Wills, Trusts & Estates Prof Blog

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

Tuesday, November 20, 2018

Article on The Discovered Country: Wyoming's Primacy as a Trust Situs Jurisdiction

WyAmy M. Staehr recently published an Article entitled, The Discovered Country: Wyoming's Primacy as a Trust Situs Jurisdiction, 18 Wyo. L. Rev. 283-320 (2018). Provided below is an introduction to the Article.

The world is shrinking; it is becoming known. The global community, of which we are all a part, has embraced information sharing, transparency, and collaboration between jurisdictions. Thanks to legislation and enforcement efforts both at home and abroad, governments are collecting long overdue taxes on unreported foreign gains, continuing to close tax and reporting loopholes, and using multinational tools to combat money laundering. To be sure, these efforts have been going on for quite some time and their value is crucial to the viability of nations, to our general safety as citizens of the world, and in ensuring that enacted tax and financial laws are enforced against everyone. As these efforts progress, so do their corollary impacts. Aside from the benefits mentioned above,these efforts have resulted in increased reporting burdens for individuals, banks, money managers, and trust companies; a glut of shared financial information that some governments have little ability to sift through and make use of; and potentially increased peril for individuals living in certain parts of the world. As the intimate nature of our world increases, the laws within jurisdictions and governing interactions between them continue to evolve. As a result, families and the people who advise them are in the unique position of being able to consider a variety of jurisdictions—both new and established—and select the one with the right opportunities, sufficient flexibility, and appropriate safeguards in which to locate trusts to hold a portion or all of a family’s wealth.

In 2010, as part of the Hiring Incentives to Restore Employment (HIRE) Act, Congress passed the Foreign Account Tax Compliance Act (FATCA) in an effort to target non-compliance by U.S. taxpayers making use of foreign accounts, including those utilized by offshore trusts. As a result, U.S. jurisdictions gained popularity as trust situs locations. Wyoming began to be recognized as a safe, stable, and friendly jurisdiction in which to locate a trust, offering accommodating and evolving trust legislation, a state-income-tax-free climate, and enhanced creditor protection. Christopher M. Reimer’s comprehensive 2011 Wyoming Law Review article entitled The Undiscovered Country: Wyoming’s Emergence as a Leading Trust Situs Jurisdiction details Wyoming trust law as compared to other leading jurisdictions at that time.

Since the publication of that article, neither the scrutiny of offshore trust jurisdictions nor the corresponding interest in U.S. jurisdictions has subsided. The FATCA-generated financial information sharing between the U.S. and foreign governments spurred a global initiative, headed by the Organization for Economic Co-operation and Development (OECD), to implement similar information exchanges across the global community. In 2014, the OECD approved the Common Reporting Standard (CRS), under which at least ninety-five jurisdictions have agreed to the automatic exchange of financial information. The OECD based the provisions of CRS largely on FATCA, with the result that financial institutions around the world, including trusts and some business entities, share account ownership and other detailed financial information with participating governments. Although the U.S. joined the 2014 Declaration on Automatic Exchange of Information in Tax Matters, which endorses the general principles of CRS, it has not signed onto the Multilateral Competent Authority Agreement. The FATCA regime already provides the U.S. government with the information it deems useful; further, joining requires legislative action. Nevertheless, the U.S. has avoided being deemed non-cooperative according to OECD standards.

November 20, 2018 in Articles, Current Affairs, Estate Administration, Trusts | Permalink | Comments (0)

Why HNWs Should be Worried About the Probate Fee Hike

UnionBritain has announced a substantial increase in the probate fee, which grants access to the control of a person's estate. The increase is slated to take effect in April of 2019, and is disguised as a tax for the wealthier estates of the country.

The claim is that it is intended to pay for court reform and will be applied on a sliding scale of estate value. Estates worth less than £50,000 will be exempt from the probate fee. The new tariff represents a dramatic increase on the current fees, which peak at £215 for a personal application, to secure the necessary documentation. An estate worth an estimated £2 million will be expected to pay £6,000 in the future, though it is not quite as large of a jump as the proposed £20,000 fee for an estate that size that was put forth just a few years ago.

This change will leave many estates struggling to pay the fee up-front when assets are tied up in frozen bank accounts or property, which in turn will make it mandatory for banks to open up accounts to pay these fees. It may also make people distance themselves from using wills and instead gift assets during their lifetime. Others may attempt to mitigate the probate fee by using the survivorship rules of joint property and joint bank accounts. But automatic inheritances may create inequalities between siblings and other family members.

See James Ward, Why HNWs Should be Worried About the Probate Fee Hike, Spear's, November 13, 2018.

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

November 20, 2018 in Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation, Travel, Wills | Permalink | Comments (0)

Monday, November 19, 2018

IRS Announces Higher 2019 Estate and Gift Tax Limits

CashThe Internal Revenue Service announced today the official estate and gift tax limits for 2019, with the estate and gift tax exemption increased to $11.4 million per individual and the annual gift exclusion remaining the same at $15,000. Even if you are not ultra rich, the increase is a reminder that every person needs an appropriate estate plan.

There were only an estimated 1,890 taxable estates in 2018 after the Tax Cuts and Jobs Acts issued in by President Trump. This is a large increase from just a few years ago in 2013 when there was 4,687 taxable estates when the exemption was $5 million. The proponents of the increase are pushing for the increases to be permanent, while at the moment they are set to expire in 2025.

Palmer Schoening of the anti-death tax Family Business Coalition says that the ultimate goal would be a complete repeal of the estate tax, but permanency of the increases would make the transition easier. In the meantime, the wealthy will continue to plan around the estate tax, whittling down their estates with lifetime wealth transfer strategies to keep below the new threshold and avoid the 40% federal estate tax.

See Ashlea Ebeling, IRS Announces Higher 2019 Estate and Gift Tax Limits, Forbes, November 15, 2018.

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

November 19, 2018 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, New Legislation | Permalink | Comments (0)

Article on Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds

FiduciaryPaul Rose recently published an entitled, Article on Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds, 2018 U. Ill. L. Rev. 891-923. Provided below is an abstract of the Article.

This Article challenges the standard doctrine that public pension funds should be managed solely for the benefit of plan participants and their beneficiaries. Instead, economic logic suggests that public pension fund trustees owe their duties to the public collectively. This analysis is driven by the fact that, in practice, individual pension fund claimants function more like senior creditors than the residual claimants that are the typical recipients of fiduciary duties, and that the public—and current and future taxpayers specifically—are the true residual risk bearers for public pension funds.

This reframing of fiduciary duties in public funds has dramatic consequences for the investment policies of the funds. Most importantly, a shift in the locus of fiduciary duties to public wealth maximization will require fund managers to more fully consider the externalities accompanying their investments, which should serve to help them fully and accurately price their investments. Private investors might ignore certain negative effects, such as uncompensated harms from pollution or depleted natural resources, because the government absorbs the costs of such externalities. Indeed, a strict fiduciary duty to act in the interests of the fund would obligate a private investor to ignore such externalities, so long as they do not negatively affect the returns of the fund’s investments. The government—and by extension, the public who funds the government—that absorbs the cost of these externalities, however, should view investments differently. They should view it with an eye to minimizing negative externalities, particularly those that are significantly more expensive to remediate than to prevent. Similarly, a strict reading of fiduciary duty would suggest that funds should ignore positive externalities from investments that benefit society but not the plan participants. A focus on public wealth maximization would suggest that positive externalities should also be taken into account in investment decisions, which might, as a consequence, result in more investment in sustainable enterprises and long-term projects.

November 19, 2018 in Articles, Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Sunday, November 18, 2018

Stan Lee’s Tangled Web of Estate Planning ­and How to Avoid it in Your Own Life

StanStan Lee, former Marvel Comics publisher and chairman, passed away this week at the age of 95. Lee is survived by his 68-year-old daughter J.C., who also had the challenge of handling her mother's passage this past year as well. Stand and Joan were married for almost 70 years. It is yet unknown if Lee had a trust or a will. Several celebrities have foregone estate planning documents recently, including Aretha Franklin and Prince.

Estate planning can be an emotional process, and maintaining one can be especially tricky as a person ages, especially if the person has cognitive degeneration. This was a potential concern for Lee, who first claimed that his daughter had befriended three men and that all four individuals were conspiring to take advantage of him, then rescinded the claim three days later. It is best to decide the issues of who will take care of personal and financial decisions before an elderly person declines. “Older people get less confident in what they’re doing, and they get more susceptible to being influenced by other people who may not have the best of intentions," said David Lehn, partner in the private client and tax team of Withers.

Lee admitted that in the beginning he worked with several attorneys and managers that either did not have the best intentions or were simply not trustworthy. Now, one of the greatest complications of Lee’s estate, and specifically his daughter, will be dealing with the numerous documents potentially floating around because of these past relationships. Even people without millions of dollars and a career creating iconic superheroes should prepare for the future they will and will not be in.

See Alessandra Malito, Stan Lee’s Tangled Web of Estate Planning ­and How to Avoid it in Your Own Life, Market Watch, November 17, 2018.

Special thanks to Carissa Peterson (Hrbacek Law Firm, Sugar Land, Texas) for bringing this article to my attention.

November 18, 2018 in Elder Law, Estate Administration, Estate Planning - Generally, Trusts | Permalink | Comments (0)

Seven Estate Planning Considerations for Blended Families

AarpBlended families are becoming increasingly common, and with that comes specific considerations. When one of the parents/step-parents pass away, it leaves both step-children and biological children depending on the remaining person to make testamentary decisions that would have been supported by both. Unfortunately, that is not always the case.

Here are seven specific tips for second (or third, fourth, etc.) marriage couples:

  1. Upon the death of the first spouse, a trust can be established for the benefit of the surviving spouse to provide them with income and perhaps principal. The spouse should not be the only trustee, and consider giving a children a bequest upon the first death.
  2. If spouses want to sign a joint trust then the trust should be drafted so that it becomes irrevocable upon the first death.
  3. As troubling as it may be on the facade, consider worst case scenarios and open a separate bank account with the children named as beneficiaries.
  4. Discuss funeral arrangements and plans with family members proactively, and sooner rather than later.
  5. Consider naming your spouse and one of your children as co-attorneys in fact.
  6. Communicate, communicate, communicate! Make sure everyone is on the same page, knows your wishes, and does not feel betrayed.
  7. Beneficiary designations trump a well drafted estate plan, so double check them.

See Meredith Murphy, Seven Estate Planning Considerations for Blended Families, Salawus, November 13, 2018.

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

November 18, 2018 in Elder Law, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Friday, November 16, 2018

Article on The 2017 Tax Act's Potential on Bank Safety and Capitalization

Tax actMark J. Roe & Michael Troege recently published an Article entitled, The 2017 Tax Act's Potential on Bank Safety and Capitalization, Tax Law: Tax Law & Policy eJournal (2018). Provided below is an abstract of the Article.

Much has been written and discussed in banking circles about recent rollbacks in prudential regulation, with some seeing the rollbacks as unsafe and others seeing them as allowing stronger financial action. Undiscussed is that the basic taxation of the corporation in the United States — and banks are taxed like ordinary corporations — has a profound impact on the level of debt and equity throughout the economy and in the banking system in particular, and that recent changes to the tax code could affect bank safety, stability, and capitalization levels.

We analyze here how and why the 2017 tax act will incentivize banks to be better capitalized, albeit modestly so. For those worried about regulatory rollbacks that decrease bank safety, this tax incentive — which has been unremarked upon and not analyzed in the academic literature, as far as we can tell — offsets some recent regulatory rollbacks. And, more important analytically and potentially for policy, we show that this tax change, if properly expanded, would have a major beneficial safety impact on banks. Properly reformed, the taxation of banks (1) can substantially improve bank safety, at a level that may well rival the improvements from post-crisis regulation and (2) can be done in a revenue-neutral way.

November 16, 2018 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Mom's Shocking Diary Secret Triggers Legal Challenge by Daughter

FranceParents are meant to provide, care, nurture their children and do everything in their power to allow their children become the greatest adults they could be. But what if a parent withholds an incredible opportunity from their child, supposedly out of love? Also, what if the child finds out about that betrayal years down the road, after the beloved parent has passed away?

That's what happened to Celeste, a student in high school from California with a knack for speaking France. A knack so great, in fact, that she won a local foundation's contest to spend a month in France. Upon her return, the president of the foundation was so impressed that he wrote a letter addressed to both Celeste's mother and Celeste herself, offering her a scholarship to the university of her choice in France, paying all expenses and tuition. But the mother did not pass on the message; instead she replied back that she could not stand for her daughter so be so far away for so long, and that Celeste would remain in her hometown and pursue cosmetology.  The mother signed the letter "Leave us alone!"

Celeste never left home, had three adult children with French names, and never lost her love for the French language. It was not until she was going through her mother's diary 2 weeks after her passage that she discovered the letter and the selfish intent behind its refusal. She now wants to know what she can do against her mother's estate, which is giving a sizable amount to charity and grandchildren. She would first have to file a claim against the estate, as creditors are paid first, then if that is denied she would file a lawsuit against the estate, claiming her mother breached her duty to her by wrongfully withholding the offer.

Secondly, she would have to send post cards from France.

See H. Dennis Beaver, Esq., Mom's Shocking Diary Secret Triggers Legal Challenge by Daughter, Kilpinger, November 14, 2018.

Special thanks to Lorri Carpenter (CPA, Florida) for bringing this article to my attention.  

November 16, 2018 in Current Events, Estate Administration, Estate Planning - Generally, Travel, Wills | Permalink | Comments (2)

Thursday, November 15, 2018

How to Choose the Right Guardian

BabyhandIf you have minor children, selecting the right person to be the guardian for them in the tragic instance that you die or become incapacitated is one of the most important planning decisions that you have to make. Failing to do so could put the future of your precious offspring in the hands of an impersonal court system.

Tackling the responsibility of another person's child or children is not one that should be taken lightly, and thus should be accepted willingly and with a complete understanding of the duty. A proper guardian should be reliable and stable, with sound judgment and values that are similar to your own so the person can be an appropriate surrogate parent. Though being a family member is often seen as a necessary factor in being a guardian, it is not required. But having an established and caring relation with the child or children can be considered immensely valuable.

Children can be inherently expensive, from sports to education to medical bills. Asking a person to be the guardian for your children is also asking them to be responsible for their financial obligations as well. Therefore, it is important to work with a knowledgeable estate planner who can help arrange financial support not only directly for your child, but also if necessary, for the personal costs that the guardian incurs in taking care of your children. Depending on the circumstances and the people or person you choose, the trustee for your children's trust can be the same person or different from the person who choose to be the children's guardian.

See Cheryl E. Hader & Jonathan Kane, How to Choose the Right Guardian, Kramer Levin, November 8, 2018.

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

November 15, 2018 in Current Affairs, Estate Administration, Estate Planning - Generally, Trusts, Wills | Permalink | Comments (0)

Wednesday, November 14, 2018

Article on Non-Grant of ‘Letters of Administration’ Where ‘Suit for Partition’ is the Efficacious Remedy

TajShivam Goel recently published an Article entitled, Non-Grant of ‘Letters of Administration’ Where ‘Suit for Partition’ is the Efficacious Remedy, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article.

The scope of an administration suit is to collect the assets of the deceased to pay off the debts and other charges and to find out what is the residue of the estate available for distribution amongst the heirs of the deceased. A suit for partition is distinct from an administration suit. Though administration of the estate may ultimately after accounts are taken also entail ‘partition’, but where it is found that there is no need for administration and what is in effect sought is partition only, the court is entitled in exercise of discretion under Section 298 of the Indian Succession Act, 1925 (hereinafter referred to as the ‘ISA’) to refuse the grant of Letters of Administration and to relegate the parties to the remedy of partition.

November 14, 2018 in Articles, Estate Administration, Estate Planning - Generally, Travel | Permalink | Comments (0)