Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Thursday, April 16, 2015

Proposed Regulations Protect Retirement Accounts

IRA 2On Tuesday, Federal regulators proposed rules to provide expanded customer protection for retirement savings.  The rules, which were proposed by the Labor Department, are part of the Obama administration’s effort to help the middle class. 

If enacted, the rules would eliminate some of the loopholes allowing brokers to avoid acting as fiduciaries when providing advice on retirement money held inside accounts such as 401(k)s and IRAs, which hold approximately $7 trillion.  The new rules would update ERISA, which was enacted in 1974. 

It is expected that the effort will save investors $40 billion over ten years.  “We want to make sure people get put into products that work best for them,” says the secretary of labor Thomas Perez.  “We have met too many people who have worked their tails off for retirement, they had barely enough saved to begin with, and then they were steered into a product that was unduly complex.”

See Tara Siegel Bernard, U.S. Plans Stiffer Rules Protecting Retiree Cash, The New York Times, Apr. 14, 2015.

Special thanks to Lewis Saret for bringing this article to my attention.

April 16, 2015 in Estate Planning - Generally, Non-Probate Assets, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

CLE on Domestic Asset Protection Trust Planning in Hawaii, Kentucky, South Dakota, Utah

CLEThe ABA Section of Real Property, Trust and Estate Law is presenting the last of five eCLE webinars that are part the Domestic Asset Protection Trust Planning: Jurisdiction Selection Series. The upcoming webinar will focus on asset protection laws in Florida Hawaii, Kentucky, South Dakota, and Utah on Tuesday, June 9, 2015, 2:00 – 3:30 p.m. CT.  1.50 General CLE Credit Hours. Here is why you should attend:

15 states, such as Nevada and New Hampshire, permit the creation of full blown self-settled asset protection trusts. Besides the 15, at least 10 other states, including Arizona and Maryland, allow some form of an asset protection trust, including inter vivos QTIP trusts.  The proliferation of domestic asset protection trusts leaves attorneys inquiring about the laws in each asset protection state and the benefits of creating such a trust in one state versus another. Over the course of this e-CLE, the presenters will address domestic self-settled asset protection trust statutes and inter vivos QTIP trust statutes, and discuss:

  • What is an inter vivos QTIP trust and how can it help my clients?
  • Will domestic self-settled asset protection trusts benefit my clients?
  • Do the costs of creating a trust in one state for creditor protection or taxation benefits really outweigh the creation of such a trust in another?
  • Is the trust really protected from creditors?
  • Can the trust be used to avoid the income tax in the grantor's state of residence?
  • Can a same sex couple benefit from the use of these trusts?
  • Is using an offshore trust better?

These are just some of the questions that will be answered over the course of six e-CLEs addressing some of the full blown domestic self-settled asset protection trust statutes and inter vivos QTIP trust statutes. The seventh and final e-CLE in the series will address international self-settled asset protection trusts and how they compare and contrast to domestic self-settled asset protection trusts and inter vivos QTIP trusts.

April 16, 2015 in Conferences & CLE, Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, April 14, 2015

California Court Recognizes Attorney Duty to Trust Beneficiaries

Gavel BWWhen Gilbert Paul had his revocable living trust amended by attorney Richard Patton, he intended for his children and not his wife to be granted an interest in his brokerage accounts, and real and personal property. However, the trust erroneously left equal shares to Paul's children and wife. His children settled with Paul's wife and then sued the drafting attorney for professional negligence. The trial court refused to allow the children to amend their complaint to add the missing allegation that Patton owed them a duty, because the court reasoned they could not be owed a duty as trust beneficiaries.

In Paul v. Patton a California court of appeals reversed and found that an attorney does owe a duty to beneficiaries when the testator clearly intended them to benefit. The children now have the chance to amend their complaint.

See Attorney Can Owe Duty of Care to Trust Beneficiary, Elder Law Answers, Apr. 13, 2015.

April 14, 2015 in Estate Planning - Generally, Non-Probate Assets, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, April 13, 2015

Using a Probate-Free Property Deed

TOD DeedAbout half of states now authorize a simple, low-cost type of deed that can be used to transfer real estate; effectively allowing an individual to avoid probate at death and forego drafting a living trust. 

Beneficiary or transfer-on-death deeds are one page forms, and prove helpful to many homeowners.  Though details vary by state, the deeds enable a property to pass automatically to the person or people named as beneficiaries while skirting the probate process.  Because the deeds do not take effect until death, they can be revoked or replaced while the owner is living.  Deeds must be filed with the recorder’s office in the county where the property is located. 

Although the deeds are not perfect, for people who do not need or cannot afford a trust, beneficiary/TOD deeds are a cost-effective estate planning tool to pass assets outside of probate.

See Russ Wiles, Probate-Free Real-Estate Deeds Spread Across U.S., AZ Central, Apr. 13, 2015. 

April 13, 2015 in Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

The Trust Litigation Burden on Beneficiaries

GavelThe ongoing trust litigation brought by the beneficiaries of trusts created by philanthropist Walter Bunzl illustrates the complicated dilemma faced by trust beneficiaries that want to challenge spending and compensation of trustees. The Bunzl family members brought a multitude of claims against the trustees, including breach of trust and fraud. However, two years later the claims are still unresolved and new claims have been brought due to the court appointed Receiver's report. Thus, the beneficiaries that were concerned about how trust funds were being spent are now facing attorney and court costs for themselves, the trustees, and the receiver being taken out f their family wealth. This beneficiaries' dilemma may be avoided by the trust instrument giving beneficiaries more options than litigation, such as the power to remove and replace trustees given to the beneficiaries or a trust protector.

See Joseph C. Mahon, The Beneficiaries’ Dilemma, Wealth Management, Apr. 10, 2015.

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

April 13, 2015 in Estate Planning - Generally, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, April 10, 2015

Article on Agent Acting on Behalf of an ERISA Plan Participant

Gavel 4

Albert Feuer (Law Offices of Albert Feuer) recently published an article entitled, When May an Agent Act on Behalf of an ERISA Plan Participant or Beneficiary?, 41 J. Pension. Plan. & Compliance 1 (Spring 2015).  Provided below is the abstract from SSRN:

This article discusses when a pension or welfare plan governed by the Employee Retirement Income Security Act of 1974, as amended ("ERISA") may, and when it must, comply with directions of an attorney in fact under a state-law power of attorney or court-appointed guardians. ERISA and the regulations thereunder do not explicitly address the appointment of agents with respect to the exercise of any rights on behalf of an individual participant or beneficiary other than the ability of an agent to pursue benefit claims on behalf of the agent’s principal.

This article argues that an ERISA plan must defer to any agent acting on behalf of a participant or beneficiary under a state-law power of attorney or guardianship to the extent the individual is unable to exercise those ERISA benefit rights so that the individual is not deprived of those rights. This is the case whether the disability is a result of the individual being a minor, being an illiterate, being physically disabled, or lacking mental capacity. Moreover, the applicable state relief laws to encourage the acceptance of such powers would also probably be applicable to ERISA plans because such provisions are needed for the effective administration of power of attorney state laws for a disabled participant that ERISA does not otherwise preempt. 

State law may authorize an individual to be the agent of an ERISA plan participant or beneficiary. This article discusses when ERISA permits such an individual, on behalf of the agent's principal, to: (1) pursue a benefit claim; (2) obtain plan or benefit information; (3) determine the time and form of benefit payment; (4) determine to whom the plan makes a benefit payment; (5) make beneficiary designations; (6) consent to the waiver of the principal’s right to a spousal survivor benefit; (7) assign benefit rights and thereby create a beneficiary; (8) determine the amount, if any, of the principal’s employee contributions to the plan; (9) obtain information about the principal’s investment options; or (10) determine how to invest the principal’s plan assets. The article also discusses when ERISA and the Health Insurance Portability and Accountability Act ("HIPAA") permit a state-law agent to (1) make healthcare decisions for the agent’s principal in ERISA healthcare plans, or (2) obtain information from a healthcare plan, or a healthcare reimbursement plan.

April 10, 2015 in Articles, Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

A Joint Trust Cautionary Tale

Trust3Joint trusts may fail in their purpose of being convenient, and create more headaches when the terms of each trust and assets segregated at the death of the first spouse is unclear. A private letter ruling illustrates possible problems that may occur, which involved the failure to segregate trust assets between the family trust and the survivor's trust based on erroneous advice from a previous estate attorney.  After the surviving spouse's death the estate was seeking to exclude the family trust assets from the estate.

In  PLR 201429009, the IRS allowed the family trust assets to be excluded, because the new attorney  backed up the correction of the problem through accounting and forensic financial review.

See John P. Dedon, Joint Trusts – Helping or Hurting? re: Estate Planning, The National Law Review, Apr. 9, 2015.

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

April 10, 2015 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

IRA Tax-Free Rollovers Annual Limit

IRAAs I have previously discussed, the new rule that only one tax-free IRA rollover may be made by any IRA held by the taxpayer in one year, is now in effect as of January 1, 2015. The rule and explanatory material published by the IRS has not distinguished between an IRA set up by the taxpayer or one inherited as a surviving spouse. It is important for spouse's remember to include all IRAs, included those inherited, when evaluated the tax consequences a roll-over.

See Seymour Goldberg, IRA Rollover Limit May Lead to Tax Penalties for Clients, Accounting Today, Apr. 2, 2015.

April 10, 2015 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

New Revenue Procedure on Employer Sponsored Retirement Plans

401(k)The new Revenue Procedure 2015-28 addresses the concerns that employers who sponsor 401(k) and 403(b) plans have with using automatic enrollment and escalation, which can increase the chance of missing an employee's elective deferral. The Revenue Procedure includes a safe harbor period that extends the length of time the employer has to correct the error. However, the safe harbor period is not applicable if the employer receives notice from the employee of the mistake.

See Kenneth A. Mason, IRS Eases Correction Rules for Missed Elective Deferrals, Spencer Fane, Apr. 6, 2015.

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

April 10, 2015 in Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Thursday, April 9, 2015

One Third of Retirees Likely to Be In Poverty

Retirement planningNew research shows that one-third of U.S. workers nearing retirement will live in or near poverty upon leaving their jobs.  The root of this problem could be linked to a sharp decline in employer sponsored retirement plans over the last 15 years. 

Only 53 percent of workers from 25-64 had access to an employer sponsored retirement savings plan in 2011, compared to 61 percent in 1999.  Unfortunately, the report found that this downward trend is likely to continue.

See Dan Kadlec, 1 in 3 Older Workers Likely to Be Poor or Near Poor in Retirement, Money, Apr. 8, 2015.    

April 9, 2015 in Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)