Wills, Trusts & Estates Prof Blog

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

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)

Wednesday, May 27, 2020

Costa Rica latest country to legalize same-sex marriage

Equality-300x193Costa 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. 

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

Tuesday, May 26, 2020

Tactics for Stretching Retirement Assets Under the SECURE Act

UnnamedOn 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.

May 26, 2020 in Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Article on COVID-19 Relief for Retirement Benefits

Albert Feuer recently published an article entitled, COVID-19 Relief for Retirement Benefits: Open Issues, Wills, Trusts, & Estates Law eJournal Retirement_clock_kxdswo(2020). Provided below is the abstract to the Article.

The CARES Act provides cash flow relief for “qualified individuals” with savings and retirement benefits by enhancing provisions for direct loans and indirect loans (repayable distributions) of those individual’s benefits. IRS Notice 2020-23 similarly extends due dates for pension plan loan payments and for completing rollovers of distributions, but such relief is available to all participants and beneficiaries rather than being restricted to “qualified individuals,” but many seem unaware of this relief, particularly the deferral of loan due dates.

However, despite recent IRS and DOL guidance there are still major outstanding issues preventing Covid-19 victims from obtaining better access to their own accrued benefits, when they are most in need of such access, and may impose undue compliance costs or risks on plan sponsors and administrators. Plan administrators, participants, and beneficiaries have the following needs:

• many individuals who have suffered adverse financial consequences from Covid-19 need an expansion of the set of factors defining “qualified individuals” so they may take advantage of the CARES Act relief;

• plan administrators need to understand their responsibilities and authority to make “qualified individual” determinations;

• plan administrators need to understand their fiduciary responsibilities with respect to CARES Act cash-flow relief, particularly their disclosure obligations;

• plan administrators, participants, and beneficiaries need to understand their rights and options with respect to the deferral of plan loan dues dates available under IRS Notice 2020-23 until July 15, 2020 and under the CARES Act for one year;

• plan administrators, participants, and participants need to understand when participants and beneficiaries may choose to avoid income tax withholding on plan distributions;

• plan administrators, participants, and beneficiaries need to understand the circumstances under which participants and beneficiaries may repay distributions to an eligible retirement plan (which includes IRAs) or plans within three years of receipt of such distribution; and

• plan administrators, participants and beneficiaries need states to amend their tax laws to avoid undue interference with the cash-flow relief that the CARES Act makes available to participants and beneficiaries of eligible retirement plans. 

May 26, 2020 in Articles, Current Events, Estate Planning - Generally, New Legislation | Permalink | Comments (0)

Thursday, April 30, 2020

Remote Notarization Law Now Available in Massachusetts

WilltestamentThe number of states that have recently passed legislation to allow remote notarization for estate planning documents during the ongoing pandemic is quickly growing. Massachusetts is number 45 with Governor Baker signing the bill into law on April 27th.

There are certain guidelines that must be followed.

  • The allowance only lasts until three days after the end of the state of emergency, which has been extended to May 18th.
  • Only attorneys and paralegals under their supervision may notarize estate planning documents: wills, trusts, durable powers of attorney, and HIPAA releases.
  • All remote notarization sessions must be recorded and the recording saved for 10 years.
  • The notary must sign a supplemental affidavit verifying a number of facts, including that the person signing the documents and all the witnesses were in the state of Massachusetts.
  • The notarization is not effective until the notary receives and compiles all original signature pages, notarizes the document, and completes supplemental affidavit.

For the immediate future this is great news, but the question remains: why is this law not permanent? Also, why do all the witnesses need to be in Massachusetts? 

See Laura Goodman & Harry S. Margolis, Remote Notarization Law Now Available in Massachusetts, Margolis.com, April 28, 2020.

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

April 30, 2020 in Current Affairs, Current Events, Death Event Planning, Disability Planning - Health Care, Disability Planning - Property Management, Elder Law, Estate Planning - Generally, New Legislation, Wills | Permalink | Comments (0)

Friday, April 17, 2020

If Not Now, When? New Legislation Simplifies Estate Planning in the Time of Coronavirus

ElecNew Jersey has now joined many other states that have enacted laws to allow for digital or remote notarization of estate planning documents during the COVID-19 pandemic. Governor Murphy has signed legislation that was sought by the legal bar to allow real estate closing, estate planning, and other legal transactions to move forward while maintaining social distancing through electronic communications.

A will does not require a notary but does require two witnesses in New Jersey, but to make it a self-proving a notary is required, which means that the will can be admitted to probate without the witnesses needing to be tracked down to attest to the signing. Health care directives require either a notary or two witnesses, although it is standard procedure to have both. Powers of attorney must be notarized. Now neither the witnesses nor the notary have to remain six feet away, but rather can witness remotely through Facetime, Zoom, or any other video application.

See Shana Siegel, If Not Now, When? New Legislation Simplifies Estate Planning in the Time of Coronavirus, National Law Review, April 15, 2020.

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

April 17, 2020 in Current Affairs, Current Events, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, New Legislation, Wills | Permalink | Comments (0)

Sunday, April 12, 2020

Virus Relief Efforts Give Rise to New Tax Strategies

TaxincentivesMany small business owners such as brothers Hy and Adam Schwartz had a primary goal in mind: to their business - S&S Worldwide - in a position to financially recover once the virus pandemic is finally over. "We haven’t caught our breath to say, ‘Hey, this is a great time to transfer wealth to the next generation,'" Adam said.  But for entrepreneurs and others that have the ability to do so, thinking through tax strategies now will reap benefits later.

The filing deadline for federal income tax returns has been pushed back to July 15, giving wealthier Americans who generally owe money a reprieve on both their annual filing and their quarterly payments for the first half of the year. Advisers also say that government relief plans to mitigate the financial impact of the pandemic have created significant opportunities to reduce personal and business tax bills for years. Many of the programs are complex and the incentives based on limited resources during this crisis, thus taxpayers may find it difficult calculating which programs are going to provide the most benefits in the long term.

Quite a large amount of focus has been on the federal government’s $349 billion emergency effort to get money quickly to small businesses through the Paycheck Protection Program, run by the Small Business Administration. The relief is structured as a loan, meant to provide for up to 8-weeks of payroll, but if the business owner spends it according to the agency’s guidelines, it converts to a tax-free grant. The filing process started April 3, but some banks were unable to accept applications on that date. There are other options available that have not been in the spotlight:  the employee retention credit and the deferral on the payroll taxes are options that are better suited to some business owners, said Andrew Finkle, a partner in the Philadelphia office of the accounting firm Marcum.

See Paul Sullivan, Virus Relief Efforts Give Rise to New Tax Strategies, New York Times, April 10, 2020.

Special thanks to Matthew Bogin, (Esq., Bogin Law) for bringing this article to my attention.

April 12, 2020 in Current Affairs, Current Events, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Friday, April 10, 2020

IRS Announces New July 15 Tax Deadline For Expats, Trusts, Estates And Corporations, Includes June 15 Estimated Payments Fix

IrsThe Internal Revenue Service (IRS) recently issued Notice 2020-23 that confirms that all individuals, trusts, estates, corporations and other non-corporate tax filers, including Americans living abroad, get extra time until July 15 to both file and as well as pay federal income taxes. Because of the current COVID-19 pandemic that is currently wrecking havoc on the daily lives of nearly all Americans, the IRS had first only postponed the due date for tax payment, but the filing date for the tax return remained the same at April 15 as of March 18. Two days later, the filing date was also extended.

On March 27 a separate Notice postponed gift and generation-skipping transfer tax deadlines to July 15. But those that were required to make quarterly payments still had their estimated payment deadlines askew: the first quarter deadline of April 15 was pushed back to July 15, but the second quarter deadline was still June 15. Ed Slott of Rockville Centre, New York said “It was the first time in history the 2nd installment was due before the first installment." Now, both of the first and second quarterly payments are due on July 15, third quarter remain due on September 15, and those for fourth quarter are due on January 15, 2021.

See Ashlea Ebeling, IRS Announces New July 15 Tax Deadline For Expats, Trusts, Estates And Corporations, Includes June 15 Estimated Payments Fix, Forbes, April 9, 2020.

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

April 10, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, Estate Tax, Generation-Skipping Transfer Tax, Gift Tax, Income Tax, New Legislation | Permalink | Comments (1)

Thursday, April 9, 2020

The Remote Witnessing of Estate Planning Documents During the COVID-19 Pandemic

DigitalGovernor Andrew Cuomo has signed various executive orders to address the issues faced by the state of New York and its residents during these unprecedented times as the country deals with the COVID-19 pandemic. On April 7, 2020, the Governor issued Executive Order 202.14 which modifies the laws concerning numerous documents pertaining to a person's estate plan.

The act of witnessing for the execution of certain instruments that is required under state laws is authorized to be performed utilizing audio-video technology. Those instruments include:

  • Last will and testament 
  • Lifetime trust
  • Statutory gifts rider to a statutory short form power of attorney
  • Real property instruments
  • Health care proxies
  • Instrument to direct the disposition of a person’s remains upon their death

See Cheryl L. Erato, The Remote Witnessing of Estate Planning Documents During the COVID-19 Pandemic, nyestatelitigationblog.com, March 8, 2020.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) and Ira Bloom (Justice David Josiah Brewer Distinguished Professor of Law, Albany Law School) for bringing this article to my attention.

April 9, 2020 in Current Affairs, Current Events, Death Event Planning, Disability Planning - Health Care, Estate Administration, Estate Planning - Generally, New Legislation, Technology, Trusts, Wills | Permalink | Comments (0)

Tuesday, April 7, 2020

D.C. Proposes Electronic Will Statute

Covid2In response to the COVID-19 pandemic and its astounding affects on the economy and the daily lives of American citizens, the Washington D.C. legislature proposed the COVID-19 Response Supplemental Emergency Amendment Act of 2020 yesterday. Today, an amendment was added to allow its citizens to create wills electronically when "the Mayor has declared a public health emergency."

To read the amendment, see here.

April 7, 2020 in Current Affairs, Current Events, Estate Administration, Estate Planning - Generally, New Legislation, Technology, Wills | Permalink | Comments (0)