Wills, Trusts & Estates Prof Blog

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

Saturday, June 19, 2021

Article: IRS Guidance About the SECURE Act's Beneficiary Provisions Requires Revision

Albert Feuer recently published an article entitled, IRS Guidance About the SECURE Act's Beneficiary Provisions Requires Revision, Wills, Trusts, & Estates Law ejournal (2021). Provided below is the abstract to the Article. Estate planning

The IRS has presented its first and only guidance about how the SECURE Act changed the Required Minimum Distribution (RMD) Rules. This was done in a detailed IRS guide for preparing 2020 returns, and an IRS FAQ web site that referenced the guide that had been released a day earlier. The SECURE Act limited the set of individual beneficiaries permitted to use their own life expectancy to stretch out the benefit distributions after the death of participant. Non-favored individual beneficiaries became subject to a 10-year rule similar to the 5-year rule upon which it is based. The 5-year rule does not require any benefit distributions before the end of the 5-year period, but requires distribution on or before the final day of the period. The 5-year rule is applicable to an estate or trust not treated as a pass-through entity when the participant died before attaining the participant’s required beginning date.

The IRS correctly treats the 10-year rule as replacing a disfavored individual beneficiary’s ability to use the beneficiary’s life expectancy to determine annual RMDs. The return guidance incorrectly describes the 10-year rule as requiring annual distributions in each year following the participant’s death even though the 5-year rule has no such requirement. Furthermore, if the participant dies after attaining the participant’s required beginning date, the IRS guidance prevents a disfavored individual beneficiary from continuing to use the participant’s life expectancy to determine annual minimum required distributions. The IRS does this even though such continuation would result in no further stretch-out of the benefit distributions, and an estate or trust not treated as a pass-through entity may so use the participant’s life expectancy. These limitations are not consistent with the stated purpose of the SECURE Act RMD provisions, the long-standing IRS regulations interpreting the RMD rules, or the amended RMD statute as a whole. Moreover, they may be readily avoided by well-advised participants.

June 19, 2021 in Articles, Current Events, New Legislation | Permalink | Comments (0)

Thursday, June 17, 2021

Barry Sherman’s will divided his estate among Barry and Honey’s four kids when they reach 35 years of age

Though Honey Sherman did not have a will, Barry Sherman had two. Documents that were unsealed by a court last week list assets of $124 million, which are outside of the majority of Sherman's estate that is wrapped up in his private companies. 

Barry Sherman was the founder and owner of Apotex, "a generic pharmaceutical giant." Barry and his wife Honey were well known Philanthropists. 

According to the estate papers, the Shermans' four children were left equal shares of a fortune that has been estimated to be around $10 billion. Though, the kids are not to receive their quarter shares until they reach age 35. 

According to The Star, this is only one of a few intriguing details "in a box of documents that has been sealed since shortly after the Shermans were murdered." Apparently, the Shermans who were one of the most generous couples in Canadian history did not have a provision for money to go to charity. 

When the Shermans were murdered in 2017, their kids were aged 43, 34, 32, and 27. Barry's will states that "until the child reaches 35 years of age, the trustees of his estate have the 'unfettered discretion' to make payments to the child for the 'maintenance, education, advancement in life' of the child. 

See Kevin Donovan, Barry Sherman’s will divided his estate among Barry and Honey’s four kids when they reach 35 years of age, The Star, June 11, 2021. 

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

June 17, 2021 in Current Events, Estate Administration, Estate Planning - Generally, Wills | Permalink | Comments (0)

Tuesday, June 15, 2021

Britney Spears will appear remotely at conservatorship hearing

SpearsBritney Spears will appear at her next conservatorship hearing remotely—along with everyone else. 

On Monday the Los Angeles County Superior Court confirmed that "all parties, including Ms. Spears, are scheduled to appear remotely" for the June 23 hearing.

According to a press release, "[l]imited seating will be available in the courtroom and in an overflow courtroom with a live audio feed from the court." 

The June 23 hearing will be the first time Spears will address LA Superior Court Judge Brenda Penny. 

According to a source close to Britney Spears, her primary focus "is having her father, Jamie Spears, removed from the case." 

The source also said, "[s]he feels that ending the conservatorship entirely can always be discussed down the road, but right now the issue is Jamie."

Samuel D. Ingham III, Britney Spears' attorney stated that Spears was afraid of her father Jamie and "will not perform" going forward should he remain in charge of her career.

See Alex Heigl, Britney Spears will appear remotely at conservatorship hearing, Fox News, June 14, 2021. 

June 15, 2021 in Current Events, Estate Administration, Estate Planning - Generally, Guardianship | Permalink | Comments (0)

Monday, June 14, 2021

Prince Philip Reportedly Left £30 Million in His Will to “Three Key Staff” Members

PhilPrince Philip reportedly left a very generous gift to his closest staff members upon his passing in April. The majority of Prince Philip's estate was likely left to his wife, but a source close to Buckingham Palace revealed that "the Duke of Edinburgh also wanted to give something special to three key staff members he was very close with."

The three staff members include his private secretary Brigadier Archie Miller Bakewell, his page William Henderson, and his valet Stephen Niedojadio.

The three men helped take care of Prince Philip all the way up until his last days. Prince Philip's private secretary, Bakewell, regularly stood in for Philip at events when he was unable to attend. Henderson and Niedojadio would also take turns staying with him during his time at Wood Farm. And Henderson was with Philip during his last two days at Windsor Castle. 

In addition to the three staff members, Prince Harry is expected to receive an inheritance despite the "bombshell Oprah interview" that aired just before Philip's death. A source claimed that the interview should not have any impact on Harry's inheritance stating "that was all sorted out quite a while ago." 

See Emily Kirkpatrick, Prince Philip Reportedly Left £30 Million in His Will to “Three Key Staff” Members, Vanity Fair, May 28, 2021. 

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

June 14, 2021 in Current Events, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Wednesday, June 9, 2021

You May Live a Lot Longer

AgingLife expectancy, especially in America, continues to evolve in unimaginable ways. Phil Mickelson just recently won the P.G.A. Championship. He's 50. Tom Brady just recently won the Super Bowl. He's 43. Serena Williams, one of the greatest tennis players of all time is 39. And Joe Biden, the newly elected President is 78. 

Accordingly, our evaluation of age is changing as people are living longer and accomplishing things ate older ages. "The fraction of over-85s in the U.S. classified as disabled dropped by a third between 1982 and 2005, while the share who were institutionalized fell nearly in half."

The new adjustment in our conception of age has made researchers "distinguish between 'chronological age'—how old the calendar says you are—and 'biological age'—how old your body seems based on measurements of organ functioning and other markers." 

In this sense, people vary widely as there are factors lie genetics, environment, and lifestyle that come into play. 

Nonetheless, Americans seem to be aging more slowly than before. 

See David Brooks, You May Live a Lot Longer , N.Y. Times, June 3, 2021. 

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

June 9, 2021 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Tuesday, June 8, 2021

Tax Trial of the Century…

MJWhen one things of words associated with Michael Jackson (moonwalk, singer, dancer, performer, etc.) they do not typically thing of the words "tax court." However, due to a monstrous tax trial, those words are now associated with Michael Jackson. 

Following Michael Jackson's death in 2009, the Executors of his estate filed an estate tax return reporting the value of his property. Included in this valuation was "Jackson's image and likeness, his 50% interest in Sony/ATV, a music catalog and music publishing business, and his interest in Mijac Music, which owned musical compositions from a variety of artists, including Jackson." 

The IRS challenged the valuation of the assets and the Tax Court was left to determine the fair market value at Jackson's date of death. The Estate valuation was a reported $2.2 million and the IRS's valuation of the assets was a whopping $964 million. 

Due to the unique nature of the assets, the market values were difficult to assess. This difficulty lead to the necessity for professional appraisers to value the assets. 

The Court engaged in a thorough analysis of the valuations performed by experts retained by both sides, while also performing its own analysis. The Court ultimately came to a conclusion which can be seen at the link posted below. 

According to Jackson's Executors:

"This thoughtful ruling by the U.S. Tax Court is a huge, unambiguous victory for Michael Jackson's children. For nearly 12 years Michael's Estate has maintained that the government's valuation of Michael's assets on the day he passed away was outrageous and unfair, one that would have saddled his heirs with an oppressive tax liability of more than $700 million. . ." 

See Mark Dana, Tax Trial of the Century…, SGR Blog, (last visited June 8, 2021). 

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

June 8, 2021 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Music, New Cases | Permalink | Comments (0)

Saturday, June 5, 2021

Oregon woman died homeless while she had $884,000 in unclaimed funds

Estate planningA woman named Cathy Boone died in a shelter in January 2020. Prior to her death, Cathy battled with mental and drug issues.

Cathy died homeless while $884,000 in inheritance money sat unclaimed in a state bank. Cathy's dad, Jack Spithall, said "It just didn't make any sense to me. That money just sitting there—and she needed help in the worst way." 

Cathy grew up near Portland, Oregon but later moved to Astoria where her mother lived. When Cathy's mom died, the representatives of her estate tried to reach Cathy, but were unsuccessful. 

The representatives went as far as using newspaper ads and a private investigator to find Cathy but could not locate her. 

A spokesperson for the Department of State Lands stated: 

"Given a year and a half of effort taken by the personal representative and the attorney for this particular estate, there really isn’t much more that the state could do. This is a unique case and we sympathize with the family."

See Mark Lungariello, Oregon woman died homeless while she had $884,000 in unclaimed funds, Fox News, June 4, 2020.

June 5, 2021 in Current Events, Estate Administration, Estate Planning - Generally | Permalink | Comments (0)

Thursday, June 3, 2021

IRS Practice Units

IRS"As part of LB&I's knowledge management efforts, Practice Units are developed through internal collaboration and serve as both job aids and training materials on tax issues. For example, Practice Units provide IRS staff with explanations of general tax concepts as well as information about a specific type of transaction. Practice Units will continue to evolve as the compliance environment changes and new insights and experiences are contributed."

Visit the link below to view the practice units: 

https://www.irs.gov/businesses/corporations/practice-units

Special thanks to Mark J. Bade (CPA, GCMA, St. Louis, Missouri) for bringing this article to my attention. 

June 3, 2021 in Current Events, Estate Planning - Generally | Permalink | Comments (0)

Monday, May 24, 2021

Democrats Mull Weakening Biden Tax On Capital Gains For Estates

Wealth taxThe Biden administration's proposal to "dramatically expand the inheritance tax bill for wealthy Americans" is beginning to frequent obstacles as Democrats on Capitol Hill are becoming nervousness about the "scope and size of elements of the White House's ambitious plans." 

One of the key elements of the Biden Administration's proposal is ending the step-up in basis, which allows heirs to use the market value of assets at the time of inheritance (as opposed to the purchase price) as the cost basis for capital gains. 

According to those in the loop, "[i]nstead of hitting heirs with a hefty tax payment at the time of the death of their benefactor, staff for House Ways and Means Chair Richard Neal have floated allowing the beneficiaries to defer the bill as long as they hang on to the asset. . ." 

The "Green Book," which is a report from the Treasury Department, is expected to provide some detail on the Biden Administration's tax plans.

See Laura Davison & Nancy Cook, Democrats Mull Weakening Biden Tax On Capital Gains For Estates

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

May 24, 2021 in Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation | Permalink | Comments (0)

Tuesday, May 18, 2021

Michael Jackson Estate Scores Big Tax Court Victory

MJIn Estate of Jackson v. Comm'r, T.C. Memo. 2021-48, "the Tax Court held that the value of the image and likeness of Michael Jackson was $4,153,912, as opposed to the $161,307,045 asserted by the IRS in court, and as compared to the IRS’s original position during audit that the likeness and image of Jackson was worth $434,264,000."

The subject of the proceedings was focused primarily on the likeness and image of Michael Jackson, as opposed to all of his intangible estate property.

Under California's codified Right of Publicity (ROP) Law, "any person who uses a deceased personality's name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods. . .without prior consent from the person or persons, shall be liable for any damages sustained by the person or persons injured as a result thereof." 

The Tax Court held that Image and Likeness is included in the Gross Estate. 

The Estate's appraisal expert estimated a value of $161 million for the ROP, but the Tax Court rejected the opinion, stating that the expert conflated the ROP with the Estate's copyright assets. 

The Tax Court also stated that Jackson's personal life reduced the value of his ROP, based on moral and legal issues "clouding Jackson's reputation." 

See Michael Jackson Estate Scores Big Tax Court Victory, Probate Stars, May 16, 2021. 

May 18, 2021 in Current Events, Estate Administration, Estate Planning - Generally, New Cases | Permalink | Comments (0)