Wills, Trusts & Estates Prof Blog

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

Tuesday, June 24, 2014

CLE on Use of IRA Trusts After Clark v. Rameker

CLE Photo

The Suffolk Academy of Law is holding a CLE entitled, Effective Use of IRA Trusts After the U.S. Supreme Court Decision in Clark v. Rameker, on July 15, 2014 in the Suffolk County Bar Center.  Here is why you should attend:

Many taxpayers have considerable assets in their retirement accounts. These assets may be in a 401(k), another kind of qualified plan, a 403(b) arrangement, a457 governmental plan, a traditional individual retirement account (IRA), or a Roth IRA.

Often taxpayers roll over their retirement plans from an employer-sponsored retirement plan into an IRA for tax purposes and for other reasons. Such assets should be part of an overall estate plan if they are substantial. And even if the assets are not substantial,  it is important to know how the basic post-death retirement distribution rules work.

The purpose of this program is to alert you to many of the rules that you must know in order to effectively implement an estate plan and asset protection planning techniques involving inherited IRAs.  These planning techniques are important, and you need to be aware of them in order to protect your clients.

This program takes on additional significance in light of  the June 12, 2014 U.S. Supreme Court decision holding that inherited IRAs are not “retirement funds” and are, therefore, not exempt assets under the bankruptcy code.

The presenter, Seymour Goldberg, is well known and highly regarded for his expertise in this area. As a bonus, a manual, Effective Use of IRA Trusts in Estate and Asset Protection Planning, will be given to registrants, at no additional cost, as part of the course materials.

June 24, 2014 in Conferences & CLE, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Avoid These 401(k) Pitfalls

Retirement planning

Many people have high hopes when they first join their company’s 401(k) plan.  However, merely joining the plan and contributing to it regularly are not enough to ensure a secure retirement.  There are many pitfalls 401(k) investors can fall into.  Here are some mistakes to look out for:

  • Cashing out early. Too often workers start an account and then cash out when they leave their employer after only a few years.  Many workers who cash out are younger workers with smaller balances.  The problem is that cashing out small 401(k)s can have a significant impact on future retirement savings.  Rather than cashing out, transfer your 401(k) into your new employer’s plan.  By doing this, you can continue to invest and grow your retirement savings.
  • Saving too little. Many employers provide a 401(k) matching plan, with contributions typically up to six percent of pay.  Yet, even saving six percent in your 401(k) is not sufficient to build adequate retirement savings for most workers.  Most people need to contribute at least ten percent of their gross income.
  • Thinking bonds are a good investment. The returns of bond funds have not been as good as stock funds in the last year.  Many people invest in bonds to reduce risk and lock in more stable returns.  But if interest rates continue to rise, bond fund returns could suffer.  If your employer’s 401(k) plan offers a stable value fund, consider using it in place of a bond fund.  These funds are usually managed by a bank or insurance company that pays a stated interest rate for a set period. 
  • Failing to make catch-up contributions. Workers age 50 and over in 2014 can contribute an additional $5,500 for a total contribution of up to $23,000 each year to their 401(k) plan accounts.  If you change jobs and are automatically enrolled into your new employer’s plan, additional catch-up contributions will not be activated automatically, you must activate them in your new employer’s plan. 

See Ray Martin, Biggest 401(k) Mistakes and How to Avoid Them, CBS News, June 23, 2014.

June 24, 2014 in Elder Law, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0) | TrackBack (0)

Vacation Planning Trumps Retirement Planning

VacationWith long summer days consuming many people's thoughts, it may not be suprising to learn that vacation planning is of high importance to many.  According to an Edward Jones study, vacation planning takes priority over retirement planning for a large portion of the population.  The survey asked 1,006 people which item they spent the most time on: vacation planning, planning for retirement, planning for higher education, or planning a big purchase such as a house or car. 

Twenty-eight percent of surveyed individuals said they spent most of  their time planning vacations.  Twenty-five percent of respondents said they spend their time on retirement, while an equal number spent most time planning for big purchases and twenty-two percent plan for higher education costs.  

“We’re not surprised people spend more time thinking about vacations instead of tackling larger challenges such as saving for retirement or higher education, particularly at this time of year . . . All too often, people don’t prioritize planning and investing for the long-term because it’s 20 to 30 years away, but this is a big mistake.”

See FA Staff, Vacation Planning Tops Retirement Planning, Financial Advisor, June 23, 2014.

June 24, 2014 in Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0) | TrackBack (0)

Rethinking Charitable Giving

CharityJon Huntsman Sr. has given away approximately $1.5 billion—80% of his total wealth—to worthy causes. Further, Huntsman is spending $200 million building a golf resort and nature reserve in Idaho that will donate all proceeds of real estate sold to his family’s charitable foundation.  Neither of these totals includes his strict tithing to the Mormon church of 10% of his earnings.  “My philanthropy is not born out of my faith.  They require 10% tithing.  I don’t consider that to be philanthropy and I don’t consider it to be part of my philanthropic giving.  I consider it as club dues.” 

Huntsman became wealthy through chemical products group Huntsman Corporation, which he founded in 1970.  However, he did not wait until he was rich to donate, “I have always given money away.  I haven’t always been wealthy—the opposite in fact.  But I have always felt that I wanted people to share it with me.” 

Huntsman’s approach is also shared by Twitter co-founder Biz Stone, who has an estimated net worth of about $200 million.  Stone has developed a theme around the “compound interest of altruism.”  He explains this theory, stating, “Through the compact impact of altruism, I came to understand that people are doing philanthropy wrong.  People generally think about charitable work the wrong way.  They think that when they’re older and comfortable they’ll give some amount of money to something but that’s not the way to do it.  The way to do it is to get involved as early on as possible because . . . the impact you’ll have over your lifetime is far greater than anything you could possibly do if you wait until you think you’re comfortable.” 

Huntsman and Stone’s outlook on charitable giving pose many questions, some of them being whether tithing to a church should be regarded as charity and if philanthropy has become the future of marketing?

See Andrew Cave, Giving to Your Church Doesn’t Count: Jon Huntsman Sr. and Twitter’s Biz Stone On New Philanthropy, Forbes, June 23, 2014.

June 24, 2014 in Estate Planning - Generally, Religion | Permalink | Comments (0) | TrackBack (0)

Rare Collectables May Not be the Best Estate Plan

PaintingIt is a common practice for the wealthy to invest in art and collectables. However, this practice can cause headaches for their family members after the owner of rare valuables passes away, both in trying to sell it and with the IRS. Over the past few years pieces have not been selling as well as expected or not selling at all. Often the amount they are appraised for, and thus the amount the IRS views them as valuing, is not close to the amount that they garner at auction. For example, a stamp collection widely regarded as extremely valuable was appraised to be worth up to $20 million, but sold for $9.5 million after four years.

See, From Stradivarius to Rare Stamps, Collectible Assets Can Leave Heirs in IRS Lurch, Trust Advisor, June 23, 2014.

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

June 24, 2014 in Estate Planning - Generally, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Sting Tells Kids Not to Expect a Large Inheritance

StingSting may have started off with nothing, but he is now worth millions. However, his children will not be getting any of his rock star fortune. Sting wants his children to have to earn their own way like he did and has warned them not to expect a big inheritance or trust funds, as he plans to spend it all.

See Press Association, Sting Says His Six Children Will Not Inherit £180m Fortune, The Guardian, June 22, 2014.

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

June 24, 2014 in Estate Planning - Generally, Music | Permalink | Comments (0) | TrackBack (0)

Survey Provides Tips for Wealthy Families to Stay Wealthy

BagAn annual wealth survey by U.S. Trust highlights the biggest risks to family wealth. The biggest risks come in the form of unexpected and major changes to the family, such as divorce, family feuds over inheritance, and sudden death of the primary source of income for the family. Here are some of the takeaways from the survey:

  • Female income earners need to find a healthy work-life balance. Women who are the primary or equal income earner are often also caring for the family and it is important that they find a healthy balance and make smart financial decisions despite doing double duty.
  • Know when to say no. The majority of individuals in the survey helped support family members, and over half of those individuals suffered financially as a result.
  • Families need to plan for how ageing family members will be cared for. Very few wealthy individuals, only 1% according to the survey, have a plan for how to cover the cost of elder care for their parents.

See Ashlea Ebeling, U.S. Trust Cites Top 5 Risks to Family Wealth, Forbes, June 20, 2014.

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

June 24, 2014 in Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)

Jackson Estate Still Facing Lawsuits

JacksonAs I have previously discussed, after five years from the death of Michael Jackson, his estate has had multiple days in court and increased in value, but not all of the issues have yet been resolved. Here are three unresolved claims that must still be faced by Jackson’s estate:

  • IRS tax request: The Jacksonestate and the IRS are still in dispute over how much the estate should be valued at, and the IRS wants over $700 million in taxes and penalties from the estate.
  • Accusations of child molestation: Wade Robson, a choreographer who stayed at the Neverland Ranch as a child is claiming that Jackson molested him and his suit against the estate is still unresolved.
  • Claims by Jackson’s previous personal manager: Tohme Tohme has sued the estate for payment on the work he did for Jackson in the reviving his career.

See The Associated Press, For Jackson’s Estate, 3 Big Claims Are Unresolved, Go San Angelo, June 20, 2014.

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

June 24, 2014 in Estate Administration, Estate Planning - Generally, Estate Tax | Permalink | Comments (0) | TrackBack (0)

Monday, June 23, 2014

How the Clintons Could Save in Estate Taxes


While the estate tax is one of the most controversial aspects of the tax system, many wealthy individuals use sophisticated tax-planning strategies to reduce or escape estate taxes altogether.  One of these strategies is called the qualified personal residence trust (QPRT), and the disclosure that former President Bill Clinton and Hillary Clinton used the strategy to cut their estate tax has brought the QPRT into the news. 

The Clintons achieved several things by utilizing QPRTs.  First, by moving their home in a QPRT, they made a taxable gift that fixed the value of the home at the then-current value back in 2011.  Second, the value of that gift to the QPRT was further discounted to reflect the value of money between 2011 and the expiration date of the QPRT. 

The greatest advantage of a QPRT is that as the value of the home increases over time, that increase in value is not subject to estate tax, it has already been transferred out of the estate because of its placement in the trust.  With enough time, the increase in value can amount to thousands of dollars, and the 40% savings in estate tax can be monumental. 

See Dan Caplinger, QPRT: This Tax Strategy Could Save Bill and Hillary Clinton (and You) Big Money, The Motley Fool, June 21, 2014.

June 23, 2014 in Estate Planning - Generally, Estate Tax, Trusts | Permalink | Comments (0) | TrackBack (0)

The End of Life Industry


Hospices seek to provide care for individuals who are at the end of their lives.  The principal objective of hospice care is to make patients comfortable with a focus “on enhancing the quality of remaining life.” 

Over the past decade the hospice industry has experienced an incredulous shift; what once was a collection of mostly small, religious-affiliated nonprofits is now a booming, $17 billion industry dominated by national chains.  These large companies have been very effective in expanding hospice’s reach.  More than one million people die each year while receiving hospice services in the U.S., “Nearly half of all Medicare patients who die now do so as a hospice patient—twice as many as in 2000, government data shows.”

Despite this booming business, evidence indicates that many hospice providers are imperiling the health of patients in order to increase revenues and enroll more people.  Patient families, hospice whistleblowers and even federal prosecutors have alleged that hospices are compromising quality and endangering patients by enrolling people who do not qualify into the service.  Various lawsuits and complaints state that health directives were ignored and loved ones received too many medications, or not enough. 

An analysis of Medicare survey data found that the average hospice has not undergone a full certification inspection in 4 ½ years and nearly 22 percent of hospices have not been inspected in over six years.  Contrastingly, under federal law, nursing homes must be inspected ever 15 months.

See Ben Hallman, How Dying Became A Multibillion-Dollar Industry, Huffpost, June 19, 2014.

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

June 23, 2014 in Disability Planning - Health Care, Elder Law, Estate Planning - Generally | Permalink | Comments (0) | TrackBack (0)