Wills, Trusts & Estates Prof Blog

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

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Thursday, March 26, 2015

Article on Challenges Facing the Posthumously Conceived Child

Test tubesAndrew T. Peebles (J.D. Candidate, University of Missouri School of Law, 2015) recently published an article entitled, Challenges and Inconsistencies Facing the Posthumously Conceived Child, 79 Mo. L. Rev. 497-515 (2014).  Provided below is the article’s introduction:

The use of artificial reproductive technology (ART) has increased sharply in recent decades as families plan ahead in the face of such difficulties as disease and military service that raise doubts as to whether reproduction will be possible for an individual in the future.  Posthumous conception of children is a widely used form of ART, and it allows families to expand, even after the death of one of the parents.  In vitro fertilization is the newest form of this technology.  But for the posthumously conceived child, the difficulties continue as most states bar these children from inheriting Social Security survivor’s benefits from a deceased parent.  The Supreme Court of the United States case of Astrue v. Capato ex rel. B.N.C. has recently given authority to this inequality, holding that posthumously conceived children are eligible for such benefits if they qualify as a “child” under state intestacy law. However, the Court’s decision in this case has left several problems unresolved that will continue to plague courts in the future and will lead to further inconsistent decisions and disparities for children born through in vitro fertilization.  Due to the rise in the use of this innovative technology, these issues affect an increasing portion of the population.

This Note will discuss the problems with the Supreme Court of the United States’ decision, the inconsistencies that exist in state intestacy law, and the solutions that are necessary to remedy these challenges.  Part II gives a brief background of the facts and circumstances surrounding Astrue.

Part III discusses the history of the Social Security Administration and in vitro fertilization and points out the conflicting results from various jurisdictions that have dealt with this issue.  Part IV delves into the Supreme Court’s reasoning behind its decision in Astrue.  Finally, Part V comments on the reasons Astrue was poorly decided, the difficulties that will result from the decision, and the methods to resolve these complications.

March 26, 2015 in Articles, Estate Administration, Estate Planning - Generally, Intestate Succession, Non-Probate Assets, Technology | Permalink | Comments (0) | TrackBack (0)

Tuesday, March 24, 2015

Pennsylvania Restricts Lawyers as Financial Advisors

Piggy bank 2Pennsylvania will be the first state to restrict the ability of lawyers to give financial advice.  Since January 30, lawyers who are state or federally licensed financial advisors or insurance agents have been barred from recommending or making investments for clients if they or their family members have financial stakes in the transactions. 

The new rule implemented by the Disciplinary Board of the Pennsylvania Supreme Court reflects the outgrowth of a longstanding prohibition against lawyers accepting referral fees from non-lawyers.  Beyond the ban against profiting from a financial transaction, the board will also prohibit lawyers from giving financial advice unless they have specific registrations with the state or the SEC.  These new prohibitions open up Pennsylvania lawyers to potential sanctions from the board ranging from a meeting with the chief counsel to disbarment. 

See Ted Knutson, Pa. First State To Restrict Lawyers As Financial Advisors, Financial Advisor, Jan. 13, 2015.

March 24, 2015 in Estate Planning - Generally, Non-Probate Assets, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Article on Bouncing Beneficiary Designations

Beneficiary designationAndrew L. Oringer (Hofstra University, Maurice A. Deane School of Law) and Albert Feuer (Law Offices of Albert Feuer) recently published an article entitled, In the Pursuit of Domestic Tranquility—Matrimonial Attorneys Should Follow the Bouncing Beneficiary Designations, 43 Comp. Plan J. 43 (March 6, 2015).  Provided below is the abstract from SSRN:

The Supreme Court, in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009) identified the “plan documents” rule (the “Plan Documents Rule”) as the legal doctrine that controls the inquiry regarding beneficiary identification for ERISA plans. The Plan Documents Rule presents an extremely bright-line standard. Generally, the inquiry starts and stops with determining who is designated as the applicable beneficiary under and in accordance with the governing plan. However, Kennedy, in a footnote, raised a question as to whether a claimant may have a cause of action against a person to whom the plan paid benefits in accordance with the governing plan documents. 

This article reviews the Court's Kennedy approach, discusses the approach taken in various post-Kennedy cases, and show how the Plan Document Rule may pose a trap for the unwary. If the beneficiary designation under an ERISA-governed plan is inconsistent with other domestic-relations documents, or otherwise inconsistent with the parties' apparent intent, the beneficiary designation will nevertheless govern the plan’s benefit payment obligation. However, there may be litigation and disputes about whether the plan’s designated beneficiary is entitled to retain the benefit amounts received from the ERISA plan. Further, such disputes may arise for an ERISA plan that is a pension plan, a life-insurance plan, or some other type of plan, or whether the plan terms include a revocation upon divorce provision. 

Fortunately, the Plan Documents Rule also provides a clear path to accuracy and certainty for a plan participant and all parties affected by the participant’s marital dissolution. Domestic-relations attorneys can do so by (i) consulting with their clients, (ii) ascertaining the intent of the clients and drafting the applicable dissolution documentation reflecting that intent, and (iii) critically, consulting with their clients so that the plan participant ultimately submits post-dissolution beneficiary designations consistent with the intended terms of the dissolution.

March 24, 2015 in Articles, Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Providing for a Surviving Non-U.S. Citizen Spouse

Tax4The estate tax on a deceased spouse's estate can be burdensome for a surviving non-U.S. citizen spouse as the unlimited marital deduction will not apply. A Qualified Domestic Trust (QDOT) can help by deferring the estate tax liability, but limits accessibility of the funds for the non-U.S. citizen spouse. Another option is a life insurance policy, which can assist the surviving spouse with paying the estate tax, but will be counted as an asset in the estate.

See Mike Thaxton, 2 Ways to Help Protect Non-U.S. Spouses From Estate Tax Liability, Life Health Pro, March 17, 2015.

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

March 24, 2015 in Estate Planning - Generally, Estate Tax, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, March 23, 2015

Spring Into IRA Season


April is just around the corner, meaning the season for individual retirement accounts is at its peak.  If you haven’t already, now is a good time to open an account and get started on saving.  Contribution limits remain at $5,500 in 2015 with an additional $1,000 allowed for those 50 and over.  You can still make a 2014 contribution up until April 15. 

In the past, you could withdraw money out of your account and do whatever you wished with no income tax consequences, as long as the money went back to the original IRA or another IRA within 60 days.  Now, you can only do this once every 365 days.  Thus, if you have multiple IRAs and plan to do a rollover from more than one account, you should consult your financial advisor to ensure you do not break any rules. 

Another IRA update concerns inherited accounts. Although retirement accounts are typically exempt from creditors, last year the Supreme Court held that IRAs left to non-spousal beneficiaries do not have creditor protection.  Implications of the rule vary, but if your heirs are responsible with their money the rule will likely have little impact on you. 

IRAs offer many advantages to retirement savers and is important to make sure you manage existing accounts to their fullest potential.   

See Roger Wohlner, IRAs: New Rules, Old Strategies, USA Today, March 22, 2015.

March 23, 2015 in Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Article on Springing Power of Attorney for Health Care

MedicalAlice Haseltine (J.D. Candidate, University of Missouri, 2015) recently published an article entitled, Last Rights Denied: Right of Sepulcher in Springing Power of Attorney for Health Care Invalidated, 79 Mo. L. Rev. 451-466 (2014).  Provided below is a portion of the article’s introduction:

A cancer patient with deteriorating health prepares for her physical and mental decline by executing a durable power of attorney for health care.  The form grants the patient’s agent both the right to make health care decisions during the patient’s lifetime and the “right of sepulcher” – the authority to control the final disposition of the patient’s body.  The powers in the form are “springing,” meaning the authority of the agent is ineffective until the patient is certified as having lost her mental capacity.  The patient dies shortly thereafter in an accidental and instantaneous death.  Because the patient was not incapacitated prior to her death, the durable power remains ineffective, and the agent is refused the right to dispose of the patient’s body. While this result is unexpected, it reflects the current state of the law in Missouri.

A recent decision from the Missouri Court of Appeals, In re Estate of Collins, holds that when a competent principal under a durable power dies suddenly without the required doctor’s certification of incapacity, the agent’s right of sepulcher does not vest, and therefore, the agent is never granted authority to dispose of the principal’s remains.  The practical effect of this decision is to invalidate the rights of sepulcher in prevalent springing durable powers of attorney for health care.  In light of this decision, all existing springing durable powers of attorney for health care in Missouri should be revisited to ensure that the instruments give effect to the principals’ intentions regarding the disposition of their remains.  Additionally, the Missouri legislature should enact legislation that will remedy durable powers of attorney for health care that were drafted prior to Collins.

March 23, 2015 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Sunday, March 22, 2015

Saying 'I Do' to Social Security

WeddingMillions of seniors rely on Social Security to supplement their retirement income.  Because your spouse’s earnings record can impact your own benefit levels, many people who find their second loves later in life believe they would be better off if the remained single. 

This is typically because of the way Social Security treats second marriages from a benefits prospective; however, there are other factors at play as well.  If you are eligible to receive Social Security, you can collect based on half the benefit level your spouse earned or the full benefit level you earned.  If you marry twice, you are only allowed to claim spousal benefits on one of your spouse’s records.  If your spousal benefits from your second spouse are higher than what you would get based on your first spouse’s record, you can claim the higher benefit level. 

Although older individuals forego marriage the second time around, there are benefits to tying the knot.  First, married couples can give gifts of unlimited sizes to one another.  When a member of a married couple passes away, the spouse has better options when it comes to retirement accounts.  Additionally, for couples that have substantial income differences, the tax benefits that come from being married and filing jointly may outweigh any hits that come from changes to their Social Security.

See Chuck Saletta, Does Social Security Encourage Seniors to Remarry? The Motley Fool. March 21, 2015.


March 22, 2015 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Article on Trustee Material Participation in Businesses

Steven GorinSteven B. Gorin (Thompson Coburn LLP) and Richard E. Barnes (BarnesLaw, LLC) recently published an article entitled, Trustee Material Participation in Businesses, 29 Probate & Property No. 2, 58 (March/April 2015).  Provided below is an excerpt from the article:

Trusts are subject to a 3.8% tax on net investment income (NII) under IRC § 1411. If a trust sufficiently participates in an S corporation or a partnership it owns, generally the trust does not owe NII tax on that entity's business income flowing through to the trust. The Code and the Regulations do not define how or how much a trust or trustee must participate to avoid NII tax.

March 22, 2015 in Articles, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, March 20, 2015

Man Defrauds Brother-In-Law's Estate

MisappropriationA sixty-year-old man admitted to misappropriating $510,000 from the estate of his brother-in-law to use in his personal business. 

Bernard W. Ozarowski pleaded guilty in Superior Court in Morristown, New Jersey to a charge of second-degree misapplication of entrusted property.  When Ozarowski’s brother-in-law died in December 2011, Ozarowski was appointed as executor of the estate, which contained significant assets.  Ozarowski was in charge of distributing the assets to the beneficiaries of the will and although he made a few payments to beneficiaries, he transferred the remaining assets of the estate to his own company.  Ozarowski misapplied over half a million of his brother-in-law’s assets by spending the money on personal business expenses in an effort to keep his company afloat. 

Under the plea agreement, the state is recommending a three-year state prison sentence for Ozarowski and he must pay $510,00 in restitution to the designated beneficiaries.  Ozarowski has made an application to be admitted to the Drug Court program.

See Ben Horowitz, Man Admits Misappropriating $510K from Brother-In-Law’s Estate, NJ.com, March 19, 2015.

March 20, 2015 in Estate Administration, Estate Planning - Generally, Non-Probate Assets, Wills | Permalink | Comments (0) | TrackBack (0)

CLE on Estate Planning for the Family Business Owner

CLE Photo

The American Law Institute Continuing Legal Education (ALI CLE) is holding a CLE entitled, Estate Planning for the Family Business Owner, July 8-10, 2015 at the Marriott Fisherman’s Wharf in San Francisco, CA.  Here is why you should attend:

Whether you advise or own a family business, or are an estate planner requiring a deeper understanding of the closely-held business, this one-of-a-kind course is for you. Instruction runs the gamut, including choice of entity, charitable planning, estate planning, and tax matters— even ways to guide owners on the need for appropriate business planning. Explore the latest strategies for family business succession planning, learn how to customize your plan for particular situations, and find new ways to
implement your plans with workable best practices, including buy-sell agreements.

March 20, 2015 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)