Wills, Trusts & Estates Prof Blog

TAX PROPOSALS IN THE NEW “BUILD BACK BETTER” FRAMEWORK

"The White House released a new framework for the build back better plan, followed by a preliminary draft of the Bill from the house rules committee." 

Included in the proposal is a spending and tax plan. The specifics of the plan are complicated and involve "rapidly evolving, Congressional dynamics." 

The House Rules Committee text did not include provisions for tax changes like lowering of gift and estate tax exemption amounts; limitations on grantor trusts; increased corporate, income and capital gain tax rates; and provisions related to IRAs and Roth IRAs. Also notably left out was the "Billionaire Income Tax." 

Draft provisions that were included were: 

• A 15% minimum tax on corporations with more than $1 billion in profits, 1% surcharge on corporate stock buybacks for public companies, and 15% global minimum tax
• An income surtax applying a 5% percent rate on modified adjusted gross income (AGI) over $10 million, and an additional 3% on modified AGI above $25 million. The income surtax thresholds are lower for trusts, applying a 5% surtax on modified AGI over $200,000, and an additional 3% surtax on modified AGI over $500,000
• An expansion of the 3.8% net investment income (NII) tax to business profits for material participants making over $400,000, joint filers over $500,000 and all trust and estates (regardless of income levels)
• Limitation of the qualified small business stock exclusion to 50% for most sales of QSBS after September 13, 2021
• Limitations on excess business losses of noncorporate taxpayers, including a no-carryover of disallowed losses

See TAX PROPOSALS IN THE NEW “BUILD BACK BETTER” FRAMEWORK, Wealth: Northern Trust, October 28, 2021. 

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!

Law professor publishes a legal thriller where the hero is a Trusts & Estates lawyer

Jeffrey A. Cooper, Professor of Law and Associate Dean for Research and Faculty Development at Quinnipiac University School of Law, has just published his novel entitled After the Fact in which a T&E attorney is the hero. How exciting is that?! I can't wait to read it! Here is the teaser:

When Jack Collins leaves a small Connecticut law practice to join one of the nation’s most prestigious firms, he trades a nondescript office for one in a gleaming New York City skyscraper. He basks in the pride of working with people far more glamorous than those he left behind, including a famous boss, an alluring coworker, and a well-known client, Abigail Walker, the wealthy widow of a senator.

Jack thinks he’s on the path to glory, but he’s really a victim of deceit, a pawn in a game he doesn’t even know he’s playing. His new boss harbors deep secrets, his seductive coworker is not the person he thinks she is, and his new law firm is at the very center of a blackmail plot involving the widow Walker.

Blinded by the allure of wealth and power, Jack doesn’t see the danger around him. Time is running out for him to figure out the truth before he loses everything: his career, his marriage, and maybe even his life.

ACTEC Shares Useful Resources

This week, the American College of Trust and Estate Counsel, ACTEC, shared a podcast that discusses ACTEC’s proposed changes to Sections 6166 and 6166A and an informative video answering questions about the estate administration process.

ACTEC Trust and Estate Talk  (podcast series for professionals)

Closely Held Business, Tiered Entities and Proposed Revisions to Section 6166 ACTEC proposed a major update to a 40-year-old IRS Code 6166 that provides estate tax deferral for family businesses but has aged poorly. Learn what’s in the proposal in this podcast.

ACTEC Family Estate Planning Guide (video series for general public)

What is Estate Administration? - What happens if someone dies without a will? How long will the distribution of assets process take? Estate planning experts answer pressing questions for families and beneficiaries.

Article: The Last Sharīʿa Court in Europe: On Molla Sali v. Greece (ECHR 2018)

Maurits S. Berger recently published an article entitled, The Last Sharīʿa Court in Europe: On Molla Sali v. Greece (ECHR 2018), Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article:

On its face, the ruling in Molla Sali v. Greece (European Court of Human Rights 2018) was about choice of forum: in an inheritance dispute, could heirs choose to apply Islamic inheritance law or did a will drawn up in accordance with Greek inheritance law govern a Muslim decedent's estate? The case is significant not so much for its outcome, but because it involved features of two legal systems that are relatively unknown among European and American jurists: interpersonal law and Islamic law in the autonomous region of Greece. The Court's reasoning provides detailed insight into how features of these systems may clash with systems of European civil and common law, particularly in the framework of human rights.

Future Returns: How Proposed Tax Changes Could Affect Art Collectors

The U.S. $3.5 trillion budget reconciliation bill before the U.S. Congress could greatly impact wealthy individuals who collect art. That being said, art collectors should keep their eye on the bill as changes within the legislation "could have big consequences for how they manage their collections." 

According to Monica Heslington, head of the art and collectibles advisory team at Goldman Sachs Family Office, those who own art and collectibles do not typically view their treasures in the same way as investments in stocks and bonds, but want to "display their paintings, and keep driving their sports cars. . ." Heslington added that "it's a lot easier to get clients to plan with financial assets than it is with art and items that are important to them. . ." 

Currently, sales of art and collectibles are subject to a 28% long-term federal capital gains tax rate.

Typically, the supply of art on the secondary market is driven by death, divorce, and bankruptcy, but people also sell art when they want to upgrade their collection or when their taste in art changes. 

Despite whatever reasons there are to buy, sell, or collect art, it is important for wealthy collectors to pay close attention to possible changes in legislation, as failing to do so could result in dire consequences. 

See Abby Schultz, Future Returns: How Proposed Tax Changes Could Affect Art Collectors, Barrons, October 5, 2021. 

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

Surgeon transplants a pig's kidney into a brain-dead human in groundbreaking surgery

Robert Montgomery, a New York transplant surgeon, "conducted a successful surgery that transplanted a pig's kidney into a brain-dead human." 

US surgeons say that the successful transplant could ultimately be the key to solving donor organ shortages. The recipient of the kidney was brain-dead, and was on artificial life support "with no prospect of recovering." 

The kidney came from a pig that had been genetically modified to stop the organ being recognized by the body as "foreign" and being rejected. 

Although the work has not been peer-reviewed or published, there are plans to do so, and experts say it is the "most advanced experiment in the field so far." 

See Michelle Roberts, Surgeon transplants a pig's kidney into a brain-dead human in groundbreaking surgery, BBC, October 21, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

New York Court Conducts In Depth Analysis Of Lack of Testamentary Capacity Will Contest

In Matter of Falkowsky, the New York Supreme Court, Appellate Division, Second Department, "affirmed a decree made after a nonjury trial which in effect granted objections alleging lack of testamentary capacity and undue influence, and denied the admission of the will to probate." 

The Court affirmed the Surrogate's Court decision in which it found a lack of testamentary capacity alone, focusing on the evidence presented which "effectively demonstrated that the decedent did not understand the nature and extent of his property." 

Harold Falkowsky was hospitalized on December 1, 2014. Two weeks later, Harold apparently executed a last will and testament "in which he devised $20,000 to each of his sons, Ira and Jeffrey, 50% of the residue of his estate to charities, and the other 50% of his residue to his sister, Alice Sobel. Harold, the decedent, died on January 14, 2015, just a month after he executed the Will. 

In March 2015, Alice petitioned for probate of the will and letters testamentary. Jeffrey, Harold's son, filed objections to the probate of the will, alleging lack of testamentary capacity and undue influence.

After examining the evidence, the Court ultimately found that Alice failed to prove that the decedent possessed the requisite testamentary capacity under New York Law, "as she failed to establish that the decedent knew the nature and extent of the property of which he was disposing." 

See New York Court Conducts In Depth Analysis Of Lack of Testamentary Capacity Will Contest, Probate Stars, October 19, 2021. 

Social Security Benefits to Increase 5.9% for 2022

Americans receiving Social Security benefits in 2022 will see "the largest increase in their payments in four decades, reflecting surging inflation during the pandemic."

According to the Social Security Administration, in 2022 the cost-of-living adjustment (COLA) will be 5.9%, which will result in an addition of $92 to retirees' average monthly benefit next year. The increase brings the amount to $1,657, the agency estimates. The 5.9% COLA is the largest since 1982. 

The Social Security Administration also said that the maximum amount of earnings subject to the Social Security tax "will increase to $147,000 in 2022 from $142,800 this year, a 2.9% increase." 

According to Naomi Fink, a retirement economist at Capital Group, an investment manager, "[t]he extent to which the larger-than-usual Social Security adjustment makes retirees' and other recipients feel more well off will largely depend on whether inflation eases next year compared with 2021. . ." 

See Amara Omeokwe, Social Security Benefits to Increase 5.9% for 2022, The Wall Street Journal, October 13, 2021. 

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

The ACTEC Foundation Announces Mary Moers Wenig 2021 Student Writing Competition Winners

The following is from an ACTEC press release:

Washington, DC, October 21, 2021: The American College of Trust and Estate Counsel (ACTEC) Foundation today announced the 2021 winners of the Mary Moers Wenig Student Writing Competition. Five law students' submissions stood out among 21 entries received and reviewed by a panel of judges appointed by the Legal Education Committee of the College. ACTEC Fellow T. Randolph Harris, who chaired the judging process, said, "This year’s entries were outstanding! It was exciting to read such thought-provoking papers." The ACTEC Foundation supports the annual legal writing competition to encourage law students to create scholarly works in the area of trusts and estates. The first-place winner receives a full-tuition scholarship to the Heckerling Graduate Program in Estate Planning at the University of Miami School of Law for the 2022-2023 or 2023-2024 academic year, a $5,000 cash award and will have their work published in the ACTEC Law Journal. Candidates must apply and be admitted as full-time students to qualify for the scholarship. The second-place winner receives a $3,000 cash award, online publication — featuring their work on ACTEC's website —and possible publication in the ACTEC Law Journal. The competition's third-place recipient is awarded $1,000, online publication on ACTEC's website and possible publication of their work in the ACTEC Law Journal. Honorable mentions usually receive a $500 cash award.  First place winner, Zachary Carsten of Pepperdine Caruso Law School, said, "I am so honored to be the winner of the 2021 Mary Moers Wenig writing competition, and I am grateful to the editors and staff of the ACTEC Law Journal for selecting my article. I hope it can provide a meaningful contribution in the conversation about physician-assisted suicide as this critical policy debate continues to unfold in the United States." The 2021 Mary Moers Wenig Student Writing Competition Winners are: First Place: Zachary Carsten of Pepperdine Caruso Law School "Physician-Assisted Death and the Slippery Slope: Carving out an American Ledge" Second Place: Madison L. Orcutt of University of San Diego School of Law "Blood Does Not Necessarily Make a Family (or Any Fraction Thereof): Intestate Succession, Half-Blood Siblings, and Assisted Reproductive Technology" Third Place: Daniel Fein of New York University School of Law "A Defense of Perpetual Trusts" Honorable Mention: Christopher John Benos of University of Virginia School of Law "Trust Protectors as Fiduciaries: Three Approaches and Beyond the UDTA" Honorable Mentions: Peter Mezey of New York University School of Law "On Estate of Elkins and a New Path to Valuation of Collectibles?" About the ACTEC Foundation: The ACTEC Foundation is the philanthropic arm of The American College of Trust and Estate Counsel or ACTEC. The ACTEC Foundation is a nonprofit, 501(c)(3) that offers education to families and professionals and supports students interested in the trust and estate area of the law. Through continued financial support, The ACTEC Foundation offers professional development, scholarships and education for a number of important efforts, including legal education, educational support, public initiatives, legal publications and the student editorial board. About the American College of Trust and Estate Counsel: Established in 1949, The American College of Trust and Estate Counsel, ACTEC, is a national organization of approximately 2,500 lawyers, peer-elected to membership by demonstrating the highest level of integrity, commitment to the profession, competence and experience as a trust and estate counselor. Our members, "Fellows," are the best and brightest in trust and estate practice, with decades of experience representing and advising families. ACTEC offers technical comments about the law and its effective administration but does not take positions on matters of policy or political objectives.