Wills, Trusts & Estates Prof Blog

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

Friday, July 3, 2020

Is Now the Time to Use Your Lifetime Exemption?

_2018_11_money-boxMany clients are asking about how to plan in light of possible changes to the federal estate tax law. In response to current events and the impact on state and federal budgets, it is very possible that the federal estate tax exemption could be reduced from the current amount of &11.58 million per person. 

Given the uncertainty surrounding estate taxes and gains, planning for income taxes will be a concern and states may be adding or increasing state income taxes as a result of budgetary shortfalls. 

One strategy that emerges from these concerns is the importance of lifetime gifts to children or other family members, in order to use some or all of the federal estate tax exemption during lifetime. 

One advantage to making a large gift now is that the appreciation will not be taxed in your federal estate and will be shifted to the recipients. Also, if you live in Oregon or Washington, your estate will not pay those states' estate tax on those gifts. If you are able to make a gift larger than what the federal exemption may be in the future, a larger gift may provide these advantages.

If you are worried about the federal exemption being lowered, the Treasury Department and the IRS have confirmed that there will be no "clawback" for gifts made under the increased estate and gift tax exclusion put in place by the Tax Cuts and Jobs Act of 2017.

One thing you should think about before making a large gift is the amount of assets to retain in order to maintain your lifestyle, which may affect which types of assets you give away. Another thing to consider is asset basis and built in capital gain as the recipient of your gift will take on your basis and may pay capital gains tax if the assets are subsequently sold. Therefore, the best assets to give are cash, assets in high basis, or assets that your recipient is very unlikely to sell. 

See Susan B. Bock, Wendy S. Goffe, & Emily V. Karr, Is Now the Time to Use Your Lifetime Exemption?, Stoel Rives LLP, June 30, 2020.

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

July 3, 2020 in Current Events, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax | Permalink | Comments (0)

Supreme Court agrees to hear Nazi art case

F588778573e24a1a8afb178bbd468f4cOn Thursday, the Supreme Court agreed to hear a case involving the descendants of a group of Jewish art dealers from Germany who say their ancestors were forced to sell a collection of religious art to the Nazi government in 1935. 

The justices will decide whether the dispute involving foreign citizens suing a foreign government belongs in U.S. courts. A lower court allowed the case to go forward, but Germany asked the Supreme Court to weigh in. 

Justices also took a case involving Hungarian nationals suing Hungary over property taken from them during World War II. 

In the case involving Germany, the group of people who sued are descendant of art dealers who in 1929 together bought a collection of religious artwork from the 11th to 15th centuries known as the Guelph Treasure. In Germany, the collection is known as the Welfenschatz. An appeals court in Washington allowed the case to go forward in 2018. 

The Justices are expected to hear both cases sometime after their summer break. It is not clear whether the justices will hear the cases in their courtroom or by telephone because of the Coronavirus pandemic. 

Nicholas O'Donnell, who represents the heirs of the art dealers, said that: "Germany seeks to eliminate recourse for Nazi-looted art and the Court will have the chance to answer this question of critical importance for Holocaust victims."

While Jonathan Freiman, one of Germany's lawyers said, "We're glad that the Supreme Court will hear the case and look forward to explaining why this dispute doesn't belong in a U.S. court." 

See, Supreme Court agrees to hear Nazi art case, The Associated Press, July 2, 2020. 

July 3, 2020 in Current Events, Estate Planning - Generally, New Cases, Travel | Permalink | Comments (0)

Wednesday, July 1, 2020

Carl Reiner Dead At 98, Rob Likely Financial As Well As Creative Heir

UnknownCarl Reiner, the versatile writer, actor, and director has died at the age of 98. Reiner was the creator of "The Dick Van Dyke Show" and was straight man to Mel Brooks' "200 Year Old Man. In recent years, Reiner was part of the gang in the "Ocean's Eleven" movies starring George Clooney.

Reiner's assistant Judy Nagy said he died on Monday night of natural causes at his home in Beverly Hills, California. Tributes have poured in from Steve Martin, Josh Gadd, Sarah Silverman, Alan Alda, and many more. 

Reiner is the father of actor-director Rob Reiner who starred on "All in the Family" and directed "When Harry Met Sally..." and "The Princess Bride." Besides Rob, Reiner had another son, Lucas, who is also a film director, and a daughter named Sylvia, who is an author. It is safe to say that the Reiners are an extremely talented family. 

It is likely that Rob Reiner will be the financial and creative heir as his father was his "guiding light." 

The creative world, especially the entertainment industry, will miss Carl Reiner dearly. 

See Carl Reiner Dead At 98, Rob Likely Financial As Well As Creative Heir, Wealth Advisor, June 30, 2020. 

July 1, 2020 in Current Events, Estate Planning - Generally, Film, Television | Permalink | Comments (0)

Sunday, June 28, 2020

‘They Just Dumped Him Like Trash’: Nursing Homes Evict Vulnerable Residents

Elderly_Male_Wheelchair_Mask_1296x728-headerNursing homes across the country are kicking out old and disabled residents and sending them to homeless shelters and rundown motels. 

On a cold afternoon in April, Los Angeles police found an old and disoriented man crumpled on a Koreatown sidewalk. RC Kendrick, an 88-year-old with dementia, was living at Lakeview Terrace, a nursing home with a history of regulatory problems. His family had placed him there to make sure he got round-the-clock care after his condition deteriorated and he began disappearing for days at a time.

However, on April 6, the nursing home placed Kendrick at an unregulated boarding house, without informing his family. Less than 24 hours later, Kendrick was wandering the streets alone.

More than any other institution in America, nursing homes have come to symbolize the deadly destruction of the coronavirus crisis. More than 51,000 residents and employees of nursing homes and long-term care facilities have died, representing more than 40 percent of the total death toll in the United States.

A Lakeview official said the company’s evictions were appropriate and weren’t an attempt to free space for Covid-19 patients. Yet, similar things are happening at nursing homes across the country. They are just dumping old and disabled residents, who are among the most vulnerable to the virus, in homeless shelters, rundown motels, unregulated boarding houses, and even the streets. 

Many of the evictions, known as involuntary discharges, appear to violate federal rules that require nursing homes to place residents in safe locations and to provide them with at least 30 days’ notice before forcing them to leave.

The pandemic has intensified the situation.

With nursing homes not allowing visitors, there is less outside scrutiny of their practices. Fifteen state-funded ombudsmen said in interviews that some homes appear to be taking advantage of that void to evict vulnerable residents.

Many nursing homes are struggling financially as post-surgery rehab has withered away due to the non-essential restrictions placed on facilities. Therefore, treating COVID-19 patients quickly has become a popular way to fill that void. 

Keep an eye on your loved ones!

See Jessica Silver-Greenberg & Amy Julia Harris, ‘They Just Dumped Him Like Trash’: Nursing Homes Evict Vulnerable Residents, N.Y. Times, June 23, 2020. 

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

June 28, 2020 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Saturday, June 27, 2020

Article on Proposed Technical Corrections for Cash-Flow Relief Provisions of the Cares Act for Individuals with Savings or Retirement Benefits

Albert Feuer recently published an Article entitled, Proposed Technical Corrections for Cash-Flow Relief Provisions of the Cares Act for Individuals with Savings or Retirement Benefits, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article: Unknown

The CARES Act provides cash-flow relief for individuals who want to access their savings and retirement plan benefits without adverse tax consequences. There are significant outstanding issues with those provisions. The article discusses and proposes technical corrections to address three such issues.

• Is there a single certification procedure to determine who is eligible to access their own savings and retirement benefits? The HEROES Act, the multi-trillion-dollar proposal to supplement the CARES Act that the House of Representatives approved in mid-May, addresses this issue differently than both the IRS guidance and the article’s proposal.

• Are those eligible to so obtain their own benefits defined sufficiently broadly? The HEROES Act broadens the eligibility for the Covid-19 enhanced family and medical care leave relief. The Act does not address the far narrower CARES Act eligibility criteria for individuals who wish to access their own savings and retirement benefits.

• Is there an unambiguous and intuitive method to determine the new amortization schedule for an eligible individual who wishes to take advantage of the CARE Act deferral of 2020 due dates for plan loans? The HEROES Act, again, does not address this issue.

The article also proposes a state law change to prevent adverse state and local personal income tax consequences for plans, participants, and beneficiaries who wish to take advantage of the cash-flow relief of the CARES Act to access their own savings and retirement benefits. For example, the CARES Act permits in-service distributions that would otherwise cause savings and retirement plans to lose their tax-exemption. State and local tax laws that are not coupled with the Internal Revenue Code may tax plans that decide to provide such cash-flow relief, and also prevent participants and beneficiaries from deferring tax on their plan benefits. The article therefore presents a technical correction to state and local personal income tax laws that conformed to the Code before the enactment of the CARES Act, such as those of New York State, to assure that those laws conform to the Code provisions changed by these relief provisions and only those provisions.

June 27, 2020 in Articles, Current Affairs, Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Thursday, June 25, 2020

Opportunities Abound for Wealth Transfer

UnknownDue to COVID-19, it has been a rough year for investments. Further, the first-quarter pullback in the stock market created continued volatility which has added insult to portfolios. 

However, the gloomy climate has opened up some rare opportunities in another area of wealth planning: wealth transfer. The low interest rates and reduced asset prices combined with the ultrahigh estate tax exemption that was enacted under the Tax Cuts and Jobs Act in 2018 create a perfect storm for maximizing the amount you can pass to beneficiaries while avoiding or minimizing a tax hit.

“If you’ve been wanting to transfer a bunch of securities or interest in your company or real estate, well, now’s the time to do it,” says Bryan Kirk, director of financial and estate planning at Fiduciary Trust International.

For those worried about estate tax, you can push more assets out of your estate under the exemption when values are low, Kirk says, adding that large assets are typically transferred to a generic irrevocable trust to ensure they’re managed properly and protected from creditors or spendthrift heirs.

Further, even families who aren’t concerned with the estate tax can benefit from low-value asset transfers. One way to do this is a grantor retained annuity trust (GRAT), which returns the value of the assets to you when the trust expires but leaves appreciation to your beneficiaries.You transfer assets to a GRAT and receive an annuity payment over the trust’s term that’s equal to the amount you put in, plus appreciation up to an IRS interest rate. At the end of the trust’s term, any appreciation over the IRS rate—called the 7520 rate—goes to heirs.

See Karen Hube, Opportunities Abound for Wealth Transfer, Barron's, June 18, 2020. 

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

June 25, 2020 in Current Events, Estate Planning - Generally, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Tuesday, June 23, 2020

South Carolina Supreme Court: No Surviving Spouse Status In Dispute Over “Godfather of Soul” James Brown’s Estate

F14de63953ac4ec3cef2e2da3c35b073In Brown v. Sojourner (June 2020), the South Carolina Supreme Court addressed the surviving spouse status of the “Godfather of Soul” James Brown’s purported surviving spouse, Tommie Rae Brown, where Tommie had not annulled her prior marriage at the time of her marriage to Brown.

Tommie married Javed Ahmed in February 1997. In December 2001, Tommie participated in a marriage ceremony with James Brown in South Carolina. On the marriage license, Tommie affirmed that the marriage to Brown was her first marriage. However, Tommie and Ahmad had never divorced and were still legally married. 

Two years after her marriage to James Brown, Tommie brought an action to annul her marriage to Ahmed. A month later, James Brown filed an action to annul his marriage to Tommie, arguing that he was entitled to annulment because Tommie had never divorced her first husband.

A hearing was held in Tommie’s annulment action against Ahmed in April 2004.  An order was entered the same day granting the request for annulment.  Ahmed did not appear.

In May 2004 Brown amended his complaint against Tommie, arguing that S.C. Code Ann § 20-1-80 prohibited Tommie from marrying Brown while she was still married to Ahmed. Tommie then counter petitioned for divorce. Both James Brown and Tommie ultimately withdrew and dismissed their actions. 

However, following James Brown's death, inheritance litigation began. Tommie sought an elective share or omitted spouse's share of Brown's estate. 

Circuit court found:

  • Tommie was the surviving spouse of Brown;
  • Tommie’s first marriage to Ahmed was void ab initio due to Ahmed’s bigamy;
  • Tommie had no legal impediment to her marriage with Brown in 2001;
  • Tommie and Brown’s marriage was valid;
  • Tommie and Brown’s marriage was not annulled, and they had not divorced prior to Brown’s death.

Some of James Brown's children appealed the order. The court of appeals held that the rule that an annulment order cannot retroactively validate a bigamous marriage – is limited to situations where the first marriage is merely voidable, not void, as voidable marriages are valid until one of the parties elects to end the marriage, but a bigamous marriage is never valid.

See South Carolina Supreme Court: No Surviving Spouse Status In Dispute Over “Godfather of Soul” James Brown’s EstateProbate Stars, June 22, 2020. 

June 23, 2020 in Current Events, Estate Planning - Generally, Music, New Cases | Permalink | Comments (0)

Wednesday, June 17, 2020

Higher Taxes For Wealthy A Stark Possibility In Wake of Virus

Im-121670As the COVID-19 crisis continues, many states are scrambling to repair tax revenues. This raises the possibility of increased taxes, and some think the familiar call to tax the wealthy most will gain new momentum. 

States have already began generating ideas on creating or increasing taxes. Wealthy taxpayers who spend more on goods and services are a likely to be hit harder than the average taxpayer. 

According to Steve Wittenberg, director of legacy planning at SEI Private Wealth Management, "The situation is highly speculative and magnified because of an election year." Wittenberg also stated, "There are only two options: Raise taxes or control the budget by cutting other expenses. Raising taxes on the wealthy may provide for the biggest bang."

The question is whether more taxes are the cure for plunging revenues. Given the deep losses in government revenues and extensive increase in unemployment benefits and tax relief, raising taxes on wealthier taxpayers becomes a real possibility. 

However, CPA Jared Feldman, stated that history has not always supported the notion that the federal government will raise taxes when they need more money. Feldman added that there are ways of raising taxes without raising rates. 

For example, even though there were no changes in the tax rates in the CARES Act, some provisions decreased the tax burden for some wealthy taxpayers that own businesses. 

See Jeff Stimpson, Higher Taxes For Wealthy A Stark Possibility In Wake of Virus, Financial Advisor Magazine, June 15, 2020. 

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

June 17, 2020 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, June 16, 2020

Assisted living looks for an assist

ChoosingAssistedLivingThroughout the COVID-19 pandemic, nursing homes have continued to be a focus given the threat that the virus poses to seniors. Residents of nursing homes account for more than one-third of deaths in our nation. 

Assisted living facilities have been excluded from federal relief aimed at nursing homes and other providers. These communities are meant for socializing among seniors who might need some help but can largely function on their own, unlike nursing homes, which provide round-the-clock care.

It is difficult to tell how this has affected these communities since they are not subject to any federal reporting requirements. The state data suggests that they are experiencing fewer cases and deaths than nursing homes. However, operators are reaching out for assistance now as the costs for protective equipment and COVID-19 testing have accumulated. The largest operator with 741 communities, Brookdale Senior Living, expects to spend $60 million on virus-related expenses by the end of the month.

Due to the virus, the facilities have not been able to take in new residents and have also been losing residents which has created a decrease in revenue. Residents typically pay out of pocket and the average monthly cost is about $4000 a month.

The facilities that accept Medicaid will soon begin receiving funds for provider relief under the CARES Act. Although it is a start, operators say it is not enough. 

See Angelica LaVito, Assisted Living Looks for an Assist, Bloomberg, June 15, 2020. 

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

June 16, 2020 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Monday, June 15, 2020

Best Practice Considerations for Virtual Execution of Estate Planning Documents

6a01bb07f6b79e970d01b7c7794534970bMarissa German and Barbara Kimmitt, attorneys for the Canadian legal practice of Bennett Jones LLP, recently wrote about the considerations that you should take when virtually executing estate planning documents. 

Due to the COVID-19 pandemic, a Ministerial Order (M.O.) was signed in Canada which modifies current legislation on a temporary basis to allow for virtual witnessing of Wills, Enduring Powers of Attorney and Personal Directives (Estate Planning Documents). The modification was made with the public interest in mind since some people cannot leave their homes due to health concerns. 

The M.O. specifies two requirements for the virtual execution of Estate Planning Documents:

  1. The persons must be connected to each other by an electronic method of communication in which they are able to see, hear and communicate to each other in real time; and 
  2. A lawyer must be providing the maker/donor/testator of the document with legal advice and services respecting the making, signing and witnessing of the Estate Planning Document.

As of now, the M.O. does not expressly allow for the execution of Estate Planning Documents in counterpart, but attorneys are working for legislation to obtain it; this would make virtual execution of Estate Planning Documents less cumbersome. 

German and Kimmitt also provided a in-depth list of the best practices for Lawyers who are assisting clients in the execution of Estate Planning Documents using video conferencing may wish incorporate the following best practices. 

See Marissa German & Barbara Kimmitt, Best Practice Considerations for Virtual Execution of Estate Planning Documents, Bennett Jones LLP, June 10, 2020. 

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

June 15, 2020 in Current Events, Estate Planning - Generally, Technology | Permalink | Comments (0)