Tuesday, May 31, 2016
Oftentimes when going through a divorce, couples have a lot on their mind, but what they forget about is how the divorce will impact their estate plan. An outcome in most divorces is a property or marital settlement agreement (PSA), which dictates obligations of both parties. It is important that this agreement have some flexibility from an estate planning perspective.
One example to consider is an agreement to maintain life insurance in the event that one parent can no longer provide child support. Make sure, however, that the PSA specifies how these proceeds are to be used, especially when being initially handled by your former spouse. It might also be beneficial to put these proceeds into a living trust, but, once again, you must make sure that the trust provisions are specific.
See Catherine F. Schott Murray, How Divorce Can Impact Your Estate Plan, National Law Review, May 19, 2016.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this Article to my attention.
Monday, May 30, 2016
Brett Rondeau recently published a Note entitled, Rising From the Dead: An Examination of the Rights of an Alleged Decedent Upon Return in the State of New York, 29 Quinnipiac Prob. L.J. 177-193 (2016). Provided below is a summary of the Note:
The first part of this Note details the background and history of New York Estate Powers and Trusts Law Section 2-1.7, the relevant statute for having an absentee declared dead in New York. This section also addresses the statute's multiple requirements, including the “specific peril of death” situation. The second part of this Note outlines the background and history of New York Estate Powers and Trusts Law Section 2226, the relevant New York statute for determining what an absentee who was wrongly presumed dead can regain from his or her already distributed estate. This section also considers the variety of potential approaches a state may take when redistributing the estate of an absentee who was declared dead. The third part of this Note analyzes the effectiveness of New York's statutes compared to other state statutes. This section concludes that New York's relatively “progressive” statutes are actually more effective than similar statutes in other states in both declaring an absentee dead and distributing his or her estate, and that New York's statutes should be a model for other states when drafting or redrafting their own similar statutes.
Friday, May 27, 2016
Jason Michael Chin, Archie Rabinowitz, & Aoife Quinn recently published an Article entitled, The Presumption of Resulting Trust and Beneficiary Designations: What's Intention Got to Do with It?, Alberta Law Review (Forthcoming). Provided below is an abstract of the Article:
When opening an RRSP or RRIF, investors typically designate a beneficiary. We expect that, when making this choice, most investors intend that their designated beneficiary will indeed benefit from the investment on their death. And further, if there is a dispute between the designated beneficiary and the investor’s estate, we expect investors intend that their choice of beneficiary will prevail. Surprisingly, this is not the case in many provincial appellate courts, which in fact favour the estate in such disputes. More specifically, most Canadian courts apply the presumption of resulting trust to beneficiary designations: they assume, absent other evidence, that the designated beneficiary holds the proceeds of the RRSP or RRIF in trust for the deceased investor’s estate. Only Saskatchewan has taken a contrary position. The Alberta Court of Queen’s Bench in Morrison v Morrison recently weighed both options and endorsed the approach that applies the presumption of resulting trust.
In the present article, we analyze the doctrine of resulting trust, its rationale as presented by several leading cases, and empirical evidence evaluating the intentions of Canadian investors. We conclude that applying the presumption of resulting trust to beneficiary designations betrays both the theory and purpose of the presumption. It also runs counter to the intentions of most Canadians and creates uncertainties in millions of beneficiary designations. Finally, we present several solutions for bringing the law in line with the intentions of investors, and indeed common sense.
If you’re wondering what will happen to your pet when you pass, do not worry any longer because you can create a pet trust! 49 states have enacted pet trust statutes to allow pet owners to continue caring for their furry friends. It is important to be specific in your care instructions, so the pet’s caregiver can administer accordingly. There are also alternatives to pet trusts, including making a conditional bequest of money to a specific person that will be spent on the care of the pet.
See Steven Maimes, Pet Trust States Grow as Owners Continue to Leave Money to Care for Their Dogs and Cats, Trust Advisor, May 20, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
Gifting the business is a great way to transfer the ownership of a business. Based on the circumstance, there are options to change the tax burden and/or have the owner still receive some money from the business.
In some cases, the Grantor Retained Annuity Trust (GRAT) may be a preferred vehicle to gifting, especially if the estate is large. Working with the firm’s CPA and a qualified attorney will provide the owners the answers they need to use one of these two vehicles properly.
See Bill Schoeffler & Catherine Oak, Gifting Agency Stock & Grantor Retained Annuity Trusts, Insurance Journal, May 23, 2016.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
Thursday, May 26, 2016
"An interesting decision regarding the arbitrability of internal trust disputes (ie, those involving the trustee and beneficiaries rather than the trust and a third party entity) has just been handed down from the Federal Court of Australia. In Rinehart v. Rinehart (No. 3)  FCA 539 (26 May 2016) (the saga has been going on for some time), the court considered a number of key issues.
The instant dispute involves an order sought by Mrs Rinehart " pursuant to s 8(1) of the Commercial Arbitration Act 2010 (NSW) (“NSW Act”) that the parties to this proceeding be referred to arbitration in respect of the matters the subject of the proceeding." Ultimately, the court decided there should "be a trial of the question whether any of the following agreements is null and void, inoperative or incapable of being performed within the meaning of s 8(1) of the Commercial Arbitration Act 2010 (NSW) or the Commercial Arbitration Act 2012 (WA)."
The opinion considers sixteen agreed questions and is both very long (669 paragraphs) and very comparative, taking into account case and statutory law from a number of common law jurisdictions as well as international law (i.e., construction of the New York Convention). One of the key issues focused on whether the trust could be considered commercial and thus within the scope of the commercial arbitration statute."
Summary written by Stacie Strong, Manley O. Hudson Professor of Law, University of Missouri.
For the full decision—Rinehart v. Rinehart.
With Sumner Redstone’s declining health, the case to decide his mental acuity is becoming more difficult and more pertinent with so many third parties involved. To determine his competency for deciding to oust two Viacom trustees, psychiatrists will look for evidence that Mr. Redstone understands relevant facts and appreciates the impact of his decisions. To determine any undue influence on the behalf of his daughter, the court will look at the facts placed before it to see if she threatened him or preyed on his emotions. Mr. Redstone will need to indicate a clear and consistent rationale for the change.
See Erik Eckholm, A Complicated Legal Battle Over Sumner Redstone’s Mental Acuity, NY Times, May 25, 2016.
Many people would rank Nevada as the leading jurisdiction for trusts. The opportunities found under Nevada law have prompted numerous estate planners and financial planners to situs their clients’ trusts in Nevada to take advantage of the advantages that Nevada offers that are not available in most other states. This article will highlight many of these opportunities. It is no longer sufficient to simply use the client’s home state as the trust situs.
See Neil Schoenblum & Steven J. Oshins, The Nevada Advantage: Why Nevada Has Become the Leading Jurisdiction for Trusts, Trust Advisor, May 25, 2016.
Wednesday, May 25, 2016
Hillary and Bill Clinton purchased their Chappaqua, New York home in 1999 and have now moved it into a residence trust. This will allow them to legally evade the so-called ‘death tax.’ Moving the home into trust will reduce their estate tax bills and avoid the IRS’s reach. This move comes at an interesting time because Hillary is fighting for estate tax reform, which would raise taxes for wealthy Americans.
See Kelly McLaughlin, Hillary and Bill Clinton Dodge ‘Death Tax’ by Putting Their New York Home into Trust – Despite Presidential Candidate’s Efforts to Make the Wealthiest Pay More, Daily Mail, May 23, 2016.
Special thanks to Jay Brinker for bringing this Article to my attention.
An installment sale to a grantor trust in exchange for a note is a popular and powerful wealth shifting strategy often recommended by estate planners. In the typical transaction, the trust is “seeded” and then a sale is made to the trust in return for a note. Under the “Intentionally Defective Grantor Trust” (IDGT) version of note sale, the client ordinarily transfers assets to a trust that is defective for income tax purposes and subsequently sells assets to the trust. Often in practice, the initial funding is designed to establish the “creditworthiness” of the IDGT. A newer strategy is for a third party to “seed” the trust, whereby a beneficiary is given a lapsing power of withdrawal which results in income tax grantor status to the power-holder under Section 678. This variation has been referred to as a “Beneficiary Defective Inheritor’s Trust” (BDIT) or “Beneficiary Grantor Trust” (BGT), which is ordinarily the recipient of an initial capitalization of $5,000.
There is a popular belief or “rule of thumb” that the initial funding of an IDGT should be 10% (a ratio of 9:1) in order to give the sales transaction “economic substance.” Thus, $1 million will support a sale of $9 million to the trust because that theoretically will provide economic validity to the transaction. In other words, subscribers to the 10% test contend that a rational seller in the “real world” would not sell his/her assets to a buyer who does not own the 10% minimal amount to protect against the downside risks of the sale.
The real test is - Will the note be expected to be paid in accordance with its terms. That test was derived from several USSC cases on the reality of sale in the income tax area, such as Clay Brown.
See Jerry Hesch, Dick Oshins & Jim Magner, Note Sales, Economic Substance and "The 10% Myth," Steve Leimberg's Estate Planning Email Newsletter, May 9, 2016.