Wills, Trusts & Estates Prof Blog

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

Wednesday, May 25, 2016

Hillary Clinton Moves New York Home into Trust

Hillary clintonHillary and Bill Clinton purchased their Chappaqua, New York home in 1999 and have now moved it into a residence trust. This will allow them to legally evade the so-called ‘death tax.’ Moving the home into trust will reduce their estate tax bills and avoid the IRS’s reach. This move comes at an interesting time because Hillary is fighting for estate tax reform, which would raise taxes for wealthy Americans.

See Kelly McLaughlin, Hillary and Bill Clinton Dodge ‘Death Tax’ by Putting Their New York Home into Trust – Despite Presidential Candidate’s Efforts to Make the Wealthiest Pay More, Daily Mail, May 23, 2016.

Special thanks to Jay Brinker for bringing this Article to my attention.

May 25, 2016 in Current Events, Estate Planning - Generally, Estate Tax, Trusts | Permalink | Comments (0)

The Need for an Intentionally Defective Grantor Trust

Intentionally-defective-trustAn installment sale to a grantor trust in exchange for a note is a popular and powerful wealth shifting strategy often recommended by estate planners.  In the typical transaction, the trust is “seeded” and then a sale is made to the trust in return for a note.  Under the “Intentionally Defective Grantor Trust” (IDGT) version of note sale, the client ordinarily transfers assets to a trust that is defective for income tax purposes and subsequently sells assets to the trust.  Often in practice, the initial funding is designed to establish the “creditworthiness” of the IDGT.  A newer strategy is for a third party to “seed” the trust, whereby a beneficiary is given a lapsing power of withdrawal which results in income tax grantor status to the power-holder under Section 678.  This variation has been referred to as a “Beneficiary Defective Inheritor’s Trust” (BDIT) or “Beneficiary Grantor Trust” (BGT), which is ordinarily the recipient of an initial capitalization of $5,000. 

There is a popular belief or “rule of thumb” that the initial funding of an IDGT should be 10% (a ratio of 9:1) in order to give the sales transaction “economic substance.”  Thus, $1 million will support a sale of $9 million to the trust because that theoretically will provide economic validity to the transaction.   In other words, subscribers to the 10% test contend that a rational seller in the “real world” would not sell his/her assets to a buyer who does not own the 10% minimal amount to protect against the downside risks of the sale.  

The real test is - Will the note be expected to be paid in accordance with its terms.  That test was derived from several USSC cases on the reality of sale in the income tax area, such as Clay Brown.

See Jerry Hesch, Dick Oshins & Jim Magner, Note Sales, Economic Substance and "The 10% Myth," Steve Leimberg's Estate Planning Email Newsletter, May 9, 2016. 

May 25, 2016 in Estate Planning - Generally, Trusts | Permalink | Comments (0)

SOL on Holy Will Bequest

ALUAmericans United for Life is asking a superior court to overturn a ruling that they waited too long to challenge the changes made to Gabrielle Mee’s 1991 will. This will would have left approximately 10% of her $60 million fortune to the organization. The new version created in 2000 left all of the estate to the Legion of Christ.

            AUL argues undue influence on the part of the Legion. They also evidence that the Legion’s founder was a sexual predator, one that Mee, devout in her Catholic faith, would never have left her estate to. The problem, however, is timing because the judge ruled that AUL knew about the changes in 2013. If AUL sees their day in court, it is likely that they have a good case against the Legion.

See John Hill, New Suit Filed Over Woman’s Bequest to Legion of Christ, Providence Journal, May 17, 2016.

Special thanks to Jim Hartnett for bringing this Article to my attention.

May 25, 2016 in Estate Planning - Generally, Wills | Permalink | Comments (0)

Prince's Death Sparks Will Trend

Last willHas Prince’s death sparked a new trend across the nation—drafting a will? Several legal information sites have seen an increase in sales for downloadable products, requests for consultations, and estate planning activity. This furor, however, is most likely due to personal life events—young couples naming guardians, old couples passing wealth, and others hearing of horror inheritance stories. Starting the will process early can end up saving you tons of money, unlike Prince’s family who face an expensive state-ordered probate.

See Dearly Beloved: Prince’s Death Prompts Uptick in Wills, Private Wealth, May 24, 2016.

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

May 25, 2016 in Current Affairs, Current Events, Estate Planning - Generally, Wills | Permalink | Comments (0)

Tuesday, May 24, 2016

Who Controls the Disposition of a Decedent's Remains?


Burial fightKyril Faenov did not make his desires known with respect to the disposition of his remains after death. His widow arranged to bury him at a cemetery in Seattle. However, his mother wanted to exhume his remains and place them in Oregon, and she petitioned the court for permission. The court denied the petition, stating that in absence of testamentary intent, the statutory kinship hierarchy controls such disposition for a decedent’s remains.

            The General Cemetery Act permits the control of human remains to vest in kinship priority, placing the surviving spouse above a surviving parent. Further, the court noted that the right to control burial circumstances that vest is a perpetual right. One that his widow enjoys unshared statutory priority in.

See Julianne Tobin Wojay, Mom Can’t Disinter Son’s Body Without Widow’s OK, May 18, 2016.

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

May 24, 2016 in Death Event Planning, Estate Planning - Generally | Permalink | Comments (0)

The Humorous Steps on How To Prepare a Will

HowtopreparewillWhen we think about preparing a will, we think about a somber, reflective experience. One where you identify your assets, name beneficiaries, and assign fiduciary duties. But does it all have to be so serious? We can certainly find some humor in accumulating enough garbage to make having a will upon your inevitable death worth it. And hey, who knows, maybe you want your remains poured out on the final drop of Splash Mountain.

See How To Prepare a Will, The Onion, May 18, 2016.

May 24, 2016 in Estate Planning - Generally, Humor, Wills | Permalink | Comments (0)

Article on Estate Tax and Combating Wealth Inequality

Goldburn+P.+Maynard+Jr.Goldburn P. Maynard Jr. recently published an article entitled, Perpetuating Inequality by Taxing Wealth, 84 Fordham L. Rev. 2429 (2016). Provided below is an abstract of the Article:

            Proposals to “fix” the estate tax by making it both more far-reaching and meaningful are plentiful. While these suggested improvements are reasonable, and even modest, they have failed to confront an important part of Graetz and Shapiro’s book, Death by a Thousand Cuts: stories trump science. This Article attempts to correct this shortcoming in the progressive argument by returning narrative to its central place in the estate tax debate. Drawing on psychological insights, I hope to underscore the difficulty of the effort to preserve progressive taxation and combat wealth inequality. I argue that the proposals have not confronted the underlying narratives that estate tax abolitionists have advanced. I use System Justification Theory to explain the entrenched and persistent nature of these narratives.



May 24, 2016 in Articles, Estate Planning - Generally, Estate Tax | Permalink | Comments (0)

Article on Will Practices of Gays and Lesbians

MonkDaniel Monk recently published an article entitled, 'Inheritance Families of Choice'? Lawyers' Reflection on Gay and Lesbian Wills, Journal of Law & Society, Vol. 43, Issue 2, pp. 167–94 (2016). Provided below is an abstract of the Article:

            This article presents the findings of research about the will‐writing practices of gays and lesbians. It develops a conversation between sociological literature about ‘families of choice’, which is silent about inheritance, and socio‐legal research about ‘inheritance families’, which is relatively silent about sexuality. It demonstrates how research with lawyers can contribute to thinking about inheritance and complement historical archives about personal life and sexuality. Focusing on funeral rites, partners, ex‐lovers, friendships, children and godchildren, and birth families, the findings reveal how gay men and lesbians have used wills to communicate kinship practices in ways that both converge with and differ from conventional testamentary practices. Examining the findings through the concepts of generationality, family display, connectedness, and ordinariness, and locating them within the recent history of social and legal changes, it complicates and troubles both anti‐normative and individualistic readings of the choices gay and lesbians make in constructing their ‘inheritance families’.

May 24, 2016 in Articles, Estate Planning - Generally, Wills | Permalink | Comments (0)

Monday, May 23, 2016

Article on Estate and Gift Tax Reform

Bridget_Crawford_1Bridget J. Crawford recently published an article entitled, Valuation, Values, Norms: Proposals for Estate and Gift Tax Reform, Boston College Law Review, Vol. 57 (Forthcoming). Provided below is an abstract of the Article:

            In their contributions to the Symposium on The Centennial of the Estate and Gift Tax, Professor Joseph Dodge, Professor Wendy Gerzog, and Professor Kerry Ryan offer concrete proposals for improving the existing estate and gift tax system. Professor Dodge and Professor Gerzog are especially interested in accuracy in valuation, and advance specific proposals with respect to split-interest transfers and family limited partnerships. Professor Dodge makes an additional proposal to improve the generation-skipping transfer tax system, an understudied area of the law. Professor Gerzog’s Symposium contribution draws particular attention to the legal fiction on which the estate and gift tax marital deductions rely. She would restrict the availability of the deduction to only meaningful economic transfers to a spouse, consistent with a desire that tax results reflect the underlying substantive results. Professor Ryan also focuses on the estate and gift tax marital deduction, along with other wealth transfer tax benefits available to spouses. She imagines an expansion of those rules, showing how easily the law can be separated from economic substance. These authors' proposals are technically expert, relevant to the legislative and regulatory regime that taxpayers face daily, focused on solutions, and deeply engaged in understanding how well the law meets its goals.

May 23, 2016 in Articles, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Article on Importance of Estate Tax

Graetz_michaelMichael J. Graetz recently published an article entitled, 'Death Tax' Politics, Boston College Law Review, Vol. 57 (Nov. 2016). Provided below is an abstract of the Article:

            In his Keynote Address “Death Tax” Politics at the October 2, 2015 Boston College Law School and American College of Trust and Estate Counsel Symposium, The Centennial of the Estate and Gift Tax: Perspectives and Recommendations, Michael Graetz describes the fight over the repeal of the estate tax and its current diminished state. Graetz argues that the political battle over the repeal of the estate tax reflects a fundamental challenge to our nation’s progressive tax system. This Address concludes that a revitalized estate tax is important for managing the national debt and reducing massive inequalities in wealth.

May 23, 2016 in Articles, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)