Wills, Trusts & Estates Prof Blog

How to Make Sure Your Estate plan Won’t Cause a Family Fight

A well-organized estate plan is a wonderful gift to your loved ones at a time when they may be grief-stricken and lost. But even the most well-meaning people can cause family rancor and resentment among their heirs. Sometimes the best laid plans on paper do not play out well in the real world, says estate and trust attorney Marve Ann Alaimo, partner at Porter Wright Morris & Arthur in Naples, Florida.

You can reduce the chances of family discord by doing these four things:

• Name the Right Executor.
  • People often name executors based on family hierarchy or personal relationships rather than considering the skills needed for the job. An executor should have the necessary skills and ethical qualifications for the task at hand.
• Include Person Property.
  • Little trinkets, pieces of jewelry, or sentimental items can often carry the most emotional value. Speak with children or heirs and make a list of what possessions each person wants and make a list. As a way to keep the peace or limit the fighting, Alaimo suggests adding a clause to the will that directs the executor to sell any disputed item if the heirs can’t agree on who gets it.
• Do Not Tie up the Money for too Long.
  • It is common for trusts to limit payments until 21, 25, or even 30 years of age. But when trusts or other documents limit doling out inheritances for decades, it could be seen as a punishment or lack of faith by the parents. It may be possible to retain too much control from the grave.
• Explain any Unequal Bequests.
  • If you do not plan on leaving each child or family member the same amount of money or assets, explain why either in the documents or in a family meeting.

See Liz Weston, How to Make Sure Your Estate plan Won’t Cause a Family Fight, Market Watch, October 30, 2018.

CLE on 25 Steps to Perfect Probate

The National Business Institute is holding a 2 day conference entitled, 25 Steps to Perfect Probate, on Monday, December 10, 2018 - Tuesday, December 11, 2018 at Cobb Galleria Centre in Atlanta, Georgia. Provided below is a description of the event:

Program Description

Gain Valuable Strategies for Every Step of the Probate Process

Are you confident you're taking advantage of every strategic opportunity the probate process has to offer? Experienced faculty will share their insights into maximizing the benefits of each step at this essential program. With a special focus on strategic decision-making to speed up the process and alleviate conflict, this guide to probate is just what you need to take your practice to the next level. Register today!

• Spend two full days learning how to strategically navigate the probate process.
• Shore up your knowledge with a tactical guide to probate inventory - and leave no stone unturned.
• Get tips from the pros on how to tackle creditor claims and troubleshoot debt repayment.
• Maximize the use of exceptions when handling Medicaid estate recovery.
• Hone your final disbursements skills to prevent disputes and re-openings.
• Use probate litigation to its fullest advantage.

Who Should Attend

This two-day, intermediate level seminar is designed for:

• Attorneys
• Accountants/CPAs
• Trust Officers/Administrators/Managers
• Tax Professionals

Course Content

1. Probate Process Overview and First Steps
2. Will Admission Techniques
3. Executor Strategies
4. Creditor Claims: Tips From the Pros
5. Inventory, Appraisement and Management Tactics
6. Medicaid Estate Recovery Insights
7. Insolvent Estate Tips and Tricks
8. Final Accounting Secrets
9. Distributions: Insights From the Pros
10. Estate Closing Strategies
11. Legal Ethics
12. Probate Litigation Tactics

Estate Lawyers Caution that Cryptocurrency Should not be Treated like any Other Asset

Cryptocurrency is becoming more mainstream, and with more clients appreciating Bitcoin's and other's unique investment attribute, estate planners should be aware of the potential pitfalls. Attorneys and their clients want to be sure to transfer the assets appropriately upon death while also not giving up the keys prematurely.

Pamela Morgan, an attorney and author who founded Empowered Law and trains lawyers about cryptocurrency and blockchain technology, says “It’s an opportunity to grow your client base­—to attract new people who never thought about this before." Because it is such a new area, some estate planning attorneys may need to fully immerse themselves in cryptocurrency to be comfortable with the subject matter.

When a person buys bitcoin, it’s associated with crypto-graphic public and private keys. The public key identifies that specific bitcoin and all of its transactions on the blockchain—a public ledger that records transactions on a network of decentralized computers across the world. The private key is the owner’s secret and proves ownership and authorizes transfers. The private key remains secret until the owner passes away, or else anyone could steal the cryptocurrency.

Cryptocurrency can be held in online exchanges, software wallets or hardware wallets, each needing a slightly different planning perspective. Hardware wallets are similar to USBs and an estate plan merely needs to spell out where the device is located and the necessary seed phrase.

See Angela Morris,  With the Rise of Cryptocurrency, Estate Lawyers Caution that it Shouldn’t be Treated like any Other Asset, ABA Journal, November 2018.

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

Happy Halloween!!

Many law school classes have one or more holidays which are especially relevant. 

For example, Family Law has Valentine's Day, Mother's Day, and Father's Day, Labor Law has Labor Day, Environmental Law has Earth Day, Military Law has Memorial Day, and Law and Religion has Christmas, Hanukkah, Ramadan, etc.

Halloween, with its fascination with death, may be the most relevant holiday to those of us interested in wills, trusts, estates, probate, and estate planning.

So, however you celebrate, have fun and be safe!

Article on The Social Meaning of the Tax Cuts and Jobs Act

Linda Sugin recently published an Article entitled, The Social Meaning of the Tax Cuts and Jobs Act, Tax Law: Tax Law & Policy eJournal (2018). Provided below is an abstract of the Article.

This Essay exposes the moral messages implicit in the Tax Cuts and Jobs Act (TCJA). It argues that the legislation reflects values that were not openly debated or discussed in the legislative process, but are crucial to the distributional effects of the law. The TCJA reduces progressivity and increases deficits because it favors traditional families, prefers capital to labor income, treats people as detached from each other, makes charity the narrow concern of the rich, and privileges the acquisition of assets. Fairness in taxation depends on explicitly identifying social values that produce economic justice and purposely designing the law to achieve fairness

U.K. to Roll Out First-of-Its-Kind Digital Tax

The U.K. said it will move ahead with plans to introduce a tax on locally generated revenue by large technology firms. Several other countries are attempting to implement similar legislation on digital services that provided by large companies such as Facebook and Google.

At issue is how governments collect taxes from the handful of tech firms that have morphed into global, digital consumer-services giants, many of which are based in the United States. It has been a question on how to form a standardized tax for these types of companies for years. The Organization for Economic Cooperation and Development, a forum of wealthy countries, has been leading the international digital-tax talks. The U.K. said they were tired of waiting, and plans to start taxing the tech firms by 2020.

The proposal would affect businesses generating U.K. revenue from services including search engines, social-media platforms and online marketplaces. That makes the ad-selling businesses of Google and Facebook particularly vulnerable. It would only target large companies that have a global revenue of at least half a million pounds, for $641 million, and apply a 2% to income accrued in the U.K. Though it may seem like a negligible amount to these giants, it is the first concrete step towards taxing these types of business in any country they generate income in.

See Paul Hannon & Nina Trentmann, U.K. to Roll Out First-of-Its-Kind Digital Tax, Wall Street Journal, October 29, 2018.

The Gift Tax Return Trap and How to Avoid it

Even though the gift and tax exemption was increased drastically in 2018 to almost $11.2, it does not mean that a person that does not have a large estate should not file a gift tax return. The annual tax exclusion is $15,000 per beneficiary before it starts to count against a person's lifetime exemption. The Internal Revenue Service can still impose a penalty for not filing the gift tax return at all, even in the case of not being close to the annual exclusion for a particular year or having an estate valued well below the exemption.

Gifts above the annual gift tax exclusion amount made during the year generally must be reported on Form 709. The gifts might not be taxed, because of the lifetime gift tax exclusion. But the gifts reduce the lifetime exclusion and must be reported so the IRS can track your use of the lifetime exclusion amount. When the gift is a joint gift from a married couple, each spouse must file a tax return to show that they consented to the gift.

How would the IRS know about gifts if a person never files a gift tax return when they made a gift? The agency began clamping down on unfiled gift tax returns by searching for gifts that should have been reported, both during a person's lifetime and through an audit of an estate after a person's death.

See Bob Carlson, The Gift Tax Return Trap and How to Avoid it, Forbes, October 23, 2018.

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

Court Affirms Judgment that Power-Of-Attorney Holder Converted Funds by Withdrawing them from a Joint Account

A Texas appeals court affirmed the decision of the lower Fort Worth court, finding that a brother used his power-of-attorney given to him by his brother (the decedent) to wrongfully exercise dominion and control over the money in a joint account to the exclusion of, or inconsistent with, the sister in law’s rights, who was the other account holder of the account.

The brother argued that the sister in law did not own the funds because the decedent was the sole source of them and the withdrawal was legal and authorized because the power of attorney allowed the brother to undertake banking transactions. However, an employee of the bank testified that the two account holders, decedent and the sister in law, had equal rights of access to the account. The brother admitted that he knew it was a joint account with rights of survivorship and that he took the funds solely so the sister in law would not receive them when his brother passed away.

The brother tortiously interfered with the sister in law’s right to obtain the decedent’s funds once the decedent died. However, the Supreme Court of Texas does not have a remedy for tortious interference with inheritance claims.

See David Fowler Johnson, Court Affirms Judgment that Power-Of-Attorney Holder Converted Funds by Withdrawing them from a Joint Account, Texas Fiduciary Litigator, October 27, 2018.

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

Article on The Tax Consequences of a Haunted House

Charles Edward Andrew Lincoln IV recently published an Article entitled, The Tax Consequences of a Haunted House, Tax Law: Tax Law & Policy eJournal (2018). Provided below is an abstract of the Article:

If a seller has been estopped legally from denying the existence of ghosts and poltergeists on the premises—thus meaning the house is haunted a matter of law, then how should the haunting be added in to the cost basis for tax purposes? More generally, if a house is legally haunted, what does this mean for tax purposes?

In the famous popular 1st year law student case—colloquially known as the Ghostbusters case—Stambovsky, v. Ackley, the New York Court of Appeals deftly wrote, “as a matter of law, the house is haunted” If a seller has been estopped legally from denying the existence of ghosts and poltergeists on the premises—thus meaning the house is haunted a matter of law, what does this mean for tax purposes?

To answer this, one must set up a premise of what tax consequences usually are and how they arise. This is a philosophical question. Indeed, there is debate on the origins of what conceptual metaphysical origin brought up tax basis and adjusted basis.

This AI Startup Generates Legal Papers Without Lawyers, and Suggests a Ruling

An artificial intelligence application (app) developed by Ignacio Raffa, a startup founder from Buenos Aires, can now draft a ruling on a non-complex case in seconds, going so far as recommending a ruling to the judge. The app was developed in collaboration with the local district attorney's office.

The app, Prometea, is being used for stuff like taxi license disputes, not murder trials, but it’s a significant automation that is beneficial to the city's overworked justice system. The Buenos Aires office says its 15 lawyers can now clear what used to be six months’ worth of cases in just six weeks. It is not meant to be used for intricate cases. “It can help legal systems around the world,” says Asha Aravindakshan, a Sloan Fellow at MIT who saw a demo of the app this summer. “Everyone has a backlog.”

Raffa trained the app using the DA office’s digital library of some 300,000 scanned court documents from 2016 and 2017 that included 2,000 rulings. So far, judges have approved 33 of its 33 suggested rulings, and it’s being used in at least 84 other pending cases. “It’s not replacing humans,” says Ezequiel González, a professor at the University of Oxford who hosted a demonstration of the app in May. “It simply comes to the rescue of judges that are buried in massive dockets.”

See Patrick Gillespie, This AI Startup Generates Legal Papers Without Lawyers, and Suggests a Ruling, Bloomberg, October 26, 2018.

Special thanks to Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.