Wills, Trusts & Estates Prof Blog

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

A Member of the Law Professor Blogs Network

Tuesday, November 25, 2014

Article on Understanding Banking, Business and Democracy Through the Trust

Jongchul Kim

Jongchul Kim (Columbia Law School) recently published an article entitled, The Trust Is Central to an Understanding of Modern Banking, Business Corporations, and Representative Democracy: A Reply to Hayden & Heiden’s Comments, Journal of Economic Issues, March 2015.  Provided below is the abstract from SSRN:

Elsewhere (Kim 2013) I have argued that the trust is central to an adequate understanding of the capitalist institutions of modern banking, the business corporation, and representative democracy. This paper has generated a comment by Greg Hayden and Andrew E. Heiden. Hayden and Heiden argue that, because the trust is a legal instrument, it cannot be used to understand more complex social institutions. In this paper I reply to their argument and refute them.

November 25, 2014 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Later-in-Life Divorce Finances

Divorce 2

For many Baby Boomers, “gray divorces” are ever prevalent.  According to research from the National Center for Family and Marriage Research at Bowling Green University, the divorce rate for adults ages 50 and older doubled between 1990 and 2010.  If you are over 50 and headed for a divorce from a long-term marriage, it may be complicated to come to a settlement agreement that will safeguard a comfortable financial future. 

“There are no ‘do-overs’ after you agree to a settlement.  After 50, you’ll have fewer years to recoup from financial errors, so it’s essential to get this right.”  Below are a few tips for protecting your finances during a later-in-life divorce.

  • Stay level-headed. Try to view divorce as a business deal.  “The more a couple is willing to divide assets objectively, and not emotionally, the faster they can complete the process and move on.”
  • Use a third party. While some couples are able to mediate on their own, other couples may need an impartial third party to provide guidance.  A financial adviser can be useful to “triage all assets and provide accurate valuation and liquidity for each item.”
  • Analyze shared and individual debt. “Hidden debt is a common nasty surprise among divorcing couples.”  It can be even worse if you live in a state with community property laws, “You’ll be held responsible for half your spouse’s debt, even if the debt isn’t in your name.”
  • Analyze assets and retirement benefits. Since most assets will be considered marital assets, consider a lump sum payment to yours spouse for less than what a payout would be to hold onto assets.  It may also be a good idea to transfer certain assets into a life estate or into a trust for other family members. 
  • Consider children and grandchildren. Estate planning during a divorce may clash with existing estate plans that gift assets to trust s and to children and grandchildren.  This could affect immediate generations and your taxes.  Determine how the divorce will financially impact any children and try to minimize damage to existing estate plans as much as possible, particularly in terms of inheritance.

See Anna Helhoski, Protect Finances in Later-in-Life Divorce, USA Today, Nov. 23, 2014. 

November 25, 2014 in Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Monday, November 24, 2014

Beware of Trust Mill Peddlers


There is no shortage of non-attorneys willing to give advice about estate planning, and this advice is often give for the non-attorney’s own financial gain. 

In Michigan, the State Bar has received numerous complains regarding estate plan salespersons practicing law without an attorney license by giving advice.  The Michigan Attorney General has received complaints of deceptive sales practices by annuity and life insurance peddlers.  The Michigan Office of Financial and Insurance Services has acquired similar complaints.

The peddlers use two primary schemes to access you and your money.  The first is a free lunch or dinner presentation under the semblance of providing estate planning or other information.  The second is the home visit brought about by a lead card mailed to you offering free estate planning information that you fill out and mail back to them.  Some use a combination of the two. 

Peddlers try to sell you a trust plan without knowing your situation or your assets and income.  Frequently, they say you do not have to pick and choose what you want in your estate plan because they know what you need and will provide it.  This is very common with trust mills.  They have a single trust form, allowing them to prepare so many trusts in one year. 

So, how do you protect yourself from the trust mills?  Of course, be on guard and on the lookout.  Use reputable and knowledgeable estate planning, investment, insurance and tax professionals in order to plan for the future accordingly.

See Matt Wallace, Trust Mill Peddlers Are Alive and Well, The Times Herald, Nov. 22, 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, Professional Responsibility, Trusts | 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)

Saturday, November 22, 2014

James Brown Estate In Limbo

James brown

A companion of music legend James Brown has requested an Aiken Court in South Carolina ban several of Brown’s children from participating in hearings that will determine if Brown had a spouse when he died in December 2006. 

According to filings in the Brown estate case, defining Brown’s marital status will affect the rights of his children as well as his education charity. 

Under Brown’s 2000 will, companion Tomirae Hynie inherited nothing, which left his music empire to the “I Feel Good” Trust for education needy children in South Carolina and Georgia.  In 2007 Hynie contested the will, claiming to be Brown’s wife and entitled to a spousal share of his estate.  After a settlement deal in 2009, Hynie was given one-quarter of the estate and the six children were given another quarter. 

The South Carolina Supreme Court overturned this settlement in 2013, calling the deal a “dismemberment” of Brown’s “noble” estate plan.  As a result of the ruling, Hynie has renewed her spousal claim, and her motion for summary judgment is scheduled next week. 

Although Hynie and Brown exchanged vows in a 2001 ceremony, Hynie was married to another man at the time.  She later obtained an annulment, but Brown refused to marry her.    

See Sue Summer, SC: James Brown Companion Moves To Ban DNA-Proven Children From Estate Hearings, Watchdog Wire, Nov. 14, 2014. 

November 22, 2014 in Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Friday, November 21, 2014

Estate Planning Without Children

Couple doing paperwork

Married couples without children who may be nearing retirement or have already reached retirement have two main tasks: One is to decide what happens to your property after you die.  The other, perhaps trickier, task is to specify who will handle your medial and financial affairs if you become incapacitated. 

Without creating a will or trust, state law will dictate who inherits your assets.  Generally, your assets will go to your spouse if you have no children, then your spouse’s relatives after he or she dies.  “This leaves the family of the first spouse to die disinherited and out of luck.  The side that inherits depends on the random order of who dies last.” 

Thus, if you do not want to risk disinheriting your relatives, or if you rather leave something to friends or charity, it is best to have a plan.  The simplest approach is for you and your spouse to execute “sweetheart” wills, leaving everything to each other and outlining who gets what after you both die.  Another approach is to transfer your assets, during life or at death, to a joint revocable living trust, which would spell out how the assets are to be distributed.  This avoids probate, which can be expensive and time consuming. 

It is also important to sign general powers-of-attorney and health-care documents empowering someone to make financial and medical decisions on your behalf if you become incapacitated.  While parents oftentimes appoint adult children, “people without children struggle to find someone they trust.” 

Spouses can appoint each other, but it is recommended to have a “Plan B,” which involves naming another, younger, person to serve simultaneously or in succession. 

See Carolyn T. Geer, Estate Planning for Childless Couples, The Wall Street Journal, Nov. 8, 2014.

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

November 21, 2014 in Estate Administration, Estate Planning - Generally, Intestate Succession, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Article on Charitable Remainder Trusts

Nathan brown

Nathan R. Brown (Proskauer Rose LLP) recently published an article entitled, A Primer on Charitable Remainder Trusts, Estates, Gifts, and Trusts Journal 1-11 (2014). Provided below is the article's introduction: 

With income tax rates as high as 39.6% and an additional 3.8% tax on net investment income, on the one hand, and a 40% federal transfer tax rate and a $5,000,000 estate tax exemption indexed annually for inflation ($5,340,000 in 2014), on the other hand, individuals are increasingly shifting their focus toward estate planning techniques that provide not only future estate tax benefits, but also immediate income tax benefits. For those individuals who are charitably inclined, a charitable remainder trust may be an excellent vehicle to reduce future estate tax, obtain an immediate income tax deduction, and benefit charity. As its title suggests, this Article is intended to serve as a general primer on charitable remainder trusts, setting forth the basics that all estate planners should know in order to effectively advise their clients.

November 21, 2014 in Articles, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0) | TrackBack (0)

Online Estate Planning Tools

LaptopMany estate planning practice tools are available online, from articles on specific subjects to whole websites that serve as informational hubs. Both the Real Property Trust & Estate Law Section of the ABA and the American College of Trust and Estate Counsel have websites with a wealth of information on estate planning topics. For more specific topic areas, articles can provide practice help for prenuptial agreements, intestacy, decanting, elder law, and a variety of types of trusts. The informative website on intestacy, mystatewill.com, provides state specific intestacy charts and calculators. A list of helpful articles and resources available online and organized by topic can be viewed here.

See Donald Kelley, Trusts and Estates Practice Resources on the Internet, Wealth Management, Nov. 11, 2014.

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

November 21, 2014 in Estate Planning - Generally, Resource Links, Trusts | Permalink | Comments (0) | TrackBack (0)

Deed of Trust Trumped IRS Lien

GavelAfter Restivo Auto Body Inc. filed for bankruptcy, a disagreement between Susquehanna Bank and the IRS began over which had a priority interest over the other. The bank had an executed deed of trust as of January 4, 2005 and recorded security interest as of February 11, 2005. In the interim time between the two actions by the bank, the IRS filed a federal tax lien on January 10, 2005. The bank was granted priority in both bankruptcy and district court and the IRS appealed.

In In re: Restivo Auto Body, Inc., the 4th Circuit held that while under Maryland statute the bank did not have priority because they recorded second, under Maryland common law the bank qualified as a bona fide purchaser and thus the bank's deed of trust had priority over the IRS's lien.

See, In re: Restivo Auto Body, Inc.: 4th Circuit Rules Executed but Unrecorded Security Interest Has Priority Over IRS Tax Lien, McGuireWoods, Nov. 17, 2014.

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


November 21, 2014 in New Cases, Trusts | Permalink | Comments (0) | TrackBack (0)