Wills, Trusts & Estates Prof Blog

Article on Life is Change: Using Powers of Amendment in a Non-Charitable Trust--Rules and Tax Implications

Joel Nitikman recently posted an Article entitled, Life is Change: Using Powers of Amendment in a Non-Charitable Trust--Rules and Tax Implications, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article:

A trust is an equitable obligation, owed by the trustee to the beneficiary in respect of property given by either the trustee in her personal capacity or a third-party settlor to the trustee, to be held on specified terms. Generally speaking, the trust's terms may not be amended. There are exceptions: a trust may be amended under the rule in “Saunders v. Vautier”, a court's salvage, or emergency powers.

In the case of a trust that contains an amending power, the conditions under which the power may be exercised and the rules governing its interpretation are subject to some debate. This article explores the law relating to the interpretation and application of amending powers and the potential income tax consequences of amending a trust.

In general, no rules limit the scope of an amending power: its scope and the manner in which it is exercised are based purely on its terms, interpreted in the light of their text, their context, and the factual matrix. Moreover, the use of an amending power should not result in the trust or a beneficiary being viewed as having disposed of any property for tax purposes.

Assets on Ice, Cryogenic Estate Planning

Dennis Kowalski is the president of the Cryonics Institute and a paramedic. The husband and father of three recently doled out $140,000 in order to cryogenically preserve his entire family after their deaths. The current process for cryogenic freezing requires the deceased patient’s blood to be entirely substituted with an antifreeze solution. The solution is designed to prevent dangerous ice crystals from forming in the body. After this, the client is placed in a cooling chamber with temperatures around negative 350 degrees Fahrenheit. Because these frozen individuals are legally dead, special planning is required in case their desired outcome, reawakening at some point in the future, is actually accomplished. One means to make sure a frozen individual does not wake up in a Star Trek-esque future with no money to enjoy space travel or exotic worlds is to draft a personal revival trust. With this type of trust vehicle, it is possible for cryonicists to retain their assets by adding themselves to the trust. Another possibility is a cryonics dynasty trust. This unique estate planning tool is specifically designed for those individuals who want to take their money with them as they undergo cryopreservation.

See Inna Fershteyn, Esq., Assets on Ice, Cryogenic Estate Planning, BrooklynTrustandWill, January 22, 2018.

Special thanks to Alexander Evelson for bringing this article to my attention.

2018 Mary Moers Wenig Student Writing Competition

ACTEC Foundation has recently announced the start of its 2018 Mary Moers Wenig Student Writing Competition.  Information about the competition is below:

 Description of Competition:

The American College of Trust and Estate Counsel (ACTEC) announces the American College of Trust and Estate Counsel Mary Moers Wenig 2018 Student Writing Competition. This competition was created by ACTEC’s Legal Education Committee, which consists of law school professors who teach in the area of trusts and estates and practitioners who teach as adjuncts in the trusts and estates field. The competition honors the late Mary Moers Wenig, a member of ACTEC’s Legal Education Committee, who was a law school professor for over 30 years.

Consistent with ACTEC’s purposes, the American College of Trust and Estate Counsel Mary Moers Wenig Student Writing Competition was created to encourage and reward scholarly works in the area of trusts and estates. ACTEC’s purposes are to maintain an association of lawyers, international in scope, skilled and experienced in the preparation of wills and trusts; estate planning; probate procedure and administration of trusts and estates of decedents, minors and incompetents; to improve and reform probate, trust and tax laws, procedures, and professional responsibility, to bring together qualified lawyers whose character and ability will contribute to the achievement of the purposes of the College; and to cooperate with bar associations and other organizations with similar purposes. The funding for the competition will be provided by the ACTEC Foundation, a 501(c)(3) public charity that supports educational projects relating to trust and estate law.

Eligibility: 

This competition is open to any law student in good standing (full-time or part-time) who is currently or recently enrolled at the time of submission or during the 90-day period prior to submission as a J.D. or LL.M. candidate in an ABA-accredited law school within the United States or its possessions.

Only papers that have not been previously published or accepted for publication are eligible. Papers prepared for law school credit are eligible provided they are the entrant’s original work. Unless a work is co-authored, each entry shall be the original work of a single individual. A co-authored paper by no more than two individuals is acceptable provided the paper submitted is the original work of the co-authors. Entrants are limited to one submission per year.

Area and Topics:

The paper must relate to the area of trusts and estates, broadly defined. Any one or more of the following topics are appropriate for discussion:

Business Planning
Charitable Planning
Elder Law
Employee Benefits
Fiduciary Accounting
Fiduciary Administration
Fiduciary Income Taxation
Fiduciary Litigation
Estate Planning and Drafting
Professional Responsibility
Substantive Laws for the Gratuitous Transmission of Property
Wealth Transfer Taxation (Estate, Gift and GST Tax)

People Know When They Are Dying and Prefer to Be Alone – Even Waiting for Loved Ones to Leave the Room Before They Pass Away, Reveals Academic

A senior research fellow at the University of Nottingham, Glenys Caswell, claims that individuals who are terminally ill have some degree of control over when they pass. Some may even wait to be alone, outside the presence of their loved ones, to die. This is certainly not always the case, as many people may prefer the warm company of family and friends in their last moments. But, Caswell’s research points to some evidence that individuals nearing death will sometimes pass away after friends and family have left their bedside. Caswell’s study delves into this oddity, as social norms decry the horror of passing away with no one around and seeks to reevaluate the status quo.

See Glenys Caswell & Alexandra Thompson, People Know When They Are Dying and Prefer to Be Alone – Even Waiting for Loved Ones to Leave the Room Before They Pass Away, Reveals Academic, DailyMail.com, January 30, 2018.

Life Insurance Planning After Tax Reform

The Tax Cuts and Jobs Act (TCJA) has ushered in direct changes involving the tax treatment of insurance and substantial indirect changes to life insurance planning. These alterations in prior law offer some new and intriguing planning opportunities relating to life insurance. A direct change of note is TCJAs imposition of reporting requirements in instances where an existing life insurance policy is purchased in a reportable policy sale. The increase of the estate tax exemption limits indirectly affects planning as far fewer clients will need to purchase life insurance policies as a means to pay the federal estate tax.

See Barry D. Flagg, Thomas Tietz, & Martin M. Shenkman, Life Insurance Planning After Tax Reform, Wealth Management.com, January 18, 2018.

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

Obituary for Veteran with ‘Zero Working Knowledge of the Kardashians’ and a Stash of Miracle Whip Wins over the Internet

Terry Ward, an Indiana veteran, passed away on Tuesday at the age of 71. His daughter, Jean Lahm, wrote an epic obituary as an homage to her father that has since captured the attention of the internet. The obituary sets the down-to-earth tone from the outset: “Terry Wayne Ward, age 71, of DeMotte, Indiana, escaped this mortal realm on Tuesday, January 23rd, 2018, leaving behind 32 jars of Miracle Whip, 17 boxes of Hamburger Helper and multitudes of other random items that would prove helpful in the event of a zombie apocalypse.” Lahm said her intent was to portray he father as he was in life, an “everyday guy” who enjoyed making people laugh.

See Stephanie Haney, Obituary for Veteran with ‘Zero Working Knowledge of the Kardashians’ and a Stash of Miracle Whip Wins over the Internet, DailyMail.com, January 29, 2018.

Will High Estate Tax Exemptions Mean Less Planning?

It seems like many estate planners are not overly concerned with the increase in the estate and gift tax exemption thresholds. In a survey conducted by Trusts & Estates in preparation for the Heckerling Institute on Estate Planning, almost two-thirds of the 1,000 who responded said they were either not worried or worried only a little about the potential effects of tax reform on their practice. A little under half expect modest changes while 52% are expecting little or no change at all. A possible explanation for this seemingly nonchalant attitude may be that many in the field do not expect the exemptions to last very long. 75.3% believe changes to the estate tax are impermanent and 82.6% think the same of the gift tax. There is some anticipation of growth in the tax arena though, with 45.8% expecting to see an increase in this part of their practice.

See Susan R. Lipp, Will High Estate Tax Exemptions Mean Less Planning?, Wealth Management.com, January 22, 2018.

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

Tax Law Brings Big Tax Changes For Alimony Payers

Under the freshly passed Tax Cuts and Jobs Act (TCJA), taxpayers supporting their ex-spouse via alimony payments will no longer be allowed to deduct those expenses. The spouse receiving alimony, on the other hand, is no longer required to report the support payments as ordinary income. Under prior law, a higher-earning ex-spouse paying alimony to a lower-income ex-spouse was able to take an ordinary tax deduction while the payee spouse had taxable ordinary income. David George, a California CPA, believes the change is part of an effort to raise revenue: “I believe that the reason for the change was as a money-raising effort, since usually the payer who gets the deduction currently is in a higher tax bracket than the recipient.” Martin Abo, a CPA in New Jersey, added: “[High-net-worth] clients now more than ever will want to consider prenuptial agreements to avoid potential litigation in the future – and it’s best to deal with this new alimony issue in such an agreement.”

See Jeff Stimpson, Tax Law Brings Big Tax Changes For Alimony Payers, Financial Advisor, January 22, 2018.

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

 

How to Prepare Financially for Being a Widow/Widower

Married couples face many challenges in retirement. One that is unavoidable and that consistently derails retirement plans is the loss of a spouse. Studies show that the death of a spouse often leads to an economic decline for the surviving spoues. This may stem from a loss of income, an inability to cope with the loss, or the inability of the surviving spouse to competently manage their finances. A few steps couples can take to mitigate this risk include: 1) having an open discussion about money matters, 2) cover what-if scenarios, 3) delay social security as long as is feasible, 4) check and recheck beneficiary designations, 5) gather a financial team, 6) make sure the estate plan is current, and 7) possibly relocate to a smaller home that requires less maintenance and has lowers associated costs. 

See Robert Powell, How to Prepare Financially for Being a Widow/Widower, USA Today, January 19, 2018.

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

 

Filial Friday on Monday: PA Supreme Court Agrees to Hear Further Appeal of "Reverse" Filial Support Case

Melmark Inc. v. Schutt involves a Pennsylvania residential facility that houses disabled children and adults and its continuing attempt to hold parents, both over the age of 70 and residents of New Jersey, liable for their autistic son's costs for care. The parents successfully argued at trail and on appeal that New Jersey law, not Pennsylvania law, controlled the issue. New Jersey statutes limit the support obligations of older adults (55+) strictly to spouses or minor children; Pennsylvania statutes do not share a similar limitation. In December, the Pennsylvania Supreme Court granted a further appeal on the facility's behalf. This case presents an interest issue relating to conflicts between the laws of these states. 

See Katherine C. Pearson, Dickinson Law, Penn State, Filial Friday on Monday: PA Supreme Court Agrees to Hear Further Appeal of "Reverse" Filial Support Case, Elder Law Prof Blog, January 15, 2018.

Special thanks to Berry P. Turney for bringing this article to my attention.