Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Tuesday, July 29, 2014

Funding GRATs With Bitcoins

BitcoinAs I have previously discussed, the IRS issued a notice in March that announced that for tax purposes bitcoins and other virtual currency will be treated as property. This notice created more certainty for using bitcoins for financial planning purposes, but many details are still unclear. Since bitcoin value can increase greatly and rapidly, some grantors wish to fund grantor retained annuity trusts (GRATs) with bitcoins. However, this same value fluctuation that can result in spikes in value, also makes funding trusts with bitcoins risky. Bitcoins are also an attractive funding source because administration of bitcoin GRATs are relatively low maintenance since transfers are simple and inexpensive.

See Ivan Taback & Nathaniel Birdsall, The Bitcoin GRAT, Wealth Management, July 2, 2014.

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

July 29, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Monday, July 28, 2014

Estate Planning Implications of Clark Unclear

IRAAs I have previously discussed, the Supreme Court has held that inherited IRAs are not protected in Bankruptcy. This has created concern in the estate planning realm since a large amount of inherited assets are no longer protected from creditors as previously thought. This decision affects an estimated $54 billion in inherited IRA funds. The decision also created uncertainty of how other similar assets will be treated. The Court left unanswered whether other types of IRAs, such as traditional and Roth IRAs, will experience the same fate as inherited IRAs.

See Cyril Tuohy, Court Decision Has Implications for Estate Planning, Insurance Net News, July 24, 2014.

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

July 28, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Thursday, July 24, 2014

How Casey Kasem’s Estate Could Have Avoided the Drama

Group HugThe drama caused by the combination of a large estate, second marriage, and conflict between the current spouse and children from a prior marriage is not unique to Casey Kasem or his estate. However, when there is a significant age gap between spouses which makes one spouse closer to the children’s ages then the deceased spouse, estate planning considerations are not completly typical. Leaving everything to the spouse can create tension between the younger spouse and the children. Here are some estate planning tools that can help ease the tension and reduce conflict:

  • A QTIP trusts that provides for the spouse during their life and then for the children can be useful, unless the age gap between the two is so close that the children outliving the new spouse is unlikely.        
  • A life insurance policy can be used to either divide inheritance or provide for the spouse and leave the remaining estate to the children.                              
  • Creating a revocable trust can help a complicated situation by keeping it flexible and avoiding the public eye.
  • A good old fashion family meeting can help prevent future conflict by making sure all parties have reasonable expectations for what will happen.

See Annika Ferris Cushnie, How Proper Plannign Can Avert a Casey Kasem-Type Drama, Market Watch, July, 23, 2014.

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

July 24, 2014 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

How Matching the Right Beneficiary to the Right Asset Can Save Big

Money BagA married couple did not have an extravagant estate that they would leave behind. They would be under the exclusion amount, but they were not cash strapped either. They had a million dollars in IRA savings and used the $43,000 they were required to take out annually to fund a $800,000 life insurance policy. They named a charity as a revocable beneficiary of the insurance policy. Then they got some great advice. The advice was to swap the beneficiaries, and it was $300,000 worth of advice. By making their children the beneficiary of the life insurance policy, the children will save $100,000 in taxes paid on their inheritance and the charity gets $200,000 more from receiving the larger IRA and will not pay taxes due to their tax exempt status.

See Kelly Kearsley,  A Beneficiary Swap Saves $300K in Taxes, The Wall Street Journal, July 23, 2014.

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

July 24, 2014 in Estate Planning - Generally, Estate Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Wednesday, July 23, 2014

Double Dipping Exceptions

Retirement benefits

Many baby boomers that are expecting to retire with ample social security benefits upon retirement, may have to think again.  Unfortunately, under the Windfall Elimination Provision (WEP), individuals may not be eligible for all the Social Security benefits that are expected.

Before 1983, people working in both public and private jobs could collect a full pension when they retired, in addition to Social Security, so long as they qualified.  However, the enactment of the WEP ended this “double dipping.” 

Yet, there is a big exception.  You are excepted from the WEP under certain circumstances—one of which is that you had 30 years or more of “substantial” earnings.  When calculating this number you must take several things into account including the fact the WEP will never be more than one-half your non-Social Security pension and living adjustments.  The age at which you take the benefits also comes into play; retiring at your full retirement age, or later, will change your benefit profile. 

See Amanda Alix, Social Security Twist for Boomers with Public, Private Jobs, USA Today, July 21, 2014.

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) for bringing this article to my attention.

July 23, 2014 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

New QLAC Regulations May Not Mean New QLAC Availability

IRAAs I have previously discussed, new regulations were released early this month that established the requirements for longevity annuities to be classified as a qualifying longevity annuity contract (QLAC). One of the goals of the new regulations is to increase the amount of 401(k) accounts that offer longevity annuities, which provide protection for retirees from the dreaded outcome of outliving their retirement fund.  However, even with the new regulations, companies may not start offering annuities. A recent survey has shown that 81% out of the 92% of companies that do not offer annuities are unlikely to change that practice.

See Mark Miller, Why Your 401(k) Isn’t Likely to Offer a ‘Longevity Annuity’, Wealth Management, July 22, 2014.

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

July 23, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Long Running Breach of Trust Case Shows No Sign of Stopping

FloridaThe case is Siegel v. JP Morgan Chase Bank, and after passing the 10 year mark, it may be the longest running breach of trust suit Florida has ever seen. The case has seen multiple trials and appeals. Now, after JP Morgan Chase has emerged victorious in the latest trial in probate court, the case is headed to appellate court once again. The case involves the beneficiaries of the affluent art collector Dorothy Rautbord challenging distributions made from the trust by corporate trustee, JP Morgan Chase.

See Jeffrey Skatoff,  Breach of Trust Lawsuit in Florida Still Going Strong, Clark Skatoff, July 25, 2014.

July 23, 2014 in New Cases, Non-Probate Assets, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Lessons Learned From James Gandolfini’s Will

James GandolfiniJames Gandolfini’s  will made headlines for the tax implications that his estate planning decisions created. The Soprano’s star left gifts to his sister and daughter totaling 80% of his estate, which was then taxed at 55% in “death taxes.” Here are six lessons learned from Gandolfini’s will:

  1. Without the public nature of probate, the media craze could not have happened.
  2. A revocable trust would have been an inexpensive way to keep the process private
  3. It is not the end of the world if Gandolfini did pay the reportedly high amount of taxes, if his estate went to who he wanted it to.
  4. There are ways to limit the tax bill, including how Gandolfini left his son $7 million through a life insurance trust.
  5. It is important to adjust provisions for the age that children will recieve inherited funds based on how responsible and mature they are over time.
  6. It is important to remember that foreign property may be subject to foreign laws, such as Gandolfini’s Italian property.

See Robert Wood, 6 Estate Planning Lessons from James Gandolfini’s Will, Forbes, July 20, 2014.

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

July 23, 2014 in Estate Planning - Generally, Estate Tax, Non-Probate Assets, Television, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Tuesday, July 22, 2014

The Shortcomings of Joint Accounts

Joint accountWhile many people may view joint accounts as an effective way to avoid probate since joint property passes automatically to the joint owner at death, there are several drawbacks to joint ownership of investment:

  1. Risk. Joint owners of accounts have total access and the ability to use the funds for their own purposes.  Additionally, the funds are available are available to the creditors of all joint owners and could be considered as belonging to all joint owners should they apply for public benefits or financial aid. 
  2. Inequity. If a senior has one or more children on certain accounts, at death some children may end up inheriting more than others.  There is no guarantee that all of the children will share equally.
  3. Unexpected. If a child passes away before the parent, a system based on joint accounts can fail.  It may be necessary to seek conservatorship to manage funds or they may pass to surviving children with nothing or a small portion going to the deceased child’s family. 

Joint accounts are not entirely cumbersome and can work well in several situations.  When a senior has just one child and wants everything to go to him, joint accounts can be a great way to provide for succession and asset management.  Also, joint accounts can be useful to put one or more children on one’s checking account to pay customary bills and have access to funds in the event of incapacity or death. 

See Three Reasons Why Joint Accounts May Be A Poor Estate Plan, Elder Law Answers, July 18, 2014. 

July 22, 2014 in Disability Planning - Property Management, Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Social Security After Divorce: Not All Is Lost

DivorceIt is a common misconception that when you go through a divorce, you will lose Social Security benefits as an ex-spouse.  Given certain conditions, you are entitled to Social security benefits and need not be married to collect.  Provided below are some relevant facts to be aware:

  • You can receive benefits on you ex-spouse’s record even if they are remarried.
  • Your decision to collect on your ex-spouse’s earnings history will have no impact on the size of their benefits.
  • One individual can have multiple ex-spouses collecting on their earnings history, provided they were married to each spouse for at least ten years.

In order to be entitled to spousal benefits, you need to have been married for at least ten years or currently unmarried.  “Like everything else in Social Security, there are complexities involved here . . . There is no divorce decree anywhere that can preclude you from collecting Social Security benefits as an ex-spouse, provided you’ve met the conditions outlined above.”

See John Wasik, Getting Social Security Benefits After Divorce, Forbes, July 21, 2014.

July 22, 2014 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)