Wills, Trusts & Estates Prof Blog

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

Saturday, May 26, 2018

Article on Fiduciary Remedies

FiduciarySamuel L. Bray recently published an Article entitled, Fiduciary Remedies, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:

This chapter offers an overview and analysis of fiduciary remedies. The remedies considered are accounting for profits, constructive trust, equitable compensation (also called equitable damages, damages, or surcharge), injunction, unwinding remedies (e.g., rescission), and supervisory remedies (e.g., instruction, removal). The chapter also considers three major unsettled questions: whether the remedial aims of fiduciary law are distinct from other fields, how to think about fiduciary remedies in light of the law/equity distinction, and the legitimacy of punishment in fiduciary remedies.

May 26, 2018 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Friday, May 25, 2018

GST Tax Exemptions in Jeopardy

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-25/02fc22e7-9cd4-49d7-a482-7452b3182461.pngChapter 13 of the Internal Revenue Code specifically deals with the generation-skipping transfer (GST) tax, the tax which deals with transfers to individuals more than one generation below the donor. The belief of Congress is that property should be transferred once at every generation, so assets left to grandchildren should not avoid a taxation.

This tax generally applies to transfers made after October 22, 1986, but Congress grandfathered in transfers from irrevocable trusts that were in existence on September 25, 1985, but only if the transfer wasn’t made out of trust property that was added to the trust after that date or to income attributable to such later-contributed property. Altering these types of trusts can be tricky so that they do not lose their GST exemption. Modifications may generate irreversible damage to the trust and its beneficiaries. Any alterations, even simple ones, must be examined with a careful eye to ensure there are no unintended gift tax consequences and no accidental estate tax inclusion and that any exclusion from the GST taxing regime is retained. 

See Andrew M. Nernery and Brianna L. Guerrea, GST Tax Exemptions in Jeopardy, Wealth Management, May 18, 2018.

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

May 25, 2018 in Current Affairs, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax, Trusts | Permalink | Comments (0)

Thursday, May 24, 2018

Here’s How Much Money You Need for Bankers to Think You’re Rich

Timage from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-24/cfc34e32-5ac5-4e37-9e00-3bc3e275b814.pnghere is an obvious wealth gap between the poor and the rich, but there is also a large gap between the rich and the really rich. So what is considered rich in this day and age among the very wealthy? $25 million. To the majority of citizens this type of money is unfathomable, but to the extremely wealthy this is just "basic" rich though.

Bankers see wealth different, because no private banker would say that a person worth a couple million is "poor." Wealth managers like to frame the type of client they target in terms of needs instead of rich or poor. With the new tax law of 2017 and the increase in the estate tax exemption, a couple worth $22 million would need different documents and services than a couple worth just a million more.

See Suzanne Woolley, Here’s How Much Money You Need for Bankers to Think You’re Rich, Bloomberg, May 23, 2018.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.

May 24, 2018 in Estate Administration, Estate Planning - Generally, Estate Tax, New Legislation, Trusts, Wills | Permalink | Comments (0)

Wednesday, May 23, 2018

CLE on Trusts From A to Z

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-23/f2cbd463-9e52-49fd-9a35-544b05e5b59b.pngThe National Business Institute is holding a conference entitled, Trusts From A to Z, on Monday, June 04, 2018, at the Best Western Plus North Haven Hotel in North Haven, Connecticut. Provided below is a description of the event:

Program Description

Understand All the Wealth Planning Options Available to Your Clients

Planning your clients' financial future and legacy is diverse and complex, with a unique tool for every unique client situation. In this fast-paced comprehensive program, our faculty will guide you through the plethora of trust options and give you a straightforward, incisive analysis of when and how each can be used for maximum effect. Explore the goals, functions, administration hurdles, and tax implications of the top trusts in the practice. Choose the best tool for the job every time - register today!

  • Weigh all the pros and cons to select the best trust options for specific client situations.
  • Anticipate tax consequences of various trusts.
  • Use sample trust language our faculty provide to save drafting time and avoid mistakes.
  • Clarify the powers and duties of trustees in different trusts.
  • Compare living and testamentary trusts for straightforward estate planning.
  • Distinguish between accounting and taxable income and learn how trust income tax is reported.
  • Understand how ATRA has changed the practice of marital trusts and learn when they are still useful.
  • Review common ethical missteps that can cost you your license - and how to avoid them.

Who Should Attend

This basic level seminar is designed for the professionals involved in creating and administering trusts:

  • Attorneys
  • Accountants and CPAs
  • Trust Officers
  • Tax Managers
  • Wealth Managers

Course Content

  1. What are Trusts? Main Trust Principles
  2. Simple Testamentary Trusts and Revocable Living Trusts
  3. Special Needs Trusts (SNTs)
  4. Grantor Trusts
  5. Marital Trusts in a Nutshell
  6. Tax Reduction With Trusts
  7. Charitable Trusts
  8. Other Trust Structures and Issues
  9. Legal Ethics

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 6.50 -  CT*
CLE 8.00 -  NY*

Enrolled Agent – Enrolled Agent: 8.00

Financial Planners – Financial Planners: 8.00

International Association for Continuing Education Training – IACET: 0.70

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 8.00 *

Professional Achievement in Continuing Education – PACE: 8.00

* denotes specialty credits

May 23, 2018 in Estate Planning - Generally, Gift Tax, Income Tax, Trusts | Permalink | Comments (0)

Drafting Do's and Don'ts, May/June 2018

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-23/e43de761-3a00-4c72-b4da-f7caf4f386df.pngThis installment of "Drafting Do's and Don'ts" pertains to inconsistent drafting. There are two basic forms of drafting inconsistency: inconsistent drafting philosophy and inconsistency in the technical aspects of a trust instrument.

The most common philosophical inconsistencies deal with the provisions governing trusts that benefit different generations. One generation may be given certain authorities or particular benefits while those same aspects are denied to subsequent generations. A certain recently reviewed trust was created that was exempt from the generation-skipping tax by benefiting a child but not a grandchild. The philosophical inconsistency would become apparent when the child would die. The instructions stipulated the income would go to the beneficiaries or the beneficiaries issue. This translates to that one generation between the two other generations may not receive any income from the trust, and that the third generation does not have to wait until the passing of the previous generation to receive distributions.

Technical inconsistencies concern mandatory income provisions that are ambiguous, repetitive, or redundant. A familiar theme is to dictate that income from the trust is to pay beneficiaries health, education, maintenance, and support, but this stipulation is unnecessary if distributions must be made at least annually.

See Stephen Liss, Drafting Do's and Don'ts, Probate and Property Magazine, Vol. 32, No. 3, May/June 2018.

May 23, 2018 in Estate Planning - Generally, Trusts | Permalink | Comments (0)

Article on Trusts of the Family Home: Social Change, Judicial Innovation and Legislative Reform [Ireland]

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-23/86827d25-4e0e-406f-9f07-708c4998c816.pngJohn Mee recently published an Article entitled, Trusts of the Family Home: Social Change, Judicial Innovation and Legislative Reform, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:

This article surveys the development, over the last half-century, of the law in relation to trusts of the family home in Ireland. The focus on disputes over the beneficial ownership of the family home, the most important asset owned by many families, allows a consideration of the evolution of an aspect of the law of resulting and constructive trusts, set against the background of relevant legislative developments. The most common trigger for disputes over the beneficial ownership of the family home is the breakdown of an intimate relationship, whether a marriage or civil partnership or cohabitation. However, the trigger could also be the death or bankruptcy of one of the parties or a dispute with creditors. In addition, not all disputes arising on the breakdown of a relationship will involve an issue related to the ownership of the family home, one obvious reason being that many couples live in rented accommodation. There is, therefore, an imperfect match between the area of the law of equity conveniently described as “trusts of the family home” and the issue of the property consequences of relationship breakdown. Nonetheless, the development of this area of the law of equity has clearly been dominated by concerns as to the latter issue.

A feature of the development of the law that will emerge in this article is that the social phenomenon or “problem” that equity has been seeking to address has changed over the course of the decades. Initially, disputes between married couples were the primary focus of the case law; however, the attention of commentators and law reformers has more recently shifted to those arising in the context of unmarried cohabitation (even if the case law in this context has remained sparse). Many judges and commentators have felt that there is the potential for injustice “upon the termination of a relationship where the parties were economically and emotionally interdependent and relied on the relationship rather than their separate legal entitlements to secure their financial well-being”. It will be seen that there is now Irish legislation governing the property rights of married couples upon judicial separation and divorce, as well as parallel legislation covering civil partners, with a more limited regime in place in respect of “qualified” cohabitants. Thus, not only do the equitable rules developed by our courts no longer have as much practical importance as they once did, it is also arguable that further judicial extension of them would not be democratically legitimate.

May 23, 2018 in Articles, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Tuesday, May 22, 2018

CLE on Firearms in Estate Planning and Administration

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-22/178b0cbd-6350-41b4-91f7-d00b51131f25.pngThe National Business Institute is holding a conference entitled, Firearms in Estate Planning and Administration, which will take place Thursday, August 23, 2018 at the Norris Conference Centers - Fort Worth/Sundance Square in Fort Worth, Texas. Provided below is a description of the event:

Program Description

Legally Compliant Transfer of Firearms: Rules, Estate Planning Tools and Potential Pitfalls

Firearms in estate planning need extra attention to make sure you, your client and the beneficiaries inheriting the firearms are abiding by the intricate nuances of firearm law, especially after all the recent legislative and administrative changes. With the myriad of changing rules and regulations, if a firearm is transferred improperly or to an improper transferee, fines and jail time are a real possibility. Get a clear view of the gun rights, requirements and restrictions that impact your clients and your practice. This program will cover types of firearms, improper transfers and legal ownership of firearms. It will also offer an objective legal analysis of the use of inter-vivos and testamentary transfers and trusts that will allow your clients to successfully and legally transfer these unique assets to their intended beneficiaries. Register today!

  • Get an update on the latest laws, regulations, rulings and trends affecting gun ownership.
  • Distinguish between the different types of legal and restricted firearms.
  • Cover all your bases: can your client and beneficiaries legally own a firearm?
  • Review a sample gun trust to ensure airtight protections.
  • Review key forms, permits and background check procedures for gun transfers.
  • Choose the best estate planning instrument to transfer guns to beneficiaries in specific cases.
  • Confidently handle thorny interstate transfer issues.

Who Should Attend

This basic level seminar is designed for:

  • Attorneys
  • Accountants and CPAs
  • Trust Administrators and Officers
  • Tax Professionals
  • Paralegals

Course Content

  1. Gun Laws and Firearms Designations
  2. Transfers of Firearms: Key Rules and Tools
  3. Gun Trusts: Drafting and Administration
  4. Firearms Forms
  5. Legal Ethics
  6. Firearms in Estate Administration

Continuing Education Credit

Continuing Legal Education – CLE: 6.75 *

International Association for Continuing Education Training – IACET: 0.70

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 8.00 *

* denotes specialty credits

May 22, 2018 in Conferences & CLE, Estate Administration, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0)

Texas Supreme Court: Incorporating the AAA Rules Does Not Delegate Arbitrability Issues to the Arbitrator

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-22/e75619d1-e498-43e8-8926-30bf70348a86.pngIn 2013, the Supreme Court of Texas in Rachal v Reitz found that arbitration clauses in trust documents may be enforced regarding claims by beneficiaries against trustees. The finding was based on the intent of the settlor, and that mutual assent was satisfied through the theory of direct-benefits estoppel.

Rule 7(a) of the Commercial Arbitration Rules of the American Arbitration Association (AAA) specifies that parties may decide that an arbitrator has the power to decide initial issues, such as "validity, enforceability, and scope of an arbitration agreement."

However, in  Jody James Farms, JV v. Altman Grp., Inc., the Texas Supreme Court held on May 11, 2018 that an incorporation of the rules of AAA did not send arbitrability issues to the arbitrator as between nonsignatories to an agreement. The Court refused to rules on the issue at it pertain to signatories.

"Arbitrators are generally inclined to keep claims and parties in arbitration where courts may be more unbiased on those issues. So, now, where the beneficiary or trustee does not sign the trust/will, the court will determine these issues and not the arbitrator. This may greatly impact the enforceability of arbitration clauses in trusts and wills in Texas."

See David Fowler Johnson, The Texas Supreme Court Holds That Incorporating The AAA Rules Does Not Delegate Arbitrability Issues To The Arbitrator for Signatories, Texas Fiduciary Litigator, May 18, 2018.

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

May 22, 2018 in Current Affairs, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

Monday, May 21, 2018

Applicable Federal Rates and Code Section 7520 Rate for June 2018 – Trending Up

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-21/9af22ec0-7889-4548-926b-a5f0ee57e698.pngThe applicable AFR is the minimum acceptable or safe-harbor interest rate that must apply to intra-family loans to avoid adverse income or gift-tax consequences. From January 2018 to June 2018, AFRs have been trending up, making intra-family loans and installment sales to grantor trusts less attractive.

The 7520 rate for the month in which a lifetime gift or testamentary transfer occurs is used to determine the gift or estate-tax value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest. The 7520 rate is equal to 120 percent of the applicable mid-term rate. The 7520 rate also has been trending up, making planning techniques like qualified personal residence trusts and charitable remainder annuity trusts increasingly attractive. On the other hand, grantor retained annuity trusts  and charitable lead annuity trusts have become less attractive.

See Carmen Irizarry-Diaz, Applicable Federal Rates and Code Section 7520 Rate for June 2018 – Trending Up, GTLaw-LegalAdvisors.com, May 18, 2018.

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

May 21, 2018 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Trusts | Permalink | Comments (0)

Sunday, May 20, 2018

Matthew Mellon's Cryptocurrency is Being Held in Probate

image from https://s3.amazonaws.com/feather-client-files-aviary-prod-us-east-1/2018-05-20/fa52989f-fbc6-4656-81fb-9ccd6742f418.pngMatthew Mellon, descendant of the famous banking family, passed away last month at the age of 54 from ingestion of the hallucinogenic ayahuasca. He was on his way to rehab to treat his oxycontin habit which at one point peaked at $100,000 a month. Mellon inherited a $25 million inheritance when he was only 21 through one of the 14 trusts created for him, but he did not become a billionaire until he invested in cryptocurrency.

According to TMZ.com, those beneficiaries of the descendant's estate desire to push Melon's accumulation of cryptocurrency through the probate process - "faster than the normal course of action." The site claims that legal documents describe being worried about "the volatility of the digital money, noting since Matthew's death it's fluctuated by up to 30% of its value."

See Jay Brinker, Mellon's Folly and Infinite Sadness, JayBrinker.com, May 18, 2018.

May 20, 2018 in Current Events, Estate Planning - Generally, Trusts | Permalink | Comments (0)