Wills, Trusts & Estates Prof Blog

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

Tuesday, April 21, 2020

Is Biden's Wealth Tax Plan a Planning Opportunity?

Biden

Joe Biden has emerged as the current front runner for the Democratic presidential candidate, so it is about time to review his wealth tax proposal. The proposition could have a profound effect on the transfer of wealth for millions of Americans.

Under current federal law, when an individual dies, that person receives a "step-up" in income tax basis for assets to the date of death. The person that the assets is transferred to then receives the benefit of smaller tax burden with less capital gains. Biden's proposal would be to eliminate this "step-up in basis" concept, and a taxpayer's death would cause an income tax realization event which would cause capital gain tax (20%) to be due, whether or not the securities are sold or the person is otherwise subject to federal estate tax.

This alteration could devastate many American's investment portfolios and how they plan to transfer investment properties to the next generation. But with current market values being depressed, capital gains could still be minimal. 

See Michael L. Mixell, Is Biden's Wealth Tax Plan a Planning Opportunity?, Barley.com, April 15, 2020.

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

April 21, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Income Tax | Permalink | Comments (0)

Monday, April 20, 2020

Don’t Give Your Adult Kids Your House

HouseGifting a house outright to an adult child or adding them to the property's deed may avoid the hassle of probate, but doing so may bring along its own slew of issues. These problems range from a potentially large tax bill to the house being in danger if the child files for bankruptcy.

Sometimes parents transfer a home to their child to try to qualify for Medicaid, the government program that pays health care and nursing home bills for the indigent. But gifts or transfers made within five years of applying for Medicaid can lead to a penalty period when seniors are disqualified from receiving benefits.

If an adult child is gifted a house through inheritance or a will, they will also get a "step-up in tax basis." Meaning the value of the house upon the conveyance will not be based on the date they acquired it, but rather when the previous owner acquired it. Kenneth Robinson of Rocky River, Ohio had a client that received his mother's house as a gift - against his advice - prior to the mother's death. The mother purchased the house in 1976 for $16,000, but the son acquired the property with a market value of $200,000 with a tax bill of $32,000 because of the $184,000 gain.

However, Section 2036 of the Internal Revenue Code says that if the mother retained a “life interest” in the property, which includes the right to continue living there, the home would remain in her estate rather than be considered a completed gift. There are specific rules for what constitutes a life interest, including the power to determine what happens to the house and liability for its bills. The executor of the person would then file gift tax return on the deceased's behalf to show that the recipient was given a remainder interest, or the right to inherit at the person's death.

See Liz Weston, Don’t Give Your Adult Kids Your House, Nerd Wallet, April 3, 2020.

April 20, 2020 in Current Affairs, Disability Planning - Property Management, Estate Planning - Generally, Gift Tax, Income Tax, Wills | Permalink | Comments (0)

Article on How Much Trust Do Trusts Require?

TrustThomas P. Gallanis recently published an Article entitled, How Much Trust Do Trusts Require?, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article.

How much trust, in the general sense, is required by a trust in the legal sense? The separation of management and beneficial ownership creates a risk that a trustee will act, or fail to act, based on its own interests. This paper explores the features of modern US trust law and practice that elevate the risk and the features that attempt to ameliorate the risk. The paper then offers two striking observations. The first is that US trust law is moving in both directions. Some aspects of modern trust law and practice require greater trust in the trustee, while other aspects of modern law and practice reduce the need for trust in the trustee. The second observation is that, to the extent US state legislatures have enacted rules diverging from uniform acts or Restatements, the divergent rules tend to increase - not decrease - the need for trust in the trustee.

April 20, 2020 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, April 19, 2020

CLE on Electronic Wills: Recent Developments, State Legislation, the New Uniform Electronic Wills Act, and More

CLEThe American Law Institute is holding a webcast entitled, Electronic Wills: Recent Developments, State Legislation, the New Uniform Electronic Wills Act, and More, on Monday, April 20, 2020 at 1:00 - 2:00 pm Eastern. Provided below is a summary of the event.

Why You Should Attend

The “electronic wills” movement has become a hot topic in recent years and continues to stir debate while gaining cautious acceptance. Further, the Uniform Electronic Wills Act was recently approved by Uniform Law Commission and is now ready for consideration by the states. What is meant the term electronic will? What are the reasons behind this movement and what are the controversial elements associated with electronic wills?

What You Will Learn

Electronic wills are gaining wider acceptance as more states permit wills and other estate planning documents to be signed entirely electronically. Join us for a 60-minute webcast to find out the latest developments involving electronic wills, and the opportunities and risks associated with signing estate planning documents electronically.

Our faculty have been closely involved in the electronic wills movement for years and will discuss:

- Fundamental Elements of Will Statutes

- Factual Scenarios from Actual Electronic Will Cases

- Types of Electronic Wills

- Legal, Technological, and Market Factors Influencing the Electronic Wills Movement

- Legislative Activity in the United States

- The Uniform Electronic Wills Act

- How States are Responding to Proposed Legislation

- Perspectives on the Impact of Electronic Wills Movement on Professional Practices


All registrants will receive a set of downloadable course materials to accompany the program.

Who Should Attend
Estate planning and financial planning professionals will benefit from our experienced panelists’ insights as to where the law may be headed and how the electronic wills movement might impact their professional practice.

April 19, 2020 in Conferences & CLE, Current Affairs, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Technology, Wills | Permalink | Comments (0)

Friday, April 17, 2020

If Not Now, When? New Legislation Simplifies Estate Planning in the Time of Coronavirus

ElecNew Jersey has now joined many other states that have enacted laws to allow for digital or remote notarization of estate planning documents during the COVID-19 pandemic. Governor Murphy has signed legislation that was sought by the legal bar to allow real estate closing, estate planning, and other legal transactions to move forward while maintaining social distancing through electronic communications.

A will does not require a notary but does require two witnesses in New Jersey, but to make it a self-proving a notary is required, which means that the will can be admitted to probate without the witnesses needing to be tracked down to attest to the signing. Health care directives require either a notary or two witnesses, although it is standard procedure to have both. Powers of attorney must be notarized. Now neither the witnesses nor the notary have to remain six feet away, but rather can witness remotely through Facetime, Zoom, or any other video application.

See Shana Siegel, If Not Now, When? New Legislation Simplifies Estate Planning in the Time of Coronavirus, National Law Review, April 15, 2020.

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

April 17, 2020 in Current Affairs, Current Events, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, New Legislation, Wills | Permalink | Comments (0)

During These Grim Times, Estate Planning Offers Peace of Mind

Covid2Due to the increased air of mortality because of the coronavirus pandemic, suddenly people are rushing to call estate planners and tax attorneys. “In recent weeks, I’ve gotten calls from people I haven’t heard from in 10 years,” Tom O’Rourke said. One of them was a healthy 85-year-old that wanted to ensure that their advance directive containing explicit instructions to not be placed on a ventilator was iron clad with no possibility of misinterpretation.

“All of a sudden, they turn on the TV at night and they see young people, old people, famous people, rich people, poor people, all kinds of people getting coronavirus,” he said. “And I think it strikes a chord with them and makes them realize that they’re not going to be around forever.”

The simple advice for this stressful time? Review everything. Make sure that the person or persons listed on your advance directive and medical power of attorney is someone in whom you have total confidence and who is geographically nearby. “The only thing you can be confident of is things are going to change,” O’Rourke said. “And things do change over time and that, many times, is when you need to revisit your estate plan.”

See Peter Musurlian, During These Grim Times, Estate Planning Offers Peace of Mind, Federal News, April 15, 2020.

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

April 17, 2020 in Current Affairs, Current Events, Disability Planning - Health Care, Estate Planning - Generally | Permalink | Comments (0)

Thursday, April 16, 2020

Prudential Suspends Applications for Some Life Insurance Policies

InsuranceOne of the insurance industry's major players, Prudential, recently announced coronavirus-related changes that now limit American's choices for life insurance policies. The company said it would suspend its acceptance of applications for 30-year term life insurance policies due to “unprecedented market volatility” and “the anticipated low interest rate environment for the foreseeable future.” The suspension will be in place until at least June.

Prudential is the second-largest life insurer in the country based on net premiums written and the third-largest seller of individual life insurance based on new and recurring premiums. Les Masterson, managing editor at Insure.com, said it is quite possible other insurance companies could take steps of their own to limit risk, further limiting the choices of those seeking policies during this crisis.

When it comes to whether your insurance will pay out for deaths from coronavirus, experts at NerdWallet said most people are covered under traditional and term life insurance policies already in place.

See Brittany De Lea, Prudential Suspends Applications for Some Life Insurance Policies, Fox News, April 7, 2020.

April 16, 2020 in Current Affairs, Death Event Planning, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0)

Will Your Health Care Wishes Be Followed?

AdvancedirectiveThis highly unprecedented time has put health decisions to the forefront of many people's minds. If you or a loved one is required to be hospitalized, one of the first questions asked will be whether there is a Medical/Health Care Power of Attorney or a Living Will, otherwise known as an Advanced Directive.

The Medical or Health Care Power of Attorney allows a person to name another individual, known as the agent, to make health care decisions if you are unable to do so due to becoming incapacitated. They may also speak to your health care providers for any health care needs or services that may arise. The Living Will or Advanced Directive details what kind of life-sustaining interventions you might want if you have a terminal condition or if you fall into an irreversible coma. This type of guidance can allow for continuous family harmony when tragedy strikes.

Many states have online sources for these documents, and several states have recently passed statutes allowing digital notarization.

See Lisa Paine, Beth Cohn and Stephanie Fierro, Will Your Health Care Wishes Be Followed?, JaburgWilk.com, April 13, 2020.

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

April 16, 2020 in Current Affairs, Disability Planning - Health Care, Estate Planning - Generally, Technology | Permalink | Comments (0)

Tuesday, April 14, 2020

Article on Time for a Tax Return Filing Fee

IrsEmily Cauble recently published an Article entitled, Time for a Tax Return Filing Fee, Tax Law: Tax Law & Policy eJournal (2020). Provided below is the abstract to the Article.

The IRS faces the monumental task of verifying, to the extent possible, the tax consequences reported on the hundreds of millions of tax returns filed each year. It does so with meager and shrinking resources. Some taxpayers burden the filing system more than others. At one extreme, a taxpayer who earns only income that is subject to third-party reporting and withholding and who claims the standard deduction adds very little to the IRS’s burden. At the other end of the extreme, a large business engaged in numerous complex transactions the tax treatment of which are not free from doubt demands significant resources if that taxpayer’s claimed tax outcomes are fully examined. In light of this landscape, this Article makes the novel proposal that Congress require payment of a tax return filing fee by some taxpayers. The amount of the fee would vary based on some of the factors that make each taxpayer more or less difficult to audit, with carve-outs for difficult-to-audit items that are disproportionately claimed by lower-income individuals.

The goals of the proposal are three: first, to make the system fairer, second, to raise additional revenue, and third, to improve efficiency by encouraging taxpayers to take into account the costs imposed on the tax administration system by their complex transactions.

April 14, 2020 in Articles, Current Affairs, Estate Planning - Generally, Income Tax | Permalink | Comments (1)

Billionaire's Wife Accuses Him of Hiding Assets Through Trusts

EdMarie Bosarge, wife of Texan billionaire Wilbur 'Ed' Bosarge, claims that the businessman is concealing more than a dozen properties and a laundry-list of assets, including a French-style chateau, a London apartment and three yachts. She believes that he is hiding them through the use of trusts and limited liability companies so that she cannot receive a fair share in their contentious divorce. Bosarge, 80, left his wife of 30 years in 2013 for a Russian socialite in her 20's before filing for divorce in 2017.

In court filings, the 66-year-old Marie argues that her husband has secreted away many of the assets in trusts in South Dakota, known for its lenient tax and privacy laws. Bosarge's attorneys claim that Marie does not have sufficient evidence that the trusts include any communal property. The two parties have given different estimates of the worth of assets held in trust, with Marie's attorneys citing a figure of $2 billion and Ed claiming in a deposition that there were approximately $800 million worth of assets. Ed's legal team also says that he has no control of the assets in trust, and that the community estate is worth only $12 million.

The couple married in 1989, a full decade before Ed launched his high-frequency trading firm, now considered one of the world's premier companies of its kind. Over the years, Bosarge has acquired an impressive portfolio of homes, boats, art, and antiques, including a mummy in a sarcophagus. Marie said that Ed purchased the assets through trusts and limited liability companies, which he allegedly said was for tax purposes and for her protection.

See Billionaire's Wife Accuses Him of Hiding Assets Through Trusts, Daily Mail, April 10, 2020; see also Candace Taylor, A High-Stakes Divorce Illustrates How the Rich Play Real-Estate Tug of War, Wall Street Journal, April 9, 2020.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) and Naomi Cahn (Harold H. Greene Professor of Law, George Washington University School of Law) for bringing these articles to my attention.

April 14, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)