Wills, Trusts & Estates Prof Blog

Details of myRA Revealed

Following President Obama’s announcement of “myRA” in his State of the Union address, the White House has released details of the new retirement savings account, which is aimed at the 50% of employees who have no access to employer 401(k) plans.

These “starter” savings accounts will be offered by employers through Roth-like IRA accounts with a guaranteed principal (like U.S. savings bonds).  According to the press release, individuals can withdraw tax-free amounts any time, but the Presidential Memorandum to the Secretary of the Treasury suggests withdrawals be made available only in emergencies.

MyRAs will require an initial investment of at least $25 and payroll deductions as low as $5.  The accounts will earn the same interest as the Thrift Savings Plan Government Securities Investment Fund.  Employees changing jobs can keep their myRAs or roll them over into a private sector retirement account.  After reaching 30 years or the total contribution limit of $15,000, participants will roll their accounts into a private-sector retirement account.  MyRA accounts should be available by December 31, 2014.

President Obama also plans on helping employees without access to a workplace savings plan by establishing ‘auto-IRAs,’ which are IRAs funded through payroll deductions.  This proposal would require enactment by Congress.

See Sally P. Schreiber J.D., Details of new myRA Retirement Savings Vehicle Revealed, Journal of Accountancy, Jan. 30, 2014.

 

Drastic Changes in New York

New York Governor Cuomo has proposed a change to his state’s estate and gift tax law that would require all taxable gifts made by New York residents after March 31, 2014, to be included as part of their gross estates.

While there is no gift tax in New York, the amount of lifetime taxable gifts made by New Yorkers may cause their estate tax rate to increase.  The net effect of Cuomo’s proposed change  would be to cause New Yorkers to pay more estate taxes if taxable gifts are made after March 31, 2014.  Gifts made after this date will incur an additional net estate tax of anywhere from 6.5-12%. 

Cuomo’s proposal also gradually increases the New York estate tax exclusion from $1 million to the federal $5.25 million over the next five years.  The top rate would also be lowered from 16% to 10% in this span.

See John D. Dadakis, New York to Drastically Change “Gift Tax” Rule, Mondaq, Jan. 31, 2014.

Tax-Free Gifts Quadrupled

In December 2010, Congress voted to allow wealthy Americans to make tax-free gifts of up to $5 million.  Wealthy Americans scrambled to take advantage of the law, resulting in $122 billion in nontaxable gifts on returns filed in 2012 (four times the amount in each of the previous two years).  With the wealthy still concerned the law could revert, gift returns filed this last year could be even more dramatic.

See Richard Rubin & Margaret Collins, Tax-Free Gifts Quadrupled in U.S. After IRS Limit Lifted, Bloomberg Business Week, Jan. 27, 2014.

Book for Family Survivors

Sally Balch Hurme recently published a book entitled Checklist for Family Survivors.  Provided below is a description from ABA Web Store:

A practical resource for dealing with family matters upon death, this first-of-its-kind publication from the American Bar Association and AARP - the nation's leading associations in the law and the advancement of issues that matter most to people 50+ and their families - helps answer the myriad of questions surrounding what needs to be done following a loved one's passing. This must-have book guides you through the steps to wrap up the personal and financial affairs of the loved one who died. Although the ABA/AARP Checklist for Family Survivors: A Guide to Practical and Legal Matters When Someone You Love Dies does not provide legal advice, it does include legal reasons, implications and complications that cover a variety of questions loved ones face upon death. In each chapter, you'll find convenient checklists to help guide you through the difficult time. Chapter topics include:

• Applying for survivors benefits    
• Checking on insurance benefits   
• Sorting through the stuff     
• Getting ready for probate   
• Taking care of yourself  
• And more! 

The ABA/AARP Checklist for Family Survivors is not intended as a sit-down-and-read book. It is a workbook designed to help you understand what you need to do following a loved one's death guided by simple yet thorough forms. Whether you fill in the forms in the book or use the CD-ROM included in the back cover, you can take comfort in knowing that the matters upon a loved one's death can be handled with ease.

While there are a number of books directed to the widow on matters of grief and financial planning, this is the first - from AARP and the American Bar Association's Senior Lawyers Division- comprehensive guide that answers questions for family survivors in one straightforward book.

Article on Estate Planning Adjustments in Context: New Rules for 2014

Robert L. Moshman (Attorney, New York and New Jersey) recently published his article entitled, Estate Planning Adjustments in Context: New Rules for 2014, The Estate Analyst (Jan. 2014). The introduction from his article is provided below:

Tax rules for 2014 have arrived with modest adjustments and without the drama of last-minute legislation. We did not plummet over any fiscal cliffs. There were no major reforms or retroactive saves. However, a lack of political drama does not mean there aren't problems and issues to attend to for estate planners. Attention must be focused upon the increased tax burden on trust income under the new rules, the impact of the Medicare surtax, and the use of portability rules.

CLE on Estate Planning and Probate Course

TexasBarCLE and the Real Estate, Probate and Trust Law Section of the State Bar of Texas is cosponsoring a CLE entitled, 38th Annual Advanced Estate Planning and Probate Course, on Tuesday-Thursday, June 10-12, 2014, in San Antonio, Texas.  Provided below are some highlights of this live presentation:

• Reproductive Material in Decedents' Estates
• Estate and Income Tax Planning for Non Resident Aliens
• Wrap-up of Planning Implemented in 2011-2012 to Avoid Audits
• Use of and Challenges Against Expert Witnesses
• Estate Planning for Beneficiaries Who May Need Long-term Care
• DOMA in Texas

When Deeds Fail For Estate Planning

The conveyance of deeds is a possible estate planning tool that carries the risk of creating a present rather than future transfer. The parents of Angela Michelle Edmounds Harrison conveyed real estate through quitclaim deeds to their daughter as an estate planning tool. Issues arose when Harrison filed for bankruptcy, and her bankruptcy trustee wanted to liquidate her real estate interest. Harrison and her parents argued that their intent for the conveyance to only give bare title to Harrison and then equitable interest after the parents’ death, created a trust. Harrison’s parents paid all cost for the property including taxes and upkeep, and collected the rent payments.

 In Soulé v. Gragg (In re Harrison), the bankruptcy trustee, as a bona fide purchaser, was not defeated by the undocumented trust and has the right to sell the property. While the existence of the trust was not challenged in the case, under Oklahoma law a bona fide purchaser of a property titled through a quitclaim deed only has an inquiry duty equal to that of a conveyance by warranty deed. Though the intent of the parents’ conveyance is not unimportant, it does not overcome the interest of a bankruptcy trustee, making deeds a risky estate planning tool if the recipient enters bankruptcy.

See Luke Lantta, Bankruptcy Ruling Highlights Potential Problems of Using Deeds As Estate Planning Tools, Bryan Cave, Jan. 22, 2014.

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

Judge May Seal Probate Case of Harold Simmons

The widow of Harold Simmons is attempting to keep the Dallas billionaire’s will and related documents secret.

Dallas County Probate Judge Michael E. Miller heard arguments about the estate’s motion to seal and has said that his will in some form will be made public, but parts of the case will likely be kept secret to protect members of the Simmons family.  The estate’s lawyer described the will as a “treasure map for those who would attempt to benefit from the estate.”

See Jeff Mosier, Judge Mulling Request to Seal Probate Case of Dallas Billionaire Harold Simmons, Dallas News, Jan. 29, 2014.

Free Online Test Screens for Dementia

The earliest signs of dementia may not be noticed by a person’s doctor or family, but early recognition makes treatment more effective and gives a person time to make important decisions.

Dr. Douglas Scharre, an Alzheimer’s expert at Ohio State University’s Wexner Medical Center, developed a  self-administered 12-question test to screen for early signs of dementia.  The Self-Administered Gerocognitive Examination, SAGE,  isn’t a substitute for proper diagnosis, but can warn patients to see a specialist or assure others that they are fine.

See Misti Crane, Ohio State Offers Free Online Test to Screen for Early Dementia, The Columbus Dispatch, Jan. 13, 2014.

Adding a Child as a Joint Signer

It can be convenient to add an adult child as a joint signer to your checking account.  The child can help you manage your money by depositing checks, writing checks, and paying bills.  And upon your death, the account will pass automatically to your child, thus avoiding probate.

As convenient as it may be, giving a child unfettered access to your account may not be the best idea.  And as a joint signer, the money in the account could be used to pay creditors or damages in a lawsuit.

Through the use of a durable power of attorney or a revocable living trust, you can give your child access to your account but not ownership.  The child could still withdraw all the money, but the account wouldn’t be exposed to creditors or lawsuits.

If your main goal is to leave the account to your child, then use a payable on death or transfer on death designation, which will also avoid probate.

See Laura Medigovich, Your Finances: Pros and Cons of Joint Signers, Record Online, Jan. 11, 2014.