Wills, Trusts & Estates Prof Blog

Avoid Probate Court: Head to Your Bank Instead [Texas]

Probate court is expensive and time intensive, and the majority of accounts have beneficiary designations that allow them to be transferred outside of probate. With a trust, more assets can be transferred outside of a courtroom. Financial institutions are called upon to help a customer determine what type of account to use and, after death of the customer, review legal documents and carry out the transfer instructions.

There are other tools that can be utilized to avoid a formal probate process, such as a small estates affidavit in Texas for estates that have less than $75,000 in assets (excluding the homestead). If there is a will and there are no unpaid debts or a need for administration, the will can be admitted to probate under a unique Texas proceeding known as a “muniment of title.” No administrator will be assigned and banks will be presented with a certified copy of of either a a small estates affidavit or an order admitting a will to probate as a muniment of title to pay out the funds in the accounts.

Power of attorney (POA) can also avoid the complex issue of a guardianship, and under a new state statute passed in 2017, POAs in Texas have expanded powers. Due to this, financial institutes also have a statutory obligations to report alleged fraud or abuse of the elderly to the proper authorities.

Employees of financial institutes are finding themselves in position to answer difficult questions and find harder solutions. They may find themselves in more of an advisor role. They may need to become more knowledgeable about statutory changes and new estate planning options, especially self-help tools, that are available to customers and train their personnel accordingly.

See David B. West, Avoid Probate Court: Head to Your Bank Instead, Lexology, October 4, 2018.

Article on The Use and Abuse of Governing-Law Clauses in Trusts: What Should the New Restatement Say?

Thomas P. Gallanis recently published an Article entitled, The Use and Abuse of Governing-Law Clauses in Trusts: What Should the New Restatement Say?, Wlls, Trusts, & Estates Law eJournal (2018).

This Essay offers a novel solution to a thorny problem at the intersection of trust law and the conflict of laws: When should the settlor be able to choose a governing law other than the law of the jurisdiction with the most significant relationship to the trust? The law of the conflict of laws gives effect to a governing-law clause in a trust instrument except when contrary to the “strong public policy” of the jurisdiction with the most significant relationship to the matter at issue. But what is “strong public policy”? The answer should not depend on the size of the Chancellor’s foot. This Essay proposes, instead, that the answer should incorporate the well-established distinction between the default rules of trust law, which aim to effectuate the intention of the typical settlor but yield to a particular settlor’s contrary intention, and the mandatory rules of trust law, which apply without regard to intention for reasons of overriding public policy. This Essay proposes that a governing-law clause in a trust instrument should be effective unless contrary to the mandatory law of the jurisdiction with the most significant relationship to the matter at issue. The Essay urges the adoption of this approach by the Restatement (Third) of the Conflict of Laws, which is currently in the process of being drafted.

Article on Comments on Proposed Regulations: 'Contributions in Exchange for State or Local Tax Credits' (Reg-112176-18)

Lawrence Zelenak recently published an Article entitled, Comments on Proposed Regulations: 'Contributions in Exchange for State or Local Tax Credits' (Reg-112176-18), Tax Law: Tax Law & Policy eJournal (2018).

These comments offer three recommendations, of which only the first involves a change in the proposed regulations themselves. First, rather than treating state tax credits as an exception to the general rule that a charitable deduction is not reduced by benefits a donor receives from third parties, the final regulations should set forth a general rule that the amount of a charitable deduction is reduced by benefits a donor receives from any source on account of the donation. Second, the preamble to the final regulations should clearly state that SALT ceiling workarounds (involving purported donations to the states themselves) would not be effective under well-established substance-over-form principles, even in the absence of new regulations. Finally, the analysis in Example 2 (in the Special Analyses, not in the proposed regulations themselves) should be revised to reflect the application of substance-over-form principles to state tax credits for contributions to the states themselves.

Why Repeal of the NJ Estate Tax Means Married Couples Should Update Their Wills

As of the first of 2018, New Jersey repealed its state estate tax - but the federal estate does still applies. Many people do not need to adjust or update their wills, including those that are not married but have living descendants, you do not have children and plan to leave your assets to other such as siblings, family members, etc., or you are married couples with children and you plan to leave everything outright to your surviving spouse. Note, however, that New Jersey did not repeal its inheritance tax, so siblings or family members will still be required to pay that tax.

The repeal of the state estate tax, however, can dramatically affect married couples who set up a trust for the surviving spouse. Now clients have the ability to be even more tax efficient for income tax and capital gains tax purposes as they do not have to worry about the New Jersey estate tax.

An easy solution when the estate isn't very large or complex would be to eliminate the trust and leave all the assets to the surviving spouse outright. However, if you are in a second marriage situation or if you are concerned about the surviving spouse getting remarried or spending away the children's inheritance this may not be the wisest option. A smarter choice may be to get with a your attorney to revise the formulas in the Will or Trust so that it gets a step-up in basis when the surviving spouse dies.

See Kevin A. Pollock, Why Repeal of the NJ Estate Tax Means Married Couples Should Update Their Wills, Kevin A. Pollock BLAWG, October 3, 2018.

Article on Oh the Insanity: After 124 years, It's Time to Amend Mississippi's Slayer Statute to Account for the Insane Slayer

Zachary B. Roberson published an Article entitled, Oh the Insanity: After 124 years, It's Time to Amend Mississippi's Slayer Statute to Account for the Insane Slayer, Wills, Trusts, & Estates Law eJournal (2017). Provided below is an abstract of the Article.

While almost every jurisdiction in the United States addresses slayer inheritance, many states have failed to account for the possibility of a slayer with a mental disability or disorder. Courts in states that do not have a modern slayer statute are left with the potentially unsettling task of applying an outdated slayer statute to a modern insanity fact pattern that was not contemplated by the state legislature when the slayer statute was enacted. For example, Mississippi’s slayer statute has not substantively changed in the 124 years since its original enactment. In a 2015 case, Estate of Armstrong v. Armstrong, the Mississippi Supreme Court held that the state’s slayer statute was inapplicable to killers who were found to be insane at the time of the killing. The court reasoned that an insane person lacks the ability to willfully kill as required by the state’s slayer statute. Considering the Mississippi Supreme Court’s recent decision in Armstrong and its public policy ramifications, this article, the first to analyze the Armstrong case, focuses on Mississippi law and the reasons why the Mississippi legislature must update the state’s slayer statute. This article contends that so called insane slayers should not be allowed to inherit from their victim. First, under Mississippi law, any monetary inheritance received by the insane slayer will be taken by the state to pay for the reasonable cost of care provided during the insane slayer’s involuntary commitment. Second, the insane slayer should not inherit from his or her victim because of the inferred change in the victim’s intent created by the insane slayer’s murderous act. Finally, the precedent set by the Armstrong decision disregards the traditional public policy justifications for slayer statutes. This article concludes with a recommended amendment to the Mississippi slayer statute which would create a mandatory disclaimer on the part of an insane slayer.

The Transitory Nature of the Estate Tax Exemption Amount

The wealthy rejoiced when the Tax Cuts and Jobs Acts (TCJA) increased the exemption to $11.18 million, and married couples have the added benefit of enjoying double this amount as well as exemptions being portable. But these increases are not permanent, meaning they will revert back to their previous amount (adjusted for inflation) in 2026.

There was included suggestions within the TCJA that Congress could make the adjustments "permanent," but in legislation there is no such thing -  a willing Congress and President could simply pass another act that nulls it.

Elizabeth Warren has been making some noise about becoming a possible presidential candidate for the 2020 election. Among her proposed legislation is reverting the estate tax exemption to 2009 numbers - $3.5 million for an individual and $7 million for couples -  and increasing what the taxable estate would be taxed at to 55%.

Warren’s bill also includes progressive, marginal estate tax rates with higher thresholds: 60 percent on anything over $10 million for an individual or $20 million for a couple and then 65 percent on anything over $50 million for an individual or $100 million for a couple. For estates worth more than $1 billion, all of those rates would be increased 10 percent across the board to 65 percent, 70 percent, and 75 percent, respectively.

See Charles Rubin, The Transitory Nature of the Estate Tax Exemption Amount, Rubin on Tax, September 28, 2018.

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

Projected 2019 Tax Rates, Brackets, Standard Deduction Amounts and More

Inflation and cost-of-living adjustments are routinely included in tax legislation, thus the reason there are changes every year to standard deduction amounts, federal gift tax exemptions, and others. Because a higher consumer price index pushes the brackets upward and increases the standard deduction and exemption amounts, the taxes due on the same income will decrease.

Capital gains rates will not change for 2019 but the break points for the rates will change.

Personal exemptions used to further decrease your taxable income before you determined your tax. A person was generally allowed one exemption for themselves, but under the Tax Cuts and Jobs Act there will not be a personal exemption for 2019. But standard deductions were typically doubled for many taxpayers for 2018, and with inflation, the standard deductions are projected to be increased for next year.

For more tax predictions, refer to the article.

See Kelly Phillips Erb, Projected 2019 Tax Rates, Brackets, Standard Deduction Amounts and More, Forbes, September 14, 2018.

 

CLE on 2018 Tax Updates for Trusts and Estates

The National Business Institute is holding a webinar entitled, 2018 Tax Updates for Trusts and Estates , on Monday, December 17, 2018, at 9:00 a.m. to 12:15 p.m. Central. Provided below is a description of the event:

Program Description

The Latest Information and Tools to Minimize Clients' Tax Burdens

This incisive course will get you up to speed on the year's developments in estate planning and asset protection tax laws so you can make tactical decisions and provide cutting-edge representation. Let our esteemed faculty guide you through ongoing legislative developments, key laws and rulings so you can enhance your tax planning strategy and ensure compliant returns - register today!

• Review the latest developments in federal estate, gift, GST and income tax laws and regulations.
• Gain summaries of the most important court rulings of the year - and understand how they impact your practice.
• Get ahead of the game: discover how you can prepare yourself for changes that are just on the horizon.

Who Should Attend

This essential update is for attorneys. Accountants, tax professionals, wealth managers, trust administrators/officers and paralegals will also benefit.

Course Content

1. TCJA Update: Unpacking Its Many Practical Implications
2. IRS Tax Forms and Procedures Updates
3. Current IRS Guidance and Enforcement Initiatives
4. Federal and State Case Rulings to Keep an Eye on
5. Looking Ahead

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 3.00 -  AK
CLE 3.00 -  AL
CLE 3.00 -  AR
CLE 3.00 -  AZ
CLE 3.00 -  CA
CLE 4.00 -  CO
CLE 3.00 -  CT
CLE 3.00 -  DE
CLE 3.50 -  FL*
CLE 3.00 -  GA
CLE 3.00 -  HI
CLE 3.00 -  IA
CLE 3.00 -  ID
CLE 3.00 -  IL
CLE 3.00 -  IN
CLE 3.50 -  KS
CLE 3.00 -  KY
CLE 3.00 -  LA
CLE 3.00 -  ME
CLE 3.00 -  MN
CLE 3.60 -  MO
CLE 3.00 -  MP
CLE 3.00 -  MS
CLE 3.00 -  MT
CLE 3.00 -  NC
CLE 3.00 -  ND
CLE 3.00 -  NE
CLE 3.00 -  NH
CLE 3.60 -  NJ
CLE 3.00 -  NM
CLE 3.00 -  NV
CLE 3.50 -  NY*
CLE 3.00 -  OH
CLE 3.50 -  OK
CLE 3.00 -  OR
CLE 3.00 -  PA
CLE 3.50 -  RI
CLE 3.00 -  SC
CLE 3.00 -  TN
CLE 3.00 -  TX*
CLE 3.00 -  UT
CLE 3.00 -  VA
CLE 3.00 -  VT
CLE 3.00 -  WA
CLE 3.50 -  WI
CLE 3.60 -  WV
CLE 3.00 -  WY

Continuing Professional Education for Accountants

Credit Hrs State
CPE for Accountants 3.50 -  AZ
CPE for Accountants 3.50 -  NY*
CPE for Accountants 3.50 -  WA
CPE for Accountants 3.00 -  WI

 * denotes specialty credits

CLE on New Tax Basis Reporting Requirements in Estate Administration

The National Business Institute is holding a teleconference entitled, New Tax Basis Reporting Requirements in Estate Administration, on Wednesday, November 7, 2018, at 11:00 a.m. - 12:30 pm. Central. Provided below is a description of the event:

Program Description

Are You Following the New Tax Rules?

The way tax basis of assets is reported during estate administration has changed. Are you confident in your knowledge of the basis consistency rules to ensure every estate is administered correctly? Clarify the new rules and get practical tax-saving tips from experienced faculty - register today!

• Compare the new basis consistency rules and the old law.
• Adopt your tax planning and reporting practices to reflect the new requirements.
• Determine what asset valuation method to use for basis reporting purposes.

Who Should Attend

This tax law update is designed for attorneys. It will also benefit accountants and CPAs, estate planners, trust officers, and paralegals.

Course Content

• New Basis Consistency Rules vs. the Old Law
• What Executors/Personal Representatives Need to Know NOW
• New Information That Must be Included
• Valuation of the Assets for Basis Reporting Purposes
• Reporting to Beneficiaries

Continuing Education Credit

Continuing Legal Education

Credit Hrs State
CLE 1.50 -  AK
CLE 1.50 -  AL
CLE 1.50 -  AR
CLE 1.50 -  AZ
CLE 1.50 -  CA*
CLE 1.50 -  CO
CLE 1.50 -  CT
CLE 1.50 -  DE
CLE 2.00 -  FL*
CLE 1.50 -  GA
CLE 1.50 -  HI
CLE 1.50 -  IA
CLE 1.50 -  ID
CLE 1.50 -  IL
CLE 1.50 -  IN
CLE 1.50 -  KS
CLE 1.50 -  KY
CLE 1.50 -  LA
CLE 1.50 -  ME
CLE 1.50 -  MN
CLE 1.80 -  MO
CLE 1.50 -  MP
CLE 1.50 -  MS
CLE 1.50 -  MT
CLE 1.50 -  NC
CLE 1.50 -  ND
CLE 1.50 -  NE
CLE 1.50 -  NH
CLE 1.80 -  NJ
CLE 1.50 -  NM
CLE 1.50 -  NV
CLE 1.50 -  NY*
CLE 1.50 -  OH
CLE 2.00 -  OK
CLE 1.50 -  OR
CLE 1.50 -  PA
CLE 1.50 -  RI
CLE 1.50 -  SC
CLE 1.50 -  TN
CLE 1.50 -  TX
CLE 1.50 -  UT
CLE 1.50 -  VA
CLE 1.50 -  VT
CLE 1.50 -  WA
CLE 1.50 -  WI
CLE 1.80 -  WV
CLE 1.50 -  WY

Continuing Professional Education for Accountants

Credit Hrs State
CPE for Accountants 1.50 -  AZ
CPE for Accountants 1.50 -  NY
CPE for Accountants 1.50 -  WA
CPE for Accountants 1.50 -  WI

Financial Planners – Financial Planners: 1.50

National Association of State Boards of Accountancy – CPE for Accountants/NASBA: 1.50 *

* denotes specialty credits

CLE on The Proposed § 199A Regulations and Multiple Trust Rules: What Estate Planners Need to Know

The American Law Institute is holding a webcast / teleconference entitled, The Proposed § 199A Regulations and Multiple Trust Rules: What Estate Planners Need to Know, on Wednesday, October 17, 2018, at 12:00 p.m. - 1:30 p.m. Eastern. Provided below is a description of the event:

Why You Should Attend

In conjunction with a massive tax cut for C corporations, 2017 tax reform enacted Internal Revenue Code § 199A, providing owners of pass-through entities, such as S corporations, partnerships (including LLCs), and sole proprietorships, with a deduction of up to 20% of their qualified business income. Whether one receives the deduction and how much it is depends on a variety of factors. In addition to the law needing clarification, several commentators suggested ways to avoid limitations that reduce the deduction – ways the IRS viewed as abusive.   Proposed regulations released in August fill in many details and close perceived loopholes. Join us to learn how the proposed regulations inform business structuring, when the deduction is available and when it is not, how to try to work within the rules to maximize the deduction, the effect of basis on the deduction and the government’s position on when basis step-up helps and when it does not, the desirability of shifting income to get a better result, and how the deduction works for trusts and informs our planning for them.  

What You Will Learn

A faculty of highly experienced estate planners will review the basic rules for context and summarize ACTEC’s comments on the proposed regulations. They will then dive into the complexities of:   

How optional aggregation can help those who have set up multiple entities for their business

How activities associated with specialized service trades or businesses can become tainted

How changes in basis may or may not affect the § 199A deduction

Planning for trusts to maximize the § 199A deduction

How the scope of the multiple trust rules under § 643(f) affects trust planning (even when the § 199A deduction is not involved)

Who Should Attend

This webcast from ALI CLE and ACTEC will benefit any estate planner, but particularly those who advise sole proprietorships, partnerships, and S corporations.