Wills, Trusts & Estates Prof Blog

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

Friday, May 28, 2010

Wealthiest Face More Stringent Tax Audits

MoneyIn the past, wealthy taxpayers’ sources of income included mainly wages, dividends, interest, and capital gains. Today, the wealthy taxpayers have many more complex methods of making money, such as through multi-tiered partnerships, trusts, hedge funds, and private foundations.

To expect one audit agent to verify a return with such forms of income is unrealistic. Thus, as IRS Commissioner Doug Shulman envisioned, the IRS is creating “wealth squads” to extensively examine the wealthiest taxpayers. A team of various experts will scrutinize each form of income, so people who fall into this category need to prepare themselves.

See Donald T. Rocen, IRS 'Wealth Squads' on the Way, Forbes.com, May 26, 2010.

Special thanks to Jim Hillhouse (Wealth Counsel) for bringing this to my attention.

May 28, 2010 in Income Tax | Permalink | Comments (0) | TrackBack (0)

Reformation of Wills in Massachusetts

WillThe following summary is supplied through the courtesy of Martin D. Begleiter (Professor of Law, Drake University):   

William Bruinsma, a private and frugal man, died in 1998 leaving a will bequeathing one-half of the income from his residuary estate (including capital gains distributions from his securities and bank accounts) to each of a friend and his sister during their lifetimes and on their deaths, to 2 charities. He did not tell the drafting attorney the value of his assets. When he died, his estate was worth about $ 1.7 million, more than the applicable exemption amount at that time.

Ten years after his death, his executrix petitioned the court to reform the will to create a CRAT. The beneficiaries consented. Despite a potential tax savings of more than $466,000, the Supreme Judicial Court of Massachusetts denied reformation in Pellegrini v. Breitenbach, 2010 WL 2026754 (Mass.). Noting that past Massachusetts cases had allowed reformation of trusts, the court said that this will created no trust and that the court had previously held it had no power to reform wills.

Moreover, there was no mistake on the part of the drafting attorney, who had followed the decedent’s requests. There was no evidence that decedent cared about the tax consequences of the will. He was concerned about keeping the will simple and inexpensive. There was no certainty that the IRS would respect the reformation, coming as it did 10 years after decedent’s death. Even if decedent had intended to establish a charitable remainder trust, there was no evidence that he would have preferred a CRAT to a CRUT, given that the will did not mandate annual distributions of income. These factors led the court to decline to reform the will.

May 28, 2010 in New Cases, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Nigerian Succession and Inheritance Laws

NigeriaKemi Mary Adekile recently published her article entitled Succession at Customary Law - Addressing the Crossroads of Constitutional Conflicts (April 14, 2010).

The abstract of the article which is available on SSRN is below:

This paper is a critical evaluation of the rules of succession and inheritance under Nigerian Law in relation to constitutional provisions of the Nigerian Law. It relates the issues of constitutional and human rights conflicts in customary law of succession to the modern legal discourse with a view to resolve the conflicts inherent in both systems.

May 28, 2010 in Articles, Intestate Succession | Permalink | Comments (4) | TrackBack (0)

Thursday, May 27, 2010

What Happened to Hattie McDaniel's Oscar?

Hattie McDanielIn 1940, Hattie McDaniel won Best Supporting Actress for her role as Mammy in “Gone With the Wind.” Upon her death, she bequeathed her award to Howard University where it was displayed for several years before disappearing. Possible explanations for the disappearance of this historic award, valued at $550,000, include:
  • Students took it in protest to McDaniel’s role in the movie
  • The plaque was moved for safekeeping and was never returned to its display case
  • A professor walked away with it
  • It was stolen and then sold to a collector

The academy refuses to create replacement awards for heirs who have come into possession of an award after the recipient’s death. Instead, the academy sent a framed photo of McDaniel and some commemorative McDaniel postage stamps to Howard University. Some people remain optimistic that the Oscar will eventually be found.

See J. Freedom du Lac, And Hattie McDaniel's Oscar Went to...?, The Washington Post, May 26, 2010.

Special thanks to Alfred Brophy (Professor of Law, UNC School of Law) for bringing this to my attention.   

May 27, 2010 in Film, Wills | Permalink | Comments (0) | TrackBack (0)

Effect of a Prepaid Estate Tax

Estate TaxAs I previously blogged, the concept of a prepaid estate tax is still under consideration, but is not the main focus of the most recent talks.  The effect of a prepaid estate tax is to create much-needed revenue for the government now, but a big decrease in collections in the distant future.  This could circumvent Congress's pay-as-you go rules.

See Robert Frank, Proposed Estate Tax:  Pay Now, Die Later, WSJ, May 21, 2010. 

Special thanks to Jim Hillhouse (Wealth Counsel) for bringing this to my attention. 

May 27, 2010 in Estate Tax | Permalink | Comments (0) | TrackBack (0)

Internet Privacy: Something Else to Worry About Post-Mortem

PrivacyChristos Catsouras was not allowed to see his 18-year-old daughter’s body after she swerved his Porsche to her death on Halloween 2006. Three weeks later, pictures that the California Highway Patrol took at the accident site were posted on hundreds of websites.

When confronted, CHP officials said there was nothing that they could do. Catsouras sued CHP, and California’s 4th District Court established that surviving family members have standing to sue for invasion of privacy in cases such as this one.

Although the lawsuit against CHP hasn’t gone to trial yet, several states have already cited the Catsouras case as precedent in other privacy cases. Keith Bremer, one of the Catsouras family’s attorneys, expects other states to follow suit and enact laws that protect privacy.

“Right now, the law protects copyright more than it does privacy. The laws that were passed in this field, in the mid- to late 1990s, made sense at the time. That was the Jurassic era of the Internet.” --Michael Fertik, founder of ReputationDefender

Christopher Goffard, Gruesome Death Photos are at the Forefront of an Internet Privacy Battle, Los Angeles Times, May 15, 2010.

May 27, 2010 in Technology | Permalink | Comments (0) | TrackBack (0)

2009 Changes to Vermont's Probate Law

VermontStephanie J. Willbanks (Professor of Law, Vermont Law School) and Jonathan Secrest recently published their article entitled Changes to Vermont's Probate Law: Increasing the Surviving Spouse's Share and Other Measures, 35 Vermont Bar J. 26 (Summer 2009).   

The abstract of the article which is available on SSRN is below:

Vermont’s laws of descent and distribution and spousal elective share were established in the late 18th century and were closely aligned with the English common law provisions. Few changes were made in those laws until 2009. In that year, the Vermont Legislature amended the intestacy and spousal elective share provisions to provide increased support for a surviving spouse. This article analyzes those changes and suggests that further modifications are, perhaps, needed.

May 27, 2010 in Articles, New Legislation | Permalink | Comments (0) | TrackBack (0)

Wednesday, May 26, 2010

The Problem of FLP's

Laura cunninghamLaura Cunningham (Professor of Law,Benjamin N. Cardozo School of Law) recently published her article entitled The FLP, the Transfer Taxes, and the Income Tax, Cardozo Legal Studies Research Paper No. 297 (April 16, 2010). 

The abstract of the article which is available on SSRN is below:

Despite repeated calls for reform, Congress has declined to act to curb transfer tax avoidance through the use of family limited partnerships (“FLP’s"). Use of FLP’s allows taxpayers to substantially leverage their exemption from estate tax, and reduce the effective rate of tax on even the most liquid investment assets. This article reviews the current state of the law in the Tax Court on FLP’s, renews the call for Congressional action, and explains why FLP’s are not just a “death tax” problem.

May 26, 2010 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

CLE for New Estate Planners

CLEThe ABA Section of Real Property, Trust and Estate Law is sponsoring the Skills Training for Estate Planners CLE Program July 12-16, 2010 at the New York Law School.

This CLE will cover the following topics:

Basic Fundamentals and Substantive Skills Development:

  • Marital deduction basics, including analysis of how much to use the use of disclaimers or partial QTIP elections, funding and fiduciary administration problems
  • Charitable deduction planning including use of computer software
  • Analyzing inter vivos gifting, both basic and sophisticated transactions such as GRATs and QPRTs, including an analysis of when such techniques make sense
  • Life insurance planning, particularly with respect to irrevocable insurance trusts and the practical aspects of product selection, premium financing, and due diligence along with GST considerations
  • Deferred compensation and employee benefits, including beneficiary designation alternatives and drafting such designations
  • Practical tips on planning with the generation-skipping transfer tax
  • Preparing flexible trusts with an eye to the future

Technical Skills Development:

  • Tax compliance: hands-on manual preparation to learn how the tax law works and how software can produce errors
  • Fiduciary administration and accounting and the tax aspects of postmortem and other fiduciary administration
  • Valuation in practice, including how to select valuation experts and analyze their work
  • Exposure to software programs and web sites that assist in the analysis of estate assets and facilitate construction of planning models

May 26, 2010 in Conferences & CLE | Permalink | Comments (0) | TrackBack (0)

First Wills to Incorporate Digital Assets

Digital assetsI previously blogged about the official launch of Entrustet and the protection it offers to users’ digital assets. The two founders of Entrustet, Jesse Davis and Nathan Lustig, recently became the first people in America to incorporate their digital assets into legal wills. Attorney Nathan Dosch, who helped the two execute their wills, said that incorporating the digital assets was easy and that he’d feel comfortable doing the same thing for his current and new clients.

See Entrustet Founders Execute North America’s First Wills That Incorporate Digital Assets, PRWeb, May 24, 2010.   

May 26, 2010 in Estate Planning - Generally, Technology, Wills | Permalink | Comments (0) | TrackBack (0)