Wills, Trusts & Estates Prof Blog

2021 Inflation Adjustments of Interest to International Tax Practitioners

The IRS recently released its annual Revenue Procedure containing inflation-adjustments for 2021.

 Of interest to international tax and estate planning practitioners are the following:

• Estate and Gift Tax Basic Exclusion Amount: $11,700,000
• Gift Tax Annual Exclusion Amount: $15,000
• Increased Annual Exclusion for Gifts to Non-U.S. Citizen Spouses: $159,000
• Tax Liability Threshold for Covered Expatriate Status: $172,000
• Gain Exclusion Amount for Covered Expatriates: $744,000
• Foreign Earned Income Exclusion Amount: $108,700

 

"Practitioners should note that the estate and gift tax basic exclusion amount is only available to U.S. citizens and U.S. domiciliaries. Foreign individuals do not receive any exclusion amount for U.S. gift tax purposes (other than the annual exclusion amounts) and only receive a $60,000 exemption for U.S. estate tax purposes."

‘Wealth tax risks worsening defective CGT system’

"The UK system of taxing capital is broken but introducing a wealth tax risks making the situation worse, a former top civil servant at HM Revenue & Customs said." 

Edward Troup, previously first permanent secretary at HMRC, suggested that MPs tackle the already existing defects of the wealth tax system before any further steps are taken.

“We have a lot of taxes on various aspects of capital . . . none of them work properly,” said Sir Edward on Wednesday, citing capital gains, inheritance and council taxes as examples. “It’s always better to try and fix what you’ve got than to pile something else on top of it.”

Sir Edward suggested that politicians shift their focus to considering whether the current wealth taxing system is working correctly.

Sir Edward also stated, “There is a real risk that we are looking at putting something new and difficult and probably pretty inefficient [a wealth tax] on top of some already non-working taxes.”

It appears that the debate surrounding new wealth taxes continues to intensify during the pandemic pushing the government to consider how to repair the damage.

See Emma Agyemang, ‘Wealth tax risks worsening defective CGT system’, Financial Times (UK), November 19, 2020.

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

Maximizing End-of-Year Charitable Giving

The holiday season is quickly approaching, which also means it is a popular time for charitable giving. Donors can be philanthropic in their charitable giving while also gaining tax advantages. 

One way donors can take advantage of these is to include a provision in your will or trust, which will provide a part of your estate to a charitable organization. Providing a gift to a charitable organization may allow your estate to receive an estate tax deduction. 

You can also gift securities through lifetime gifts. This method will allow the chosen charitable organization to receive the full value of stock and will allow you to take an income tax charitable deduction. 

You can also gift your IRA to a designated organization upon your death. This strategy requires you to file a beneficiary designation form with the IRA administrator. You can either gift the entire IRA or you can set a specific percentage for the organization to receive. The organization will not have to pay income taxes for withdrawals and will receive the full value of the gift. There is also another tax break for older donors that gift out of their IRA. 

See Eileen Y. Lee Berger, Maximizing End-of-Year Charitable Giving, Bowditch & Dewey, November 25, 2020. 

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

Article: The Law of High-Wealth Exceptionalism

Allison Anna Tait recently published an article entitled, The Law of High-Wealth Exceptionalism , Alabama Law Review (2020). Provided below is the abstract to the Article. 

No family is an island.But some families would like to be--at least when it comes to wealth preservation and they depend on what this Article calls the law of high-wealth exceptionalism to facilitate their success. The law of high-wealth exceptionalism has been forged over the years from the twinned scripts of wealth management and family wealth law, both of which constitute high-wealth families as sovereign entities capable of self-regulation and deserving of exemption from the rules that govern ordinary wealth families. Consequently, high-wealth families take advantage of complicated estate planning techniques and highly favorable wealth rules in order to build walls around their family fortunes and construct bespoke governance systems. Hiding in plain sight, the law of high-wealth exceptionalism protects, privileges, and enables high-wealth families in their own particular form of organizational sovereignty. The fact that high-wealth families operate according to their own rules might seem totally unconnected to the political lives and financial health of original wealth families. However, high-wealth exceptionalism intensifies old harms and creates new ones within the larger policy. To begin, the law of high-wealth exceptionalism increases systemic risk in financial Markets, shifts tax burdens from high-wealth to lower wealth families, and widens the wealth gap. Compounding these problems, high-wealth family exceptionalism facilitates the growth of plutarchic and patrimonial system of government in which power is based on family wealth and privilege flows in a circuit between a small number of already exceptionally resourced families. Understanding how the lax of high-wealth exceptionalism functions is, consequently, an important step in identifying hidden levers of wealth inequality, and addressing the resulting democratic deficit.

Article: Wills Formalities Beyond COVID-19: An Australian-United States Perspective

Kelly Purser, Tina Cockburn, and Bridget J. Crawford recently published an article entitled, Wills Formalities Beyond COVID-19: An Australian-United States Perspective, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article.

Executing a valid will during the COVID-19 pandemic can be difficult, given various economic and public health restrictions, including social distancing and lockdowns. For that reason, many states in Australia and the United States have implemented emergency measures to facilitate valid will-making during the pandemic. When societies can begin to look forward, the question is whether these temporary measures, which permit remote witnessing of wills, should become the "new normal." Examination of these matters through the lenses of law in Australia and the U.S. raises associated concerns about reliance upon real-time audiovisual technologies to satisfactorily assess testamentary capacity, as well as the importance of incorporating safeguards to adequately identify and prevent undue influence, the perpetration of fraud and/or elder abuse.

Article: Introduction to The Right of Redress

Andrew S. Gold recently published an article entitled,  Introduction to The Right of Redress, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article. 

This is a draft of the Introduction chapter from my new book, The Right of Redress (Oxford University Press, 2020). As the book argues, the law enables private parties to engage in redress by undoing the wrongs committed against them. Moreover, a distinctive kind of justice governs our legal rights of redress, different from the kind described in leading corrective justice approaches. Through analysis of these key ideas, The Right of Redress helps to make sense of tort law, contract law, fiduciary law, unjust enrichment doctrine, and equity.

Article: Stakeholder Fiduciaries

Evan J. Criddle recently published an article entitled, Stakeholder Fiduciaries, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article. 

Legal scholars and judges often assert that fiduciaries bear a duty of “undivided loyalty” that precludes concern for self-interest. This chapter explores the limits of selfless loyalty in American fiduciary law by showing that the law often permits parties to serve as fiduciaries while also maintaining a beneficial interest in their own exercise of fiduciary power. I coin the term “stakeholder fiduciary” to describe these fiduciaries who are formal beneficiaries of their own exercise of fiduciary power. I argue that stakeholder fiduciaries are genuine fiduciaries despite the fact that they claim a beneficial interest in their own performance. But I also make the case that fiduciary law does (and should) treat stakeholder fiduciary relationships differently than non-stakeholder fiduciary relationships.

Stakeholder fiduciary law departs from non-stakeholder fiduciary law in two important respects. First, the fiduciary duty of loyalty applies differently to stakeholder fiduciaries, requiring not complete self-abnegation, but rather solidarity with other beneficiaries. This means that a stakeholder fiduciary may retain an equitable share of the profits she generates through her position—even when those profits are the product of conflicted transactions or misappropriated opportunities. More striking still, when a stakeholder fiduciary exercises voting rights in collective governance, she may vote solely in her own interests as long as she does not misuse her voting power to undermine the purposes of the fiduciary relationship or dominate other beneficiaries.

Second, courts repose a different kind of trust in stakeholder fiduciaries. When a non-stakeholder fiduciary is alleged to have violated her duty of care, courts do not ordinarily accord any deference to the fiduciary’s judgment. The same cannot be said of stakeholder fiduciaries: as long as a stakeholder fiduciary’s interests are plausibly aligned with the interests of other beneficiaries, courts allow the fiduciary to decide for herself how much time and energy she should devote to a particular decision. Taking into account the stakeholder character of certain fiduciary relationships therefore clarifies why courts apply a highly deferential standard of review to the decisions of some fiduciaries (e.g., business partners) but not others (e.g., investment managers). The best explanation, I argue, is that courts trust stakeholder fiduciaries to exercise reasonable care without intrusive judicial oversight precisely because these fiduciaries have a direct personal stake in their own performance.

Article on 2019 Developments in Connecticut Estate and Probate Law

Jeffrey A. Cooper, John R. Ivimey, & Katherine Mulry recently published an article entitled, 2019 Developments in Connecticut Estate and Probate Law, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article. 

This Article provides a summary of recent developments affecting Connecticut estate planning and probate practice. Part I discusses 2019 legislative developments. Part II surveys selected 2019 case law relevant to the field.

How Covid-19 Will Change Aging and Retirement

The most recent Fall wave of COVID-19 continues to destroy lives and communities throughout the United States. The pandemic has also affected retirement and old age and how Americans deal with and plan for these things. 

Physician and entrepreneur Bill Thomas stated, "isolation of older people has long been a problem, but Covid is focusing attention on the issue and adding urgency" to address it. With rising government deficits and falling bond yields, there is a lot of uncertainty surrounding retirement and how to fund it. Thus, many people are continuing to work for as long as possible. 

However, innovations are on the rise. Laura Carstensen, director of Stanford University's Center on Longevity stated that people will begin to "rethink retirement altogether." In the wake of Covid, there has been more emphasis on mortality, causing us to consider how we want to live in die. 

It is likely that more people will age at home. Covid has cast the spotlight on long-term care facilities, revealing "how shockingly inadequate our care infrastructure and systems are." Innovation will hopefully provide better nursing homes and more resources for people to age at home. 

Also, innovation is aimed at older people due to the pandemic and the aging population. However, Covid-related lockdowns are likely to "reduce the life expectancies of those who avoid or survive the virus." 

New innovations will hopefully cause people to work longer, value life more, save more for retirement, embrace healthier lifestyles, and plan for death. 

See Anne Tergesen, How Covid-19 Will Change Aging and Retirement, Wall Street Journal, November 15, 2020. 

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

OSU can lead the way in ending diversion of dollars from scholarship endowments to entertain rich alums: David Marburger and Jeffrey Moritz

Ohio State University has dealt with a lot in the wake of COVID-19. The football season has been cancelled and brought back, they have had to deal with COVID-10 on campus and have even dealt with a $250 million cut in the operating budget. These obstacles have not been easy to overcome for the new president, Kristina Johnson. 

Another obstacle that has been lingering in the shadows is that Ohio State University has been spending millions of dollars that come from privately funded endowments. Due to this massive expenditure, a slew of students are paying for tuition that "private benefactors already have supplied the money to pay." 

An endowment is essentially a lump sum payment from a wealthy alum to a university. In exchange for the endowment, the university commits to spend the funds on a specific cause. 

The universities will invest the payment on order to preserve the original sum (the corpus) allowing the payment to continually generate money for scholarships. 

Sounds reasonable right? Well unfortunately, this is not always what happens. Jeff Moritz discovered that his deceased fathers endowment to Ohio State University was "sinking." Moritz retained an attorney to investigate the blunder and hopefully rectify it.

After studying hundreds of pages of public records, it was found that "nearly half of Ohio State University's 300 largest privately funded endowments established over the last 30 years are underwater." 

After Ohio State University was put on notice about this terror, they removed the link on its website allowing the public to review such records, stating that the removal of the link was due to "maintenance." 

However, it appears that unchecked spending is the actual problem.

See OSU can lead the way in ending diversion of dollars from scholarship endowments to entertain rich alums: David Marburger and Jeffrey Moritz, Cleveland.com, November 22, 2020. 

Special thanks to Susan N. Gary (University of Oregon School of Law) for bringing this article to my attention.