Wills, Trusts & Estates Prof Blog

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

Saturday, August 28, 2010

ESOPs Gaining Popularity

ESOP A Georgetown University study shows that companies that offer employee stock ownership plans (ESOPs) have outperformed companies that do not during the recession. Thus, experts believe that more companies will soon offer ESOPs to their employees as retirement options.

Employees pay nothing for ESOPs, so it’s always smart to participate in an ESOP when it’s offered to you. If you participate in an ESOP, make sure you understand the fluctuating value of your account, how the benefit payments work, and the tax ramifications of your plan. Also, to reduce risk, you shouldn’t rely entirely on an ESOP to fund your retirement.

See Nancy Mann Jackson, All About Your Employee Stock Ownership Plan, Bankrate.com, Aug. 23, 2010.

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

August 28, 2010 in Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Asset Protection for Doctors

Ike devji Ike Z. Devji (attorney, Phoenix, AZ) authored Asset Protection 101 for Physicians, which will be featured in a forthcoming book on wealth preservation for doctors. The introduction is below:

Good financial advisors seek to create safe, steady growth and help you avoid losses and exposures to things like market risk and income and estate taxes. A natural extension of that stewardship is making sure that the growth you are fostering, as well as the balance of your assets, are safe from exposure to an increasingly predatory and hostile litigation system. Not only is litigation against doctors more common than ever (as is evidenced by the heated debate on this topic in the context of our national healthcare debate), it’s more dangerous than ever given the multiple attacks on the wealth of the thousands of doctors we serve including:

• Current Economic Conditions • Decreasing Compensation and Insurance Reimbursement Rates • Increasingly Hostile Litigation System that Targets YOUR wealth • Stalled or Negative Investment Momentum • Increasing Overhead and Liability Insurance Costs • Decreases in Liability Insurance Protection due to large awards, consent to settle and defense inside the limits clauses in your current coverage • Increasing Employee Lawsuit exposure; suits against medical employers have tripled in the last ten years! • Increasing burdens of Income and Estate Taxes; the death tax will be 55% of everything over $1MM in 2011 as of the time of publication

Most of our clients have obvious exposures, such as a physician’s potential malpractice exposure or the enduring liability that a large commercial contractor faces. Other sources of exposure are more insidious, such as merely being wealthy and visible, owning income property, or something as simple as you (or your kids) owning and driving a car every day. The numbers are staggering; we are at a point in our litigation system where we have over 70,000 lawsuits filed per day in the United States alone, many without any real merit. Unfortunately being “right” or careful is not enough to keep you safe, nor is relying on your skill and experience.

What we and our clients must take to heart is that litigation attorneys are in business. Just like any business, including yours, they have weekly meetings in which they examine growth, cash flow, revenue goals and new leads or opportunities. This economic motivation is a key and explains in part why we see awards rising and why plaintiffs’ attorneys regularly seek and obtain awards above the limits of applicable liability insurance policies. The average medical malpractice policy, as just one example, is $1MM, whereas the average national malpractice award is about $3.9 million. This leaves the physician “holding the bag” for the other several million dollars. The average doctor simply can’t survive that kind of a loss and maintain their financial goals.

August 28, 2010 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Friday, August 27, 2010

Benefits of Long-Term GRATs

Trust There have been many attacks on GRATs recently, and it appears that some form of anti-GRAT legislation will become law eventually. Most likely, this legislation will require GRATs to have a minimum term of ten years. While this greatly increases mortality risk for grantors, there are some benefits of using long-term GRATs, including:

  • Long-term GRATs can benefit more from a favorable 7520 rate than short-term GRATs
  • Long-term GRATs require smaller annuity payments than short-term GRATs, making it easier to keep illiquid assets in the trust
  • Long-term GRATs can have increasing annuity payments, allowing more assets to grow in the earlier years

For more information on GRATs, see Seth R. Kaplan, Estate Planning: The Great GRAT Debate, Forbes, Aug. 18, 2010.

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

August 27, 2010 in New Legislation, Trusts | Permalink | Comments (0) | TrackBack (0)

12-Part Webinar on Special Needs Training

CLEThe Academy of Special Needs Planners is sponsoring a 12-part special needs training webinar entitled Public Benefits, Trust Drafting & Implementation from September 15 to December 8. An overall description is below:

Four main study areas:

  • Understanding Public Benefits
  • Using First Party SNTs
  • Using Third Party SNTs
  • SNT Administration

Individual sessions consist of a 50 minute web-based visual presentation, telephone conference bridge and 10 minute Q&A session.

Also included with each session are presentation materials (including Power Point), certificate of attendance and CLE request packet.

Descriptions of the individual sessions can be accessed here.

August 27, 2010 in Conferences & CLE, Trusts | Permalink | Comments (0) | TrackBack (0)

Giving Gifts to Lower Your Estate Taxes

GiftIf the estate tax comes back with a vengeance next year, people will need to transfer more assets to family members during life instead of after. Here are some ways to do so:
  1. Lend Money. If you lend money to family members, you have to charge the AFR, which is less than they’d have to pay a bank and more than you’d earn from CDs or money market accounts. Thus, family loans are a win-win situation.
  2. Sell Assets. You can sell assets to your family members. If you use a grantor trust, you pay tax on the trust’s income without it being considered a gift to the beneficiaries. Further, assets in the trust appreciate without being depleted by taxes.
  3. Set up New GRATs. It is currently possible to form a zeroed-out GRAT, which allows you to save your lifetime gift tax exemption because the remainder is theoretically worth nothing. However, the future of zeroed-out GRATs is uncertain.
  4. Revisit Existing GRATs. If asset values have declined in your current GRAT, you may want to move the assets into a new GRAT, taking advantage of lower rates. This transaction would not generate additional capital gains or income.
  5. Benefit Charity, Then Family. The more money that goes to charity through the use of a charitable lead annuity trust, the less the gift tax you will have to pay on the remainder that goes to your family members.

See Deborah L. Jacobs, Five Ways to Freeze Out Uncle Sam, Forbes, Aug. 25, 2010.

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

Overview of Asset Protection

Ike devji Ike Z. Devji (attorney, Phoenix, AZ) published an article entited Asset Protection 101, Advisor Today (Feb. 2008). This article continues to be used to educate advisors and clients nationally. The introduction is below:

Your affluent clients depend on you to be a source of information on a wide variety of complex topics. They assume you are at least informed about every area even marginally related to your core business. One such area is asset protection.

As a financial advisor, you seek to create steady growth of your clients’ assets and help them avoid losses and exposures to things like market risk and income and estate taxes. A natural extension of this stewardship is making sure the growth you are fostering, as well as the balance of your clients’ assets, is safe from exposure to an increasingly predatory and hostile litigation system. Some of your clients have obvious exposures, such as a physician’s potential malpractice exposure or the enduring liability that a large commercial contractor faces. Other sources of exposure are more insidious, such as merely being wealthy and visible, owning income property, or something as simple as owning and driving a car every day. We are at a point in our litigation system at which we have over 70,000 lawsuits filed per day, many without any real merit. Unfortunately being “right” is not enough to keep our clients safe.

August 27, 2010 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Thursday, August 26, 2010

Investigations Begin on a Half-Billion Estate

Huguette clarkManhattan DA’s Elder Abuse Unit, which investigated Brooke Astor’s finances, is now investigating the finances of Huguette Clark, a 104-year-old heiress worth four times as much as Astor. The detectives are investigating attorney Wallace Bock and accountant Irving Kamsler, who are in charge of Clark’s hospital room and wealth. The two under investigation recently became the owners of an apartment, a Mercedes, and cash of another elderly client after his will was revised six times. Further, “Bock arranged to sell quietly Clark’s Stradivarius violin for $6 million and a Renoir painting for $23.5 million."

Bill Dedman, Criminal Probe Begins Into the Finances of Reclusive Heiress Huguette Clark, msnbc.com, Aug. 24, 2010.

August 26, 2010 in Elder Law, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Things You Should Know About the Retirement Front

RetirementSome recent developments regarding retirement include:
  • The IRS recently issued a private letter ruling reiterating that it will be flexible with the 60-day deadline for rolling money over from one tax-deferred account to another. The IRS will be lenient in situations where the taxpayer intended to roll the money over, but some event prevented the taxpayer from doing so.
  • Due to a quirk in the Social Security benefits formula, individuals born in 1947 are receiving a lower percentage of income than seniors born in any other year between 1930-1948.
  • The federal Eldercare Locator and the nonprofit Senior Service America published a free brochure entitled Employment Options—Tips for Older Job Seekers for older adults who are thinking about returning to work.

See Anne Tergesen, IRS Cuts IRA Owners Some Slack, W.S.J., Aug. 1, 2010.

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

August 26, 2010 in Elder Law, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Probate Rules Consultation Paper

RulesThe British Columbia Law Institute recently published an article entitled Consultation Paper on New Probate Rules (May 17, 2010). The abstract as provided on SSRN is below:

This consultation paper is issued in connection with the Probate Rules Reform Project of the British Columbia Law Institute (BCLI).

BCLI has undertaken this project with the support of the Ministry of Attorney General because of two recent and significant legal developments. One was the enactment of the Wills, Estates and Succession Act in 2009. The other was the general reform of the rules of the Supreme Court of British Columbia that culminated in the unveiling of the new Supreme Court Civil Rules (Civil Rules) slated to come into effect in July 2010.

The current rules of court concerning probate business, namely Rules 61 and 62, were not a priority in the general reform of the rules of court and they appear largely unchanged as Rules 21-5 and 21-4, respectively, in the Civil Rules. Changes to the probate rules are needed nevertheless in order for the Wills, Estates and Succession Act to be brought into force. Those changes must be in keeping with the tenor of the rest of the Civil Rules. Additional reasons for reforming the probate rules appear in Part One of this consultation paper.

The Project Committee’s approach to reform of the probate rules was fourfold. First, there would be an attempt to design an optimal procedure instead of simply improving on the existing one. Second, aspects of probate procedure would not be retained for purely historical reasons. Third, in recognition of the fact that unrepresented persons initiate much probate business, procedures would be simplified where possible. The revised probate rules would provide more explicit guidance than Rules 61 and 62 now do. Fourth, differences between procedures in probate matters and general civil procedure would be harmonized to the extent possible and old anomalies removed.

Part One of the consultation paper explains the background to the procedural re-forms that the proposed rules would introduce. Part Two contains the proposed rules and commentary. Following the general format of the Civil Rules, the proposed rules take the form of subrules grouped under one principal rule that would be numbered 21-4. As the proposed rules abandon the present contentious / non-contentious classification of probate business, division of the subrules between two principal rules of court was not seen as necessary.

The proposed rules in Part Two are intended to accommodate a system in which a single court file for the estate would be opened when the first filing (typically an application for a common form grant) is made. Contested matters that currently must be pursued in separate actions with different court files and file numbers, such as probate in solemn form and revocation, would be initiated instead by interlocutory application within the single estate file. The procedure in each case would be only as elaborate as necessary to resolve the particular matter, ranging from an ordinary chambers argument to summary trial on affidavits to a regular civil trial with oral evidence.

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

Conference at McGill University About Trusts

CLEThe Quebec Research Centre of Private and Comparative Law is holding a conference entitled The Worlds of the Trust/La fiducie dans tous ses États on September 23-25, 2010, at the Faculty of Law, McGill University. A description of the conference is below:

Until recently, the trust was often described as foreign to the logic of the law of property in the civilian tradition. This assertion is increasingly untenable, as the profile of the trust in legal systems with a civilian law of property continues to develop and expand. This conference seeks to explore the multiple ways in which civilian and mixed legal systems have embraced the trust, with the goal of allowing jurists from different jurisdictions to better understand their different approaches to this increasingly important legal institution.

This conference promises to be a new point of departure in the comparative study of trust law. Twenty papers will be presented which examine issues relating to the nature and operation of trusts in civilian and mixed legal systems. Commentary on the papers will be provided by commentators with expertise in the common law trust. The working languages of the conference will be English and French. Simultaneous translation will be provided.

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