Wills, Trusts & Estates Prof Blog

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

Tuesday, February 25, 2020

Article on Basis and Bargain Sales: Income Tax and Other Concerns

Bridget J. Crawford & Jonathon G. Blattmachr recently published an Article entitled, Basis and Bargain Sales: Income Tax and Other Concerns, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article.

In this article, the authors explain the income tax consequences of the sale during lifetime and at death of property for less than fair market value. The authors focus in particular on the tax consequences of a bargain sale by a transferor who wishes to confer some financial benefit on a family member, but leave the rest of her estate to charity. Generally speaking, death-time bargain sales may be preferable to similar transactions during lifetime, if the assets have a low basis pre-death, because of the step up in income tax basis under section 1014.

The authors also discuss in detail an under-studied provision of section 1015 that requires adjustments to the basis of property acquired in a lifetime bargain sale to an individual. Basis must be increased by a certain portion of the gift tax paid by the transferor. Different rules govern the allocation of the transferor’s basis in lifetime bargain sales to individuals on the one hand, and charity, on the other. This difference gives rise to a statutory ambiguity that the authors believe should be resolved in a way that gives the transferee the greatest increase in basis. The authors conclude their discussion by noting multiple other contexts in which bargain sales might be part of an effective estate plan. As a policy matter, a pro rata basis rule would simplify tax administration and lead to parity in treatment between bargain sales to individuals and to charities.

February 25, 2020 in Articles, Current Affairs, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Monday, February 24, 2020

Nearly 100-Year-Old Dallas Home Torn Down by Mistake

Wrong-House-demo-beforeJR’s Demolition, a demolition company in Dallas, Texas, realized they had made a terrible mistake earlier this month. The company demolished a pink home in Dallas that was almost 100 years old, but it was the wrong house. The correct house was approximately a block away.

The house had been owned by Mary Ann Degataire prior to her death a year before. The new owners live in Los Angeles and were notified of the demolition by neighbors. “We had plans, we had a future figuring out what to do with the house and it was going to be a fun project and suddenly that is just blown up,” Robb Hagestad, the current owner, said. 

"We made a mistake and thought we had the right property," the company said in a statement. "We spoke with the new owner of the property who acquired it in 2019 and will be working with him toward a resolution." A spokesperson for the city of Dallas stated that they are investigating the incident.

See Jack Highberger, Nearly 100-Year-Old Dallas Home Torn Down by Mistake, NBCDFW, February 21, 2020.

February 24, 2020 in Current Affairs, Estate Planning - Generally | Permalink | Comments (0)

Article on Leveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax

InheritancetaxLily. L. Batchelder recently published an Article entitled, Leveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax, Wills, Trusts, & Estates Law eJournal (2020). Provided below is an abstract of the Article.

Despite our founding vision as a land of opportunity, the United States ranks at or near the bottom among high-income countries in economic equality and inter-generational mobility. Our tax code plays a key role. Inherited income is taxed at less than one-seventh the average tax rate on income from work and savings. This chapter proposes a major step toward leveling the playing field by requiring wealthy heirs to pay income and payroll taxes on inheritances they receive above a large lifetime exemption. As part of this shift, the proposal would repeal the current estate and gift taxes and would tax accrued gains (beyond a threshold) on transferred assets at the time of transfer. It would also substantially reform the rules governing family-owned businesses, personal residences, and the timing and valuation of transfers through trusts and similar vehicles. Relative to current law, the Urban-Brookings Tax Policy Center estimates the proposal would raise $337 billion over the next decade if the lifetime exemption was $2.5 million, and $917 billion if the lifetime exemption was $1 million.

The proposal would almost exclusively burden the most affluent and most privileged heirs in society, while the additional revenues could be used to invest in those who are not as fortunate. As a result, the proposal would soften inequalities, strengthen mobility, and more equitably allocate taxes on inheritances among heirs. It would also enhance efficiency and growth by curtailing unproductive tax planning, increasing work among heirs, and reducing distortions to labor markets and capital allocation. Furthermore, the proposal is likely to increase public support for taxing inherited income. While the burdens of estate and inheritance taxes both largely fall on heirs, inheritance taxes are more self-evidently “silver spoon taxes” and appear to be more politically resilient as a result.

February 24, 2020 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Tumamoc Hill Thief Breaks into Hiker’s Car, Steals Relative’s Ashes

VialJoanne Schultz of Tucson, Arizona usually hikes Tumamoc Hill with friends three times a week with no incident. Last week, however, the mother was shocked to come back to a shattered window of her vehicle and her purse missing.

But what was in the purse had more emotional value rather than monetary. "I had a bag of memento's including my daughter’s ashes in a vial in my purse because I carry her with me to Tumamoc,” Schultz said. Though affectionately referred to as daughter, Kaylie was Schultz's stepdaughter and had passed away in August 2019 at the age of 23. The purse itself was a Coach bag, but the ashes were inside of a small pink Victoria's Secret coin pouch.

Schultz sent out a plea that the vial of ashes be returned, no questions asked. "This vehicle will be here three days a week … and if they just left it anywhere on the car or near the car or whatever, I’d be grateful,” she said. They do have more ashes, but they would like as much of their daughter as possible.

See Karly Tinsley, Tumamoc Hill Thief Breaks into Hiker’s Car, Steals Relative’s Ashes, KOLD, February 18, 2020.

February 24, 2020 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Sunday, February 23, 2020

Article on How to Not Lose Your Head When Your Client is Losing His: Operating in the Gray Zone of Diminished Capacity

TexastechMatt G. Lueders recently published an Article entitled, How to Not Lose Your Head When Your Client is Losing His: Operating in the Gray Zone of Diminished Capacity, Est. Plan. & Cmty. Prop. L.J., Vol. 12 Book 1 (Fall 2019). Provided below is the introduction to the Article.

    As our population ages, it is increasingly important for estate planning professionals not only to assist clients with planning for eventual death, but also to aid clients with developing a plan with potential diminished capacity and incapacity. The increasing frequency of incapacityy in our society has caused many issues for estate planning attorneys and the manner in which he or she counsels and represents their clients. Attorneys must be aware of the possibility of client incapacity, and the proper steps for determining handling a client's diminished capacity or incapacity.

    The estate planning attorney must understand substantive tax techniques, distribution mechanisms, and probate laws that accompany an estate planning and administration; however, the attorney cannot stop there. He or she must also embrace the human side of estate planning - the side involving a client's emotions, mental and psychological state, and relationships among family members and friends. This article will discuss the awareness surrounding applicable legal standards of capacity, the legal and ethical rules important to estate planning attorneys with respect to capacity and undue influence, and the practical steps than an estate planning attorney can undertake when representing a client with diminished capacity or incapacity. This article will not spend a great deal of time discussing drafting for incapacity. For detailed discussion in that regard, the reader is encouraged to see Wesley L. Bowers' article "Mind the Gap: Advanced Planning Techniques for Incapacity" presented to the State Bar of Texas 2016 Estate Planning & Probate Drafting Course.

February 23, 2020 in Articles, Current Affairs, Elder Law, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0)

Jeffrey Epstein Estate's Bills, Employees Going Unpaid Over 'Insufficient Funds'

EpsteinLawyers for co-executors of Jeffrey Epstein's estate, Darren K. Indyke and Richard D. Kahn, have filed documents in the Superior Court of the Virgin Islands requesting that the imposed lien for criminal activity be lifted because they are unable to pay bills for the estate. Payments for several bills, including electricity and pest control for various properties, have been returned for 'insufficient funds.'

The lien, imposed January 31, was part of a civil enforcement action brought by U.S. Virgin Islands Attorney General Denise George, expanded in February to name Indyke and Kahn as co-conspirators. She alleges that the co-executors conspired with Epstein to help him exploit minors and fears their involvement in the estate's proposed victims’ compensation fund. George said the lien was necessary to get an accurate inventory of the estate's assets.

See Brie Stimson, Jeffrey Epstein Estate's Bills, Employees Going Unpaid Over 'Insufficient Funds,' Lawyers say: Report, Fox News, February 22, 2020.

February 23, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, New Cases, Trusts, Wills | Permalink | Comments (0)

Book on McGovern & Hirsch California Probate Code Annotated

ProbatecodebookAdam J. Hirsch & William M. McGovern recently published a Book entitled, McGovern & Hirsch California Probate Code Annotated (2020 ed.). Provided below is a summary of the Book.

Your comprehensive resource for probate law and estate planning in California, McGovern & Hirsch California Probate Code Annotated provides the complete text of the California Probate Code, related state and federal statutes, and rules of court regarding estate planning and probate.

This volume contains:

    • Authoritative commentary, annotations, and analysis of leading cases
    • Law Revision Commission editorial notes that provide additional guidance in the construction and application of particular sections
    • References to Witkin's Summary of California Law, 10th which direct you toward further research
    • A table of Judicial Council forms to help you identify forms to be used in conjunction with the statutes and rules
    • A table of cases illustrating the cases discussed in the author's commentary
    • A table of affected sections indicating recent modifications
    • Underlining to indicate additions or changes in statutes
    • Asterisks to indicate deletions

February 23, 2020 in Books, Current Events, Estate Planning - Generally, New Cases, New Legislation | Permalink | Comments (0)

Saturday, February 22, 2020

Article on Who Are the Beneficiaries of Fisk University's Stieglitz Collection?

CourtroomAlan Feld published an Article entitled, Who Are the Beneficiaries of Fisk University's Stieglitz Collection?, Wills, Trusts, & Estates Law eJournal (2011). Provided below is the abstract to the Article.

Most fiduciary relationships determine with specificity the beneficiaries of the fiduciary's activities. Not-for-profit entities, however, serve a class of unspecified beneficiaries and can exercise discretion in determining who to serve and how to serve them. This paper explores the limits of discretion that recent litigation established for Fisk University in balancing its educational mission and its administration of a valuable art collection donated decades earlier. The paper analyzes the case as it addresses respect for donor conditions, changes in circumstance, standing issues, the doctrine of cy pres and the designation of the appropriate class of public beneficiaries. Race and geography also play contributing roles.

February 22, 2020 in Articles, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Amid Protests, Portugal Lawmakers Vote to Allow Euthanasia

EuthanasiaPortugal’s parliament voted last week in favor of allowing euthanasia and physician-assisted suicide for terminally ill people by passing 5 bills similar to each other, priming the country to be one of the few in the world that would allow the procedure. But the Portuguese president could still attempt to block the legislation.

Before the 230 member Republican Assembly, the name of Portugal's parliament, hundreds of protesters met outside, brandishing banners and religious effigies. The Assembly recognized the monumental vote they were embarking on, so instead of utilizing the electronic voting system, each lawmaker was called in alphabetical order to state their vote on each bill. Such a lengthy voting method is usually used only for landmark votes, such as a declaration of war or impeachment. All five bills were passed with significant margins, between 28 and 41 votes.

President Marcelo Rebelo de Sousa is known to be reluctant when it comes to euthanasia and may veto the vote, making it revert back to the Assembly for a second vote to bypass the veto. The president also could ask the Constitutional Court to review the legislation as Portugal’s Constitution states that human life is “sacrosanct,” though abortion has been legal in the country since 2007.

The legislation, presented by the governing Socialist Party, is similar the ones passed in other countries, covers patients over 18 years of age who are “in a situation of extreme suffering, with an untreatable injury or a fatal and incurable disease.”  Two doctors, at least one of them a specialist in the relevant ailment, and a psychiatrist would need to sign off on the patient’s request to die. The case would then go to a Verification and Evaluation Committee, which would have to approve or turn the procedure. The process will be postponed if it is legally challenged, or if the patient loses consciousness, and health practitioners can refuse to perform the procedure on moral grounds.

See Barry Hatton, Amid Protests, Portugal Lawmakers Vote to Allow Euthanasia, Associated Press, February 20, 2020.

February 22, 2020 in Current Events, Death Event Planning, Estate Planning - Generally, Travel | Permalink | Comments (0)

Friday, February 21, 2020

‘The Good, The Bad And The Ugly’ Of The SECURE ACT

SecureactpiggybankThe Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by the House over the summer and the Senate on December 19th before being signed by President Trump on December 20th as part of the Further Consolidated Appropriations Act, 2020. The legislation has a combination of good aspects, negative portions, and possible 'ugly' outcomes.

The positive aspects of the Act are geared towards senior workers and improving retirement, including allowing IRA contributions beyond age 70½ if the contributor is still working and the required minimum distributions (RMDs) has been raised to age 72 rather than 70½. It will be simpler for part-time workers that have been employed long term to be able to join their company's 401(k) plan. Family planning will be easier now because each parent can withdraw up to $5,000 penalty-free when a child is born or adopted.

But one of the more non-positive parts of the legislation is the removal of the stretch IRA, which allowed a non-spousal beneficiary of a qualified plan to withdraw their distributions each year over their lifetime, based on the IRS rules and life expectancy table. Now, a non-spouse beneficiary of the IRA must withdraw all distributions within 10 years, and pay the subsequent taxes of the payout, usually while they are still working.

That slides right into the ugly part of the Act. IRAs are intended to assist during retirement, but many beneficiaries will be forced to take out significant distributions will employed. Many part time workers or employees of smaller businesses that were meant to benefit from the legislation, are not in a position to take advantage of the new rules and save more for retirement because they spend all the income on a month to month basis.

See Michael Chamberlain, ‘The Good, The Bad And The Ugly’ Of The SECURE ACT, Forbes, February 12, 2020.

Special thanks to Mark J. Bade (CPA, GCMA, St. Louis, Missouri) for bringing this article to my attention.

February 21, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0)