Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Sunday, October 19, 2014

Retirement Planning for Singles

Single retiree

Retirement planning for couples can be difficult, however, when you are single, the planning can be that much harder. 

While many Americans will retire single for various different reasons (death of a spouse, divorce, changing lifestyles), the one thing senior singles have in common is that their retirement-planning needs can be very different from that of their married peers—and many of them are unprepared. 

A study by the Rand Corporation indicated that single people are at a greater risk of not saving enough for retirement than their married counterparts.  This may be because there are more forces eating away their income and resources.  For the newly widowed or divorced, housing costs may jump as well as living expenses. 

Furthermore, singles miss out on tax breaks.  Tax experts say that single adults will face steeper tax challenges as they near retirement age.  Without tax credits, a spouse exemption, and no one to realize the benefits of filing jointly, singles can take a large tax punch during earning years.  “To lessen the tax bite, I advise my single adult clients who own their won businesses or have side businesses and freelance income to set up a solo 401(k).”  The contributions consist of a salary deferral and a profit-sharing distribution. 

Once singles stop working, they must be smart about planning for withdrawals from their retirement accounts.  Assets like life insurance and alimony become less reliable sources of income, thus, singles should have other resources in place.

See Jane Hodges, Retirement-Planning Tips for Singles, The Wall Street Journal, Oct. 5, 2014.

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

October 19, 2014 in Estate Planning - Generally, Income Tax, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Article on Benefits to After-Born Children

Mark Strasser

Mark Strasser (Capital University Law School) recently published an article entitled, Capato, Art, and the Provision of Benefits to After-Born Children, Michigan State Law Review 985-1001 (2013). Provided below is the abstract from SSRN:

In Astrue v. Capato ex rel B.N.C., the United State Supreme Court held that the twins conceived and born after their father’s death in that case were not entitled to Social Security benefits. While the decision might simply be thought to involve deference to an agency’s interpretation of a statute, the decision is nonetheless regrettable because the Court failed to take advantage of an opportunity to provide needed guidance on whether, why, or how Social Security benefits should be based on state intestacy laws in cases involving after-born, ART children. Such guidance would have been especially welcome considering that Congress when passing the Social Security Act did not have ART children in mind, and providing benefits to such children would have been in accord with some of the purposes behind the Act’s passage.

October 19, 2014 in Articles, Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Saturday, October 18, 2014

New Case: In re Theresa Houlahan Trust

TrustLimitations does not begin to run even though trust property consists only of a claim against the trustee. The Supreme Court of New Hampshire reversed the grant of summary judgment for a successor trustee in an action alleging that the predecessor trustee violated his fiduciary duty by transferring all of the property of Trust 1 of which he was a trustee to Trust 2 of which he was settlor and trustee. The trial court granted the successor trustee’s motion for summary judgment on the ground that the action was barred by the statute of limitations which requires actions against a trustee for breach of trust be brought within three years of the termination of the beneficiary’s interest in the trust.

In re Theresa Houlahan Trust, citing Restatement (Third) of Trusts § 2, comment i and the Reporter’s Notes, the court held that Trust 1 did not cease to exist when all of its property was transferred to Trust 2 because Trust 1 held a chose in action against the trustee. The court remanded the case for trial on the remaining issues of both fact and law.

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

October 18, 2014 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (1) | TrackBack (0)

Friday, October 17, 2014

Trustee Ratifying Invalid Action Not Enough

AntiA co-trustee cannot ratify an action by the other co-trustee that violates terms of the trust. Beneficiary was co-trustee of a trust with a corporate co-trustee and the trust terms required that no trustee who was also a beneficiary may exercise any powers of the trustees for his or her own direct or indirect benefit, and whenever “participating in income or principal of a beneficiary who is also a trustee is being considered” decisions must be made solely by the corporate co-trustee. The individual co-trustee entered into a 1031 like-kind exchange with himself. The corporate co-trustee ratified the transaction. Another beneficiary brought an action alleging that the individual co-trustee had violated his fiduciary duties by engaging in the 1031 exchange. After a bench trial, the court found that the co-trustee had not violated his fiduciary duty.

In re Estate of Foiles, on appeal, the Colorado intermediate appellate court reversed and remanded, holding that in the absence of a trust term allowing a co-trustee to ratify otherwise invalid actions of a trustee, ratification can come only from all of the beneficiaries.

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

October 17, 2014 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Thursday, October 16, 2014

Keys Behind Beneficiary Designation

Life Insurance

The decisions behind designating beneficiaries for your life insurance policies or retirement plan may seem straight-forward.  However, naming beneficiaries is a nuanced decision-making process that could have substantial repercussions on your loved ones if done incorrectly.  Below are a few things to keep in mind as you make these designations:

1. The Basics. You can name beneficiaries for a broad range of assets and you can name almost anyone, or anything, as your beneficiary.  Naming a beneficiary allows your assets to pass directly to who you designate, therefore avoiding probate.  Be aware that beneficiary designations will override bequests you make in your will. 

2. Update Designations. Review your designations on a regular basis, ideally as part of an annual review of your finances.  Major life events, such as marriage, divorce, or death, may require you make changes.

3. Understand Tax Consequences. Inheriting assets will have tax ramifications for your loved ones.  If you are making someone other than your spouse the beneficiary on your company retirement plan, they might have to take mandatory distributions from that plan and pay taxes on the money.

4. Be Specific. It is important to be as specific as possible when designating beneficiaries.  Most beneficiary designation forms allow you to name multiple primary and contingent beneficiaries and to specify what percentage of assets you want distributed to each person.

See Christine Benz, How to Handle Beneficiary Designations, Morningstar News, Oct. 10, 2014. 

October 16, 2014 in Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

New Case: McCarthy v. Taylor

TrustRequirement that amendments to trust be “in writing” does not require formal execution. Shortly before his death, the settlor/trustee of a revocable trust delivered to his attorney a copy of the executed trust agreement with certain provisions crossed out and substitute provisions he hand wrote above the strike outs. In a contest between an original beneficiary and the person benefited by the handwritten modifications, the trial court found with the aid of extrinsic evidence that the amendment provisions of the trust required only that they be in writing and that the modifications were valid amendments.

In McCarthy v. Taylor, the intermediate Illinois appellate court affirmed, holding that as a matter of law the requirement that an amendment be “in writing” does not require that the writing be a “formal legal document,” be signed, or explicitly state that it is an amendment of the trust.

Special thanks to William LaPiana (Professor of Law, New York Law School) for bringing this case to my attention.

October 16, 2014 in Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 15, 2014

Social Security: Now and Then

Social security

The Social Security Administration recently came out with a report on Social Security that compared aspects of the program from 1962 to 2012.  The report’s findings exposed the many ways in which Social Security has transformed the retirement landscape. 

First, the SSA report looked closely at the sources of income that Americans relied on at age 65 and older.  In 1962, more than two-thirds of Americans of retirement age received Social Security income, establishing it as a key aspect in financial planning for retirement.  By 2012, Social Security had become an even more important source of retirement income with 86 percent of all Americans over 65 receiving some benefit from the program. 

Social Security has had an even more notable impact on worker expectations.  In 1962, one out of every eleven Americans received money from private pensions from their employers, and the same number got retirement from governmental sponsored pension plans.  As Social Security became more popular, Americans realized the value of dependable monthly income after they stopped working and consequently, the percentage of those receiving private pensions has tripled in the past half-century.  Pensions for government employees have also grown more popular, indicating the value workers place in financial security in retirement. 

While retirees accumulate income from a variety of sources, they rely on those different sources to broadly varying degrees. When looking at actual aggregate income received, Social Security, work income, and pensions have all increased in influence, while the proportion of income from investments has sharply fallen.  This illustrates that most Americans have not done much in the realm of retirement planning and more Americans have continued to work beyond age 65 in order to make ends meet. 

See Dan Caplinger, 50 Years of Social Security: How It’s Transformed America’s Retirement, The Motley Fool, Oct. 12, 2014.

October 15, 2014 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 14, 2014

Financial Vehicles Triggered by Death

Piggy bank

An individual’s death often generates a need for spouses, families, and businesses to rearrange their finances; triggering a spouse’s need for survivor income or required estate liquidity.  Fortunately, there are financial vehicles to help with these challenges.  Below are some of these features and their benefits:

  • Death Puts. Also called a survivor option, the death put is an optional redemption feature on a corporate bond allowing the estate of the deceased to put (sell) the bond back to the issuer at par value in the event of the owner’s death.  This can generate a secure stream of income. 
  • POD Bank Accounts. A payable-on-death (POD) account is an individual bank account that avoids probate.  The account owner designates beneficiaries to receive the proceeds of the account upon the owner’s death. 
  • Immediate Annuity Refund. This provides an income that the annuitant cannot outlive.  An insurer will pay an income based on the individual life being measured.  
  • Deferred Annuity Death Benefits. A deferred annuity is an annuity that builds up value currently, with the intention of paying out income in the future. 

See Steve Parrish, Financial Features to Die For, Forbes, Oct. 13, 2014.

October 14, 2014 in Estate Administration, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Monday, October 13, 2014

Estate Planning for the 30-Somethings

30 somethings

With thirty being the new twenty, the last thing this generation wants to do is plan for their demise.  Yet, financial experts suggest that his could be the best time to protect your family and your assets in case the unexpected occurs.  “It is imperative that those in their 30s have their estate plans in order, because they have as much to lose as their elders—in fact, sometimes more.”  To get started, experts recommend meeting with an attorney to get the following in place:

1. Last Will and Testament. A will establishes who will inherit your assets when you die, along with other vital aspects including information such as who you want to place in charge of administering your estate and who you want to be the guardians of your minor children.

2. Living Will. This outlines your wishes if you are incapacitated or death is imminent.

3. Power of Attorney. This will identify someone who can make financial decisions for you if you are incapacitated.

4. Health Care Proxy. You will specify a person to make medical decisions on your behalf.  “It even may make sense to have a conversation with the person you identify so that they clearly understand what your wishes are—God forbid these circumstances arise.”

5. Life Insurance. Term insurance is an effective way to cover current debts that you do not want to burden your significant other with should something happen to you.

6. Retirement Fund. It is vital that 30-somethings start saving for retirement, especially if their employers offer incentives such as profit-sharing or matching contributions to a 401(k).

See Michael Lerner, 6 Estate Planning Moves You Should Make in Your 30s, Daily Finance, Oct. 10, 2014.

October 13, 2014 in Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Non-Probate Assets, Wills | Permalink | Comments (0) | TrackBack (0)

Court Ruling Prompts Move to Shield IRAs


In June, the United States Supreme Court ruled that an inherited IRA is no longer a retirement account and is not protected from creditors under federal bankruptcy law.  Consequently, financial advisers and families are taking steps to shield IRA assets for children and other beneficiaries in case those heirs ever find themselves in bankruptcy proceedings. 

Advisers are urging clients to create a trust as the IRA’s beneficiary, or establish an IRA as a trust account while the owner is still alive.  “The prudent thing to do, if you’re concerned about the child’s or other beneficiary’s potential creditors, is not to leave the IRA outright to the child.” 

The challenge that then arises is identifying and employing the proper trust.  The type of trust to use depends on “how many beneficiaries, the tax goals, asset-protection goals, as well as many other variables.”

The Supreme Court did not specifically address surviving spouses who inherit an IRA, thus, their status remains uncertain.  Financial advisors recommend that spouses roll over an inherited IRA into one under their own name.

See Robert Powell, Court Ruling Sparks Rush to Shield IRAs, Wall Street Journal, Oct. 12, 2014. 

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

October 13, 2014 in Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)