Wills, Trusts & Estates Prof Blog

Succession Planning in Taiwan

After starting with almost nothing, successful entrepreneurs now run some of Taiwan’s largest companies.  These firms have helped propel Taiwan’s rapid economic growth over the past decades, and are crucial to maintaining the island’s future. 

Yet some analysts estimate that only one third of these family run companies, which account for up to 90% of the island’s business, have a succession plan.  “In Taiwan, though, it’s still the emperor’s style of succession.  No-one outside can tell what will happen—it’s the founder’s decision.”

It is a traditional Chinese approach for founders to divide the family firm up between their children however, this tradition has divided companies.  Many Taiwanese companies have become so large that younger family members have been incapable of taking a leadership role.  “Family businesses are definitely very important in Taiwan and across Asia because they control a lot of resources . . . And if they make the wrong decisions . . . the whole economy will suffer a lot.”  Because many first generation entrepreneurs are workaholics, they have difficulty relinquishing their position as they want to make major decisions for their company.  Consequently, their successor does not have the opportunity to handle the whole company. 

See Cindy Sui, The Tricky Business of Succession Planning in Taiwan, BBC News, July 30, 2014.

Tax Court Issues Ruling Against IRA Owner

In Dabney v. Commissioner, a recent U.S. Tax Court case, the Court ruled against an IRA owner and regarded his IRA as distributed and taxable since the IRA owner failed to properly execute his intended self-directed IRA real estate investment. 

Rather than invest his IRA into real estate, Mr. Dabney dispersed his IRA and used the funds to buy real estate outside of his IRA.  Charles Schwab subsequently issued Mr. Dabney a 1099-R for that distribution, which Mr. Dabney contested, arguing that the funds were used to buy a property owned by his Schwab IRA.  Yet, the Court ruled against him because his funds were distributed outside of his Charles Schwab IRA and because his IRA funds and the real estate were not held by a self-directed IRA custodian that allowed for IRAs to own real estate.  The Court explained that an IRA can hold real estate, but that Charles Schwab’s policies did not allow for Mr. Dabney’s IRA to own real estate.

In order to properly execute a self-directed IRA investment into an asset such as real estate, the IRA owner needs to roll over or transfer their IRA funds first to a self-directed IRA custodian who allows the IRA to won real estate and then that self-directed IRA will take title and ownership to the IRA asset directly. 

See Mat Sorensen, Tax Court Rules Against IRA Owner Who Failed to Properly Make a Self-Directed IRA Real Estate Investment, The Self Directed IRA Handbook, July 29, 2014.

Article on Unconstitutional Perpetual Trusts

Steven J. Horowitz (Sidley Austin LLP) and Robert H. Sitkoff (Harvard Law School) recently published an article entitled, Unconstitutional Perpetual Trusts, 67 Vanderbilt Law Review, Forthcoming (June 16, 2014).  Provided below is the abstract from SSRN:

Perpetual trusts are an established feature of today's estate planning firmament. Yet little-noticed provisions in the constitutions of nine states, including five states that purport to al-low perpetual trusts by statute, proscribe "perpetuities." This article considers those provisions in light of the meaning of "perpetuity" as a legal term of art across history. The article considers the constitutionality of perpetual trust statutes in states that have a constitutional ban on perpetuities and whether courts in states with such a ban may give effect to a perpetual trust settled in another state. Because text, purpose, and history all suggest that the constitutional proscriptions of perpetuities were meant to proscribe entails, whether in form or in function, and because a perpetual trust is in purpose and in function an entail, we conclude that recognition of perpetual trusts is prohibited in states with a constitutional prohibition of perpetuities.

Jesse Ventura Wins Lawsuit Against the Estate of a Navy SEAL

Jesse Ventura has won his lawsuit against the estate of a Navy SEAL. Ventura says that the man wrote a book that included a false story that he punched out Ventura for making a negative comment about the Navy SEALs. Ventura won a $1.8 million verdict, and is now the target of criticism due to concerns of how the wife and children of the deceased man will be provided for after such a large hit to the estate. However, Ventura, also a former Navy SEAL, maintains that this suit was about the truth and clearing his name from the allegation of treason.

See, Jesse Ventura: No Regret Over Suing Widow of Navy SEAL, CBS News, July 30, 2014.

House Passes Charitable Giving Tax Breaks

The “America Gives More Act of 2014” passed in the House earlier this month. If passed the act will extend the charitable IRA rollover and the enhanced conservation easement breaks which have expired. The act would also enact two new charitable giving tax breaks, which include extending the time to make charitable gifts to the tax return due date and changing the two tier excise tax for investment earnings by private foundations to a flat 1% rate.

 See Ashlea Ebling, 4 Charitable Giving Tax Breaks in Play, Forbes, July 18, 2014.

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

University of Pittsburg seeks T&E Visitor

 

The following announcment is a reposting from The Faculty Lounge (Al Brophy, July 30, 2014).

The University of Pittsburgh School of Law invites applications for 2015-2016 visiting faculty positions. The positions would include teaching one-term first-year courses in Civil Procedure, Contracts, or Property and, depending on the length of the visit, one or more courses in associated areas. We particularly welcome applicants who teach in the associated areas of employment discrimination, energy law, estates and trusts, health law, or intellectual property. Applicants should submit a letter of interest, resume, and a list of three references—preferably before November 1, 2014. In furtherance of our strong institutional commitment to a diverse faculty, we encourage applications from minorities, women, and others who would add to the diversity of our faculty. Please contact: Professor George Taylor, Chair, Faculty Appointments Committee, University of Pittsburgh School of Law, 3900 Forbes Avenue, Pittsburgh, PA 15260. Email: [email protected]. Email submissions are preferred.

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Using Marriage as Deciding Factor for Death Benefits Ruled Unconstitutional in Alaska

After the tragic death of Kerry Fadely, who was murdered while working a shift as a manager at Millennium Hotel, her same-sex partner Deborah Harris filed for workers compensation death benefits. Harris’s claim was denied because she wasn’t married to Fadely, which was based on the Alaska Workers' Compensation Board's interpretation of “widow” in the statute. The couple had been together for over ten years and shared responsibility for bills and raising their children.

In Harris v. Millennium Hotel, the Alaska Supreme Court overruled the denial of the death benefits. The court reasoned that using marriage as the test for awarding the death benefits was a violation of equal protection, and the case was remanded.

See Stephanie Goldberg, Same-Sex Partner of Murdered Woman Due Comp Death Benefits: Alaska High Court, Business Insurance, July 29, 2014.

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

Article on Midsummer’s Madness-2014: The Tragic Case of Casey Kasem

Robert L. Moshman, recently published an article entitled, Midsummer’s Madness-2014: The Tragic Case of Casey Kasem, The Estate Analyst, July 28, 2014. Provided below is the introduction to the article:

Once more into the breach as we embark on what has become our annual journey to Crazy Town in a quest to cover inexplicable developments that strain reason, challenge credulity, and burst free from the shackles of logic. Once again, there is an abundance of material fitting this description.

This collection reviews the recent developments in the estate of Casey Kasem, a 164% estate tax hazard inside New York’s new estate tax law, slayers successfully suing their victims, a lawsuit by the estate of John “Duke” Wayne against Duke University, and some surprising potential hazards of using a software program for writing a will.

Rules of Rollovers

Until recently, if you owned more than one IRA, you could rollover each once a year.  However, thanks to a U.S. Tax Court opinion, IRA certificate of deposit rollovers could be “very risky” for older investors. 

The court ruled that the once-a-year rollover limit applies to the investor, not to the individual IRA; thus, no matter how many IRAs you own, only one rollover is permitted in any 12-month period.  The IRS announced that this ruling would not take effect until 2015. 

To avoid problems you can use a direct IRA-to-IRA transfers rather than 60-day rollovers.  With a transfer, the firs bank with the maturing CD sends the money directly to the second bank, and you are never in possession of the money.  “You can make as many direct transfers in a year as you want without any worries.”

Although the IRS will not immediately enforce the rule, experts encourage IRA owners to follow it immediately.  It is unclear when the 365-day clock begins.

See Susan B. Garland, Avoid Rollovers of IRA CDs, Dallas News, July 29, 2014.