Wills, Trusts & Estates Prof Blog

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

Tuesday, November 24, 2020

Article on Cooperative Compliance Program for Individuals and Trusts: A Proposal for a Compliance Passport

Philip Marcovici and Noam Noked recently published an article entitled, Cooperative Compliance Program for Individuals and Trusts: A Proposal for a Compliance Passport, Wills, Trusts, & Estates Law ejournal (2020). Provided below is the abstract to the Article. 

Tax and beneficial ownership transparency regimes result in substantial costs and risks for many law-abiding individuals, family trusts, and private investment vehicles. Such parties suffer from substantial direct and indirect costs, legal uncertainties, and risks to their privacy. This article develops a proposal for a voluntary program which draws upon cooperative compliance programs such as the International Compliance Assurance Programme. Under the proposed program, the authorities of the relevant jurisdictions would determine on a joint basis whether the participant is in full compliance with their tax obligations and whether there are any money laundering concerns. The proposed program would ensure the participants’ compliance while reducing the costs and risks for the participants and the relevant governmental authorities.

November 24, 2020 in Articles, Current Events, Estate Planning - Generally, Estate Tax, Income Tax, Trusts | Permalink | Comments (0)

Sunday, November 22, 2020

Is Now the Right Time to Forgive Intrafamily Loans?

Estate planningIf you made intrafamily loans to family members in the past, or even more recently due to the COVID-19 pandemic, you should consider forgiving those loans. Here's why, as of now, the gift and estate tax exemption rates are at an all-time high. Also, the interest rates are at a record breaking low. 

It is possible that intrafamily loans can be used as an estate planning tool due to the ability to transfer wealth to your loved ones tax free so long as the loan proceeds reach a certain level of returns. 

"Generally, to ensure the desired tax outcome, an intrafamily loan must have an interest rate that equals or exceeds the applicable federal rate (AFR) at the time the loan is made. The principal and interest are included in the lender’s estate, so the key to transferring wealth tax-free is for the borrower to invest the loan proceeds in a business, real estate or another opportunity whose returns outperform the AFR."

Any excess from these investment returns over the interest expense will work as a tax-free gift to the borrower. With low interest rates, it is much easier to outperform the APR. 

If have some leftover exemption, forgiving an intrafamily loan will allow you to transfer the entire loan principal plus any accrued interest tax-free. This will allow you to take advantage of the $11.58 million exemption amount before it is gone. 

There are also income tax considerations. Typically, forgiving intrafamily loans will be considered a gift, which carries with it no income tax consequences. 

In deciding whether or not you should forgive an intrafamily loan, you should speak with your financial and/or estate planning advisor.

See Joseph R. Marion, III & David T. Riedel, Is Now the Right Time to Forgive Intrafamily Loans?, Adler, Pollock, & Sheehan P.C.: Insight on Estate Planning, October 27, 2020.

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

November 22, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax | Permalink | Comments (0)

Saturday, November 21, 2020

The Family Feud Behind a $32 Million T. Rex Named Stan

PNG imageLegendary paleontologist brothers Peter and Neal Larson dug up the fossils of a 40-foot-long Tyrannosaurus rex out of the ground in South Dakota. The twenty-eight year old discovery, now known by Stan, sold for $32 million dollars, a record breaking price for a fossil. 

One would expect this would be a joyful moment for the Larson brothers. However, the Larsons have been in a yearlong legal battle, and the sale of Stan only added fuel to the flame. The hope was that the sale of Stan would bring the brothers closer together, but it appears that has not been the case. Friends have begun to worry that the high sale price "deepened the bad blood between the brothers" as Neal received all of the money. 

“I figured they might still dislike each other, but there’s no way they’ll ever get over this,” said Mark Norell, chair of paleontology at the American Museum of Natural History.

The original plan for Stan was to stay at the Larson brothers' Black Hills Institute of Geological Research in Hill City, S.D., but two years ago the brothers were in a complex ownership dispute and were ordered to divide the institute's assets and go their separate ways. 

The older brother, Peter, kept the institute and along with it, 100,000-plus fossils and 5,000-square-foot private museum, which was valued around $5 million. Neal, was given the rights to Stan and the proceeds as his buyout. At the time, the deal appeared financially equal, but of course at the time Stan was not predicted to sell for $32 million. 

As it turns out, neither one of the brothers thought they'd make that much "in the history of their entire business." 

See Kelly Crow, The Family Feud Behind a $32 Million T. Rex Named Stan, The Wall Street Journal, October 21, 2020. 

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) for bringing this article to my attention.  

November 21, 2020 in Current Events, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Friday, November 20, 2020

Debt After Death: What You Should Know

BoxHeadAlthough some debts are relieved when you die, others may have a great impact on your family. Below are a few things you should know about incurring debt and how those debts may impact your family after your death. 

First, after you die, your debt becomes apart of your estate. Dividing up your debt is done in a process called probate. "The length of time creditors have to make a claim against the estate depends on where you live. It can range anywhere from three months to nine months. Therefore, you should get familiar with your state’s estate laws, so you are well aware of which rules apply to you."

You should know that Beneficiaries' money is partially protected but only if they are named properly. Unsecured creditors usually will not be able to touch funds that are in life insurance policies or 401(k)s. However, if beneficiaries are not named until after your death, the funds will go to the estate leaving them open to creditors. 

Credit card debt will not disappear so easily. It is the norm for the estate to pay credit card debt using the estate's assets. So long as children are not a joint holder on the account, they will not inherit credit card debt. If a surviving spouse is a joint borrower, they will be responsible for their deceased spouse's debt. It is important to pay attention to joint applicants and joint borrowers on your credit card accounts, whether or not they had anything to do with the credit card following the paperwork. 

Federal student loan debt will be forgiven. Once the borrower dies, the debt is forgiven, however, proof of death is required. This rule is not the same for private student loan debt. Although some loan programs offer loan forgiveness upon death, others are not so generous. Thus, it is important to know where your student loans came from and who the borrower was, especially for private loans. 

In regard to your mortgage, if your heirs inherit property, lenders must allow them to take over the mortgage. However, heirs are not required to keep the mortgage and can refinance or pay off the debt. This same rule applies to the surviving spouse. 

Marriage is very important. If your spouse dies, you are legally required to pay any "joint tax owed to the state and federal government."

It is very important for you to organize your debts and use any safeguards possible to plan for your debts and how they may impact your family in the event of your death. 

See Michael Aloi, Debt After Death: What You Should Know, Kiplinger, November 2, 2020.

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

November 20, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax | Permalink | Comments (0)

Biden Won’t Enforce DOL's Revamped ESG Policy, State Street Says

Estate planningPresident-elect Joe Biden's administration has gotten to work around the topic of retirement policy. It appears that the Biden administration will be focusing on ordering non-enforcement of the U.S. Department of Labor's "revamped ESG rule." 

The DOL modified the rule in response to a slew of criticism, but the Biden administration is "likely to do a sweep of all regulatory agencies to ensure that regulations encourage environmental social and governance investing and that companies address climate change, racial equity, and inclusion" said Melissa Kahn, State Street's managing director. 

Kahn further stated, “I think the Biden administration will say, ‘Let’s put a hold on any enforcement of this regulation.’ Whether they decide to pull back the regulation entirely or make revisions remains to be seen, but the first thing they can do is put in place a non-enforcement policy.” 

Kahn also predicted that the Biden administration will focus on fiduciary regulation. There still remains a great deal of uncertainty around the topic of fiduciary regulation, so it would not be surprising for the Biden administration to revisit the topic and possibly make corrections to the DOL's fiduciary rule pertaining to investment advice. 

The uncertainty has made it difficult for financial advisors regarding the recommendation of rollover space and whether it is a fiduciary act or not. 

Kahn stated that she does not believe the Democrats will win both Senate seats in Georgia, leaving control of the Senate in the hands of the GOP. 

See Tracey Longo, Biden Won’t Enforce DOL's Revamped ESG Policy, State Street Says, Financial Advisor Mag, November 17, 2020.

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

November 20, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Thursday, November 19, 2020

Alzheimer’s Research Looks at Hot Spots Across the U.S.

AlzheimersApparently, where you live impacts the risk of getting Alzheimer's disease. Scientists and medical researchers have done loads of research on things that may increase the chances of developing Alzheimer's, but now, they are focusing on the potential role that location may play. 

Through research, researchers have found that certain counties and neighborhoods have a higher prevalence of Alzheimer's disease, the sixth-leading cause of death in the United States. 

The next step is seeking to find if these locations have common risk factors associated with Alzheimer's. 

"The data show, among other things, that overall prevalence is more highly concentrated in the Southeast and Gulf Coast states, including Florida and Texas, compared with Western states, such as Colorado and Arizona." 

The research has only just begun and as expected, there are still a lot of unanswered questions. One study has shown that Alzheimer's is more prevalent in poor neighborhoods while another showed a higher prevalence in in rural Appalachia compared with non-Appalachian rural counties. 

The data also showed that social determinants of health, like higher levels of poverty, fewer options for exercise, and less education are risk factors. 

This new research may also be an effective aid in helping researchers pinpoint which intervention efforts will be more successful. 

See Clare Ansberry, Alzheimer’s Research Looks at Hot Spots Across the U.S., The Wall Street Journal, November 16, 2020. 

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

November 19, 2020 in Current Events, Estate Planning - Generally, Technology | Permalink | Comments (0)

Year-end planning just got a whole lot more complicated

Estate planningAs Election Day approached, talk surrounding estate planning grew. Presidential candidate Joe Biden announced his tax plan proposal, which many thought may come to fruition if the Democratic Party won the Presidency and took over a majority of the Senate. The proposed tax plan would significantly reduce estate and gift tax exemptions. 

Although the election has come and gone, there is not yet much clarity surrounding the future of estate planning. It appears more likely than not that Joe Biden will be the next President, there is still a lot of discussion. Further, the determination of which party will control the Senate will not be made until the two runoff elections in Georgia are held in January.

Therefore, we will not know who will control the Presidency, House, and Senate until after 2020 has ended. Due to the uncertainty, estate planning has been and will continue to be difficult. 

It may be in your client's best interest to take advantage of the current tax exemptions while they are available. Whether this is what is best for your client will depend on their current financial situation. It may be the case that the potential reduced exemptions will not affect them.

However, "The harder situation is for those individuals who might not have a federal tax due at death if the exemptions stay where they are, but would owe tax if they were to be cut by 50% or more. Those of us who lived through 2012 have already seen this movie. In these cases, there may be ways to structure the gift to give a family more time to make the decision."

It is important to discuss the implications of the new exemption rates and the potential impact they could have on your client, whether or not the new tax plan is a sure thing.

See Scott Bieber, Year-end planning just got a whole lot more complicated, Thompson Coburn LLP, November 13, 2020. 

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

November 19, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Tuesday, November 17, 2020

Rothschild descendant claims initial victory in legal battle with Vienna

Rothschild A Rothschild descendant has "claimed an initial victory" in a legal battle with the City of Vienna regarding the challenge of a medical trust set up by his ancestors. The medical trust was seized by Nazis in 1938 and is now controlled by the city. 

Geoffrey Hoguet is suing the Austrian authorities for control of the trust. "The case is the latest chapter in Austria’s long, slow reckoning with one of the darkest chapters in its history, the persecution of its Jewish citizens after it came under Nazi rule, and the theft of their property and assets." 

Hoguet was supported by a court when his lawyer claimed that the city of Vienna had a conflict of interest over the foundation's finances. The court held that "an independent figure, or "collision curator" must be appointed to represent the charity in legal proceedings over a 2017 change to its statutes." 

This decision was very important as it was a step forward in correcting "the course of Nazi-era injustices endured." Hoguet has now called on Viennese politicians to take action and reinstate and independent governing board. 

Hoguet, an American, learned that his great-grandfather set up a foundation for mental health and neurological conditions. "The Nathaniel Freiherr von Rothschild foundation flourished in the city known as the birthplace of modern psychiatry, and home of Sigmund Freud, with board members at one point including a Nobel laureate."

Hoguet has made it his mission to end the pattern of erasure that "scrubbed" the city of any remembrance of the Rothschild's philanthropy and investment that shaped the city. 

See Emma Graham-Harrison, Rothschild descendant claims initial victory in legal battle with Vienna, The Guardian, November 14, 2020. 

Special thanks to Daryane Couto for for bringing this article to my attention.

November 17, 2020 in Current Events, Estate Planning - Generally, New Cases, Travel, Trusts | Permalink | Comments (0)

It’s a tough year for year-end tax planning

Estate planningWith the new year approaching and the likelihood of a new president, advisers have their work cut out for them. Not knowing who will control the senate, leaves helping clients plan difficult. 

If the Democrats control the Senate, it is more likely that tax plans will change dramatically as Presidential candidate Joe Biden's proposal is very different from what President Donald Trump implemented. Control of the Senate will likely be determined on the Georgia Senate seats. 

Although possible, the odds of the Democrats winning both Georgia Senate seats is only 25%. Thus, it is not very likely. 

Even though Democratic control of the Senate is unlikely, the possibility should be taken into consideration. Under Biden's proposal, capital gain tax, charitable giving, and estate tax would be affected. 

Biden has proposed raising the capital gain rate form 20% to 39.6% for taxpayers with income over $1 million. So it may be more beneficial for individuals to sell before the end of the year. 

In regard to charitable donations, Biden's proposal caps itemized deductions at a 28% tax benefit for anyone making more than $400,000, compared to the current rate of 37%. 

In regard to estate tax, the Biden plan would reduce the gift and estate tax exemption from the current $11.58 million to $3.5 million. 

If your clients are making plans and their plans include one of these three categories, it may be safe for them to go ahead and make their moves before 2021. 

See Dave Strausfeld, J.D., It’s a tough year for year-end tax planning, Journal of Accountancy, November 16, 2020. 

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

November 17, 2020 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Monday, November 16, 2020

When Medicare Choices Get ‘Pretty Crazy,’ Many Seniors Avert Their Eyes

RetireWith the new year approaching, many seniors will be bombarded with messages about their Medicare coverage. These messages range from emails to physical mail to television ads. 

The fall enrollment season which began October 15 and will run until December 7. During this season, "enrollees can shop Medicare’s marketplace for the prescription drug and Advantage plans offered by commercial insurance companies. They can also switch between fee-for-service original Medicare and Advantage."

The choices continue to grow as time passes. This year, enrollees will have 57 different coverage plans to choose from. At its inception in 1965, Medicare was much more basic and was seen as a social insurance program. Eligible workers would pay taxes and premiums but would all receive the same coverage. 

Between the 1990s and 2006 and continuing on, Medicare has expanded greatly. The growth allows people to make decisions and choose plans that are best tailored to their needs and lifestyle. 

This type of shopping is very important because seniors' needs may change, requiring them to shop for new plans and coverages that fit their lifestyle changes.

See Mark Miller, When Medicare Choices Get ‘Pretty Crazy,’ Many Seniors Avert Their Eyes, N.Y. Times, November 13, 2020. 

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

November 16, 2020 in Current Events, Elder Law, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)