Wills, Trusts & Estates Prof Blog

Minimum Distribution Rules for IRAs Changed

The folllowing excerpts discussing the new IRA MRD rules are from Relief from Required Minimum Distribution Rules - But Only for 2009 , BracewellGiuliani.com, Dec. 30, 2008:

A recent tax law change promises to help give retirees and retirement plan beneficiaries some much needed flexibility in managing their finances during these trying financial times. A key provision in the recently passed Worker, Retiree and Employer Recovery Act of 2008 provides relief to retirees and others by allowing them to continue to keep more money in retirement accounts in 2009. The The Act provides relief only for 2009 distributions; Required Minimum Distributions for 2008 will still need to be made before Dec. 31, 2008. * * *

The 2008 Recovery Act provides a one year suspension of the RMD rules for 2009. Specifically, no minimum distribution is required for calendar year 2009 from Individual Retirement Accounts and defined contribution retirement plans (such as Section 401(k) plans). The exemption also applies to so-called Section 457(b) eligible deferred compensation plans maintained by a state, a political subdivision of a state, or any agency or instrumentality of a state or political subdivision of a state. Thus, any annual minimum distribution for 2009 from these plans is not required to be made. The next RMD will be for calendar year 2010. This relief (referred to as the "2009 RMD waiver") applies to life-time distributions to employees and IRA owners and after-death distributions to beneficiaries. * * *

The 2008 Recovery Act's suspension of RMDs for 2009 helps retired taxpayers who are well-to-do and do not need to rely on their RMDs for living expenses. By not making the RMD for 2009 (or withdrawing less than the RMD) from their qualified plan accounts and/or IRAs, they will wind up with less taxable income for 2009, and, possibly, avoid (or mitigate the effect of) AGI-based phaseouts of tax breaks. They will also have more tax-sheltered amounts to leave to their beneficiaries. Older recipients will benefit the most, because their (short) table-life expectancy factors would otherwise compel them to take large RMD payouts in 2009. 

From a nontax standpoint, those taxpayers that can afford not to take their 2009 RMD will have an opportunity to allow their investments to recover (if the market rebounds over the next 12 to 24 months) before having to sell assets in order to make withdrawals.

Note that these changes are for 2009, not the current year (2008).

Retention of Testamentary Freedom -- A Good Idea?

Joshua C. Tate (Assistant Professor of Law, SMU Dedman School of Law) has recently published his article entitled Caregiving and the Case for Testamentary Freedom, 42 U.C. Davis L. Rev. 129 (2008) (the link is the the SSRN version of the article).

Here is the abstract of his article:

Almost all U.S. states allow individuals to disinherit their descendants for any reason or no reason, but most of the world's legal systems currently do not. This Article contends that broad freedom of testation is defensible because it allows elderly people to reward family members who are caregivers. The Article explores the common-law origins of freedom of testation, which developed in the shadow of the medieval rule of primogeniture, a doctrine of no contemporary relevance. The growing problem of eldercare, however, offers a justification for the twenty-first century. Increases in life expectancy have led to a sharp rise in the number of older individuals who require long-term care, and some children and grandchildren are bearing more of the caregiving burden than others. Recent econometric studies, not yet taken into account in legal scholarship, suggest a tendency among the American elderly to bequeath more property to caregiving children. A competent testator, rather than a court or legislature, is in the best position to decide how much care each person has provided and to reward caregivers accordingly. Law reform, therefore, should focus on strengthening testamentary freedom while ensuring that caregivers are adequately compensated in cases of intestacy.

Impact of Madoff scam on charitable donations

The impact of the Madoff scam on charitable donations is discussed in Deborah Brewster, Non-profits face donor ire over Madoff exposure, FT.com, Dec. 28, 2008.

Here are a few excerpts from this article:

Non-profit organisations may find it harder to raise money, and will almost certainly face calls for greater scrutiny by donors and regulators, after losing billions of dollars by investing with Bernard Madoff. * * *

Several foundations and charities have closed after losing either their endowment or their donors through investments with Mr Madoff.

Others have lost money but say they will continue and try to replace funding. Many endowments had all their money, or a large part of it, invested with Mr Madoff. * * *

Some in the non-profit world * * * suggested there should be greater regulatory oversight of non-profit investments, possibly by making an amendment to the section of the US tax code, 503c(3), which exempts a non-profit from paying tax.

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

Long-Term Care Insurance FAQs

Katherine C. Pearson (Professor of Law & Director, Elder Law and Consumer Protection Clinic Penn State Dickinson School of Law) has recently posted her article entitled Evaluating Long-Term Care Insurance in a Troubled Economy.

To prepare her article, Prof. Pearson interviewed Thomas M. Lilly, J.D., C.L.U., who is from Pittsburgh and is the founder of Futurecare Associates, Inc.  Their discussion was triggered by questions raised by students during her fall 2008 Seminar on Law and Aging Policy, questions that were made more important by the country’s recent economic turmoil.

Estate Planning for Closely Held Business Owners CLE

The American Bar Association Section of Real Property, Trust and Estate Law and the ABA Center for Continuing Legal Education are sponsoring a teleconference and live audio webcast on January 6, 2009 entitled Estate Planning for Business Owners: Recent Developments You May Have Missed.

Here is a description of this program:

Closely held business owners have distinctive estate planning needs, but also have unique opportunities available to meet those needs in life and in death.  To take advantage of those opportunities, and avoid the many pitfalls, you should be aware of the current developments in this area.  This program will concentrate on recent developments in tax planning and administration involving closely held business interests, while considering the significant non-tax issues that often drive these choices.

The topics to be covered include the following:

• IRC Section 2032--Alternate Valuation Proposed Regulations:  The Anti-Kohler Regulations
• IRC Section 6166--Notice 2007-90:  Security Under Section 6166 Elections
• IRC Section 6695A:  Appraiser Penalties Revisited
• Family Limited Partnerships:  Case Law Update
• Rev Rul. 2008-22, 2008-16:  The Grantor Trust 675(4) Exchange Power

Probate lawyer behaving badly

A Houston lawyer recently received a six-month suspension from the practice of law for the following behavior:

[He] was retained to file an application for a guardianship in probate court. [He] did not return many of the client’s phone calls and generally failed to keep her properly informed about the matter. Richey promised the client a partial refund of his fee, but failed to follow through on that promise.

In the second matter, [he] was retained to file a Medicaid application and handle related issues. For a lengthy period, Richey did not respond to the client’s letters or otherwise communicate with the client.

Surprisingly, the suspension was fully probated!

See Disciplinary Actions, 71 Tex. B.J. 910, 912 (2008).

First U.S. Face Transplant

Earlier on this blog, I reported on an unusual anatomical gift, a face.  Up to now, face transplants have only been done in France (2) and China (1).  Now, the first face transplant in the United States has taken place.

Here are some details from Marilynn Marchione, Nation's first face transplant done in Cleveland, YahooNews!, Dec. 16, 2008:

• 80% of a woman's face was replaced with that of a deceased female donor.
• The donee's name and age were not released for privacy reasons.
• The ethics of the surgery is being debated because the transplant is to enhance the quality of life, not to extend it.
• If the surgery does not go well, at least one bioethicist thinks the patient should be given the option of assisted suicide.

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this article to my attention.

Mediation of Elder Law Disputes

The ABA Commission on Law and Aging and the ABA Senior Lawyers Division are co-sponsoring a program entitled Elder Mediation: The Challenges and Rewards of this Evolving Practice Area on February 13, 2009 from 10:45 a.m. to 12:15 p.m. EST as part of the ABA Midyear Meeting in Boston.  Attendance is also possible via teleconference.

Here is a description of the program:

This session will highlight the challenges of working with adult families in multi-party disputes around care giving, estate planning, inheritance matters, living arrangements and other issues brought on by aging.  Join us to learn about this evolving practice area and multi-disciplinary approach to mediation.
   

Topics covered include: how to present issues; characteristics of adult mediation; who should be included; when the elder does not/should not participate; obstacles to and strategies for bringing parties to mediation; ethical challenges; and defining success.

To register for this program, please click here.

Steeler Update

Earlier on this blog, I discussed the considerable family and business strife involved with the Pittsburgh Steelers professional football team.

Here are some recent developments according to AP, NFL OKs Steelers restructuring, SI.com, Dec. 17, 2008:

• Dan Rooney and his son will own 30% of the team.  This reduction in ownership will meet the NFL's requirement that not too much control be in one family.
• Other family members with gambling connections have agreed to sell their shares.
• Yet other family members and owners are adjusting the amount of their ownership.
• "The NFL approved three new partners for the Steelers during the meeting: James Haslman III of Knoxville, Tenn., Thomas Tull of Los Angeles, and the Paul family based in Pittsburgh and Los Angeles."
• "The agreement among the Rooney family calls for the deal to be closed by March 31," 2009.

Special thanks to Sara Hudman (May 2008 J.D., Texas Tech University School of Law) for bringing this article to my attention.

Uniform Probate Code Authorizes Notarized Wills

As many of you aware, the Uniform Probate Code has recently authorized what is known as the "notarized will," that is, a non-holographic unwitnessed will which may be valid if properly notarized.

To read more about this new technique, see David M. Goldman, Uniform Probate Code Authorizes Notarized Wills, Florida Estate Planning Lawyer Blog, Dec. 17, 2008.