Wills, Trusts & Estates Prof Blog

Article on Capital Gains

Robert L. Moshman (attorney, New York & New Jersey) recently published his article entitled Capital Gains Paradox, The Estate Analyst (Mar. 2011). An excerpt from the begining of the article is below:

Have capital gains become a threatened and endangered species?

Can the size of future estates be projected accurately? If an estate’s assets appreciate in value, which capital gains tax breaks apply? Which of those tax breaks will still be available five years from now? What does it all mean?

The paradox of establishing financial plans that can exploit future gains and current tax rules is that there may be no gains, and the tax breaks that apply now may be gone by the time they are needed.

 

Woman Leaves $1 Million to Pets, Judge Rejects Will

The following video is Jerry Carnes’ report on the case of Kay Johnston’s estate. Johnston went to attorney Robert Johnson to draft her will. She left $1 million to her fifty cats and six dogs and $50,000 to Kyria Wilhite who was to move into the house and 7 acres to care for the pets. Johnston only knew Wilhite for two weeks prior to drafting this will.

Johnston’s cousin disputed the will. A probate judge rejected the will, finding that Johnston was physically and mentally weakened at the time the will was executed due to cancer, and that attorney Johnson failed to disclose that Wilhite was actually his girlfriend.

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

States Investigate Life Insurers' Failure to Pay Out

Three years ago, Verus Financial LLC pitched an idea to cash-strapped states regarding identifying unclaimed life insurance policies that the states could seize as abandoned property.  Eventually, 35 states signed up, agreeing to give Verus around 10% of what the state is able to seize.  Verus is currently investigating two dozen insurance companies. 

Insurance companies sometimes fail to ensure that they pay out on policies, which enables them to hold on to this money for a few years until the accounts go "dormant."  Once they are dormant, the insurance company must notify the state.  The state attempts to get in touch with the policyholders, but is able to seize the funds and use them until the rightful owner claims the property, if ever.  This battle could shift millions to state coffers and consumers.   

See Leslie Scism and Vauhini Vara, Life Insurers Skimp on Payouts:  States, W.S.J., Apr. 28, 2011. 

Special thanks to Gus Fuldner (MacAccess Systems LLC) for bringing this to my attention. 

Alzheimer's Association Released Study Regarding Alzheimer's and the Baby Boomer Generation

This year, the first of the Baby Boomer Generation turns 65. More than 10,000 baby boomers will turn 65 each day starting this year, and approximately 10 million will develop Alzheimer's.  To bring urgently-needed attention to the risk facing the Boomers, the Alzheimer's Association recently released a groundbreaking study entitled Generation Alzheimer's: The Defining Disease of the Baby Boomers.

 

The Story of an Elderly Widow

Stewart O’Nan recently published his book entitled Emily, Alone (Penguin Group USA 2011). The publisher’s description is below:

A sequel to the bestselling, much-beloved Wish You Were Here, Stewart O’Nan’s intimate new novel follows Emily Maxwell, a widow whose grown children have long moved away. She dreams of vists by her grandchildren while mourning the turnover of her quiet Pittsburgh neighborhood, but when her sole companion and sister-in-law Arlene faints at their favorite breakfast buffet, Emily’s days change. As she grapples with her new independence, she discovers a hidden strength and realizes that life always offers new possibilities. Like most older women, Emily is a familiar yet invisible figure, one rarely portrayed so honestly. Her mingled feelings-of pride and regret, joy and sorrow- are gracefully rendered in wholly unexpected ways. Once again making the ordinary and overlooked not merely visible but vital to understanding our own lives, Emily, Alone confirms O’Nan as an American master.

For a review of the book and how it can be helpful to caregivers, see Paula Span, The Caregiver’s Bookshelf: How She Carries On, N.Y. Times, Apr. 16, 2011.

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

Tips For Spending a Windfall Responsibly

When an individual receives a large financial gift, his or her choice on how to spend the money largely depends on his or her personal and financial circumstances. It is important, however, that the recipient is able to articulate the reasons for his or her financial decisions. Though spending a windfall on frivolous things is understandable and expected, financial advisers suggest a few guidelines to help recipients handle gifts in a prudent and responsible manner:

• Make a financial plan before spending any money.
• Pay off credit cards and other debt with high interest rates.
• Increase contributions to tax favored pension plans.
• Max out on retirement plans.
• Buy more health, life, and liability insurance.
• Put money away for long term plans (such as a child’s education).
• Last but not least, have some fun with the gift.

See Conrad de Aenlle, When a Windfall of Money Arrives, So Can Challenges, N.Y. Times, Nov. 23, 2010.

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

Not All Americans Can Be a Betty White

Older celebrities like Betty White (89) and Joan Rivers (77) may have the stamina to continue working well past retirement age, but for many Americans, working past the age of 65 is unlikely. A recent survey found that 74% of Americans expect to continue working after retirement (increased from 56% in 1998). Additionally, the survey found that 36% of Americans do not expect to retire until after age 65 (increased from 11% in 1991).

However, the same survey found that 45% of current retirees left work earlier than they expected. Reasons for these early retirements included the retiree’s health or disability, downsizing or other company changes, and caring for a family member.

For Social Security benefits purposes, 62 is currently the early retirement age, and 66 is the “full” or “normal” retirement age for Americans born between 1943 and 1954. The full retirement age increases two months per birth year and eventually hits 67 for Americans born in 1960 or later. During the recession, 42% of Americans claimed early Social Security retirement benefits and will experience a reduction in their full benefits amount as a result.

Some economists advocate for the raise of both the full and early retirement ages, though these economists believe allowances for individuals unable to work past 62 should exist. These economists concede that, realistically, the average American cannot work in a regular job past the age of 67.

The notion that Americans can quit work at 55 or 60 to lounge on the beach has already been exposed as the unaffordable fantasy it always was. But it’s delusional, too, to believe we all have the stamina and skills to hang in there as long as Betty White—or even until 67.

Janet Novack, Betty White, Joan Rivers, Social Security And Senior Slackers, Forbes, Apr. 6, 2011.

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

Article on Cy Pres Redux

Alberto B. Lopez (Professor of Law, Salmon P. Chase College of Law, Northern Kentucky University) recently published his article entitled A Revaluation of Cy Pres Redux, 78 U. Cin. L. Rev. 1307 (2010). An excerpt from the introduction is below:

Although cy pres doctrine has remained relatively staid over time, the doctrine received a legislative makeover during the latter twentieth century that has continued into the twenty-first century. The most recent revision to the doctrine of cy pres is contained in the Uniform Trust Code (UTC). The UTC transforms one of the traditional elements of cy pres--finding general charitable intent--into a presumption that can be rebutted by the party opposing the application of the doctrine. Furthermore, the UTC abandons the traditional “as near as possible” standard for redistributing cy pres assets and provides an additional ground to justify the exercise of cy pres. These changes not only represent the most recent reconfiguration of the doctrine, but also the most important modifications of cy pres since the early twentieth century. As evidence of its importance, the UTC has been adopted in twenty-one jurisdictions and bills proposing its adoption are making the legislative rounds in several states. If the trend continues, the UTC's version of cy pres will soon become a majority rule.

A wave of commentary has been aimed at portions of the UTC involving subjects such as special and supplemental needs trusts and the information available to beneficiaries, but the UTC's cy pres has barely elicited a whisper from commentators. The paucity of cy pres analysis under the UTC stands in stark contrast to the criticism directed at the versions of cy pres contained in the Restatement (First and Second) of Trusts. Scholars have long argued for an expansion of cy pres to prevent spending charitable dollars on antiquated charitable objectives simply out of respect for the dead hand. If silence can be equated with approval, the scholarly community welcomes the liberalization of cy pres represented by the changes to the power under the UTC.

This Article fills that scholarly void by subjecting the modifications to cy pres doctrine introduced by the UTC to a critical evaluation and offers a view of the UTC's cy pres that is contrary to its perceived acceptance. Part II traces the evolution of cy pres in England and the United States through the promulgation of the UTC to highlight the substantial differences between the UTC's cy pres and its traditional ancestor. Part III of this Article demonstrates that the departure from history cleaved by UTC Section 413 tilts the theoretical balance of interests associated with cy pres too far toward the public interest and fails to fulfill its underlying goal of promoting efficient use of scare resources. To counter the theoretical and efficiency concerns associated with the UTC's cy pres, Part IV proposes replacing the UTC's presumption of general charitable intent with a presumption of specific charitable intent. Although presuming specific charitable intent is likely to result in an increase in cy pres denials, Part V argues that presuming specific charitable intent benefits charity generally by increasing the number of charities that will receive assets via cy pres without any loss in efficiency. The Article concludes that a presumption of specific charitable intent not only serves as a counterweight to the increasing paternalism of charity law, but also ultimately benefits the public by reducing ambiguity in the law, thereby saving litigation costs.

Emergency Rooms Tailored to Senior Patients

Many hospitals are now opening emergency rooms tailored exclusively to senior patients. Many seniors have a difficult time explaining their symptoms, and traditional ERs are not always equipped to spend the time and resources to discover a senior’s true ailment.

There are roughly twelve self-designated senior ERs in the U.S., but many estimate that number will grow as the number of seniors continues to rise. One estimate shows that one in every five Americans will be sixty-five or older by the year 2030.

Aside from tailoring care-giving techniques to senior patients, senior ERs also create a nurturing environment through the use of senior friendly amenities:

Mattresses are thicker, and patients who don't need to lay flat can opt for cushy reclining chairs instead....Nonskid floors guard against falls. Forms are printed in larger type, to help patients read their care instructions when it's time to go home. Pharmacists automatically check if patients' routine medications could cause dangerous interactions. A geriatric social worker is on hand to arrange for Meals on Wheels or other resources.

Some Hospitals Open ERs Just For Graying Patients, Associated Press, Mar. 14, 2011.

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

CLE on Mastering the Basics of Estate Planning

The ABA Section of Real Property, Trust and Estate Law is sponsoring an annual program entitled Skills Training for Estate Planners at the New York Law School July 11-15, 2011. Covered topics include:

Basic Fundamentals and Substantive Skills Development

• Marital deduction basics
• Charitable deduction planning
• Analyzing inter vivos gifting
• Life insurance planning
• Deferred compensation and employee benefits
• 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
• Fiduciary administration, accounting and the tax aspects of postmortem and other fiduciary administration
• Valuation in practice, including how to select valuation experts
• Software programs and web sites that assist in the analysis of estate assets and facilitate construction of planning models

Developing Ethical Attitudes

• Ethics instruction in practical settings, particularly including representations of spouses and fiduciaries.

To download the registration form, click here.