Wills, Trusts & Estates Prof Blog

What Non-Citizens Need To Know About Estate Taxes

This article discusses some of the rules that non-citizen residents should know about estate taxes.  It is important to establish where that person is domiciled (where they live).  Attorneys should understand a person’s citizenship status and where they are domiciled in order to plan for any estate tax issues that the client might encounter.  Estate planning attorneys should gather this knowledge to help their client make better decisions about what sort of connection they might want to pursue with the United States.  The domiciliary test involves many different factors that are discussed in this article.  It is important to get an accurate picture of what assets the client owns and where they are located.

See Olivia Carbajal de Garcia, Understanding the Rules for Estate Taxes and Non-Citizens, Texas Lawyer, October 5, 2015.

Funeral Home Accused Of Taking Advantage Of The Mentally Ill

This Monday a class action lawsuit was filed in Marion County, Indiana, alleging that a funeral home took advantage of people with mental illnesses.  The guardian of one of the alleged victims filed the claim against Crown Hill Management that does business as the Crown Hill Funeral Home and Cemetery.  According to the suit the funeral home violated Indiana’s Pre-Need Act accusing it of targeting patients that reside in mental health care facilities to sell them expensive funeral service packages.  This lawsuit seeks to obtain class status for any Indiana resident that was under the care of a health facility and purchased pre-need services from Crown Hill Funeral Home and Cemetery.

See David Wells, Funeral Home Said to Target Mentally Ill, Courthouse News Service, September 30, 2015.

Elderly Woman Leaves $4 Million Estate To Charity For Homeless Children

An elderly woman that loved children has donated her entire $4 million estate to a charity that cares for homeless children.  When Lily Fardell passed away at the age of 96 she did not have any children of her own.  Part of the estate included a four-bedroom and three-bathroom home that had an extensive collection of Victorian antiques and furniture.  The home overlooking King Edward Park on The Terrace near Newcastle sold for $2.34 million in June.  The Victorian furniture will also be auctioned off in the future with all of the proceeds going to the homeless children’s charity.

See Elderly Newcastle woman leaves $4m estate to homeless children, 9 news, September 29, 2015.

Estate Planning Gets Difficult When Family Is Involved

This column discusses some of the difficult and emotional issues that can come up for estate planners whenever a client’s family members get involved.  Oftentimes client’s children will want the estate planner to provide them with their parent’s financial information.  This column discusses instances where a client’s child brought in their parents tax return or a parent wanted the estate planner to fill out a return for their child.  An estate planner must often have written consent from a client before disclosing their financial information to one of their family members.  It is also important for estate planners to avoid getting entangled in a client’s family disputes. 

See Jeff Stimpson, Blood Feuds: Handling Clients’ Families, Accounting Today, September 28, 2015.

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

CLE On Keeping the Family Business in the Family

The American Bar Association is presenting a CLE entitled, Keeping the Family Business in the Family, Tuesday October 6, 2015, 12:00-1:30pm Central, online.  Here are some details about the event:

JOIN THE SECTION & SAVE!
ABA Members join RPTE for $70 to save $55 on this and future RPTE teleconferences, sign up at Register online. Find upcoming programming here . You may also email [email protected], or call 312-988-5260. Visit www.shopaba.org to update your preferences to receive future program announcements via e-mail.

UNABLE TO PARTICIPATE?
This program will be available on audio CD and MP3. Order from the ABA Web Store
(search by program title or keyword).

ALL PARTICIPANTS MUST REGISTER
Cancellations and requests for refunds will be honored on the following basis: Two business days or more, 100% refund; one business day or less, 100% refund minus the $25 administrative fee. Substitute registrants are welcome. The ABA will seek 1.5 hours of CLE credit in 60-minute states and 1.8 hours of CLE credit in 50- minute states in states accrediting ABA live webinars and teleconferences.* Credit hours granted are subject to each state’s approval and credit rounding rules. NY- licensed attorneys: This non-transitional CLE program has been approved for experienced NY-licensed attorneys in accordance with the requirements of the New York State CLE Board for 1.5 New York CLE credits.

Article On Material Participation Of Trusts

Ryan Pulver & Alan Joseph Wilson recently published an article entitled, In Agents We Trust - A Proposal for Material Participation of Trusts, 15 Wyoming L. Rev. 71-105 (2015). Provided below is an abstract of the article:

In the business succession planning context, estate planners frequently employ the use of trusts to pass ownership of a business from one generation to another. Often, the beneficiaries of such a trust include the children of the grantor. The trust mechanism provides trustee oversight and a controlled process for transition. In many cases, the child/trust beneficiary works in the business and perhaps earns his or her sole income from participation in the business with the promise of direct ownership in the future. This transition requires thorough planning to properly pass ownership in the most tax-efficient manner. In 2010, Congress amended the Internal Revenue Code (the “Code”) as part of the Affordable Care Act (“ACA”). This amendment introduced a new tax on “net investment income” applicable to individuals, estates, and trusts. Net investment income includes income from a trade or business in which the taxpayer does not “materially participate.” This raises a question regarding how a trust as a taxpaying entity materially participates under the tax code. With Section 1411 of the Code, Congress codified a requirement to look to Section 469 (passive activity losses) for guidance on determining material participation. Since the 1986 amendments to the Code, however, the Treasury has yet to pass regulations defining material participation in an estate and trust context.

In an attempt to provide guidance to trustees and estate planners, this article explores the meaning of “material participation” in the context of estates and trusts with respect to the Net Investment Income Tax (“NIIT”). In deriving this article’s topic from Treasury comments accompanying a final rule regarding the NIIT, this discussion primarily responds to the Treasury’s call for comments and guidance on “material participation” of estates and trusts and the proposed coordination with regulations under Section 469. Current guidance on this issue remains relatively limited, consisting of two court opinions and administrative decisions. The trending position of the Commissioner of the Internal Revenue Service (“Commissioner”) focuses solely upon the actions by the trustee or other person with discretionary powers and the ability to bind the trust. Such a position excludes trust beneficiaries that actively participate in the business but that lack a formal “trustee” obligation. The Commissioner’s position provides a clearly identifiable person who happens to hold legal title to the trust interest. By focusing on the trustee, however, the Commissioner overlooks the equitable interest of trust beneficiaries. The involvement of beneficiaries may equal or exceed that of the trustee and may more realistically represent the underlying economic interest of the trust. With the passage of Section 1411, another tax is added to the debate involving the activities of estates and trusts, and this area merits clear guidance.

Battle Over Historic Jacket Ends Before Pennsylvania Appellate Court

A battle between family members over the ownership of a fighter pilot jacket that was used in World War II appears to be over after an appellate court ruling. The jacket belonged Phillip Eppley who was a member of the legendary Flying Tigers, an American volunteer force fighting for China before Pearl Harbor, and ended up in the estate of his wife who died after Eppley. One of the widow's sons took the jacket before his mother's death and refused to return the jacket until he was hit with an estate tax bill. Since then he has been seeking to show that he never owned jacket, in order to avoid the tax, and was merely holding it on behalf Eppley's son who owned all other memorabilia. The appellate court ruled that the son owned the jacket and failed to show that he was merely holding the jacket due to his exclusive possession of the jacket for over a year after his mothers death.

See Matt Miller, Rare WWII 'Flying Tigers' flight jacket focus of Pa. court battle, Penn Live, September 29, 2015.

 

Is The Tontine Set For A Comeback?

The tontine is little heard of this day and age aside from the random references in shows such as Archer but it once ubiquitous in the American insurance industry. Up until the early 20th century, tontines were popular with retiring workers since a policy would promise an increasing stream of income as other members died off. Ultimately, the last survivor would be taking the entire payout that might have once been split among dozens. But scandals surrounding the insurance industry, and their management of tontines in particular,  lead to their downfall after New York set off a wave of prohibition by states against the scheme. However, some now argue that tontines are a legitimate estate planning devise that, if revived in a modern setting, would offer greater security to members that lived to an age that often requires huge sums of money to maintain ones self. What future the tontine might have in estate planning is highly uncertain but as new retirement alternatives are sought it's time might arrive again.

See Jeff Guo, It’s sleazy, it’s to, tally illegal, and yet it could become the future of retirement, The Washington Post, September 28, 2015.

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

Sotheby’s Sells The Beatles’ Original Signed Contract For $569,000

The original 1962 contract signed by the four members of the Beatles and their manager Brian Epstein has been sold for $569,000 at Sotheby’s London.  This historical contract helped to launch the Beatles into their legendary status and is considered the most important contract in rock and roll history.  Beatles memorabilia is often a hit at these sorts of auctions.  Valuable items that have been auctioned off in the past include “John Lennon's doodles, manuscripts, letters, and guitar to the wool jacket that Ringo Starr wore in the 1965 film Help!” 

See Sarah Cascone, The Beatles’ Signed Original Contract Fetches $569,000 at Auction, Art Net News, September 29, 2015.

Ninth Circuit Court Of Appeals Rules That Herbalife Heir Lacks Standing

The Ninth Circuit Court of Appeals has held that the sole beneficiary of a multimillion dollar trust that was created by the founder of Herbalife lacked the standing to challenge a bankruptcy courts approval of a settlement agreement.  The Court ruled that a Trust beneficiary is not a “party in interest” and could only sue to enforce the terms of the Trust.  In the opinion Judge Jay Bybee wrote that "in general, a trust beneficiary is not the entity positioned to take legal recourse to protect the trust assets, unless the beneficiary is seeking only to enforce the terms of the trust."  The heir’s objection to the settlement agreement was not an action to enforce the terms of the Trust according to the court. 

See Jack Bouboushian, Ninth Circuit Sidelines Young Herbalife Heir, Courthouse News Service, September 29, 2015.