Wills, Trusts & Estates Prof Blog

Article on Children of Assisted Reproduction vs. Old Dynasty Trusts: A New Approach

Kristine S. Knaplund recently published an Article entitled, Children of Assisted Reproduction vs. Old Dynasty Trusts: A New Approach, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Today, thousands of children are born each year using assisted reproduction technology (ART), including assisted insemination, in vitro fertilization, and gestational carriers, and the numbers continue to rise. Many of these children are not genetically related to one or both of their parents because donated gametes are used; in cases where a gestational carrier gives birth, the intended parents may adopt the child even if they are the genetic parents. Some of these ART children may find themselves clashing head on with old dynasty trusts that presume that adoptees are excluded from class terms such as “issue,” “descendants” or “grandchildren,” and require all beneficiaries to be related by blood to the settlor. Two recent cases, McGehee v. Edwards, 268 Va. 15 (2004) and Matter of Doe, 7 Misc. 3d 352 (N.Y. 2005) have raised this issue, but we are likely to see many more in the next few years.

Will courts treat ART children just as they have treated adopted children, parsing the difference between “issue,” “lineal descendants,” “heirs of the body,” “heirs,” and other class terms; debating whether the writer’s intent or public policy should prevail; and raising questions about whether a change in the common law presumption may or should be applied retroactively? Or should an entirely different approach be used, one that allows us to avoid extensive litigation, the invasion of privacy that extensive DNA testing would produce, and the inevitable stigmatization of children of same-sex couples who can’t be biologically related to both people raising them? This article examines the language of 74 old wills and trusts, ones that are already up and running and cannot be amended, to see if there is a better way to deal with ART children. Can the trustee use doctrines such as decanting to solve this dilemma? Can courts be persuaded to broaden their approach so that trustees or executors can accurately predict what these terms mean, and not flood the courts with requests for instructions? I will propose solutions that might just do that.

Safeguarding Estate Planning Documents

In cases of severe weather such as hurricane and tornadoes, people can focus just on the moment. When evacuations are issued, people often leave their homes with a handful of possessions and the clothes on their backs. They may not think to grab their physical estate planning documents. All drama aside, it may be a good idea to back up the paper originals with electronically stored copies in a secure cloud.

However, if you can produce a signed copy of the will, there is usually statutory authority providing a means to prove a copy of a lost or destroyed will.

See Carol Warnick, Safeguarding Estate Planning Documents, Fiduciary Law Blog, September 9, 2019.

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

In Gentrifying Philly, Speculators Pay Heirs Peanuts — Then Flip Their Properties for Massive Gains

Philadelphia has become a hot-spot for "flipping," or selling properties that people have owned for less than two years, second only to Detroit in profitability. Speculators Bryheim Murray and Kyle Easley have jumped on the bandwagon with a seemingly ingenious caveat: they contact heirs (through Ancestry.com leads) that are in line to inherit property that they are not aware of, explain they may have an exuberant tax bill if they actually get the property, and present them with an offer. The heirs are usually excited at the prospect of getting money that they were not expecting and jump to sell, usually completely unware of the property's true value.

Then enters the lawyer: Kevin Murphy, the most active seller of property in Philadelphia as an estate administrator. Murray and Easly, as buyers of the heir's property, have the heir assign Murphy as the newly established estate's administrator. Murphy then facilitates the sell, making sure all the taxes are paid and documents properly filed. His fee can range from $750 to over $9,000, court documents show, and the title company he uses is his own, housed in the same building as his law firm.

 Murphy claims that because he comes into the picture after the sale has been initiated, he is just a facilitator and that "I'm not representing anybody." David Horton, a professor of law and an expert on estates, wills, and trusts at the University of California Davis, said the deals may violate the “duty of care” that estate lawyers must uphold to the estate's heirs. The duty, long codified in judicial decisions, holds that lawyers entrusted with assets must care for them as if they were their own. He and another law professor, Reid Weisbord, an expert on estates at Rutgers University Law School, questioned Murphy’s belief that he had no responsibility to vet sale prices because he was hired after the deals were struck. They also said that the deals themselves were improper from the start because the heir were not declared official through probate.

See Jacob Adelman and Craig R. McCoy, In Gentrifying Philly, Speculators Pay Heirs Peanuts — Then Flip Their Properties for Massive Gains, Philadelphia Inquirer, September 27, 2019. 

CLE on Medicaid: Maximizing Excluded Assets

The National Business Institute is holding a webcast entitled, Medicaid: Maximizing Excluded Assets, on Wednesday, November 6, 2019 at 9:00 AM - 4:00 PM Central. Provided below is a description of the event.

Effective Approaches to Medicaid Eligibility Planning
Satisfying the spenddown requirement to ensure your client qualifies for Medicaid is a tough balancing act. One of the most effective levers in this planning is to maximize excluded assets. This practical guide will give you the knowledge and skills you'll need to ensure your clients use all the tactics at their disposal to qualify for Medicaid as early as needed, without excessive burden on their families. From simple approaches like gifting to the more complex Medicaid trusts - learn what works and get sample documents to ensure all your approaches are implemented impeccably. Register today!

 

• • Get an updated overview of Medicaid resource and transfer eligibility.
  • Evaluate common planning techniques and when they are most (and least) effective.
  • Maximize purchase and prepayment methods without undue hardship for your clients.
  • Save drafting time with sample Medicaid trust provisions.
  • Review the application and appeals process to ensure compliance and maximize chances of success.
  • Gain effective asset transfer tactics when time is of the essence.

Who Should Attend

This Medicaid legal guide is designed for attorneys. It will also benefit accountants and paralegals.

Course Content

• • Medicaid Asset Eligibility: Commonly Overlooked Excluded Assets
  • Purchasing Excluded Assets, Prepayment of Future Expenses, and Converting Countable Assets: Top Tips and Techniques
  • Anticipating the Tax Consequences of Medicaid Planning
  • Addressing Assets in Application, Appeals, and Fair Hearings Process
  • Coordination with Other Asset-Based Benefits Eligibility
  • Using Trusts to Maximize Excluded Assets
  • Asset Transfers in Crisis Planning
  • Can You Prove to Medicaid that an Asset Transfer Should NOT be Penalized?
  • Legal Ethics in Medicaid Planning

Old Estate Plans May be Harmful to Your Health

The main reason that many people do not update their estate plan or will is because they believe that "nothing has changed" in their lives. The passing of time may seem monotonous, but it is still unlikely that an event has not occurred that alters some aspect of your life, no matter how small. Even if you still do not believe that anything has overtly changed in your realm, the tax laws may have still changed. If you have not looked at your estate plan since the 2017 Tax Cuts and Job Act overhaul, you may be shocked to see that "everything" may have changed.

Here are a few other things that may trigger a change in your estate plan, even if you did not think so on the face:

• Marriage, either yours or an heir/beneficiary
• Death of an heir/beneficiary or other person named in documents
• Birth/adoption of a new child or grandchild
• Move to a new state
• Significant change in economic situation
• Change in jobs (make bring changes in beneficiary designations)
• Change in wishes
• Health issues that are new, worsening or even getting better
• Change in relationship with anyone named in documents
• New lawsuit or resolution of a lawsuit
• Change in life insurance policies
• Change in state laws that could effect any aspect of your estate plan

See Martin Shenkman, Old Estate Plans May be Harmful to Your Health, Forbes, September 27, 2019.

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

Family of Brain-Dead Patient in Arizona says He's Still Alive and Doesn't Want His Organs Procured

26-year-old Ruben Vati suffered a drug overdose on September 11, 2019 and was rushed to Phoenix HonorHealth Hospital. Four days later he was declared brain dead, but his family claims that he is just in a vegetative state and with time, he can "come out" of it.

According to court documents, Vati no longer has any brain function and is being kept "alive" through machines for the purpose of procuring his organs. Vati registered twice with the Donor Network of Arizona, a procurement agency, who states that five patients are currently waiting for life-saving organs from Vati. The agency claims that time is of the essence, and the life-span of the organs are dwindling. A judge has issued a court order that a neurologist access Vati to determine that he is in fact brain dead, and the hospital is simply waiting for the neurologist to arrive.

The family says they will continue to fight, and that "we don't want them to take his organs no matter what," according to his mother, Stela Vati. "They said from the neck up he's dead, but he don't look dead to me." His older brother, Daniel, added that "He's in there, and he's alive."

See Family of Brain-Dead Patient in Arizona says He's Still Alive and Doesn't Want His Organs Procured, KGun.com, September 26, 2o19.

The ‘Social Contract’, Care and Inheritance in England and Hong Kong

Brian Sloan recently published an Article entitled, The ‘Social Contract’, Care and Inheritance in England and Hong Kong, Wills, Trusts, & Estate Law eJournal (2019). Provided below is an abstract of the Article.

In common with much of the world, the populations of both England and Hong Kong are ageing. One of the most important questions of our age is therefore how to allocate the burdens of providing and funding the care that increasing numbers of people are likely to need. Another vital question affecting the elderly and their families is that of inheritance: how legitimate is the claim of family members (including adult children) to a person’s assets? The aim of this paper is to explore the relationship between these questions, with reference to concepts such as the ‘social contract’ and family solidarity, and the law of family provision in England and Hong Kong.

Why Estate Planning is not Just for the Wealthy and Elderly

Society focuses on youth and being young, and as such many people hesitate to contemplate their mortality. At the same time and for the same reason people incorrectly assume that estate planning is only for the elderly and those that have acquired all the their possible wealth.

Not all documents in an estate plan are to prepare for your death; powers of attorney are documents that protect you in times of incapacity. There are two forms of these documents: healthcare and financial, and both of them allow a designated agent the power to make decisions pertaining to whichever document it is. 

If you have minor children, your death will affect them more than if they were older. To provide for them financially and legally, a guardian should be designated to take over the role of parent if something should happen to you. Without a guardian designation, your most precious assets could go to a family member or someone else that you would not have preferred.

If you are young and relatively healthy, term life insurance is relatively inexpensive and can for a term of 10, 20, or even 30 years. The younger you are, the less the premiums will be to start out. Group life insurance may also be available through your employer and may allow you to purchase additional coverage for you and your spouse.

See Stephanie Fierro, Why Estate Planning is not Just for the Wealthy and Elderly, Jaburgwilk.com, September 25, 2019.

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

Article on Avoiding Roth IRA Taxing Tax Traps

Seymour Goldberg recently published an Article entitled, Avoiding Roth IRA Taxing Tax Traps, Ed Slott's IRA Advisor, October 2019. Provided below is the introduction to the Article.

Roth IRAs and other Roth plans offer tax-free cash flow to account owners and beneficiaries, once the age (59½) and holding period (five years) requirements have been met. However, tax code technicalities could lead to the taxation of all distributions of inherited Roth assets. Fortunately, certain steps can reduce that risk.

Inflation Adjusted 2020 Figures Announced

The Internal Revenue Service has announced the inflation adjustments for the estate and gift tax exclusion, the generation-skipping transfer tax exemption, the gift tax exclusion and other estate planning rates for 2020.

• The federal estate and gift tax exclusion amounts will increase by $180,000, from $11.4 million to $11.58 million.
• The generation-skipping transfer (GST) tax exemption will also going to be $11,580,000.
• The annual gift tax exclusion will remain the same at $15,000 per donor per donee per calendar year.
• Trust and estate income tax rate brackets have also been released.
  • If income is less than $2,600, the tax is 10% of taxable income.
  • If income is over $2,600 but not over $9,450, the tax is $260 plus 24% of what is over $2,600.
  • If income is over $9,450 but not over $12,950, the tax is $1904 plus 35% of what is over $9,450.
  • The highest bracket comes in at amounts over $12,950, in which the tax is $3,129 plus 37% of the excess over $12,950.

See James V. Roberts, Inflation Adjusted 2020 Figures Announced, JamesVRoberts.com, September 25, 2019.