Wills, Trusts & Estates Prof Blog

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

Friday, October 19, 2018

Article on Making Directed Trusts Work: The Uniform Directed Trust Act

TrustJohn Morley & Robert H. Sitkoff recently published an Article entitled, Making Directed Trusts Work: The Uniform Directed Trust Act, Wills, Trusts & Estates Law eJournal (2018). Provided below is an abstract of the Article.

Directed trusts have become a familiar feature of trust practice in spite of considerable legal uncertainty about them. Fortunately, the Uniform Law Commission has just finished work on the Uniform Directed Trust Act (UDTA), a new uniform law that offers clear solutions to the many legal uncertainties surrounding directed trusts. This article offers an overview of the UDTA, with particular emphasis on four areas of practical innovation. The first is a careful allocation of fiduciary duties. The UDTA’s basic approach is to take the law of trusteeship and attach it to whichever person holds the powers of trusteeship, even if that person is not formally a trustee. Thus, under the UDTA the fiduciary responsibility for a power of direction attaches primarily to the trust director (or trust protector or trust adviser) who holds the power, with only a diminished duty to avoid “willful misconduct” applying to a directed trustee (or administrative trustee). The second innovation is a comprehensive treatment of non-fiduciary issues, such as appointment, vacancy, and limitations. Here again, the UDTA largely absorbs the law of trusteeship for a trust director. The UDTA also deals with new and distinctive subsidiary problems that do not arise in ordinary trusts, such as the sharing of information between a trustee and a trust director. The third innovation is a reconciliation of directed trusts with the traditional law of co-trusteeship. The UDTA permits a settlor to allocate fiduciary duties between co-trustees in a manner similar to the allocation between a trust director and directed trustee in a directed trust. A final innovation is a careful system of exclusions that preserves existing law and settlor autonomy with respect to tax planning, revocable trusts, powers of appointment, and other issues. All told, if appropriately modified to fit local policy preferences, the UDTA could improve on the directed trust law of every state. The UDTA can also be used by practitioners in any state to identify the key issues in a directed trust and find sensible, well-drafted solutions that can be absorbed into the terms of a directed trust.

October 19, 2018 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation, Non-Probate Assets, Trusts | Permalink | Comments (0)

Thursday, October 18, 2018

Paul Allen May be Leaving Largest Estate in Washington History

PaPaul Allen constructed an empire over the 35 years after he left Microsoft that consists of funding local museums and arts festivals, sponsoring brain science and artificial intelligence research institutes, and even owning sports teams and an enormous real-estate portfolio. The disposition of possibly the largest estate in the history of the state of Washington poses many questions of the future of these endeavors, and the Internal Revenue Service will be poring through all of it.

There is familial continuity built in to the structure of Allen’s empire even though he was not married and had no children. His sister, Jody, helped carry out many of his endeavors. But there are early signs of how various pieces of the Allen empire have been subtly restructured to operate more independently. And rumors have already started about possible sales of Allen’s sports franchises, the Seahawks and Portland Trail Blazers.

Large estates such as Allen's have their assets moved into a revocable living trust. Engineered to administer an estate, a trust serves in place of a will, but is not subject to the traditional court process of probate. But the issue of estate taxes remain, with substantial estates facing the possibility of being hit with a combined federal and state estate tax rate as high as 52%.

Douglas Lawrence, a lawyer whose practice includes planning and probate matters at the law firm Stokes Lawrence, says that “It all boils down to: What’s the value of that enterprise?” He expects the process to take a full nine months, and he would not be surprised if the estate asks tax authorities for an extension.

See Matt Day, Paul Roberts, & Benjamin Romano, Paul Allen’s Death Leaves Many Questions Around What’s Likely the Largest Estate in Washington History, The Seattle Times, October 17, 2018.

Special thanks to Jay Brinker (Cincinnati Estate Planning Attorney) for bringing this article to my attention.

October 18, 2018 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Non-Probate Assets, Technology, Trusts, Wills | Permalink | Comments (0)

Tuesday, October 16, 2018

CLE on Revocable Living Trusts from Start to Finish

CLEThe National Business Institute is holding a video webcast entitled, Revocable Living Trusts from Start to Finish, on Thursday, November 1, 2018, at 10:00 a.m. to 5:00 p.m. Central. Provided below is a description of the event.

Program Description

Draft Better Revocable Living Trusts

In this engaging overview, our expert estate planning attorney faculty will analyze the most popular and the most effective revocable living trust structures. Discover when a revocable living trust is a better alternative than a simple will, which trust to choose and what provisions must and should be included to give it the desired power. Register today!

  • Compare traditional estate planning with revocable trust planning to offer your clients the best alternative in each specific circumstance.
  • Get practical tips for making the best use of Qualified Terminable Interest Property Trusts.
  • Protect the interests of both spouses - draft better marital deduction trusts.
  • Review sample trust materials to avoid errors and save time drafting yours.
  • Protect your professional reputation with legal ethics advice from experienced attorneys.

Who Should Attend

This fundamental legal course breaks down the use of revocable living trusts into simple tips and tactics that will benefit attorneys. It may also be of interest to accountants and CPAs, estate planners, trust officers, and paralegals.

Course Content

  1. Key Estate Transfer Laws
  2. Revocable Living Trust Planning vs. Traditional Estate Planning
  3. Ethics in Estate Planning
  4. RLT Structures
  5. Drafting Tips and Clauses
  6. Marital Deduction Trusts in Detail
  7. Funding the Revocable Trust
  8. Common RLT Mistakes to Avoid

October 16, 2018 in Conferences & CLE, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (1)

Thursday, October 11, 2018

Avoid Probate Court: Head to Your Bank Instead [Texas]

BankProbate court is expensive and time intensive, and the majority of accounts have beneficiary designations that allow them to be transferred outside of probate. With a trust, more assets can be transferred outside of a courtroom. Financial institutions are called upon to help a customer determine what type of account to use and, after death of the customer, review legal documents and carry out the transfer instructions.

There are other tools that can be utilized to avoid a formal probate process, such as a small estates affidavit in Texas for estates that have less than $75,000 in assets (excluding the homestead). If there is a will and there are no unpaid debts or a need for administration, the will can be admitted to probate under a unique Texas proceeding known as a “muniment of title.” No administrator will be assigned and banks will be presented with a certified copy of of either a a small estates affidavit or an order admitting a will to probate as a muniment of title to pay out the funds in the accounts.

Power of attorney (POA) can also avoid the complex issue of a guardianship, and under a new state statute passed in 2017, POAs in Texas have expanded powers. Due to this, financial institutes also have a statutory obligations to report alleged fraud or abuse of the elderly to the proper authorities.

Employees of financial institutes are finding themselves in position to answer difficult questions and find harder solutions. They may find themselves in more of an advisor role. They may need to become more knowledgeable about statutory changes and new estate planning options, especially self-help tools, that are available to customers and train their personnel accordingly.

See David B. West, Avoid Probate Court: Head to Your Bank Instead, Lexology, October 4, 2018.

October 11, 2018 in Current Affairs, Disability Planning - Property Management, Elder Law, Estate Planning - Generally, New Legislation, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Sunday, September 30, 2018

CLE on Inherited IRAs in Estate Planning

CLEThe National Business Institute is holding a teleconference entitled, Inherited IRAs in Estate Planning, on Wednesday, November 28, 2018 at 9:00 a.m. to 10:30 a.m. Central. Provided below is a description of the event.

Program Description

Make the Best Use of Inherited IRAs

Clarify IRA rollover and minimum distribution rules to help your clients maximize the benefit of inherited IRAs after the Clark decision. Get practical solutions to new and common problems and learn why and how to draft an IRA trust. Register today!

  • Clarify required minimum distribution rules and find the best ways to comply.
  • Determine whether an IRA trust is a wise choice for your clients.
  • Find out how to resolve multiple beneficiary challenges.

Who Should Attend

This legal guide is designed for attorneys. It will also benefit accountants, CPAs, trust officers, and paralegals looking to increase their knowledge of IRA rollover rules.

Course Content

  • SCOTUS Clark v. Rameker Decision on Inherited IRAs
  • Implications for Inherited IRAs in Non-Bankruptcy Cases
  • Rollover Rules and Tactics
  • Recent IRA Guidance on Inherited IRAs
  • IRA Required Minimum Distribution Rules
  • Multiple Beneficiaries: Problems and Solutions
  • IRA Trusts

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 1.50 -  AK
CLE 1.50 -  AL
CLE 1.50 -  AR
CLE 1.50 -  AZ
CLE 1.50 -  CA
CLE 2.00 -  CO
CLE 1.50 -  CT
CLE 1.50 -  DE
CLE 2.00 -  FL
CLE 1.50 -  GA
CLE 1.50 -  HI
CLE 1.50 -  IA
CLE 1.50 -  ID
CLE 1.50 -  IL
CLE 1.50 -  IN
CLE 1.50 -  KS
CLE 1.50 -  KY
CLE 1.50 -  LA
CLE 1.50 -  ME
CLE 1.50 -  MN
CLE 1.80 -  MO
CLE 1.50 -  MP
CLE 1.50 -  MS
CLE 1.50 -  MT
CLE 1.50 -  NC*
CLE 1.50 -  ND
CLE 1.50 -  NE
CLE 1.50 -  NH
CLE 1.80 -  NJ
CLE 1.50 -  NM
CLE 1.50 -  NV
CLE 1.50 -  NY*
CLE 1.50 -  OH
CLE 2.00 -  OK
CLE 1.50 -  OR
CLE 1.50 -  PA
CLE 1.50 -  RI
CLE 1.50 -  SC
CLE 1.50 -  TN
CLE 1.50 -  TX*
CLE 1.50 -  UT
CLE 1.50 -  VA
CLE 1.50 -  VT
CLE 1.50 -  WA
CLE 1.50 -  WI
CLE 1.80 -  WV
CLE 1.50 -  WY

Continuing Professional Education for Accountants

Credit Hrs State
CPE for Accountants 1.50 -  AZ
CPE for Accountants 1.50 -  NY*
CPE for Accountants 1.50 -  WA
CPE for Accountants 1.00 -  WI

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 1.50 *

* denotes specialty credits

September 30, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0)

Saturday, September 29, 2018

South Africa: What’s Yours is Mine and What’s Mine is Mine

SouthafricaIn Naidoo v Discovery Life Limited & others the Supreme Court of Appeal was faced with the main task of determining whether a risk-only policy with a beneficiary clause constitutes an asset in the joint-estate. This case deals with two areas of law, insurance and matrimonial law, and illustrates the interplay between the two.

The concept of marriage in community of property is that spouses are in a "universal economic" partnership and all their assets and liabilities are combined in a joint estate in which they hold equal shares, no matter their financial contributions to the joint estate.

The appellant in the case had been married to the deceased, who had purchased a joint life assurance policy by the first respondent. The material terms of the policy included: the deceased was the owner of the policy, that he was also the principal life insured, he could at any time direct Discovery in writing to change the nominated beneficiary and that he could also, at any time, revoke the appointment of a beneficiary. Originally the appellant had been named as beneficiary, but later changed it to that of his parents, brother and sister as the new beneficiaries.

The appellant's contention was that the rights and obligations under the policy vested in the joint estate, including the right to designate beneficiaries of the policy. Thus, the deceased should not have been able to alter the beneficiaries without her written approval. The court found that a risk-only life insurance policy taken out on the life of the policyholder is not an asset and is thus not an asset in the joint estate and the right to nominate a beneficiary or to change a nominated beneficiary does not amount to an alienation of a right to the asset in the joint estate.

See Hogan Levell, South Africa: What’s Yours is Mine and What’s Mine is Mine, Lexology, September 20, 2018.

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

September 29, 2018 in Current Events, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0)

Monday, September 24, 2018

What Every Spouse Needs to Know About Inheriting IRAs

IraInheriting an individual retirement account (IRA) can have some unforeseen pitfalls, and a few of the potential mistakes (and steps to avoid them) depend on if the beneficiary is a surviving spouse or another type of beneficiary. There are several solutions to this problem, depending on the tax or retirement goals of the individual inheriting the IRA.

An often unattractive option from a tax planning perspective, a person can distribute all of the IRA assets within five years of the original IRA owner’s death. The distributions will be included in gross income and taxed in the same way they would have been to the original owner, but if there is a need for cash, it needs to be considered.

A more appealing option for some is that of establishing an inherited IRA. This is accomplished by changing the legal name of the IRA and having the title include the name of the original owner, the fact that the original owner is deceased, "for the benefit of," and the name of the inherited owner. Each custodian may have its own particular wording, so be aware. For non-spousal beneficiaries, the required minimum distributions (RMDs) must begin by December 31 of the year following the original IRA owner’s death. For spouses, it can wait until the deceased spouse would have turned 70 1/2, or the surviving spouse can use their life expectancy.

Surviving spouses have the option of using the spousal rollover. In essence the spouse can distribute all of the assets of the deceased spouse's IRA into their own IRA or a new IRA for that purpose. The IRA is treated as if the surviving spouse was the original owner.

See Bob Carlson, What Every Spouse Needs to Know About Inheriting IRAs, Forbes, September 18, 2018.

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

September 24, 2018 in Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0)

Thursday, September 13, 2018

Article on Revisiting Revocation upon Divorce?

DivorceNaomi R. Cahn recently published an Article entitled, Revisiting Revocation upon Divorce?, Iowa Law Review, Vol. 103, No. 1879 (2018). Provided below is an abstract of the Article:

In an increasing number of states, divorce presumptively renders an ex-spouse ineligible to benefit from the testator’s will. Divorce may also impact other revocable dispositions in favor of the ex-spouse and exclude the ex-spouse’s family members from benefitting in any way from the decedent’s death. Revocation upon divorce statutes have become more common as divorce itself has become more common, and courts have been quite rigorous in interpreting the statutes, creating an almost irrevocable presumption of revocation. By contrast, other countries vary in their approaches to the effect of a divorce on testamentary and nonprobate transfers to an ex-spouse and family members.

This Article challenges the utility of the presumption of revocation upon divorce. In raising questions about the appropriateness of the presumption, this Article traces developments in divorce law—from the purely fault system to the no-fault system to contemporary, and more collaborative, approaches to divorce—to show the historical shifts towards contemporary attempts to dissolve the acrimony often associated with divorce. This Article also explores the relatively limited sociological and empirical material on actual individuals’ preferences for disposition of their estates to ex-spouses and their families. And it examines the class, gender, and race aspects of wealth ownership as part of an effort to determine who is most likely to have probate and nonprobate assets affected by the revocation statutes. Finally, this Article discusses alternative approaches for states to consider.

September 13, 2018 in Articles, Current Affairs, Estate Planning - Generally, Non-Probate Assets, Wills | Permalink | Comments (0)

Sunday, August 5, 2018

Your Money: How to deal With the Paperwork Scramble After a Spouse Dies

ProbateAmidst the anguish of mourning the loss of a beloved spouse, the stress can be compounded by the process and paperwork of changing the title of all the assets that were jointly owned to now having a sole owner. The process - probate - can by time-consuming, expensive, and public, which is why many people try to avoid it if possible.

Financial adviser David Demming out of Aurora, Ohio recommends that clients with simple family structures use “pay-on-death” or “transfer-on-death” designations on all assets, rather than the legal structure of an estate trust. “If you are not trying to control from the grave, you don’t need a trust,” Demming said.

If a family dynamic is more complex financial advisers recommend legally structuring assets in trusts, regardless of the total amount of your assets. This can be especially important for blended families and those with special needs. Qualified retirement accounts like IRAs and 401(k)s, pensions and joint life insurance policies come with varying sets of rules about how they are inherited by spouses.

See Beth Pinsker, Your Money: How to deal With the Paperwork Scramble After a Spouse Dies, Reuters, June 18, 2018.

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

August 5, 2018 in Current Affairs, Death Event Planning, Elder Law, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0)

Sunday, July 22, 2018

Did You Choose the Right Trustee?

TrusteesChoosing just the right trustee is a highly important decision, and in many cases more imperative than that of the proper executor of your estate. They will have discretionary authority over an entity that can last for multiple generations and will have the responsibility of decision making and asset investing for your trust.

  • Trustee Qualifications
    • A trustee should have sound professional financial judgment, and be reliable and trustworthy. They will be in charge of every financial and tax related responsibility of the trust including collecting trust assets, paying bills, filing trust tax returns and accounting as well as distributions to the beneficiaries, balancing the competing interests of income beneficiaries and remaindermen, considering whether to make loans of, or pledge, trust assets, and monitoring the investment performance of the trust.
  • Should You Select a Family Member?
    • Family members may have a stake in the success of the trust, prompting a heightened level of care and concern. However, if the family member chose to be trustee is also a beneficiary of the trust, their authority over trust distributions will be limited. If you would prefer that a trustee have broad discretionary power over trust distributions, you will need to name at least one trustee with no beneficial interest in the trust.
  • Should You Select an Unrelated Party?
    • An unrelated party, such as a close family friend, professional advisor or bank is another option. You may be hesitant to name a family friend as a trustee as they will then be granted intimate knowledge of your family's finances. If you are creating a long-term “dynasty trust,” you may want to consider naming a bank or trust company as trustee, since the trust will last beyond the lifetimes of any individuals you may know.
  • Revisiting Your Choice of Trustee?
    • One’s circumstances and relationships often change through the years, and you will want to make sure that the person or institution you selected a few years ago is still the right choice.

See Cheryl E. Hader, Monika Jain, & Avigail Goldglancz, Did You Choose the Right Trustee?, KramerLevin.com, July 16, 2018.

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

July 22, 2018 in Estate Administration, Estate Planning - Generally, Income Tax, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)