Wills, Trusts & Estates Prof Blog

ABA RPTE Conservation Easement Task Force Report: Recommendations Regarding Conseration Easements and Federal Tax Law

The ABA Conservation Easement Task Force published this Report, entitled, ABA RPTE Conservation Easement Task Force Report: Recommendations Regarding Conseration Easements and Federal Tax Law, Real Property, Trust and Estate Law Journal, Vol. 53, No. 2 (Fall 2018/Winter 2019). Provided below is the synopsis of the Report.

In October 2015, the American Bar Association's Real Property, Trust and Estate Law (RPTE) section convened a Conservation Easement Task Force. The objective of the Task Force was to provide recommendations regarding federal tax law as it relates to conservation easements. This Report is the culmination of the Task Force's work. Part I of the Report is an Executive Summary of the Task Force's recommendations. Part II provides the background necessary to understand the Task Force's recommendations. Part II briefly set forth the Task Force's comments of the Tax Cuts and Jobs Act of 2017 as it relates to charitable contributions in general and conservation easement donations in particular. In Part IV, the Task Force recommends that the Treasury publish safe harbor provisions that would be common to most conservation easements. Part V sets forth the Task Force's recommendations regarding amendments and discretionary consents, the inconsistent use regulations, and furthering transparency in conservation easement administration. Part VI discusses issues surrounding valuation of conservation easements. Part VII contains a brief comment on syndicated conservation easement transactions. Part VIII is the Task Force response to certain proposals the Treasury Department made (most recently in 2016) to change conservation easement law.

Appendix A sets forth the "perpetuity" requirements of § 170(h) and the Treasury Regulations. Appendix B offer specific language to facilitate the preparation of key safe harbor provisions.

Washington Becomes the First State to Legalize Composting of Humans

Washington Governor Jay Inslee signed a bill this Tuesday that legalizes human composting, but the law will not go into effect until May of next year. Human composting speeds up the process in which dead bodies turn into soil. Human composting will be the third option for citizens, combined with traditional burials and cremations.

The bill's sponsor, Senator Jamie Pedersen, said it is an environmentally friendly way of disposing of human remains and that it gives citizens more "freedom to determine for themselves how they'd like their body to be disposed of." The option also will be cheaper, estimating that composting will cost $5,500 compared to burials at $8,000 to $25,000 and cremations ranging up to $6,000.

According to Katrina Spade, the CEO of the human composting company Recompose, a "body is covered in natural materials, like straw or woods chips, and over the process of about three to seven weeks, thanks to microbial activity, it breaks down into soil." The family of the deceased will then received the soil that remains, and will be up to them how they use the soil.

Recently, Luke Perry's family had his body undergo a similar process by burying him in a "mushroom suit."

See Faith Karimi & Amir Vera, Washington Becomes the First State to Legalize Composting of Humans, CNN, May 22, 2019.

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

Note on No Good Deed Goes Unpunished: How the New Hampshire Probate Court Has Strengthened the Power of the Attorney General in Charitable Trust Suits

Angelina M. Spilios, recently published a Note entitled, No Good Deed Goes Unpunished: How the New Hampshire Probate Court Has Strengthened the Power of the Attorney General in Charitable Trust Suits, 17 U.N.H. L. Rev. 379-408 (2019). Provided below is an abstract of the Note.

As Americans increasingly use estate planning tools to provide for their favorite charities, the charitable trust is an important instrument that fits uniquely into general trust law. While charitable trusts are similar to private trusts to a great extent, there are also some critical differences between the two vehicles, especially regarding their enforcement. Specifically, state attorneys general play a special role in the enforcement of charitable trusts. This Note examines this special role of the state attorney general—namely, how trustees interact with the attorney general, arguments for why the role of the attorney general needs to be reformed or eliminated, and arguments in support of letting the attorney general maintain his or her power in these charitable trust cases.

After considering the historical background on charitable trusts, this Note analyzes a recent New Hampshire case, In re Nashua Center for the Arts, as an example of how the New Hampshire Probate Court affirmed the power of the state Attorney General in this charitable trust setting. In that case, several groups of concerned citizens tried to intervene when the trust for Nashua Center for the Arts, part of the Edith Carter estate, announced it would relocate its funds to the Currier Museum of Art in Manchester, New Hampshire. The court denied their motions to intervene because only the state Attorney General has the power to represent them—the parties did not have standing to intervene on their own. The Note then explores other New Hampshire cases, Massachusetts cases, and legal disputes in other states to provide additional perspectives.

This Note concludes that while the court’s decision in In re Nashua Center for the Arts initially seems like a harsh injustice for the nonprofits in Nashua that felt entitled to make use of the funds from Edith Carter’s estate, the court correctly applied the existing law. The outcome of the case should remind nonprofits and citizens in New Hampshire that, while the state has held itself out as one of the most progressive states for trust law, the significant powers held by the state Attorney General will not be limited any time soon.

Texas Woman Taken Off Life Support Against Family's Wishes – Then a Pro-Life Group Stepped in

Donald Jones and his daughter, Kina, were preparing their final goodbyes this week as their wife and mom, Carolyn Jones, 61, who suffered a stroke in 2017 and has been transferred between different rehabilitation facilities, was about to be taken off life support. She was denied life-saving care by the ethics committee at Memorial Hermann Southwest in Houston after the hospital invoked a law allowing it to deny further care called the Texas 10-day Rule, which is part of  the Texas Advance Directives Act.

Texas Right to Life and other pro-life groups in the state rallied together after the plug was pulled and the hospital refused to give Jones dialysis. The groups transported her Wednesday using a private ambulance to a new hospital, and the woman began receiving dialysis on Thursday. Her daughter said that her mom is in stable condition and looks like herself once again.

"It's kind of crazy that you try to get someone out of a hospital so their life could be saved," Mark Dickson, director and vice president of Right to Life East Texas, who was with Jones and helped to orchestrate her "escape," told Fox News." He believes that the decision by the ethics committee had more to do with the family's financial situation. The Jones' and the pro-life groups want to change the law so that no other family has to endure what they did at the hand of the Texas 10-Day Law.

See Caleb Parke, Texas Woman Taken Off Life Support Against Family's Wishes – Then a Pro-Life Group Stepped in, Fox News, May 17, 2019.

CLE on Estate Planning: New Laws That Make Old Tools Obsolete

The National Business Institute is holding a teleconference entitled, Estate Planning: New Laws That Make Old Tools Obsolete, on Friday, June 7, 2019, from 10:00 AM to 11:30 AM Central. Provided below is a description of the event.

Program Description

Stay on the Cutting Edge of Your Practice

This timely update will review the latest changes in the rules and will offer new tools to adapt to the new regulatory environment. Make certain your clients get the most up-to-date representation - register today!

• Get an incisive summary of the tax changes and their implications for existing planning tools.
• Learn which deductions remain and how to obtain them.
• Identify planning approaches that no longer help your clients.
• Gain practical pointers for fixing old trusts.

Who Should Attend

This legal update is designed for attorneys. It will also benefit accountants and CPAs, trust and tax professionals, and paralegals.

Course Content

• Leveraging and Reporting the Step Up in Basis (Recent IRS Guidance)
• QPRT Replacements
• Obsolete Small-to-Medium Size Estate Tools and How to Update Them
• The Sky High Estate/Gift/GST Tax Exemption and the New Approaches it Dictates
• Old Large Estate Techniques That No Longer Work and What to Replace Them With
• Charitable Giving after TCJA
• Using the QBI Deduction: New Opportunities
• Fixing Other Old Trusts
• What if? . . . How the Potential Clawback of the New Rules Affects Client Advice

Comment on Retiring the One-Party Consent Statute for Long-Term Care Residents' Rooms

Lynsie Zona recently published a Comment entitled, Retiring the One-Party Consent Statute for Long-Term Care Residents' Rooms, 50 Ariz. St. L.J., 1347-1378 (2018). Provided below is the introduction to the Comment.

A recent article in the Arizona Daily Star opened with a heartbreaking story: A woman learned that her father had not received a critical medication during a month's stay at an assisted living facility. His health declined rapidly, and he died a few months later. The article featured an interview with a Tucson attorney, who noted that litigation often prompts long-term care facilities to make improvements. According to the attorney, "[i]f facilities are being looked at and watched more closely, they generally will attempt to do better." But litigation comes too late for some families hoping to protect their loved ones. Instead, families may turn to technology to watch their relative's facility more closely and ensure their loved ones are being cared for properly.

The use of an electronic monitoring device ("EMD"), such as a camera, in a long-term care resident's room raises critical ethical and legal questions regarding privacy and responsibility. Currently, most states, including Arizona, rely on wiretapping statutes to govern the use of EMDs in long-term care residents' rooms. In theory, long-term care residents in one-party consent states should be able to capture conversations to which they are a party without seeking the permission of any other party. But the nuanced environment of long-term care complicates the legal analysis, because a resident's room is a home, a health care facility, and a workplace. In states with one-party consent statutes, reliance on wiretapping statutes is inefficient, and exposes facilities and residents to unnecessary risks through uncertainty about rights and responsibilities. Tailored statutes governing EMDs in long-term care facilities clarify the rights and responsibilities of facilities, residents, and residents' family members.

EMD legislation addresses a modern reaction to enduring concerns about inadequate treatment in long-term care facilities. These laws require facilities to permit a resident to use an EMD and outline responsibilities of facilities, residents, and family members. While efforts to legislate the use of EMDs in long-term care facilities span nearly two decades, success has been slow. Only six states have passed legislation addressing EMDs in long-term care facilities. But several factors indicate that EMD legislation may become more popular in state legislatures. First, advances in technology have made it easier than ever to capture and share disturbing videos of elder abuse or neglect in long-term care facilities. A rash of news stories featuring these videos have captured public interest, drawing attention to EMDs. Second, families are interested in using technology to "validat[e] good care." One study found that more than half of individuals with a relative in a nursing home would be likely to request a camera in their relative's room. Finally, the discourse surrounding the most recent EMD legislation suggests that stiff resistance from the long-term care industry may have softened a bit. But the long-term care industry remains wary of efforts to permit residents to install EMDs in their rooms.

This Comment advocates for balanced, thoughtful legislation that permits long-term care residents to use an EMD without interference, but allows a facility to adopt custom EMD procedures. Although the proposed statutory language could benefit any one-party consent state, the approach is tailored for Arizona. The state's demographics, and a recent Arizona Supreme Court decision addressing claims of elder abuse, make Arizona an ideal framework for EMD legislation analysis. Part II examines Arizona law addressing elder abuse, then describes ongoing struggles within the long-term care industry. Part II.C provides a brief overview of one-party consent laws, focusing on Arizona's wiretapping statute. Part III.A describes the privacy concerns surrounding EMDs in long-term care residents' rooms. Part III.B highlights failed EMD legislation efforts and explores the strength of the long-term care industry's influence in state legislatures. Part III.C introduces EMD legislation in four one-party consent states and compares key provisions. Part IV draws upon the provisions in Part III.C and proposes EMD legislation language for Arizona that balances a family's desire to protect a long-term care resident while providing flexibility for the facility.

CLE on Medicaid Update 2019: Knowledgeably Advise Clients on the New Medicaid Changes

The National Business Institute is holding a seminar entitled, Medicaid Update 2019:Knowledgeably Advise Clients on the New Medicaid Changes, on Thursday, June 6, 2019, from 9:00 AM to 4:30 PM at the Illinois Business & Industry Services in Naperville, Illinois. Provided below is a description of the event.

Program Description

Knowledgeably Advise Clients on the New Medicaid Changes

Do you have the most current information relating to the impact of the new Medicaid changes? Are you confident in your ability to advise your clients due to these changes? Join us at this seminar to not just learn what changes have been made, but also gain insight into how the changes will affect your clients. Get yourself up to speed - enroll today!

• Gain valuable insight into Medicare Part A through D so you can help clients ensure that hospital services, medications and medical visits are covered.
• Help clients make smart financial planning decisions with a solid understanding of the new framework.
• Avoid precedence conflicts by analyzing the new federal reforms versus your state's Medicaid policies.
• Review the possible financial outcomes and get tips for helping with planning decisions in light of the Medicaid changes.
• Guide clients through the Medicaid qualification process by knowing what's involved.
• Translate the recent Medicaid reforms into the day-to-day practice skills you'll need to advise your clients.
• Understand limitations on Medicare, long-term insurance and HMO coverage so your clients can plan for uncovered expenses.

Who Should Attend

This basic level seminar is designed for those who need to stay current on the latest in Medicaid law and practice, including:

• Attorneys
• Accountants
• Insurance Professionals
• Nursing Home Administrators
• Paralegals

Course Content

• State and Federal Medicaid Laws Update
• Qualifying Clients for Medicaid and Medicare Benefits
• Planning Tips and Traps
• The Medicaid Application and Appeals Process
• Understanding Medicare Parts A Through D, Veterans' Benefits and the Impact on Medicaid Benefits
• Limitations on Medicare, Long-Term Insurance and HMO Coverage
• Medicaid Estate Recovery

CLE on Qualified Opportunity Funds and Opportunity Zones: What Estate Planners Need to Know

The American Law Institute is holding a webcast entitled, Qualified Opportunity Funds and Opportunity Zones: What Estate Planners Need to Know, on Thursday, ‎May ‎30, 2019, 12:00 to 1:30 pm Eastern. Provided below is a description of the event.

Why You Should Attend

The 2017 Tax Cuts and Jobs Act includes a new tax incentive provision that is intended to promote investment in economically distressed communities, referred to as "Opportunity Zones." Through this program, investors can achieve significant tax benefits: deferral of gain on the disposition of property to an unrelated person until December 31, 2026 so long as the gain is reinvested in a Qualified Opportunity Fund (QOF); elimination of up to 15% of that gain; and potential elimination of tax on gains associated with the appreciation in value of a QOF.

This webcast, taught by highly-experienced estate planning practitioners and Fellows of the American College of Trust and Estate Counsel (ACTEC), will focus on the critical tax rules that you need to know in advising your clients on investing in and establishing QOFs. Particular emphasis will be placed on the estate planning challenges and opportunities that can be presented through such investments.

What You Will Learn

Topics include:

• The income tax consequences resulting from the death of a taxpayer who has deferred gain through a timely reinvestment of such gain in a QOF
• The consequences resulting from the gift of an interest in a QOF including with respect to the tacking of holding periods
• The impact of holding QOF investments through grantor trusts, and whether the ordinary tax rules involving grantor including Rev. Rul. 85-13 apply in the context of QOFs as well
• The application of the 180-day period for rollover of gain to a QOF in the case of partners, S corporation shareholders, and beneficiaries of estates and trusts, and the special timing concerns that may arise in the context of trusts and estates
• Non-tax considerations relating to QOFs, including fiduciary duties and investment related considerations
• Estate planning applications and considerations

All registrants will receive a set of downloadable course materials to accompany the program.

Who Should Attend

Any estate planner with a client interested in investing in Opportunity Zones and QOFs should attend this webcast from ALI CLE and ACTEC.

Section 1035-Your Way Out of Obsolete Life Insurance Trusts

The estate and gift tax exemption increase has had many people wondering if they still need a life insurance trust, a tool that was once hailed for its savings potential. For some clients, dismantling existing life insurance trusts may be the smartest move—but not without considering the repercussions of that approach.

One possibility is the fact that the gift exemption may change in the future and revert back to his previous level of between $5 and $6 million. Another factor for clients is that many reside in states that are subject to separate state estate and inheritance taxes, and the majority of these states kept their thresholds at the same level as they were before the tax reform. Meaning that if state taxes were an issue for the client pre-reform, they continue to present the same issues now. Taxpayers with liability concerns regarding a business should also consider asset protection.

The process of dismantling a life insurance trust is very straight forward. The client could choose to give the policy to his or her spouse, and if there are no other assets held in the trust, that would be the end of it. Sometimes there are issues with remainder beneficiaries. But even if they do want to dismantle the trust, clients understand that they will, continue to have ongoing life insurance needs, be it providing for loved ones or using the cash value of the policy during retirement. Enter the 1035 exchange.

The IRC Section 1035 exchange rules allow the owner of a financial product, such as a life insurance or annuity contract, to exchange one product for another without treating the transaction as a sale. No gain is realized, thus there is no tax liability. To qualify, the policy owner must stay the same, except the IRS has allowed a change when the original policy insured two lives in a second-to-die policy and the exchange policy is a single product due to the death of the second person.

See William H. Byrnes and Robert Bloink, Section 1035-Your Way Out of Obsolete Life Insurance Trusts, Think Advisor, April 17. 2019.

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

California's New Uniform Trust Decanting Act

Last year, California enacted a uniform trust decanting law under Chapter 407 of the California Statutes. The new law allows "a fiduciary of an irrevocable trust may distribute the property of a first trust to one or more 2nd trusts or modify the terms of the first trust without the consent of the beneficiaries or approval of the court, subject to certain exceptions."

The California Commission on Uniform State Laws (CCUSL) is the source of the new law, and the Commission is part of the Legislative Counsel Bureau. The CCUSL is required to "do all in its power to promote uniformity in state laws upon all subjects where uniformity is deemed desirable and practicable."

See Keith Paul Bishop, California's New Uniform Trust Decanting Act, National Law Review, May 2, 2019.

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