Wills, Trusts & Estates Prof Blog

Special Needs Trusts

About 20 million U.S. families will face the struggle of raising a child with disabilities, and the financial responsibility can be difficult to manage.  For example, for a family to care for a child with autism, it could cost an estimated $3.2 million over that child's lifetime. 

Families with special needs children recognize these costs and may want to set aside assets in their children's names or name them as beneficiaries in wills or life insurance policies. However, when planning for children with a special disability, parents have to be cautious not to disqualify their children from governmental benefits. They should also consider that planning for retirement becomes a different concern too, since they may never have an empty nest. 

Instead of having assets flow directly to a special needs child, parents should use special needs trusts to provide for their child's care. MassMutual's Special Care division provides several helpful recommendations when planning for a special needs child.  A few of these suggestions are listed below:

1. Create a Letter of Intent: While this is not a binding legal document, it gives courts and trustees a better understanding of what you intend for your child.  It is good to include details such as medical history, preferred care and living arrangements, and whom you'd like to have guardianship over your child after you're gone. 

2. Get a Special Care Planner: A special care planner can work with lawyers, accountants, and caregivers to compile the best financial and health strategy for your child. 

3. Create a Supplement Special Needs Trust: This kind of trust enables you to leave funds for the care of your child without disqualifying him from federal aid.  

4. Make Sure Your Will Funds the SSNT, Not the Child: If you have a special needs child, you must have a valid will.  Ensure that you and your spouse have a valid will written that makes the supplemental special needs trust the beneficiary of the special needs child's portion of the estate. 

5. File for Legal Guardianship: You are not legally the guardian of your child once he or she turns 18 unless you file for legal guardianship.

6. Learn About All the Possible Help Available: Special needs children can receive help from Medicaid, Medicare, the State Children's Health Insurance Program, or the Children with Special Health Care Needs portion of the Social Security Act. 

See Kenneth Urken, Avoid the Biggest Mistake of Financial Planning For Special Needs Kids, Daily Finance, Sept. 28, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Top SSRN Downloads

Here are the top downloads from August 1, 2012 to September 30, 2012 from the SSRN Journal of Wills, Trusts, & Estates Law for all papers announced in the last 60 days.

Rank	Downloads	Paper Title
1	560	Preserving Wealth and Inheritance Through Medicaid Planning for Long-Term Care John A. Miller, Sean Bleck, Barbara Isenhour, University of Idaho College of Law, Unaffiliated Authors - affiliation not provided to SSRN, Unaffiliated Authors - affiliation not provided to SSRN, Date posted to database: August 8, 2012 Last Revised: September 1, 2012
2	186	The Dirty Little Secret of (Estate) Tax Reform Edward J. McCaffery, University of Southern California - Law School, Date posted to database: August 14, 2012 Last Revised: August 14, 2012
3	175	Time for Permanent Estate Tax Reform Jeffrey A. Cooper, Quinnipiac University School of Law, Date posted to database: September 12, 2012 Last Revised: September 20, 2012
4	139	Facebook's Afterlife Jason Mazzone, University of Illinois College of Law, Date posted to database: September 7, 2012 Last Revised: September 11, 2012
5	133	Too Many Tiaras: Conflicting Fiduciary Duties in the Family-Owned Business Context Karen E. Boxx, University of Washington School of Law, Date posted to database: August 3, 2012 Last Revised: August 3, 2012
6	89	Absolute Preferences and Relative Preferences in Property Law Lior Strahilevitz, University of Chicago Law School, Date posted to database: July 31, 2012 Last Revised: August 10, 2012
7	85	Parental Testamentary Appointments of Guardians for Children Alyssa A. DiRusso, S. Kristen Peters, Samford University - Cumberland School of Law, Unaffiliated Authors - affiliation not provided to SSRN, Date posted to database: August 24, 2012 Last Revised: August 24, 2012
8	75	Subrogation, Equity and Unjust Enrichment Mark Leeming, University of Sydney - Faculty of Law, Date posted to database: August 7, 2012 Last Revised: August 8, 2012
9	61	Shareholder Fiduciary Accountability: No Duty to the Minority Robert Flannigan, University of Saskatchewan, Date posted to database: September 17, 2012 Last Revised: September 17, 2012
10	59	Case Law Update Gerry W. Beyer, Texas Tech University School of Law, Date posted to database: September 21, 2012 Last Revised: September 21, 2012

Madonna, Vogue and The Estate of Marlon Brando

Madonna's song "Vogue" lists of various Hollywood icons and everytime that it is performed, Madonna pays the estates of each of those icons.  For example, when she performed "Vogue" at the superbowl last year, she paid $3,750 each to estates of James Dean, Jean Harlow, Ginger Rogers, Bette Davis, LanaTurner, Greta Garbo, Marlene Dietrich, Gene Kelly, Grace Kelly, and Joe DiMaggio. CMG Worldwide manages the intellectual property rights of many of these dead stars.  

After the Super Bowl, Madonna wanted to go on tour to support her latest album and she wanted to play Vogue again.  To facilitate this, the touring company, Bhakti Touring, Inc. went to CMG for help gaining clearance for use of the dead starts' publicity rights, including Brando's.  Since CMG does not represent the rights of Marlon Brando, they began negotiations with Brando Enterprises and its agent at Brand Sense Partners (BSP). When Madonna performed Vogue at the Super Bowl, CMG was able to get an agreement with BSP indicating that the Brando estate would be paid $3,750 just like all the other stars. When CMG went to BSP about Madonna's tour, they made the same proposal. Shortly after, CMG convince Bhakti to agree to pay $5,000 for each celebrity, but in the last week of May, BSP allegedly began demanding that Bhakti pay Marlon Brando $20,000.  

As a result of these new demands, CMG filed a low-key lawsuit in Indiana state court alleging that Brando Enterprises and BSP reneged on a valid and enforcable contract.  Among other things, they are also demanding that Brando's estate and its agents do not bring any lawsuits against CMG, Bhakti, and Madonna claiming that they violated Brando's intellectual property.

On Wednesday, Brando Enterprises got the lawsuit removed to federal court in Indianapolis on the basis of diversity jurisdiction.  They are planning to show that Brando's IP rights far exceed $5,000 and that Madonna exploited Brando's IP in about 90 different concert performances. 

See Eriq Gardner, Lawsuit Aims to Stop Marlon Brando Estate From Suing Madonna Over 'Vogue' (Exclusive), The Hollywood Reporter, Sept. 28, 2012. 

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this blog to my attention.

Women Choosing Not to Work

Wealth Management wanted to find out if women were well represented in the financial services, RIA market. Upon investigation, they had trouble finding 25 women owned RIAs in a list of 400 RIAs, indicating that women are not so well represented in the RIA market.  Even though women may be underrepresented in the industry, maybe that is just because women are choosing to stay home and nurture children instead. Sexism and discrimination don't have to be the driving forces behind the number of women in the workplace.  Instead, that number is likely set by women's desire to have a baby and take time out of work.

See David Geracioti, Women Are Getting Richer and Taking Charge of Wealth.  But There are Few Women-owned RIAs, WealthManagement.com, Sept. 28. 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

More on the Brooke Astor Estate Auction

As I have previously discussed, Brooke Astor's Estate recently held an auction and earned quite a bit of money on a few of the items it has already auctioned. At the end of the auction, the estate earned about $18.8 million to donate to the charities of Ms. Astor's choice. This is good news for the estate because her property earned twice what the estate expected to earn. With the end of the auction comes the end of the administration of the late-socialites estate. So ends the sad story of the administration of Brooke Astor's estate. 

See The Reliable Source, In Other News...: Brooke Astor Estate Auctioned for $18.8 Million, Washington Post, Sept. 26, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

CLE on Medicaid Planning

On Wednesday, October 17, 2012, the ALI-ABA is hosting a CLE entitled Practical Medicaid Planning: Advising Your Clients.  The CLE will be from 1:00 p.m. to 2:30 p.m. Eastern and is offered via telephone seminar or audio webcast.  You will learn the following: 

This 90 minute audio-only program will explore various topics related to Medicaid and planning for Medicaid, including (but not limited to):

• Significance of payment of debts and expenses
• The community spouse resource allowance
• Transfer rules
• Distributions from inter-vivos trusts
• Tax issues in elder law
• Why you must read Medicaid not as a trust and estates lawyer but from the point of view of public benefits.

Though primarily designed for estate planning attorneys, tax lawyers and other professionals handling Medicaid issues will benefit from this program, which is co-chaired by Mark Levin of the Law Office of Mark Levin in Roseland, New Jersey, and Leonard Pasculli of Hollander, Strelzik, Pasculli, et al. in Newton, New Jersey.

Please click here for more information. 

Letters on Perpetual Trusts

Lawrence W. Waggoner (Lewis M. Simes Professor of Law Emeritus, University of Michigan Law School) and Calvin H. Johnson (Andrews & Kurth Centennial Professor, The University of Texas at Austin School of Law) recently published their article entitled 'Perpetual Trusts: The Walking Dead' and 'Congress Should Effectively Curb GST Exemption for Perpetual Trusts,' Tax Notes, Vol. 136, No. 10 (2012).  The abstract available on SSRN is below: 

In separate but complementary letters to the editor of Tax Notes, Calvin Johnson (University of Texas School of Law) and Lawrence Waggoner (University of Michigan Law School) respond to an article by Dennis Belcher and seven other practicing attorneys that defend the GST exemption for perpetual trusts. In Federal Tax Rules Should Not Be Used to Limit Trust Duration, 136 Tax Notes 832 (Aug 13, 2012), the attorneys argue that the duration of a trust is a state law issue. Their article is actually a response to a Shelf Project article: Lawrence W. Waggoner, Effectively Curbing the GST Exemption for Perpetual Trusts, 135 Tax Notes 1267 (June 4, 2012), Doc 2012-9442, 2012 TNT 110-14, available electronically at http://ssrn.com/abstract=2083804.

In Perpetual Trusts: The Walking Dead, 136 Tax Notes 1215 (Sept. 3, 2012), Johnson argues that the harm to the national wealth done by perpetual trusts is a federal responsibility. Trusts reduce the value of wealth, and settlors could figure that out if they were not seduced by the tax exemption. Specific settlor instructions get out of date and become an impediment after a generation. Delegating to trustees accountable to no one means trusts are managed primarily for the benefit of the trustees. Perpetual trusts become monsters, the walking dead. The federal exemption is motivating the harm; federal law is responsible for the harm that perpetual trusts cause.

In Congress Should Effectively Curb the GST Exemption for Perpetual Trusts, 136 Tax Notes 1216 (Sept. 3, 2012), Waggoner reaffirms his Shelf Project proposal and his criticism of the Treasury Department’s proposal for dealing with perpetual trusts. The Treasury Department’s proposal would leave many trusts and much wealth GST exempt for much longer than Congress originally intended. The Waggoner proposal, if enacted, would be much more effective. Belcher and the other attorneys argue that Congress should do nothing (a position refuted by Johnson), but if Congress is to do something, the attorneys essentially embrace the Treasury proposal.

Estate Tax Liability For Americans Under Three Different Scenarios

When it comes to estate tax, a recent study indicates there are three proposals that Congress is most likely to consider: (1) Let the estate tax law revert back to $1 million and 55% maximum tax; (2) extend the current law with $5 million exemption and 35% maximum tax; or (3) enact a compromise of $3.5 million exemption and 45% maximum tax.

If Congress does not take action regarding the estate tax by the end of the year, 15 million U.S. households will owe estate tax. While only 4.4 percent of households have financial assets greater than $1 million, other assets are included in estate tax calculation.  Households can use life insurance proceeds on the deceased to pay estate tax, but the LIMRA analysis indicates that 55% of these households do not have enough coverage to pay the tax.

 If Congress extends the existing law, 2.4 million households would have a potential estate tax liability.  43% of these households do not have enough coverage to pay the tax.

If Congress agrees to a compromise of $3.5 million exemption and 45% tax rate, 3.6 million households would have a potential estate tax liability.  53% of households do not have the coverage to pay this tax. 

See Warren Hersch, LIMRA: More Than 1 in 8 U.S. Households May Owe Estate Tax in 2013, LifeHealthPro, Sept. 27, 2012. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Lecture on Estate Planning for Resident and Non-Resident Aliens

Stephanie E. Heilborn (Partner, Fulbright & Jaworski, New York) & Monika Jain (Counsel, Phillips Nizer, New York) recently gave a lecture for a webinar entitled, Estate Planning Involving Resident and Non-Resident Aliens—Navigating Estate, Gift, and GST Tax Rules and Leveraging Estate and Lifetime Gifting Opportunities, (Webinar, Strafford Publications, Sept. 20, 2012). A link to the webinar's lecture slideshow has been provided above.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

German Inheritance Policy

In Germany, the country's laws state that domestic residents can take a €500,000 exemption on inheritances and gifts, while it restricts the exemption to €2,000 if the testator and the heir are not residing within the geographic boundaries of Germany. As a result, the European Commission (EC) referred the nation to the European Commission's Court of Justice. The commission determined that not only was the law discriminatory but also a burden on the free movement of capital. This last determination is provided for in the treaties between the European Countries. 

See Taxation: Commission Refers Germany to the Court of Justice for Discriminatory Inheritance Tax Provisions, Press Release: European Commission, Sept. 27, 2012.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this blog to my attention.