Wills, Trusts & Estates Prof Blog

Video wills: Leaving a legacy moves into 21st century

The COVID-19 pandemic has pushed new tech adaptations in regard to wills. 

Since the Wills Act of 1837, making a will has required the physical presence of at least two witnesses, at least in England and Wales.

However, the Ministry of Justice now allows video technology to be used to witness the signing of wills. The concession has been backdated to January 31, 2020, which will cover all wills that were witnessed by video and will remain current until January 2022.

The Ministry of Justice has stated that they prefer that this method is only used as a last resort. For example, when the testator cannot meet people outside of their household. 

The pandemic has pushed many people to change their priorities, which has in turn pushed people to make wills. Will-writing organizations and law firms have seen a vast increase in the amount of wills. 

Farewill, which is the UK's largest will-writing organization saw a "three-fold" increase between May and July compared to the same period last year. 

Lorraine Robinson, head of legal at farewill, stated that she is on board with the new technological advances, but that people should be "vigilant" due to the newness and uncertainty of the new law. 

Many attorneys are urging those to only use this modern approach in the "most dire emergencies." 

See Lindsay Cook, Video wills: Leaving a legacy moves into 21st century, Financial Times (U.K.), September 3, 2020. 

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

Utah becomes first state to enact the Uniform Electronic Wills Act

The 2020 Sixth Special Session of the Utah Legislature passed the Uniform Electronic Wills Act. The bill was subsequently signed by Governor Gary Herbert on August 31, 2020 and took effect immediately. Notably, the enacted version allows for remote witnessing.

Utah is thus the first and only state to enact the UEWA joining four other states which authorize electronic wills (Arizona, Florida, Indiana, and Nevada; DC temporarily authorizes them during COVID).

Special thanks to Adam J. Hirsch (Professor of Law, University of San Diego School of Law) for being the first of many to bring this landmark development to my attention.

House OKs on 2nd reading bill extending estate tax amnesty by 2 more years

"The House of Representatives approved on second reading a bill that would extend the estate tax amnesty program by another two years."

The House Bill, No.7068, will amend Republic Act No. 11213 (Tax Amnesty Act) extending the estate tax amnesty from two years to four years. 

The Bureau of Internal Revenue defines estate tax as a "tax on the right of the deceased person to transmit his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made law as equivalent to testamentary disposition." 

On Feb. 14, 2019, President Rodrigo Duterte signed RA 11213 into law and it took effect on May 31 of 2019. 

"The tax amnesty covers the estate of decedents who died on or before Dec. 31, 2017, with or without prior assessments." 

"Rep. Joey Salceda of Albay's 2nd District and chairman of the House Ways and Means Committee, pointed out that only less than 24,000 taxpayers availed of the amnesty since the original deadline for the availment and payment has been extended four times, with the new deadline set on Dec. 31, 2020."

Salceda also mentioned that the availment of amnesty only resulted in earnings of $1.362 billion out of the projected $6 billion plus. 

Therefore, the two year extension is necessary in order for the Act to be effective. 

See House OKs on 2nd reading bill extending estate tax amnesty by 2 more years, CNN Phillipines, September 9, 2020. 

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

The 2020 Election in Maryland: It's Not About Politics

During Autumn of 2020, Maryland's new elective share law will take effect. "No longer limited to a fractional share of the net probate estate, a surviving spouse who decides to reject what was given to him under the decedent's existing estate plan will then receive his elective share out of the deceased spouse's augmented estate."

Maryland's existing share law is based on a statute that was originally enacted in 1798. That statute states:

“Instead of property left to the surviving spouse by will, the surviving spouse may elect to take: (1) A one-third share of the net estate if there is also a surviving issue; or (2) A one-half share of the net estate if there is no surviving issue.”

Any rights the spouse has in non-probate assets will be unaffected by the spouse's exercise of her elective share rights. The fact that non-probate assets and other inter vivos transfers will not be affected by the election is an important upside. 

Under the new law, "a surviving spouse who exercises his right of election will receive a share of the deceased spouse’s estate from a mix of assets that includes probate assets, property outside of the probate estate, and certain other lifetime and testamentary transfers."

"The new law establishes the following ordering rule for the satisfaction of the elective share, to determine the priority of payment from assets included in the estate and which are not part of the spousal benefits: (i) from the probate estate; (ii) from the revocable trust; (iii) if the decedent had more than one revocable trust, by apportionment among the trusts in proportion to the value of each revocable trust; and (iv) by the recipients of any other portions of the estate, prorated among the recipients in proportion to the value of the assets received by each recipient. The decedent’s will or trust instrument may override the ordering rule, or the parties who pay the elective share may enter into an agreement subject to court approval for payment of the elective share."

See Linda Kotis, Andrea Dykes, & Carolyn Rogers, The 2020 Election in Maryland: It's Not About Politics, American Bar Association: Probate & Property, July/August 2020. 

Remote Notarization and Witnessing Extended in New York

On July 6, 2020, Governor Cuomo (N.Y.) signed Executive Order 202.48, which extends the option for individuals to use remote procedures to execute estate planning documents in order to practice social distancing. Individuals will be able to execute documents through video conferencing through August 5th, unless further extended. 

Executive Order 202.7 allows individuals to have documents notarized virtually through video conferencing, while Executive Order 202.14 allowed for the use of video conferencing for witnessing. 

Although the Executive Orders allow for individuals to execute documents from a distance, the formality itself is no more relaxed than before. Therefore, it is important to be informed of the necessary requirements to properly executed documents through these procedures. 

See, Remote Notarization and Witnessing Extended in New York, Hodgson Russ L.L.P., Jul 21, 2020.

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

Charitable Donors Get New Perks From CARES Act

Thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, charitable giving for high-net-worth clients comes with new tax perks. 

According to Lisa Colletti, managing director and partner at Aspiriant in New York, it is likely that wealthy donors may increase the amount they give to charity this year. Colletti further stated, “While portfolio values are down, the wealthy are keenly aware the need for support is way up.”

According to Bruce Primeau, Perks can last into the future, too. “Any amount contributed in excess of the AGI can be carried forward and deducted over the next five years.”

According to Suzanne Shier, Chicago-based wealth-planning practice executive and chief tax strategist for Northern Trust Wealth Management, Donors who have planned gifts in their estate plan should examine lifetime charitable gifts, which offer the benefit of “meeting the immediate needs of charities and taking a current income tax deduction rather than a deferred estate tax deduction.” Shier also added that gifts of long-term appreciated marketable securities might work especially well.

Also good for donors, an occasionally down market and historically low-interest rate environment also make this a good time to consider a charitable lead annuity trust (CLAT).

See Jeff Stimpson, Charitable Donors Get New Perks From CARES Act, Financial Advisor Magazine, May 18, 2020. 

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

D.C. Council raises gas and other taxes, rejects tax increase on wealthy, during first budget vote

On Tuesday, the D.C. Council raised the gas tax and eliminated some tax breaks for businesses, but rejected an income tax hike for the wealthy, during a contentious debate over how to winnow the budget as the coronavirus crisis continues to decimate the economy. 

The Council also reduced the estate tax threshold from $5.6 million to $4 million. The Council claims the revenue from this increase will be about $1.8 million.

The council addressed the tax issues before unanimously approving a spending plan for the fiscal year that starts OCt. 1, in the first of two budget votes scheduled this month.

Mayor Muriel E. Bowser (D) did not include tax increases in her budget proposal. However, she said she would plug an $800 million hole largely by freezing pay and hiring, and tapping reserves. In a letter to lawmakers, Bowser said it would be "foolhardy to raise taxes this year."

However, lawmakers raised an extra $63 million by increasing some business and other taxes and dedicated the funding to social services including housing vouchers, assistance to undocumented immigrants and mental health assistance in schools. 

Meeting virtually via zoom, the hearing turned chaotic as lawmakers had a hard time following the details of complex tax proposals. 

Council Chairman Phil Mendelson (D) sought to delay some of the tax increases for the time being. Mendelson noted that revenue projections are likely to shrink again when forecasters revise their estimates in late summer, which will force the council to revisit the budget. 

After passing the budget, the council approved legislation needed for the Bowser administration to move forward on a deal to build a new hospital to replace the public United Medical Center in Southeast Washington. 

The council also voted to grant Bowser the power to keep restricting businesses and social activities to limit the spread of coronavirus. 

Under law, the mayor can declare a state of emergency for 135 days — meaning the current emergency would end July 24. 

See Fenit Nirappil & Julie Zauzmer, D.C. Council raises gas and other taxes, rejects tax increase on wealthy, during first budget vote, Washington Post, July 7, 2020.

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

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:

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.

Costa Rica latest country to legalize same-sex marriage

Costa Rica's supreme court ruling went into effect early Tuesday morning, removing the ban on same-sex marriage. Some couples broadcasted their ceremonies, while others were held privately, but either way there was reason to celebrate in Costa Rica. 

Yaritza Araya and Alexandra Quiros were married just after midnight in an outdoor service and became the first legal gay marriage in Costa Rica. Also, gay equality activist Marco Castillo married his longtime partner before a judge on Tuesday morning. 

Castillo had fought for same-sex marriage for years and was recently sanctioned as a notary for conducting the marriage of two women, which was later annulled. 

President Carlos Alvarado broadcast the message, "Today we celebrate freedom, equality, and democratic institutions." In August 2018, Costa Rica's supreme court said the country's ban on same-sex marriage was unconstitutional and gave the congress 18 months to act, but the Legislative Assembly never acted, so at midnight, the law banning same-sex marriage was nullified. 

 

See Javier Cordoba, Costa Rica latest country to legalize same-sex marriage, AP News, May 26, 2020. 

Tactics for Stretching Retirement Assets Under the SECURE Act

On December 20, 2019, President Trump signed into law The Setting Every Community Up for Retirement Enhancement (SECURE) Act. The Act has many provisions related to financial planning, with a focus on retirement planning with IRAs and employer-sponsored plans. One of the more attractive provisions under the Act is the curtailing of "stretched" inherited retirement assets. 

Generally in a stretch arrangement, one spouse will retire with a retirement account, which would be tapped during their lifetime and the balance would then be left to a surviving spouse. The surviving spouse would then draw down the account and eventually leave what is left to their children or other beneficiaries. The ultimate heirs or beneficiaries would then have the opportunity to spread required minimum distributions (RMD) over their life expectancies, which could possibly lead to years of untaxed compounding and substantial wealth accumulation. 

The SECURE Act eliminates the stretch for most beneficiaries, but keeps the opportunity intact for the plan participant's surviving spouse. Also, disabled and chronically ill beneficiaries can still take advantage of the stretch in regard to RMDs. 

The IRS has just recently released new life expectancy tables for distributions beginning in 2021, which designated beneficiaries will be able to use. Compared to 2019, the life expectancy is longer, which means fewer RMDs each year, a potentially smaller tax on those RMDs, and more funds left in the IRA for continued compounding. 

The SECURE Act applies to the retirement accounts of individuals who die in 2020 or later. The accounts of people who have died before 2020 will fall under the old rules until the beneficiary dies.

Under the SECURE Act, those planning for retirement have the opportunity to choose from a number of tactics to find what fits their financial scheme.

See Sidney Kess & Julie Welch Tactics for Stretching Retirement Assets under the SECURE Act, The CPA Journal, April, 2020. 

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