Monday, December 25, 2017
Hugh Hefner died this past September at the age of 91 from heart failure. He left part of his estate in trust for the benefits of his heirs, but included strict limitations. One of the provisions in the trust excludes beneficiaries from receiving distributions if trustee suspects the beneficiary “routinely or frequently uses or consumes any illegal substance so as to be physically or psychologically dependent upon that substance, or is clinically dependent upon the use or consumption of alcohol or any other legal drug or chemical substance that is not prescribed by a board certified medical doctor or psychiatrist in a current program of treatment supervised by such doctor or psychiatrist.” The trustees may request a drug test if they suspect abuse. While discovery of substance abuse prevents the reception of trust assets, distributions may continue if the beneficiary is clean for at least a year and the trustees decide he or she can care for himself or herself.
See Jessica Sager, Hugh Hefner Demands His Heirs Stay Sober, Page Six, December 21, 2017.
F. Philip Manns Jr. & Timothy M. Todd recently posted an Article entitled, The Tax Lifecycle of a Single-Member LLC, Wills, Trusts, & Estates Law eJournal (2017). Provided below is an abstract of the Article:
The single-member LLC (SMLLC) is ubiquitous. Despite its ubiquity, the Internal Revenue Code (Code) does not squarely address its tax consequences nor even contemplate its existence. This article examines the tax lifecycle of an SMLLC through its formation, operation, and exit event (e.g., sale, gift, or deathtime transfer).
This article identifies and isolates a tax asymmetry that arises from the U.S. Tax Court’s decision in Pierre v. Commissioner. Despite the check-the-box regulations, which disregard the SMLLC, Pierre regards the SMLLC for federal gift tax purposes. This asymmetry has several tax consequences, including a potential prophylactic immunization of transfers to SMLLCs against application of section 2036 — which claws back into the federal gross estate transfers when the transferor retains an interest — in the family partnership context.
Consequently, this article demonstrates that the SMLLC can be used to blunt the negative effects of section 2512 (a gift tax provision), section 1015 (an income tax provision), and section 2036 (an estate tax provision). In effect, due to the Pierre asymmetry, the SMLLC is the ideal initial entity in a gifting strategy.
Though Charles Manson died over a month ago, his body remains on ice. Part of the problem with disposing of the remains is the number of individuals that have come forward with claims. Among at least five claimants, there are two pen pals and a man claiming to be the cult leader’s grandson, all of whom claim they have a right to the body. Another issue is jurisdictional. Local officials are not certain which court actually has jurisdiction to distribute Manson’s estate. Bryan Walter, a local attorney, said that this “is a really weird legal case. It’s like a circus, and nothing is clear where we should hang our hat on.” Until officials make a decision, Manson’s corpse will not be cremated.
See Fight for Charles Manson’s Body Is a ‘Circus’ County Attorney Says, Fox News, December 22, 2017.
The recently-signed tax reform legislation doubles the amount individuals can leave to their heirs free from estate tax. At the federal level, an individual can now leave up to $11.2 million to beneficiaries without triggering the 40% tax. States like Maine, Hawaii, Maryland, and Connecticut will match this increase over the next few years as they have tied their state estate tax thresholds to the federal rate. In total, there are seventeen states that still levy an inheritance or estate tax. In those states that have tied their tax rates to the federal rate, the number of taxable estates is certain to decrease dramatically. Phil Hunt, an estate lawyer in Portland, Maine predicts that some of these states are likely to “rethink it rather quickly. I wouldn’t be surprised if they tried to do something retroactively.” For now though, the increased exemption limit means more assets can be passed on without needing to worry about the estate tax. But, this does not warrant complacency when it comes to estate planning. There are still a number of non-tax reasons to plan, including assigning a power of attorney in case of incapacity or choosing a guardian for minor children.
See Ashlea Ebeling, Where Not to Die in 2018, Forbes, December 21, 2017.
Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.
Sunday, December 24, 2017
President Trump signed tax reform legislation into law on Friday, which marked his first major legislative victory since taking office. The bill passed through the Senate with a narrow 51 to 48 vote. The bill reduces the corporate tax rate from the current 35% to 21%. It keeps seven tax brackets for individuals, but reduces rates in five. The Affordable Care Act’s penalty for failing to carry insurance has been removed, the estate tax exemption levels have doubled, and local and state property tax deductions are allowed up to $10,000.
See Madeline Farber, Sam Chamberlain & Kaitlyn Schallhorn, Congress Votes on Tax Bill: What the ‘Tax Cuts and Jobs Act’ Means for You, December 22, 2017.
Stephen Paddock, the Las Vegas massacre gunman, died with an estate worth over $5 million. Lawyers for victims appeared in court on Thursday as part of an effort to decide how the estate is to be distributed. Judge Gloria Sturman asked victim’s attorneys for help in determining the best method to regulate potential claims against the property. She is reportedly concerned that the sheer volume of claims against Paddock’s estate will result in more fees paid to attorneys than paid to victims.
See Elizabeth Zwirz, Las Vegas Gunman Stephen Paddock’s $5 Million Estate to Be Settled in Court, Judge Says, Fox News, December 14, 2017.
Saturday, December 23, 2017
The National Business Institute is holding a conference entitled, Recreational Marijuana Business Law in California, which will take place on Wednesday, January 17, 2018, at the Courtyard by Marriott Santa Rosa in Santa Rosa, CA. Provided below is a description of the event:
Know the Salient Points of Recent Marijuana Laws and Effectively Advise Your Clients
Recent legislation and initiatives are paving the way for many new business opportunities in the cannabis industry. It has also created many questions and uncertainties for professionals advising these new businesses. What are possible federal responses to legalized cannabis? What types of businesses does the law allow, and how does a potential business owner obtain a permit? When are you potentially violating federal law by merely assisting a client? Learn the answers to these questions and more - register today!
- Understand how the federal government can use forfeiture laws to close marijuana-related businesses.
- Evaluate the current banking landscape and determine whether a cannabusiness can obtain financing.
- Ensure marijuana business clients have business policies and procedures in place that help them avoid legal scrutiny.
- Confidently advise clients on all aspects of the marijuana business licensing process.
- Recognize the state and federal tax implications for cannabis-related businesses.
- Analyze the ethical implications of advising cannabis business clients.
Who Should Attend
This basic-to-intermediate level seminar provides practical information on recreational marijuana law for:
- Accountants and CPAs
- Bankers and Commercial Lenders
- Financial Advisors
- Federal Responses to California Marijuana Law
- Banking and Financing for the Marijuana Industry
- Recreational Marijuana Businesses Law in California
- Obtaining a California Cannabis Business License
- California Marijuana Taxation: The Latest Rules
Continuing Education Credit
Continuing Legal Education – CLE: 6.00 *
International Association for Continuing Education Training – IACET: 0.60
National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 7.00 *
Professional Achievement in Continuing Education – PACE: 7.00 *
* denotes specialty credits
Eve Chilton, Harvey Weinstein’s ex-wife, is worried that Weinstein will not be able to pay off $5 million he currently owes in child support. Their 2004 divorce required the now-disgraced movie mogul to pay a total $60 million; the $5 million is what remains left to be paid. Chilton’s newest concern is the ever-increasing pile of lawsuits against Weinstein claiming sexual assault and harassment. He has allegedly been pre-paying attorneys large sums to fight these suits, and Chilton is concerned her children will be left in the cold. Weinstein’s attorney argued to a Manhattan judge that there was no reason for concern as his client had not missed a payment in fourteen years.
See Harvey Weinstein Owes $5 Million in Child Support; Ex Worries He’s Going Broke, TMZ, December 21, 2017.
Friday, December 22, 2017
IRA trusts are often utilized by practitioners in asset protection planning and estate planning. Drafting an IRA trust can be particularly difficult for those practitioners who are unaware of IRS IRA compliance issues and state accounting rules for trusts reflected in the Uniform Principal and Income Act (UPAIA). When IRA trust documents are involved, it is incredibly important for practitioners to be aware of these rules. Because there are currently few continuing legal education courses offered on the subject, the burden rests on the practitioner to become aware of the rules through independent study of the law and relevant commentary.
See Seymour Goldberg, Practical Issues Involving Implementing IRA Trusts (from a State Trust Point-of-View), Ed Slott’s IRA Advisor, October 2017.
Brett Bueltel, Margaret Ryznar, & Jamie Seitz recently posted an Article entitled, Using the Marital Deduction in Settlements, Wills, Trusts, & Estates Law eJournal (2017). Provided below is an abstract of the Article:
This article considers a common scenario in which a surviving spouse challenges a prenuptial agreement that granted each spouse a life estate at the other’s death, and whether the resulting settlement payment by the estate can qualify for the marital deduction when structured as a statutory election. Section 2056(c) explicitly allows the marital deduction for the elective share, but the result may be the same even if the Will Contest Regulation applies. Thus, a prenuptial agreement does not necessarily prevent the marital deduction if the surviving spouse challenges the prenuptial agreement and attempts to exercise statutory rights, facilitating settlement.