Wills, Trusts & Estates Prof Blog

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

Friday, February 25, 2011

The Worst States to Die In

Taxes With the new $5 million federal estate tax exemption, few people need to worry about federal estate taxes. However, many states have their own estate or inheritance taxes that kick in at a much lower level. Bill Bischoff wrote an article for SmartMoney on February 16, 2011 entitled Estate Taxes: The Worst Places to Die. The article lists the different exemption levels and rates for state estate and inheritance taxes:

State Estate Taxes:

  • Three states have exemptions of less than $1 million (Ohio at $338,333; New Jersey at $675,000; and Rhode Island at $850,000).
  • Six states have $1 million exemptions (Maine, Maryland, Massachusetts, Minnesota, New York, and Oregon), and so does D.C.
  • Three states have $2 million exemptions (Illinois, Vermont, and Washington)
  • Two states have $3.5 million exemptions (Connecticut and Delaware).
  • Two states have $5 million exemptions (Hawaii and North Carolina).

State Inheritance Taxes:

  • Six states impose only inheritance taxes, which are assessed on the value of specific inherited assets in excess of the applicable exemption (estate tax is assessed on the entire value of an estate in excess of the applicable exemption).
  • The inheritance tax exemptions are zero or negligible--except in Tennessee which has a $1 million exemption.
  • The tax rates are 9.5% in Tennessee, 15% in Iowa and Pennsylvania, 16% in Kentucky, 18% in Nebraska, and 20% in Indiana.

The Bottom Line

The worst place to die is New Jersey with a combined effective estate and inheritance tax rate of 54.1%. Congrats to the Garden State! In second place is Maryland at 50.9%. Good try! In fact, none of the states mentioned here are good places to die, but some are significantly worse than others.

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

February 25, 2011 in Death Event Planning, Estate Tax | Permalink | Comments (4) | TrackBack (0)

Provisions for Ex-Spouse in Contractual Will Revoked by Statute

Missouri In In re Estate of Pence, 327 S.W.3d 570 (Mo. App. 2010), husband and wife executed a joint contractual will that divided the estate between their daughters by previous marriages on the death of the second to die. After thirty years of marriage, the couple divorced and ex-husband died a year later.

The ex-wife sought to probate the will, her former step-daughter objected, and the court granted letters to the daughter, holding that the Missouri revocation on divorce statute applied and the ex-wife must be treated as having predeceased her ex-husband. The intermediate appellate court affirmed, holding that the contract not to revoke could not prevail over statutory revocation in the absence of a provision in the contract dealing with divorce.

Special thanks to William P. LaPiana (Rita and Joseph Solomon Professor of Wills, Trusts,and Estates, New York Law School) for bringing this to my attention.

February 25, 2011 in New Cases, Wills | Permalink | Comments (0) | TrackBack (0)

Thursday, February 24, 2011

Michael Jackson's Estate Earns Over $310 Million Since His Death

Michael Jackson When Michael Jackson died on June 25, 2009, he had over $400 million in debt. The estate has since recovered much of that debt and negotiated deals for video games, albums, and movies. In less than two years, Jackson’s estate has earned over $310 million.

See Michael Jackson’s Estate Earns $310 Million Since His Death, CBSNews, Feb. 18, 2011.

February 24, 2011 in Estate Administration | Permalink | Comments (0) | TrackBack (0)

Top 50 Charitable Donors Gave Less in 2010

Donating to charity Despite the hype surrounding the Giving Pledge last year, the top 50 private donors in the U.S. gave less in 2010 than they did in the previous nine years. In 2006 the 50 biggest private donors gave out $50.7 billion compared to $3.3 billion in 2010. Broader gauges reflect the same drought. In 2009, 400 charities saw an 11% drop in donations.

While the 2008 financial crisis may explain the overall drop in charitable giving, it doesn’t explain the drop in the “Philanthropy 50.” A blip in the economy doesn’t affect billionaires the way it affects other donors. So why did the top 50 donors decrease their donations as well? Maybe the tax uncertainty clouded some people’s donation plans, or maybe there was a lag in how the financial crisis affected the books of charities. Charitable foundations are required to give away 5% of funds each year based on the previous 12-16 quarters, which could cause a delayed reaction. Further, Gates’ and Buffet’s Giving Pledge may also have put a brake on some high-wealth donations.

See Big-Ticket Philanthropy Under Pressure, Private Wealth, Feb. 17, 2011.

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

February 24, 2011 in Current Events, Estate Planning - Generally | Permalink | Comments (1) | TrackBack (0)

Obama Justice Department Drops Defense of Anti-Same-Sex Marriage Law

Gay marriage I recently blogged that the Obama administration may be forced to take a stand on same-sex marriage due to two new lawsuits filed in New York and Connecticut. The Obama Justice Department has defended the Defense of Marriage Act in the past, but it announced on Wednesday that it will no longer do so. Attorney General Eric Holder agrees with the President, declaring the provision to be unconstitutional. Members of Congress may defend the statute, but the Justice Department “will cease defense.”

Obama Administration Drops Defense of Anti-Gay Marriage Law, FoxNews.com, Feb. 23, 2011.

Special thanks to Robert I. Aufseeser (Attorney at Law, Bedminster, NJ) for bringing this to my attention.

February 24, 2011 in Current Events, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Future of Private Placement Life Insurance

Rafael Rodriguez Rafael Rodriguez (2011 J.D. Candidate, Texas Tech University School of Law) recently published his comment entitled Cashing in the Policy: Will Looming Financial Regulation End the Use of Private Placement Life Insurance in Estate Planning?, 3 Est. Plan. & Community Prop. L.J. 151 (2010). The introduction is below:

The economic decline had many direct and clear consequences. However, what is not clear are the secondary and indirect effects some individuals will face as a consequence of the recent recession. One of the major and clear effects of the financial decline was the push towards reforming financial regulation. The reformation of the regulatory structure and procedure, undoubtedly, will alter the face of the financial system. It is unknown how these new financial regulations will affect individual investors as well as estate planners and their clients. This comment will specifically focus on the increase in regulatory requirements for private pools of capital or hedge funds and its effect on estate planners.

Hedge funds in modern financial markets are playing a significant role in the financial system. Significant growths in number, size, and capital under management have propelled private funds into becoming an integral part of the financial industry and overall economy. Historically, hedge funds-although required to submit to anti-fraud requirements-are a largely unregulated sector of the financial industry. The lack of oversight and the heavily publicized collapses of large private funds have resulted in a growing sentiment favoring an increase in the regulation of these funds. Broad regulation proposals for hedge funds-largely focused on registration and transparency-may have significant effects on individual investors, including individuals using these investment vehicles for estate planning purposes.

Estate planners use hedge funds or private funds as investment vehicles because of their history of earning significant returns. Wealthier estates can use interests in private funds in a number of different ways when planning for the transfer of their estate at death. When combined with insurance policies, trusts, and other estate planning instruments, individuals can minimize what would otherwise be significant income, gift, and estate taxes, while earning high returns on a large amount of capital. These strategies, however, are exclusively limited to higher net worth individuals, who largely use these strategies for tax avoidance purposes. Tax rules eroded these strategies, leaving the use of hedge funds in estate planning solely for estate planning objectives.

This comment will evaluate the possible effect that increased regulation on private funds and hedge funds will have on estate planning strategies for wealthier individuals, as well as the compatibility of increased regulatory standards and stringent tax requirements. The second section of this comment will outline a general estate planning strategy that uses a combination of life insurance and private funds interests as a medium to transfer wealth to future generations. This section will also include a description of the strict tax guidelines in these strategies. Part III will begin with a description of recently passed regulations and how these regulations will affect the private funds industry. The second portion of Part III will survey the regulatory proposals. The final section of this comment will evaluate the effect that increased regulations will have on estate planning strategies. Ultimately, this comment will conclude that, although there will be an elimination of the exemptions regularly used by private funds, an unclosed exemption will increase the number of private funds that cater to estate planners.

February 24, 2011 in Articles, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Wednesday, February 23, 2011

UB School of Law and Hopkins Announce Collaboration

Handshake The University of Baltimore School of Law and the Johns Hopkins University School of Medicine are joining to launch the nation’s first academic center for law and medicine focused on the health care provider. The center, which will open in July, will promote understanding between the two professions. It will help doctors to better understand legal issues that affect their daily practice while helping lawyers understand the real-world issues involved in the medical profession.

See Hopkins, UB School of Law Announce Collaboration, University of Baltimore School of Law Press Release, Feb. 15, 2011.

February 23, 2011 in Current Events, Teaching | Permalink | Comments (0) | TrackBack (0)

Ultimate Beneficiaries Can Enforce Contractual Will Omitting Restrictions on Survivor's Use of Property

Illinois In Ernest v. Chumley, 936 N.E.2d 602 (Ill. Ct. App. 2010), husband and wife executed mutual wills giving the entire estate to the survivor of them and on the death of the survivor, one-half to his children and one-half to hers. The wills were also declared to be irrevocable on the death of the first to die. After husband’s death, wife remarried, executed a new will giving her estate to her new husband if he survived and if not to her children and his children in equal shares, sold the home she and her late husband had held in joint tenancy with right of survivorship and ultimately placed the proceeds in three separate certificates of deposit held in joint tenancy with her husband. The late husband’s children sued asking for a constructive trust to be imposed on the property.

The trial court entered judgment for the wife and on appeal by the children, the intermediate Illinois appellate court held that because the will placed no restrictions on the surviving spouse’s use of the property received from the deceased spouse, the children have no interest in the spouse’s property until her death. However, the creation of the jointly held certificates of deposit breaches the contract by removing those assets from the wife’s estate by operation of law. The court remanded with directions that the trial court order wife to end her current husband’s interest in the certificates of deposit and to refrain from taking any action inconsistent with the children’s interest under the contractual will except expenditures made for her own support.

Special thanks to William P. LaPiana (Rita and Joseph Solomon Professor of Wills, Trusts,and Estates, New York Law School) for bringing this to my attention.

February 23, 2011 in Estate Administration, New Cases, Wills | Permalink | Comments (0) | TrackBack (0)

Anna Nicole Smith's Estate May Sue Opera

ANS opera I previously blogged about the Anna Nicole Smith opera. Larry Birkhead says Smith’s estate is now threatening legal action regarding the opera. The producers never contacted Larry or Smith’s estate, nor did they offer an advance screening. The opera features a very large woman with big boobs and is like “a sleazy tabloid.”

See ‘Anna Nicole’ Opera – The Fat Lady May Sue, TMZ, Feb. 17, 2011.

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

February 23, 2011 in Estate Administration, New Cases | Permalink | Comments (0) | TrackBack (0)

Struggle to Save Newcomb College Over; LA Supreme Court Refuses to Hear Case

Newcomb College I previously blogged about Susan Henderson Montgomery asking the Louisiana Supreme Court to hear an appeal in the case of Montgomery v. Tulane. On Friday, four justices of the Louisiana Supreme Court voted not to hear the case, putting an end to the struggle. 

Supporters of Newcomb College cannot reapply for a hearing before the Louisiana Supreme Court, so the only option would be to request a hearing at the U.S. Supreme Court. However, neither side sees a federal issue, so it seems that the battle is finally over.

See John Pope, Newcomb College to Remain Closed After State Supreme Court Refused to Hear Appeal, The Times-Picayune, Feb. 21, 2011; Louisiana Supreme Court Denies Application, Feb. 21, 2011.

Special thanks to Sue Bentch (Professor, retired, St. Mary's University School of Law) and Ronald J. Scalise, Jr. (A.D. Freeman Associate Professor of Civil Law, Tulane University Law School) for bringing this update to my attention.

February 23, 2011 in Current Events, New Cases | Permalink | Comments (0) | TrackBack (0)