Wills, Trusts & Estates Prof Blog

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

Tuesday, June 28, 2011

Determining the Basis of Gifted and Inherited Stock

Stock-certificate-collection1 Determining capital-gains tax due on gifted or inherited stock shares can be complicated. The basis of an inherited stock share is generally easier to determine than that of a gifted stock share as the basis for inherited stock shares is based on the stock’s value at the time the bequeathing party died. A taxpayer can locate the basis on a tax return of the estate or by researching the stock’s worth at the time of the decedent’s death. If the estate does not provide the stock’s value at the time of death, then the IRS will generally require brokers to determine the stock’s value and report it on Form 1099-B starting next year.

Determining the basis of a gifted stock can be a bit more complicated as it is based on what the original owner paid for the stock, along with any subsequent company changes (e.g. stock splits). In the best case scenario, the gifted stock will come with an original bank statement showing the amount paid for the shares. If the gifted stock does not come with cost-basis information, then the following steps may make locating the stock’s basis a little less troublesome:

  • Review family archives for the original investment statements.
  • Look in a Wall Street Journal dated the same as the year on the stock certificate for the company’s old stock symbol.
  • Keep in mind that stock splits may cause further complications. Look on the internet and company websites for a genealogical tree listing cost basis affecting events.
  • Many CPA firms will research cost basis changes and use software programs to help calculate the adjusted basis for their clients.

Though the IRS has not challenged many taxpayers to date concerning tax basis assertions, challenges may increase once the IRS requires brokers to report cost basis information on Form 1099-B.

The lesson for anyone thinking about making a gift of stock: Give cost-basis information along with it.

Without it, recipients could end up with a lot of detective work to do and a big tax bill if the trail runs cold, especially if they err on the side of caution and pay what they estimate the biggest likely tax bill would be.

Arden Dale, Tips for Solving the Cost-Basis Mystery, The Wall Street Journal, Jun. 20, 2011

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

June 28, 2011 in Estate Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Highest Appeals Court in France Rejects Appointment of Guardianship Request for L'Oréal Heiress

ImagesCA67TBMC The highest appeals court in France rejected Françoise Bettencourt-Meyers’ motion to have her mother, Liliane Bettencourt (daughter of the founder of L'Oréal), placed under legal guardianship. Bettencourt-Meyers claimed that her mother’s advisors were taking advantage of the L'Oréal heiress. The court held that the application was invalid because Bettencourt-Meyer had retracted her formal request the previous year during a settlement with Bettencourt.

See Appeals court rejects request to appoint guardian for Bettencourt, Family Business, Jun. 24, 2011.

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

June 28, 2011 in Current Events, Elder Law, Guardianship | Permalink | Comments (0) | TrackBack (0)

Monday, June 27, 2011

Creditors' Rights to Insurance Proceeds in Illinois

Insurance-policy1Illinois laws exempt life insurance proceeds from creditors of the decedent-insured, but a number of exceptions allow creditors a chance to claim these proceeds. The Illinois Insurance Code, at 215 ILCS 5/238(a) (“5/238”) has limited language protecting insurance proceeds from creditors.

5/238(a) exempts (i) all life insurance proceeds that are payable either (a) to a wife or husband of the insured or (b) to a child, parent or other person depend upon the insured, and (ii) the cash value of a policy while the insured is still alive from attachment by the creditors of the insured for the insured’s debts and liabilities, except the amount o f premiums paid by the insured in fraud of creditors.

Section 12-1001 has similar language to 5/238, except that Section 12-1001's language is not as limited, allowing the exemption to expand to a beneficiary debtor. Under Section 12-1001, some life insurance proceeds are exempt from attachment by judgment creditors of both the life insurance policy beneficiary and the insured during her lifetime. In In re Ashley, 317 BR 352, 358 (CD Ill 2004), the court concluded that,

[L]life insurance proceeds received by a debtor who was a wife, husband, or dependant of an insured are exempt for the debtor/beneficiary’s creditors’ claims. The court said the same goes for property traceable to life insurance proceeds (i.e., that have been converted into other property), but only to the extent reasonably necessary to support the debtor or his or her dependent…”

Courts tend to interpret 5/238 more favorably toward the policy beneficiaries and 12-1001 more favorably toward creditors.

Under 5/238(a) creditors can still reach premiums paid by the insured in fraud of creditors and receive payment on debts of the estate. Additionally, creditors may have access to the value of a life insurance policy if a living insured names a trust, not a person, as a beneficiary on the policy. Creditors may also have claim to debts where a beneficiary is jointly liable to the creditor, even if the beneficiary is a spouse or dependent child.

Thomas A. Pasquesi and Thomas M. Badenhausen, Life Insurance Proceeds Are Exempt From Creditors—Or Are They?, 99 Ill. Bar J. 254 (May 2011).

June 27, 2011 in Estate Administration, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Article on Experiential Learning in Trusts and Estates Courses

Beyer Mary_RadfordGerry W. Beyer (Governor Preston E. Smith Regents Professor of Law, Texas Tech University School of Law) and Mary F. Radford (Professor of Law, Georgia State University College of Law) recently posted their article entitled Experiential Learning in Trusts and Estates Courses (2011) on SSRN. The abstract is below:

The Legal Education Committee of the American College of Trust and Estate Counsel has had extensive discussions about the increasing need for law schools to provide students with opportunities to engage in skills-related or experiential learning courses. Many Committee members observed that, as the large firms are cutting back on their hiring and many lawyers in all sizes of firms are being forced to be more focused on the bottom line, there are fewer and fewer opportunities for new young lawyers to receive the mentoring and training they need. Additionally, given the sad state of the job market, many of us are seeing our students start up their own firms immediately upon graduation.

In addition, the American Bar Association is placing more emphasis on experiential learning in its accreditation process. Standard 302(a)(4) requires law schools to provide each student with, “professional skills generally regarded as necessary for effective and responsible participation in the legal profession.” Interpretation 302-2 provides the following non-exclusive list of programs that fulfill this Standard: “[t]rial and appellate advocacy, alternative methods of dispute resolution, counseling, interviewing, negotiating, problem solving, factual investigation, organization and management of legal work, and drafting.”

Mary F. Radford and Gerry W. Beyer chaired a subcommittee to gather information on what types of experiential learning opportunities are being offered or being considered in our area of the law. The results of this survey are provided in this article. The authors provide contact information for many of the professors using the techniques and encourage you to contact them to learn more about their techniques and to share your own experiences.

June 27, 2011 in Articles, Estate Planning - Generally, Teaching, Trusts | Permalink | Comments (0) | TrackBack (0)

CLE on Owning Buy-Sell Insurance Through Partnerships

The American Bar Association Section of Real Property, Trust and Estate Law is sponsoring a 90-minute teleconference and live audio webcast on July 19 entitled Using Partnerships to Own Buy-Sell Insurance. The program description is below:

Clients often prefer a cross-purchase buy-sell agreement but find practical problems often make them more difficult to administer than an entity purchase agreement. Our panelists will discuss a solution to these problems – using a limited liability company or other entity taxed as a partnership to hold life insurance policies used to fund a cross-purchase buy-sell agreement. Such a structure maximizes flexibility as ownership of an operating business changes over time, including the transfers of life insurance to owners entering or leaving the business. It also can provide superior income tax, estate tax, and asset protection results.

They will also cover how the owners should split the costs and benefits of such an arrangement, given differences in cost of insuring and each owner’s ability to contribute and percentage ownership in the business.

The economics, drafting, and tax considerations of three practical models will also be discussed.

June 27, 2011 in Conferences & CLE, Estate Planning - Generally, Estate Tax, Income Tax | Permalink | Comments (0) | TrackBack (0)

Changes Same-Sex Couples Can Expect in New York

Samesex-600x400-custom Same-sex couples in New York can expect to see changes to their financial lives now that they can legally marry. A list of some of the financial and legal changes couples can expect is below:

  • Couples can file a joint state tax return but will have to file separate federal tax returns. For couples who earn less than $65,000 a year jointly, the amount they pay in state income taxes may decrease because they will receive a marriage bonus. Couples in a higher bracket, however, may end up paying more by filing a joint tax return.
  • Couples may spend more time and money preparing their tax returns as they must prepare a dummy federal tax return using a married status in order to use that data while filing their state joint tax return.
  • New York allows spouses to transfer an unlimited amount of assets at their death; individuals must pay state estate tax on estates over $1 million. (Couples will still be considered as individuals with regard to federal estate and gift taxes).
  • Spouses of state employees will be eligible for health insurance, pension survivor benefits, and any other benefits available for state employees.
  • For married lesbian couples having a baby, the woman who did not give birth to the couple’s child will also be recognized as a parent on the child’s birth certificate. (It may still be wise to have a formal adoption to secure the child’s legal status to both women).
  • For married gay men using a surrogate, only the biological father will be listed on the child’s birth certificate. In New York, the surrogate mother must relinquish her maternal rights before the other father can adopt the child.
  • Spouses may now bring wrongful death claims and receive worker’s compensation benefits if their spouse dies in a work-related injury.
  • Couples will receive federal benefits if the Defense of Marriage Act (which defines marriage as being between a man and a woman) is ever struck down.

See Tara Siegel Bernard, How Gay Marriage Will Change Couples’ Financial Lives, The New York Times, Jun. 24, 2011.

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

June 27, 2011 in Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0) | TrackBack (0)

Sunday, June 26, 2011

Advice on Inherited Jewels

Marilyn_monroe_diamonds_are_a_girls_best_friend Many people who inherit jewelry do not know where to find advice on what to do with the pieces they inherited. One option is to visit an auction house (the auction house may come to you if the inheritance is valuable enough). The auction house will value and sale your pieces. The advantages of using an auction house are that most estimates are free, appraisers will suggest the appropriate time to sell your jewelry, and your pieces will be exposed to a wide market, including collectors and dealers. The drawback to using an auction house is that premiums for both sellers and buyers have risen. This means that both the buyer and seller will inevitably “lose” on the price. Additionally, a client can pay up to 10% to the company brokering the sale.

Another option is to sell directly to a dealer. Getting advice from a jewelry specialist can help ensure that a dealer does not give you a poor deal. Some of these advisors will advise clients on available offers, opine as to whether the pieces should be sold at auction or privately, and will sometime even educate clients on the art of jewelry.

See Maria Doulton, Maximising assets: Top tips on what to do with inherited jewels, Financial Times, Jun. 10, 2011.

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

June 26, 2011 in Travel, Wills | Permalink | Comments (0) | TrackBack (0)

Same-Sex Marriage Legalized in New York

25marriage4_span-articleLarge As I previously blogged, New York Governor, Andrew Cuomo, signed a bill legalizing same-sex marriage on Friday. The marriage bill was approved 33 to 29, and same-sex couples in New York can start legally marrying by late July (the law goes into effect in thirty days). New York joins Connecticut, Iowa, Massachusetts, New Hampshire, and Vermont, along with the District of Columbia, as the sixth state to legalize same-sex marriage. New York is now the largest state that grants legal recognition of same-sex marriages.

Though the Republican party successfully negotiated changes to the bill to protect religious institutions, New York’s Catholic bishops stated, “The passage by the Legislature of a bill to alter radically and forever humanity’s historic understanding of marriage leaves us deeply disappointed and troubled.”

All but one Democrat, Rubén Díaz Sr. of the Bronx, approved the marriage bill. Four Republicans supported the bill: Senators Stephen M. Saland of the Hudson Valley area, Roy J. McDonald of the capital region, Mark J. Grisanti of Buffalo, and James S. Alesi of East Rochester. After Cuomo signed the bill, Gristanti stated, “I apologize for those who feel offended… I cannot deny a person, a human being, a taxpayer, a worker, the people of my district and across this state, the State of New York, and those people who make this the great state that it is the same rights that I have with my wife.”

Supporters of same-sex marriage feel the passage of the bill in New York is particularly symbolic as the June 1969 riot against police in the West Village is known as the foundational moment for the gay rights movement.

Nicholas Confessore and Michael Barbaron, New York Allows Same-Sex Marriage, Becoming Largest State to Pass Law, The New York Times, Jun. 24, 2011; Michael Barbaro, Behind N.Y. Gay Marriage, an Unlikely Mix of Forces, The New York Times, Jun. 25, 2011.

June 26, 2011 in Current Events, New Legislation, Religion | Permalink | Comments (0) | TrackBack (0)

Saturday, June 25, 2011

Extra Funding for Medicaid Running Out

In February 2009, Congress approved extra federal financing for Medicaid as part of an economic recovery package. The number of Meicaid beneficiaries has increased since 2009, and the financing runs out at the end of this month. As a result, millions of people will be cut from their benefits.

Many states, in an attempt to reduce costs, are limiting Medicaid recipients’ benefits, increasing beneficiaries’ co-pays, reducing Medicaid payments to hospitals and physicians, and reducing the number of services covered. A recent survey found that twenty-four states reduced or were reducing Medicaid payments to providers, and twenty states limited or were limiting recipients’ benefits in some other way.

Medicaid is more vulnerable to cuts than Social Security and Medicare because its political support is not as broad. According to Senator John D. Rockefeller, IV, Democrat of West Virginia and chairman of the Senate Finance Subcommittee on Health Care, the majority of Medicaid’s population simply do not have the finances needed for lobbying.

Medicaid is very much on the chopping block. Seniors vote. But if you are poor and disabled, you might not vote, and if you are a child, you do not vote — that’s a lot of Medicaid’s population. They don’t have money to do lobbying.

Robert Pear, As Number of Medicaid Patients Goes Up, Their Benefits Are About to Drop, The New York Times, Jun 16, 2011.

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

June 25, 2011 in Elder Law | Permalink | Comments (0) | TrackBack (0)

New York Legalizes Same-Sex Marriages

New York

On Friday, June 25, 2011, Gov. Andrew Cuomo of New York signed a bill legalizing same-sex marriage in New York within the next 30 days.

New York now joins Massachusetts, Connecticut, Vermont, New Hampshire, Iowa, and Washington, D.C. in allowing same-sex marriage.

See New York governor signs same-sex marriage bill into law, CNN.com, June 25, 2011.

June 25, 2011 in New Legislation | Permalink | Comments (0) | TrackBack (0)