assets to Qualify for Medicaid, The New York Times, July 21, 2017.

July 26, 2017 in Current Events, Elder Law, Estate Planning - Generally, New Legislation, Trusts | Permalink | Comments (0)

Monday, July 24, 2017

Article on 2016 Developments in Connecticut Estate and Probate Law

5c93fe16bb57e784835b7aa857de8020Jeffrey A. Cooper, John R. Ivimey, & Katherine E. Coleman recently published an Article entitled, 2016 Developments in Connecticut Estate and Probate Law, Wills, Trusts, & Estate Law eJournal (2017). Provided below is an abstract of the Article:

This Article provides a summary of recent developments affecting Connecticut estate planning and probate practice. Part I discusses 2016 legislative developments. Part II surveys selected 2016 case law relevant to the field.

Special thanks to Robert H. Sitkoff (John L. Gray Professor of Law, Harvard Law School) for bringing this article to my attention.

July 24, 2017 in Articles, Estate Planning - Generally, New Legislation, Wills | Permalink | Comments (0)

Friday, July 7, 2017

 Latest State to Repeal Estate Tax: Delaware

EscapeDelaware is now the latest state to have repealed its estate tax. Representatives recognized the need to repeal the tax as many former residents escaped to Florida to avoid the burden. “We came to the realization that it was absolutely necessary to do [estate tax repeal] because we were losing more in income tax than what we would gain in estate tax,” says Rep. Mike Ramone, the bill’s primary sponsor and a small business owner. The Delaware change will make that 17 states plus D.C. for 2018. New Jersey’s estate tax is also a goner as of Jan. 1, 2018, but its inheritance tax remains on the books. In Delaware, 10 Democrats voted for repeal in the House, and three in the Senate. Fellow Democratic Rep. John Kowalko, in an opinion piece in The News Journal, called their votes “betrayal” and said that estate tax repeal victimizes the state’s needy at the expense of the wealthy. This piece seems to ignore the basic understanding that as more tax-paying residents migrate to states without the estate tax, overall revenues decrease.

See Ashlea Ebeling, Latest State to Repeal Estate Tax: Delaware, Forbes, July 5, 2017.

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

July 7, 2017 in Estate Planning - Generally, Estate Tax, New Legislation | Permalink | Comments (0)

Article on Tomorrow's Inheritance: The Frontiers of Estate Planning Formalism

HortonhearsawhoDavid Horton recently published an Article entitled, Tomorrow's Inheritance: The Frontiers of Estate Planning Formalism, 58 B.C. L. Rev. 539 (2017). Provided below is an abstract of the Article:

The rules that govern the creation of an estate plan are in flux. Courts once demanded strict adherence to the Wills Act. Yet, this legacy of hyper-vigilance is waning, as the Uniform Probate Code, the Restatement (Third) of Property, and ten states have adopted the harmless error rule. Meanwhile, trusts, which need not comply with the Wills Act, have eclipsed wills as the dominant method of posthumous wealth transmission. This Article explores three budding topics that threaten to further complicate this area. First, there are anecdotal accounts of decedents trying to make electronic wills. In both strict compliance and harmless error jurisdictions, e-wills raise thorny issues about the meaning of “signed” and “writing” in the Wills Act, and when, if ever, courts should be able to overlook violations of the statute. Second, despite the received wisdom that trusts are less formal than wills, a rising number of settlors are failing to observe the arcane principles that govern the transfer of property into a trust. Third, most state legislatures have adopted or are currently considering statutes that give fiduciaries access to the contents of a decedent’s email, text messaging, and social media accounts. But the precise steps necessary to convey these cutting-edge forms of property after death is unclear. This Article tries to help courts and policymakers regulate these matters by offering a fresh perspective on the purpose of mechanical, bright-line principles in the realm of estate planning. As conventionally framed, this debate revolves around what the Article calls the “intent paradigm”: the idea that execution doctrines should be gauged primarily by whether they facilitate or frustrate the wishes of individual decedents. Conversely, this Article explores a different virtue of formalism: its ability to prevent decedents from imposing spillover costs. This Article demonstrates how some unyielding principles limit the burden on courts, survivors, trustees, the trustee’s creditors, purchasers of trust property, and other third parties. It then explains how recognizing this anti-externality function can pay dividends in wills law, trust law, and emerging niches such as the inheritability of digital assets.

July 7, 2017 in Articles, Current Events, Estate Planning - Generally, New Cases, New Legislation, Technology, Trusts, Wills | Permalink | Comments (0)

Wednesday, July 5, 2017

Heading South: Estate Tax May Be One Factor in Minnesotans' Moves

Tax burdenMark Sellner now relaxes luxuriously in Sarasota Springs, FL. There, it is a balmy 91 degrees and puffy, dancing clouds traverse a vibrant blue sky. The warm, embracing Florida sun gently caresses a land that blissfully free from estate taxes. Only a year prior, in Plymouth, MN, Sellner labored to enjoy the clear skies and a cool temperature of 74 degrees, but suffered under the yoke of guaranteed estate taxes.

Though the Minnesota Legislature has raised the estate tax threshold, there are still many Minnesotans that will be forced to pay taxes on their estates after their passing. Representative Greg Daniels wants to completely eliminate the estate tax. He argues that it is intrinsically unfair to force an individual’s heirs to pay estate taxes when the property has been taxed throughout the decedent’s lifetime.

The lawmaker earns a living as an insurance agent, and works on financial planning as part of that enterprise. He said he may call a client for an annual financial checkup only to find they have moved to Florida, Texas or other southern state. Minnesota's high taxes are part of the reason, he said.

See Don Davis, Heading South: Estate Tax May Be One Factor in Minnesotans' Moves, West Fargo Pioneer, June 30, 2017.

July 5, 2017 in Current Events, Estate Planning - Generally, Estate Tax, New Legislation | Permalink | Comments (0)

Sunday, July 2, 2017

Plan on Growing Old?

FightOne in three people over the age of 65 will end up in a nursing home. Among those living in a nursing home today, 62% cannot pay the bill on their own. The harsh reality in the United States is that many older Americans cannot pay their own way as they move into old age. Possible cuts to Medicaid by Republicans in Congress may make qualification and payments scarcer. With Medicaid reductions looking very real, many Americans are being placed in a vulnerable position.

See Ron Lieber, Plan on Growing Old? Then the Medicaid Debate Affects You, The New York Times, June 30, 2017.

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

July 2, 2017 in Current Events, Disability Planning - Health Care, Estate Planning - Generally, New Legislation | Permalink | Comments (1)

Thursday, June 29, 2017

State: 111 Terminally Ill End Lives Under New California Law

Life-ending durgsTuesday, California health officials released a report revealing that 111 individuals opted to end their lives with prescribed drugs after a 2016 law made it legal to do so in the state. According to the report, physicians prescribed life-ending drugs to 191 people after they were diagnosed with having fewer than six months to live. Of the 191, 111 ended their lives with the drugs, 21 died prior to taking the drugs, and 59 patients were not reported on in the applicable timeframe. The typical demographic of those requesting the drugs tended to be older, white, college educated, and receiving hospice or palliative care. A hearing will be held later this year to determine how the law is playing out in California. Testimonies of families with individuals who have pursued this option will be included in the hearing.

See State: 111 Terminally Ill End Lives Under New California Law, The New York Times, June 27, 2017.

June 29, 2017 in Current Events, Death Event Planning, Estate Planning - Generally, New Legislation, Science | Permalink | Comments (0)

Wednesday, June 28, 2017

Florida Governor Scott Vetoes Landmark Electronic Will Legislation

FAOn Monday, June 26, 2017, Florida Governor Rick Scott vetoed House Bill 277. The bill would have created the "Florida Electronic Wills Act." Below is the text of the letter from Gov. Scott to Secretary Detzner.  Special thanks to Tami F. Conetta, Senior Vice President, Northern Trust, for bringing this development to my attention.

 

June 26, 2017 

Secretary Ken Detzner Secretary of State
Florida Department of State
R.A. Gray Building
500 South Bronough Street
Tallahassee,  Florida 32399
 

Dear Secretary Detzner:

By the authority vested in me as Governor of the State of Florida, under the provisions of Article III, Section 8, of the Constitution of Florida, I do hereby veto and transmit my objections to Committee Substitute for Committee Substitute for House Bill 277, enacted during the 119th Session of the Legislature of Florida, during the Regular Session of 2017 and entitled:

An act relating to wills and trusts...

The bill creates the "Florida Electronic Wills Act" which authorizes the creation of electronic wills, and provides that the execution of electronic wills may be witnessed and notarized through the use of remote technology. The bill also specifies that electronic wills of residents and nonresidents  may be probated in Florida.

This bill has generated much debate among stakeholders who seek to find the right balance between providing safeguards to protect the will-making process from exploitation and fraud while also incorporating technological options that make wills financially accessible to a greater number of Florida's citizens. While the idea of electronic wills is innovative and may transform estate planning for Floridians, I believe this bill fails to strike the proper balance between competing concerns.

As Governor, I oversee the appointment of notaries public in the State of Florida and have a responsibility to ensure that notaries safeguard the most vulnerable Floridians  against fraud and exploitation. While the concept of remote notarization is meant to provide increased access to legal services like estate planning, the remote notarization provisions in the bill do not adequately ensure authentication of the identity of the parties to the transaction and are not cohesive with the notary provisions set forth in Chapter 117, Florida Statutes.

Furthermore, providing an additional Florida venue for the probate of nonresident wills based only upon the qualified custodian's location in this state could burden Florida's court system with the probate of estates that may have no Florida nexus other than that the wills were created and stored here. Additionally, if the state where the decedent is domiciled does not recognize electronic wills as a valid declaration of intent, the individual could be left intestate.

Furthermore, I have concerns with the delayed implementation of the remote witnessing, remote notarization, and nonresident venue provisions of this bill. The Legislature delayed these provisions to April 1, 2018, in order to address "substantive changes and outstanding questions" during the next legislative session. Rather than sign an imperfect bill into law, I encourage the Legislature to continue to work on answering these outstanding questions and address the issues comprehensively during the next legislative session.

For the reasons stated above, I withhold my approval of Committee Substitute for Committee Substitute for House Bill 277 and do hereby veto the same.

Sincerely,

Rick Scott
Governor

June 28, 2017 in Current Events, Estate Planning - Generally, New Legislation, Technology, Wills | Permalink | Comments (1)