Wills, Trusts & Estates Prof Blog

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

Thursday, April 30, 2020

Remote Notarization Law Now Available in Massachusetts

WilltestamentThe number of states that have recently passed legislation to allow remote notarization for estate planning documents during the ongoing pandemic is quickly growing. Massachusetts is number 45 with Governor Baker signing the bill into law on April 27th.

There are certain guidelines that must be followed.

  • The allowance only lasts until three days after the end of the state of emergency, which has been extended to May 18th.
  • Only attorneys and paralegals under their supervision may notarize estate planning documents: wills, trusts, durable powers of attorney, and HIPAA releases.
  • All remote notarization sessions must be recorded and the recording saved for 10 years.
  • The notary must sign a supplemental affidavit verifying a number of facts, including that the person signing the documents and all the witnesses were in the state of Massachusetts.
  • The notarization is not effective until the notary receives and compiles all original signature pages, notarizes the document, and completes supplemental affidavit.

For the immediate future this is great news, but the question remains: why is this law not permanent? Also, why do all the witnesses need to be in Massachusetts? 

See Laura Goodman & Harry S. Margolis, Remote Notarization Law Now Available in Massachusetts, Margolis.com, April 28, 2020.

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

April 30, 2020 in Current Affairs, Current Events, Death Event Planning, Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Estate Planning - Generally, New Legislation, Wills | Permalink | Comments (0)

Do You Want to Die in an I.C.U.? Pandemic Makes Question All Too Real

Covid2Many older American's with chronic health issues, even if they have not contracted the novel coronavirus, are asking themselves a difficult question: if given the choice, would like want to die in a hospital's intensive care unit? Edo Banach, president of the National Hospice and Palliative Care Organization, recently had that conversation with his 69-year-old mother, Cheryl Goldman. She told her son that she would rather stay at home and receive hospice care instead of being admitted and being placed on a ventilator.

“It’s the kind of conversation everyone should be having with their loved ones,” Banach said. Depending on the source, one-third to two-thirds of Americans have not executed an advanced directive, which outlines what medical treatments they would accept or refuse and also designates a decision maker to act on their behalf if they become incapacitated. Many seniors and their families focus on do not resuscitate orders which deals with whether patients would want to be resuscitated after cardiac arrest. But advanced directives are the documents that involve the question of ventilation and intubation, which involves a tube inserted down the throat, connected to a ventilator that pushes air into the lungs. After an extended period of time on a ventilator - usually two weeks - doctors commonly perform a tracheostomy, creating a surgical opening in the windpipe that replaces the swallowed tube.

“After elderly people have been on a ventilator, they’ve often already developed physical debilitation, difficulty swallowing, bedsores,” said Dr. Kosha Thakore director of palliative care at Newton-Wellesley Hospital in Massachusetts. Further medical issues can be physical or cognitive or both, and are often permanent. Though the question may be hard to ask of loved ones, during these uncertain times it is becoming critical - "If you got really sick, would you want to take a chance and be placed on a ventilator? Or would you prefer to pass at home?"

See Paula Span, Do You Want to Die in an I.C.U.? Pandemic Makes Question All Too Real, New York Times, April 24, 2020.

Special thanks to Matthew Bogin, (Esq., Bogin Law) for bringing this article to my attention.

April 30, 2020 in Current Affairs, Disability Planning - Health Care, Elder Law, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, April 28, 2020

Choosing the Right Trustee

TrustsThe largest transfer of generational wealth is expected to occur in the next 25 years, so there so should be no surprise that there has been an increase in trust litigation. One issue that is often at the heart of these cases is that of successor trustees. With proper planning and and due diligence this problem may be avoided without getting litigators or arbitrators involved.

The following is a number of mistakes that settlors and trustees often make that should be avoided.

  • When Successor Trustees Misunderstand Their Fiduciary Responsibility
    • The fiduciary responsibility of successor trustees is to the trust's beneficiaries rather than to the creator of the trust, and this distinction should be clearly spelled out in the trust document.
  • When Trust-Makers Appoint Co-Trustees Who Disagree
    • If co-trustees are siblings or other family members, disagreements are almost bound to happen. Consider naming an unbiased third party to serve as successor trustee.
  • When There Is A Failure To Coordinate Among The Grantor’s Key Advisors
    • Lack of communication during the trust's creation and the initial estate planning process can cause disagreements and missing information. The grantor should introduce all trustees and advisors at the outset of the relationship to inspire cohesion. 
  • When The Successor Trustee Doesn’t Act Objectively
    • To ensure the trustee acts in accordance with the grantor’s intentions, it can be helpful to appoint an objective third party rather than a biased family member or adult child.
  • When The Grantor Does Not Build Enough Flexibility Into The Trust Documents
    • Depending on the state where the trust was created, amending the trust documents can be complicated. Naming a trust protector, whose sole purpose is to remove an unsatisfactory trustee on behalf of the beneficiaries when necessary, can avoid costly and time consuming court involvement.

See Kimberly Dawn Bernatz, Choosing the Right Trustee, Financial Advisor, April 1, 2020.

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

April 28, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Monday, April 27, 2020

Article on Gifts in Contemplation of Death: Why Can't Section 2035 Simply Die?

TaxclockStephanie J. Willbanks recently published an Article entitled, Gifts in Contemplation of Death: Why Can't Section 2035 Simply Die?, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article.

Income and wealth inequality has become a popular topic. There are a myriad of ways to reduce such inequality utilizing the tax system, either the income tax or the transfer taxes. Revitalizing the estate tax by reducing the exemption amount and adjusting the rate structure would reduce inequality. Much has been written about the viability of the estate tax and possible alternatives. This article does not revisit that analysis. Instead, it assumes that the estate tax will remain a viable component of the overall tax system. It analyzes one small segment of the estate tax – §2035 – and argues that repeal would simplify the estate tax without reducing revenues. Commentators have advocated for integration and simplification of the gift and estate tax provisions governing retained interests for over 70 years, but §2035 has received relatively little attention.

April 27, 2020 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Income Tax | Permalink | Comments (1)

Saturday, April 25, 2020

CLE on Primer on Life Insurance and Basic Structuring

CLEThe Section of Real Property, Trust & Estate Law of the American Bar Association is presenting a webinar entitled, Primer on Life Insurance and Basic Structuring, on Tuesday, April 28, 2020 at 1:00 pm - 2:30 pm EST. Provided below is a description of the event.

This fundamentals program will provide an overview of commonly used life insurance products and basic structuring to give planners the tools to advise clients who own or are considering purchasing a life insurance policy.

The topics covered will include:

    • Types of insurance products
    • Suitability
    • Taxation
    • Life insurance trusts in general
    • Considerations for life insurance trust trustees

Speaker include:

    • Bruce Tannahill, Mass Mutual, Phoenix, AZ
    • Melisa Seyhun, Merrill Lynch, Chicago, IL

April 25, 2020 in Current Affairs, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Income Tax, Trusts | Permalink | Comments (0)

Thursday, April 23, 2020

Texas Courts Conflict On Whether Contingent Remainder Beneficiaries Have Standing To Assert Claims Regarding Trust Administration

GavelTwo different appellate courts in Texas have recently published opinions with differing views on whether a contingent remainder beneficiary has standing to sue a trustee for a trust administration issue.

In one of the cases, In re Estate of Little, a settlor of a revocable trust withdrew trust assets and deposited them into an account with rights of survivorship with one child as the beneficiary . The beneficiaries of the trust, also children of the settlor, sued the non-settlor trustee for allowing that to happen, and the trial court granted the trustee summary judgement. The beneficiaries appealed. The appeals court the beneficiaries had standing to bring the claim under Texas Property Code Section 115, and that an interested party includes simply a beneficiary, defined in Tex. Prop. Code § 111.004(2) as “a person for whose benefit property is held in trust, regardless of the nature of the interest.” However, the claims still failed because the settlor of a revocable trust had the authority to remove assets from the trust. Father as settlor and co-trustee had the power to revoke the Trust and was the sole beneficiary of the Trust while alive. Father was free to fund the Trust and dispose of its property as he saw fit.” Furthermore, any fiduciary duty of the co-trustee was owed solely to the father while he was still alive. The summary judgement was affirmed.

In Berry v. Berry, a son and his daughter sued his mother and her brothers regarding a trust and family partnership regarding the operation of a ranch and family business. The defendants asserted that both plaintiffs lacked standing; the appellate court found that the son as present beneficiary of the trust had standing to bring a claim but that the daughter, just a contingent beneficiary, did not. The court of appeals noted a case from 1942 that stated: “[a]n expectant heir has no present interest or right in property that he may subsequently inherit and consequently he cannot maintain a suit for the enforcement or adjudication of a right in the property.”

See David Fowler Johnson, Texas Courts Conflict On Whether Contingent Remainder Beneficiaries Have Standing To Assert Claims Regarding Trust Administration, LexBlog, April 17, 2020.

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

April 23, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Tuesday, April 21, 2020

Article on The Role of Trust Law Principles in Defining Public Trust Duties for Natural Resources

TreesJohn C. Dernbach recently published an Article entitled, The Role of Trust Law Principles in Defining Public Trust Duties for Natural Resources, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article.

The public trust doctrine for natural resources is based to a significant degree on longstanding trust law. Just as trust law is directed at protection of certain assets, so public trust law for natural resources is intended to protect those resources. But how far should that analogy be taken? This issue matters when the statutory or constitutional public trust provisions for natural resources do not seem to address the exact question at issue. Trust law, including charitable and private trust law, has the potential to enhance the protectiveness of public trusts by imposing various fiduciary duties on trustees. It also has the potential to undermine public trusts, particularly through rules requiring that trust assets be financially productive. Using cases from around the country, this Article sets out a four-step methodology for answering that question in a way that furthers the text and purpose of public trusts for natural resources. This methodology can be applied in any case involving the use of trust principles to supplement public trust law. This Article then applies that methodology to a case that is now pending before the Pennsylvania Supreme Court.

In its landmark 2017 decision in Pennsylvania Environmental Defense Foundation v. Commonwealth (PEDF II), the state Supreme Court held for the first time that that judicial review of public trust claims under Article I, Section 27 of the state constitution is to be based on the text of Section 27. But it added that judicial review must also be based on “the underlying principles of Pennsylvania trust law in effect at the time of its enactment.” In 2019, Commonwealth Court used private trust law to hold that one third of the moneys received from bonuses and leases from oil and gas leasing can be expended without any trust limitation. This is the case now before the state Supreme Court.

This Article’s four-step methodology begins with an inquiry into the terms and purpose of the public trust, which in this case is Section 27’s command to the Commonwealth to “conserve and maintain” public natural resources. It then asks whether the terms and purpose of the public trust answer the question. While PEDF II’s analysis seems to foreclose that possibility, the court left the question open. The third step assumes the terms and purpose of the public trust do not answer the question, and asks what trust principles are available to help provide an answer. Under this step, it becomes clear that, while private trust law is one possible principle, another possible principle comes from the law of perpetual charitable trusts. Under the latter, all of the money from bonuses and rentals would be expended for trust purposes. The fourth and final step is to determine which principle would most fully effectuate the terms and purpose of the public trust. The Article argues that the charitable trust law principle is more likely to further Section 27 than private trust law because of its public purposes. As more public trust cases to protect natural resources are litigated and decided, this Article offers an approach to the incorporation of traditional trust law that can enhance the effectiveness of the public trust.

April 21, 2020 in Articles, Current Affairs, Estate Planning - Generally, New Cases, Trusts | Permalink | Comments (0)

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)