Wills, Trusts & Estates Prof Blog

Ten Estate Planning Questions to Ask Yourself

John O. McManus, the Founding Principal of estate planning firm McManus & Associates, recently highlighted some effective financial tactics and maintenance items to apply before 2014.  Here are ten estate planning questions to ask yourself before the end of the year:

1. Should I change my estate plan before laws change in 2014?
2. Is your partnership validly maintained?
3. If making gifts to loved ones, are you exceeding your exemption amount?
4. Are you employing the most current estate planning strategies?
5. Are you making the most of income tax deductions?
6. Do the fiduciaries named in your estate planning documents still reflect your wishes?
7. Are you using the best strategies when making year-end charitable gifts?
8. Are your cash donations from an IRA to charity being properly made?
9. Should you consider using a GRAT or a QPRT?
10. How should you harvest capital gains and time long-term losses?

See Top 10 Estate Planning Considerations to Complete Before Year-End, McManus & Associates, Nov. 22, 2013.

Estate Entitled to Refund

In Anne Batchelor-Robjohns et al. v. United States, 2013-TNT-221-15, an estate was declared entitled to a tax refund for an incorrect assessment by the IRS.

This refund was based on the decedent’s 2000 tax return “with no offsets and interest from the date the erroneous assessment was paid until the date of repayment.”

See Rachelle Hellams, Esq., Estate Entitled to Refund from IRS, Wealth Strategies Journal 2.0, Nov. 18, 2013.

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

CLE on Estate and Gift Tax Planning Opportunities for 2014 and Beyond

The American Legal Institute and the American College of Trust and Estate Counsel (ACTEC) is presenting a CLE entitled, Estate and Gift Tax Planning Opportunities for 2014 and Beyond, on Wednesday, December 11, 2013 at 12:30-2:00 pm ET. Provided below is a description of the event:

Why You Should Attend

The American Taxpayer Relief Act of 2012 (ATRA) provided a “new normal” of transfer tax certainty, large indexed transfer tax exemptions, unification of estate and gift tax exclusion amounts, and portability. While fewer taxpayers will be subject to estate and gift taxes, those who do incur liability face a higher estate tax rate.

In this CLE program on estate and gift tax planning in 2014, Fellows of The American College of Trust and Estate Counsel conduct a lively and informative discussion of how ATRA has affected estate and gift tax planning for 2014 and beyond, including a focus on the useful estate and gift tax planning opportunities that have arisen post-ATRA!

What You Will Learn

Discussion will include the following topics:

• effect of legislative proposals on planning
• addressing the huge impact of high indexed exclusions on estate planning practices
• assessing the impact of large gifts over the last several years
• planning strategies to deal with “portability” complexities
• administering trusts under pressure of high rate brackets and the new 3.8% tax on undistributed net investment income
• strategies for providing flexibility to plan for basis adjustments in light of increased (and indexed) estate exemptions
• tax planning implications of Windsor (and related IRS guidance) for same-sex couples
• growing use of decanting and status of IRS guidance
• IRS guidance and pending Tax Court case (Davidson) regarding self-canceling installment notes
• “net, net gifts” – Is a gift offset allowed for the donee’s assumption of the donor’s potential added estate tax liability under section 2035(b)?
• GRAT planning, including estate inclusion for GRAT when donor died during trust term (Trombetta)

Questions submitted during the program will be answered live by the faculty. In addition, all registrants will receive a set of downloadable course materials and free access to the archived online program.

Who Should Attend

This accredited continuing legal education program from ALI CLE is designed for attorneys who practice trust and estate law, estate planning, as well as financial planners and accountants.

Charitable Trusts Increase in Popularity

There is growing interest in charitable remainder trusts for contributions of assets with high appreciation value. Assets transferred to a charitable remainder trust will be shielded from tax on any capital gains. As a result, the funds from the trust can be fully reinvested versus an individual who would be left with 77 cents on the dollar after taxes. While the trust can pay income to the income beneficiaries, clients should be sure that they have charitable intent because the trust is irrevocable. An individual who creates a charitable remainder trust is given at least a 10% tax deduction of the value of the trust assets. With the many tax benefits, it is no wonder why charitable trusts are increasing in popularity.

See Donald Jay Korn, Tis the Giving Season: The Allure of Chritable Trusts, Financial Planning, Nov. 25, 2013.

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

The Huguette Saga Continues

The recent Huguette Clark settlement saw $1 million go to Beth Israel, the hospital the copper heiress lived in for the last twenty years of her life.  The executors of her estate are now suing the hospital for $105 million, alleging the hospital, as well as Clark’s primary doctor, put profit ahead of medical duty by extracting millions in rent and gifts.

The suit seeks from the hospital $45 million for breach of fiduciary duty, $50 million in punitive damages, and a $3 million Manet painting allegedly given under pressure. 

The estate also wants $1.7 million plus $5 million in punitive damages from her doctor, Henry Singman, who got $100,000 in the settlement.  The executors allege Singman “had persuasive powers” over the heiress and received over $800,000 in gifts.

The parties are due to be back in court this January.

See Julia Marsh, Huguette Clark’s Estate Sues Beth Israel for ‘Secluding Healthy Heiress’, New York Post, Nov. 21, 2013.

Estate of Julie Harris Embroiled in Drama

Five-time Tony Award-winning Broadway star Julie Harris died in August at age 87.  Friends and former employees are now stirring up some drama over her estate.  They claim minor soap-opera actress Francesca Rubino “wormed” her way into Harris’ life, took control over Harris’ medical and business affairs, and kept Harris away from her son, Peter Gurian.

Harris named Rubino co-executor of her estimated $10 million estate.  Rubino stands to make up to $200,000 in commissions in addition to the $50,000 she inherited outright and the ten items of Harris’ tangible personal property she is permitted to select.  Although Harris left the bulk of her estate to Peter, she included an unusual codicil that says Peter will receive nothing if he were harass Harris or any of her friends.  It just so happens that Rubino took out a harassment prevention order against Peter three years ago.  Because of this order, Peter had no contact with his mother in the last three years of her life even though he lived right next to her.

Peter claims his mother’s will and codicil were the product of undue influence and that his mother lacked testamentary capacity to make them.  Rubino claims these accusations are merely rumors circulated by disgruntled former employees.

See Michael Riedel, Battle of Wills After Julie Harris’ Death, New York Post, Nov. 22, 2013.

Supreme Court to Decide Case on Inherited IRAs

In Clark v. Rameker, the U.S. Supreme Court will hear a case that could dictate how inherited individual retirement accounts will be treated in bankruptcy.

In 2010, the Clarks declared bankruptcy after their Soughton, Wisconsin, pizza shop fell victim to economic hardship.  The Clarks owed creditors $700,000 and William Rameker, the trustee in charge of administering the bankruptcy estate, decided that $300,000 in an IRA inherited from Mrs. Clark’s late mother was fair game.  However, the Clarks argued the inherited IRA was exempt under bankruptcy laws.

The 7th Circuit U.S. Court of Appeals sided with Rameker, holding that creditors could access inherited IRAs because they cease to be “retirement funds” when inherited from a deceased owner.  This decision clashes with other court decisions, meaning that the U.S. Supreme Court could clear up this split and have a big impact on retirement and end-of-life planning.

See Nick Brown, U.S. High Court to Chart Fate of Inherited IRAs in Bankruptcy, Reuters, Nov. 26, 2013.

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

IRS Releases Safe Harbor Rules

On November 14, the IRS released its final safe harbor rules, which allow companies operating at a loss to eliminate or reduce non-elective contributions made to Safe Harbor 401(k) plans midyear.

Popular among small business owners, the Safe Harbor 401(k) allows them and their employees “to make the maximum contribution either tax-deferred or after tax to their Roth 401(k) regardless of income.”

Employers in the past had to have a business hardship to suspend or reduce the non-elective contributions to their plans.  But now, employers can do this no matter what their financial condition is as long as they let participants know at the beginning of the year that their plan contributions can be reduced or suspended midyear. 

See Paula Aven Gladych, Safe Harbor Rules Issued for Non-Elective Contributions, BenefitsPro, Nov. 19, 2013.

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

Secret Millionaires

Kathleen and Robert Magowan were a pair of elderly twins working middle class jobs and living in a middle class home. Robert died in 2010, and Kathleen died just one year later. It was a shock when it was discovered that the twins left behind a $10 million dollar estate. Attorneys have been sifting through the twins’ accounts for two years. More surprising than the twins’ wealth was their generosity. Kathleen left more than $5 million to 15 charities, neighbors, and relatives. She divided a million dollars between public schools in the area as well as her alma mater. She also left substantial sums to her assisted living facility and her parish.

See What Happens When Your Neighbors Turn Out To Be Secret Millionaires, Huffington Post, Nov. 27, 2013.

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

Inheritance in India

A study conducted by the U.N. revealed that just eight years after India amended the Hindu Succession Act that gives equal inheritance rights to agricultural land to sons and daughters, a dowry is still considered 'adequate' compensation for inheritance. Even though the law did not accomplish its goal, the study shows the positive impact similar laws have had. Andhra Pradesh, a state in India, has had a similar law for 20 years longer than Bihar and Madya Pradesh, and has experienced four times the rate of female inheritance. Additionally, the rate of female inheritance has increased substantially in Andhra Pradesh.

See Just One In 10 Women Inherits Land, The Hindu, Nov. 28, 2013.