Wills, Trusts & Estates Prof Blog

Divorces Drowning Retirement Plans

According to a study by the National Center for Family and Marriage Research, the divorce rate among people 50 or older has doubled since 1990.  These divorces can sabotage retirement plans as assets are usually split in half.  Emerging from a divorce with unbroken retirement plans may be challenging.  “There isn’t much time left to enhance portfolios post-divorce.  So you have to be careful to get the best settlement you can.  Some people may have difficulty recovering.”  One solution is to have a good attorney fighting for your fair share. 

Some experts suggest hiring a financial planner even before finding a divorce lawyer.  Planners can assist divorcing spouses navigate through retirement plan laws, predict cash-flow forecasts, and maximize tax-free distributions.  This financial aptitude is needed early so that assets such as deferred-compensation plans or stock options are not overlooked. 

While moving on after a divorce can be difficult, experts advise creating a plan that allows you to live the best life possible with your available resources.  “The ship isn’t sinking.  You’re just steering a new course.”

See Constance Gustke, Retirement Plans Thrown Into Disarray by a Divorce, The New York Times, June 27, 2014. 

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

A Surprising Expense That Can Impede Retirement Planning

When it comes to retirement planning, the earlier you get started, the better.  Because planning early is so important, unexpected expenses early in one’s career can thwart retirement planning for the future.  Surprisingly, the largest expense for many young families across the nation is childcare. 

A recent study conducted by care.com says that the average family can expect to pay $18,000 per year in childcare.  Forty-two percent of families do not budget for childcare, and seventy-five percent are “shocked” at the total costs. 

Yet with the right planning, you can take steps to take control of your taxes and lower your tax bill. 

See Brian Stoffe, The Unexpected, Enormous Expense That Throws Retirement Planning Out the Window (Hint: It’s Not Healthcare), The Motley Fool, June 28, 2014.

 

Prince Harry Will Inherit £10 Million Legacy

Prince Harry is set to inherit more than £10 million as part of a legacy left by his mother, Princess Diana.  Harry will inherit the vast sum of money on September 15^th, when he turns 30.  Although Harry may have to pay around £4 million in taxes, experts say this could be limited to £3.6 million if he gives cash to charities.  When Prince William received his share of his mother’s estate, forty percent went to inheritance tax, “William got hit with a hefty bill when he turned 30 and so will Harry.  His aides have to work out the most tax-efficient way for him to handle the money.” 

Harry was just 12 years old when Diana was killed in a Paris car crash.  She left £12,966,022 million, which was reduced to £8,502,330 after death duties.  Insiders believe the fund has grown to more than £20 million due to wise investments by royal advisors.  Diana shared her wealth equally between her two sons. 

See Ben Glaze, Prince Harry to Inherit Diana’s £10million Legacy When He Turns 30 In September, Mirror, June 28, 2014.

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

Article on Punitive Damage Awards Against Estates

Emily Iverson recently published an article entitled, Invading the Realm of the Dead: Exploring the (Im)propriety of Punitive Damage Awards Against Estates, 47 U. Mich. J.L. Reform 827–852 (2014).  Provided below is the article’s abstract:

Punitive damages are traditionally understood, at least in part, as damages designed to punish. It should therefore come as no surprise that, in the majority of states that have decided the issue, courts have chosen not to allow punitive damage awards against the estates of deceased tort feasors. After all, the tort feasor can no longer be punished (at least by tort awards). Nonetheless, punitive damages can also serve other purposes, such as deterrence. This Note argues that Michigan, a state which has not yet taken a stance, should adopt the minority position that allows punitive damages to be awarded against estates. Because of Michigan’s historically liberal stance on the survival of actions and its unique understanding of punitive damage awards, this Note contends that the minority position is the only position consistent with state law. However, this Note also advocates for legislative action in order to make Michigan’s adoption of the minority position absolutely clear. Such clarity would promote stability and predictability for plaintiffs and defendants alike and would ensure results consistent with Michigan’s broader history and policies.

Britain’s Supreme Court Asks Parliament to Reconsider Assisted Suicide Laws

As I have previously discussed, the Supreme Court of Britain recently rejected an appeal that challenged Britain’s law on the right-to-die. An assisted dying bill, modeled off of similar legislation passed in Oregon, is scheduled to be debated by Parliament. However, Lord Neuberger of the Supreme Court called for Parliament to seriously consider whether to legalize assisted suicide and noted that the currently scheduled bill, which would limit the practice to those who are already dying, may be too restrictive. He also pointed out that suicide is currently legal.

See John Bingham, Supreme Court Rejects Right to Die Bid but Challenges Parliament to Review Law, The Telegraph, June 25, 2014.

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

Overview of the Legal Treatment of Same-Sex Marriage

As I have previously discussed, about one year ago the U.S. Supreme Court struck down the Defense of Marriage Act, which has created Social Security and Medicare benefits, and some complications for same-sex couples. Federal benefits have been extended in many other areas of law, such as income tax and immigration, but the extension of these benefits to the state level still depends on whether the state of residence recognizes the couple’s marriage. Below are areas that are creating legal complications for same-sex married couples that live in a state that does not recognize their marriage:

• Receiving Social Security and Veteran Benefits in states that do not recognize the couple’s marriage
• Having to file as single on state tax returns, even though the couple can file as married for federal taxes.
• Receiving time off of work to care for a same-sex spouse
• Having employee health benefits extend to the same-sex spouse
• Having the marriage recognized to obtain a visa for the same-sex non-citizen spouse

See Jonnelle Marte, A Year After Supreme Court Ruling, a Rundown of What’s Changed for Same-Sex Couples, The Washington Post, June 26, 2014.

Special thanks to Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing this article to my attention.

Article on Where is the Estate Planning Profession Going?

John J. Scroggin recently published an article entitled, Where is the Estate Planning Profession Going?, Wealth Strategies Journal, June 26, 2014. Provided below is the author's executive summary of the article:

This commentary will address the issue of the estate planning opportunities for younger estate planning attorneys and whether those opportunities are diminishing. While the focus of this commentary is on estate planning attorneys, many of the issues discussed in this commentary apply equally to other estate planning professionals.

The estate planning profession continues to change as tax rules change and our culture evolves. But the truth of Ben Franklin’s insightful comment remains no matter what Congress does or how the demographics change: “‘In this world nothing can be said to be certain, except death and taxes.” Taxes are always going to be a part of the estate planning process. While estate taxes will not govern estate planning as much as they have over the last several decades, the expanding deficit increases the possibility of new taxes in the future. As George Harrison noted in his 1966 song ‘Taxman” (written when he realized that his revenue was subject to a 95% super-tax), the government will always find a way to collect its “fair share”:

Should five percent appear too small Be thankful I don’t take it all cause I’m the taxman Yeah, I’m the taxman

If you drive a car car, I’ll tax the street If you try to sit sit, I’ll tax your seat

If you get too cold cold, I’ll tax the heat

If you take a walk walk, I’ll tax your feet

The Bottom Line: While the nature of the applicable taxes and clients may change over time, there will always be work for estate planning professionals because neither death nor taxes are going to disappear. Moreover, because of a number of factors, work for estate planning professionals (particularly those in their 30s and 40s) should increase between now and the middle of the century.

This commentary will discuss thirty positive and negative trends that will impact estate planning over the next several decades.

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

Last Chance to Register for CLE on Trust Income Taxation

The American Law Institute Continuing Legal Education (ALI CLE) is presenting a CLE entitled, Trust Income Taxation: Navigating the changing State Landscape, Today June 30, 2014, 2:00 – 3:30pm, online and by phone.  Here is why you should attend:

The rules governing the state income taxation of trusts are rapidly evolving. Recent cases have challenged the validity of the taxation of trusts in a variety of states. Trustees, beneficiaries, and their advisors need to stay current with respect to these changes.

Register today and hear our faculty examine significant recent decisions, explore the state law landscape, and share practical guidance on many topics including:

• why trusts are difficult to “tax” locate
• tax haven and quasi tax haven states
• identifying states with tax statutes vulnerable to constitutional challenges
• general state law landscape regarding the taxation of trusts

Article on Dependent Relative Revocation

Richard F. Storrow (University Of New York School of Law, Professor of Law) recently published an article entitled, Dependent Relative Revocation: Presumption or Probability?  Real Property, Trust and Estate Law Vol. 48, No. 3 (Winter 2014).  Provided below is the author’s synopsis:

A primary goal of the law of wills is to carry out the testator’s intent.  However, when a testator dies leaving a succession of wills or having expressed to an attorney his or her plan to execute a new will, ascertaining the testator’s intent can be difficult.  The problem is especially challenging when a court attempts to rationalize the testator’s intent with the principle of law that disallows correcting wills.  This Article explores how courts have used the doctrine of dependent relative revocation to determine which testamentary scheme should be admitted to be probate.  The application of this doctrine has unfortunately become untidy and unpredictable, due in part to the failure of courts to position their use of dependent relative revocation within the traditional framework of will interpretation.  This Article explains the advantages of adopting a two-step interpretive process for applying the doctrine.

Court Issues Stay on Indiana Same-Sex Marriage Ban

Only two days after U.S. District Judge Richard Young ruled Indiana’s same-sex marriage ban was unconstitutional, a federal appeals court has already put a hold on the order.  The U.S. 7^th Court of Appeals issued the order Friday after Indiana Attorney General Greg Zoeller appealed the District Court’s decision. 

The Marion County clerk’s officer in Indianapolis handed out 120 marriage licenses to same-sex couples on Friday, and planned to issue even more on Saturday, however after the ruling it announced it would not.  Ken Falk, legal director of the American Civil Liberties Union of Indiana, said he was disappointed but not surprised by the stay. 

How the stay will affect same-sex marriages remains to be seen.  Legal experts say couples may need to consult a professional to sort through the process.   

See Tom LoBianco, Court Puts Indiana Gay Marriage Ruling on Hold, Associated Press, June 27, 2014.