Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Monday, November 24, 2014

5 Overlooked Retirement Expenses

Retirement planning

When planning for retirement, what you do not know can cost you.  There are many savings-depleting expenses in retirement that people fail to factor in when calculating their future needs.  Below are five you do not want to overlook:

  1. Financially helping children and grandchildren. In today’s economy, there is an increasing number of Americans who are providing financial support to their adult children or other family members.  “Unless you specifically plan for that expense, letting adult children live at home free of charge or lending them a hand financially can be costly.  As much as you may want to help your kids and grandkids, your own financial independence should be your first priority.”
  2. Retrofitting your house. Even if you have paid off your mortgage does not mean you are free of housing expenses.  It is important to include in your budget both expected and unexpected ongoing and one-time costs, such as painting, replacing appliances, and repairing heating and cooling systems.  “It also means setting aside funds for certain updates and renovations that may become necessary in the future to help make you home livable and safe as you age.”
  3. Hiring “replacement” services. As people grow older, they generally need help with day-to-day household chores and repairs.  Replacement services for tasks such as grocery shopping, mowing, cleaning, should be considered when budgeting for retirement.
  4. Purchasing the new car. The car you have on the day you retire is unlikely to be the last one you buy or lease.  Moreover, your driving needs change as you age, including the things you need in a car.
  5. Maintaining two houses. While owning two homes offers great advantages, the cost of owning two properties can be greater than you would expect.  “You’ll probably spend several thousand dollars a year for dual expenses on everything form regular long care and ongoing utility bills to home-owners’ dues and a monthly fee to someone who can oversee your property when you’re not there.”

See Northwestern MutualVoice Team, The True Cost of Retirement: 5 Expenses You Shouldn’t Overlook, Forbes, Nov. 20, 2014.  

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

November 24, 2014 in Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Article on Wills Law

David horton

David Horton (University of California, Davis School of Law) recently published an article entitled, Wills Law on the Ground, UCLA Law Review, Vol. 62, 2015 Forthcoming. Provided below is the abstract from SSRN:

Traditional wills doctrine was notorious for its formalism. Courts insisted that testators strictly comply with the Wills Act and refused to consider extrinsic evidence to construe instruments. However, the 1990 Uniform Probate Code revisions and the Restatement (Third) of Property: Wills and Donative Transfers replaced these venerable bright-line rules with fact-sensitive standards in an effort to foster individualized justice. Although some judges, scholars, and lawmakers welcomed this seismic shift, others objected that inflexible principles provide clarity and deter litigation. But with little hard evidence about the operation of probate court, the frequency of disputes, and decedents’ preferences, these factions have battled to a stalemate. This Article casts fresh light on this debate by reporting the results of a study of every probate matter stemming from deaths during the course of a year in a major California county. This original dataset of 571 estates reveals how wills law plays out on the ground. The Article uses these insights to analyze the issues that divide the formalists and the functionalists, such as the requirement that wills be witnessed, holographic wills, the harmless error rule, ademption by extinction, and anti-lapse.

November 24, 2014 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0) | TrackBack (0)

CLAT 101


A charitable giving and tax planning strategy known as the Shark-Fin charitable lead annuity trust (Shark-Fin CLAT), is a split-interest trust that is designed to offer substantial fixed and determinable benefit to a taxpayer’s favorite charity, while also providing the taxpayer’s heirs with the potential for an excess benefit that is contingent on assets held in the trust outperforming the IRS’s established rate of return. 

A CLAT involves the contribution of property to an irrevocable trust that requires annual annuity payments to charity over a term that can either be: (1) a fixed number of years; or (2) based on the life of an individual.  The value of the charitable annuity is determined by discounting the scheduled annuity payments to charity back to present value at the IRC section 7520 rate, which the IRS sets monthly.  A CLAT that is structure as a grantor trust for income tax purposes provides the grantor with an income tax charitable deduction for the present value of the charitable annuity, but the grantor must pay tax on any income that may be earned by the CLAT during the term. Additionally, the grantor receives a gift tax charitable deduction for the present value of the charitable annuity so the only difference between the amount contributed to the CLAT and the present value of the charitable annuity is preserved as a taxable gift to the remaindermen. 

See Jordan Smith, Time to Head Back Into the Water, Wealth Management, Nov. 21, 2014. 

November 24, 2014 in Estate Administration, Estate Planning - Generally, Gift Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

Proposed Changes to Canada's Income Tax Act Could Have Significant Estate Planning Effects

ChangeA bill that includes draft legislation from Canada's Department of Finance that proposes an addition to the Income Tax Act is currently being considered by Parliament. The changes will significantly impact estate planning for Canadian couples by treating the income from a spousal trust as income of the deceased spouse, which will be taxed to the spouse instead of the trust. Concerning implications of this change were addressed during the comment period for the draft legislation by The Joint Committee on Taxation of the Canadian Bar Association and Chartered Professional Accountants of Canada, but the draft legislation was included in the bill without changes.

See Kim G. C Moody, Canada: New Draft Legislation Will Have A Great Impact On Traditional Estate Planning For Canadians, Mondaq, Nov. 11, 2014.

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

November 24, 2014 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, New Legislation, Trusts | Permalink | Comments (0) | TrackBack (0)

Estate of Boris Berezovsky Valued at Zero

EmptyAs I have previously discussed, attempts to settle the estate Boris Berezovsky, who at one time was the second richest man in Russia, have been entangled in complexity and confusion over finding a willing executor of his estate and whether there were even any assets left. According to probate records, Berezovsky died intestate and his UK estate was valued at nothing, though it is still unknown whether overseas trusts or other assets of value may exist.

Opinions are divided on whether Berezovsky's death was a suicide or somehow connected with his public criticism of Russian President Vladimir Putin. His family believes his death was not a suicide, but no evidence of murder was found by police, and the coroner's report includes an open verdict on cause of death.

See Stephanie Linning, Russian 'Billionaire' Boris Berezovsky Found Dead in Bath Last Year Left Nothing in His Will After Dying Penniless, Daily Mail, Nov. 22, 2014.

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

November 24, 2014 in Current Affairs, Estate Administration, Intestate Succession | Permalink | Comments (0) | TrackBack (0)

Using Life Insurance To Fill Social Security Gaps

InsuranceBy combining life insurance  and social security benefits in retirement and estate planning, some risks of a social security only retirement plan can be solved. If a couple is planning retirement income on social  security only, they run the risk of the surviving spouse's monthly income being drastically cut in retirement when one spouse dies. This can cause serious financial problems for the surviving spouse since some large expenses are fixed and will not reduce when one spouse dies. However, by having a life insurance policy for both spouses the surviving spouse can still receive additional income from the policy to supplement their own income and can pass the value of their own life insurance policy to the couple's children, which will have favorable tax results.

See William Rainaldi & Frank Rainaldi, Social Security and Life Insurance, Wealth Management, Nov. 19, 2014.

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

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

Article on Physician Orders For Life-Sustaining Treatment

HealthRobert B. Wolf, Marilyn J. Maag and Keith Bradoc Gallant recentlypublished an article entitled, The Physician Orders For Life-Sustaining Treatment (POLST) Coming Soon To A Health Care Community Near You, 49 Real Property, Trust and Estate Law Journal, no. 1, 71 (Spring 2014). Provided below is the editor's synopsis:

The estate, trust, and elder law community is seasoned in explaining and assisting in the implementation of advance health care directives. While directives are useful because they allow patients who are 18 years old and older to provide instructions for future treatment, they often fall short of conveying patients’ current wishes in light of existing conditions. POLST forms aim to fill this gap and provide consistency for patients who have a serious life-threatening illness. Through a decision-making process with their health care professionals, POLST give patients the tools for deciding upon and documenting their medical treatment preferences, thereby keeping the patients in control of their end-of-life treatment.

November 24, 2014 in Articles, Disability Planning - Health Care, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Sunday, November 23, 2014

Cut Costs with Joint Life


First-to-die life insurance, or “joint life,” may be a more cost effective way for a couple to concurrently get life insurance. 

The policy pays off when the first of the insured couple dies.  It generally costs less than individual coverage because underwriting two people is cheaper than one, especially if they are in good health. 

There are not many companies that sell this product, but in today’s volatile markets, people want insurance products that offer an economical approach paired with flexibility and an opportunity for constant cash accumulation. “[T]he policy builds account value from which loans and withdrawals are available.  It gives customers the flexibility of a permanent life insurance product with living benefit features at a more affordable price to households, business owners and others.”

The coverage can also provide for an orderly transfer of a business interest.  For a family owned business, it can help those interested in continuing the business, while also providing for heirs who are not interested in the business.

However, some professionals are skeptical of first-to-die coverage.  “We might recommend first-to-die in a circumstance where we have a prosperous, relatively young and healthy couple and we want to protect estate value at the lowest cost, although, to be candid, we would probably load them up with separate term policies.”  One of the major drawbacks of joint life is that a couple can get more term insurance individually at a lower cost or they could find universal life policies for about the same price as first-to-die coverage. For high net worth families, second-to-die insurance can be used for wealth replacement or to pay taxes.

See Alan Lavine, Insuring Two Lives is Cheaper Than One, Wealth Management, Nov. 18, 2014.

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

November 23, 2014 in Disability Planning - Health Care, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Symposium on The Role of Federal Law in Private Wealth Transfer

Wealth 2

The symposium issue of the Vanderbilt Law Review, Vol. 67: 6: 1531, addresses various facets of federal law in private wealth transfer.  A number of the articles are followed by comments by other distinguished scholars, who not only address the particular article, but also use the comment as a platform to explore other aspects of the topic.  Provided below is a portion of the introduction to this issue:

The old paradigm is dead. Private wealth transfer law is NOT just state law. Indeed, in some respects, it is now principally federal law. This increasing federalization and even dominance can be expected to continue apace. While the problems and consequences of federalization are not new to many other areas of law and have received considerable and serious scholarly attention, they are new to private wealth transfer. The way in which the state-federal balance is being struck, the consequences for private wealth transfer flowing from federal involvement, and the principles that should guide courts and legislators in determining the proper state-federal allocation, are all examined with considerable analytic care in these pages. Hopefully, this symposium issue will stimulate similar efforts in the future—all contributing to a better understanding of what the federal role is and what it ought to be in this historically state dominated area of law.


November 23, 2014 in Articles, Estate Administration, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Why Reconsidering IRAs May Be Beneficial

IRATraditional IRAs have been a popular and often beneficial form of retirement planning. However, changing tax consequences and common misconceptions for IRAs create a need to reconsider if these accounts are still the best route for saving for retirement.  Since these accounts are tax deferred rather than deductable, account holders can be hit with increasing tax liability as marginal tax brackets change over time and tax rates rise. In addition, the required minimum distributions that must be taken out after age 70 and a half creates confusion for many and can result in large penalties if not taken.                

See Andrew McNair, 3 Reasons to Ditch Your IRA, Market Watch, Nov. 11, 2014.

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

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