Wills, Trusts & Estates Prof Blog

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

Friday, April 5, 2019

Article on The Effects of Capital Gains Rate Uncertainty on Realization

TaxcalcDavid Kamin and Jason Oh recently published an Article entitled, The Effects of Capital Gains Rate Uncertainty on Realization, Tax Law: Tax Law & Policy eJournal (2019). Provided below is an abstract of the Article.

Taxpayers should expect capital gains rates to fluctuate in light of frequent historical changes and the current divergence of rates preferred by Democrats and Republicans. This paper is the first to model the effect of such rate uncertainty on the realization incentives of asset holders and finds those effects to be potentially large. There are several implications. First, rate uncertainty may alleviate the lock-in effect of the realization rule when rates are low and exacerbate lock-in when rates are high. Second, there could be significant inaccuracies extrapolating the elasticity of capital gains realizations measured at one rate to another. Third, some policy solutions aimed at addressing distortions created by the realization rule may not work as well as expected.

April 5, 2019 in Articles, Current Affairs, Income Tax, New Legislation | Permalink | Comments (0)

House Committee Unanimously Passes Bill to Upgrade 401(k) Plans Amid 'Retirement Income Crisis'

CongressA key House committee this past Tuesday passed a bill intended to increase the flexibility of 401(k) plans and improve access to the accounts. The bill, known as the Secure Act, had a Republican and Democrat backing it from the tax-writing Ways and Means committee, and was passed unanimously.

The bill has a significant chance of passing the heavily divided Congress. It contains elements that have support from both industry groups and advocacy organizations. Committee Chairman Richard Neal (D-Mass.) called the bill "a major bipartisan accomplishment" on Tuesday. The bill would be the first major legislative action to affect retirement since the Pension Protection Act of 2006.

The bill will allow small businesses to band together to offer 401(k)s and creates a new tax credit of up to $500 for companies that set up plans with automatic enrollment. It also repeals the maximum age for IRA contributions and raises the age for required mandatory distributions from 70 1/2 to 72. It would also expand the use of 529s, from only college-related expenses to include private schools, home schools and student loans.

See Ylan Muai, House Committee Unanimously Passes Bill to Upgrade 401(k) Plans Amid 'Retirement Income Crisis', MSN, April 2, 2019.

 

April 5, 2019 in Current Affairs, Current Events, Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0)

Thursday, April 4, 2019

Article on Fixing Philanthropy: A Vision for Charitable Giving and Reform

Charity2Roger Colinvaux recently published an Article entitled, Fixing Philanthropy: A Vision for Charitable Giving and Reform, Wills, Trusts, & Estates eJournal (2019). Provided below is an abstract of the Article.

The article explains how Congress can advance the goals and values of philanthropy and address the crisis of the charitable sector with a number of legislative initiatives. These include expansion of the charitable giving incentive, reform of in-kind contributions, getting more money to working charities with a payout rule for donor advised funds (DAFs), and changing standards for private foundation transfers to DAFs. Congress can also improve the worthiness of the charitable sector by maintaining the separation of politics and charity, supporting oversight (including by mandatory e-filing of returns), and by revisiting some of the rushed through ideas of recent tax legislation (the TCJA).

April 4, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Friday, March 29, 2019

Trump Tax Reform Causing Freak-Outs in Rich New York Area Towns

TaxcalcThe Tax Cut and Jobs Act (TCJA) of 2017 lowered taxes for many Americans, but for those that live in high-income-tax, high-property-tax areas such as New Jersey and New York City, the results of the Act are more confusing.

The implication is due to the new limit of state and local taxes, which will apply to about 11 million taxpayers across the country according to a February estimate from the U.S. Treasury Inspector General for Tax Administration. The states that had a high number of citizens affected attempted to pass workarounds for the cap, but the Internal Revenue Services shot these attempts down. The April 15th deadline is looming large for many of these taxpayers as those with more money and thus more complicated tax returns tend to wait until the deadline is near to file. 

Now real estate professional are stepping in to try to benefit from the situation. South Florida developers have set up sales offices in Manhattan, angling to lure tax-weary finance workers with the promise of sunshine and no state income tax. Local realtors are highlighting the tax benefits of changing towns as they hope to compete. There is even a neighborhood in New Jersey that is advertising that they have lower municipal tax because of a lack of sidewalks, professional firefighters and a public high school.

For those who do not want to move, the obvious solution is to complain -- ideally to a tax court.

See Patrick Clark, Trump Tax Reform Causing Freak-Outs in Rich New York Area Towns, Financial Advisor, March 21, 2019.

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

March 29, 2019 in Current Affairs, Estate Planning - Generally, New Legislation | Permalink | Comments (1)

Wednesday, March 27, 2019

Article on Making Directed Trusts Work: The Uniform Directed Trust Act

LawJohn D. Morley and Robert H. Sitkoff recently published an Article entitled, Making Directed Trusts Work: The Uniform Directed Trust Act, ACTEC Law Journal, Vol. 44, No. 1, Winter 2019. Provided below is an abstract to the Article.

Directed trusts have become a familiar feature of trust feature in spite of considerable legal uncertainty about them. Fortunately, the Uniform Law Commission has just finished work on the Uniform Directed Trust Act (UDTA), a new uniform law that offers clear solutions to the many legal uncertainties surrounding directed trusts. This article offers an overview of the UDTA, which particular emphasis on four areas of practical innovation. The first is a careful allocation of fiduciary duties. The UDTA's best approach is to tale the law of trusteeship and attach it to whichever person holds the powers of trusteeship, even if that person is not formally a trustee. Thus, under the UDTA the fiduciary responsibility for a power of direction attaches primarily to the trust director (or trust protect or trust advisor) who holds the power, with only a diminished duty to avoid "willful misconduct" applying to a directed trustee (or administrative trustee). The second innovation is a comprehensive treatment of non-fiduciary issues, such as appointments, vacancy, and limitations. Here again, the UDTA largely absorbs the law of trusteeship for a trust director. The UDTA also deals with new and distinctive subsidiary problems that do not arise in ordinary trusts, such as the sharing of information between a trustee and a trust director. The third innovation is a reconciliation of directed trusts with the traditional law of cotrusteeship. The UDTA permits a settlor to allocate fiduciary duties between cotrustees in a manner similar to allocation between a trust director and directed trustee in a direct trust. The final innovation is a careful system of exclusions that preserves existing law and settlor autonomy with respect to tax planning, revocable trusts, powers of appointment, and other issues. All told, if appropriately modified to fit local policy preferences, the UDTA could improve on the directed trust law of every state. The UDTA can also be used by practitioners in any state to identify the key issues in a directed trust to find sensible, well-drafted solutions that can be absorbed into the terms of a directed trust.

March 27, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation, Non-Probate Assets, Trusts | Permalink | Comments (0)

Saturday, March 23, 2019

An Answer to a Tax Problem You Didn't Know You Had

TaxesThe tax deadline is steadily approaching, but yet the Internal Revenue Service has yet to release guidance on an issue that has occurred for taxpayers because of the recent tax overhaul. The question is how the IRS will tax state-tax refunds given the new $10,000 cap on state and local tax deductions, or SALT.

The truth is that the majority of taxpayers will not have to be anxious about the situation. Michael Graetz, a former Treasury Department official that is now teaching at Columbia University's law school, says that there is a "longstanding legal doctrine means it won't be hard for most taxpayers subject to the SALT cap to minimize taxes on state refunds." This doctrine is known as the Tax Benefit Rule.

Under the doctrine, a "recovery" such as a state-tax refund is not taxable as gross income for the next year if deducting it did not yield a tax break according to Bryan Camp, a professor at Texas Tech University's law school. Because of this, millions of filers should not have to distinguish between types of state-tax deductions for 2018 because the SALT limitation combines them all into one unit.

Camp warns that not all refunds will be nontaxable. This result depends on other deductions and the size of these deductions.

See Laura Sanders, An Answer to a Tax Problem You Didn't Know You Had, Wall Street Journal, March 22, 2o19.

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

March 23, 2019 in Current Affairs, Estate Planning - Generally, Income Tax, New Legislation | Permalink | Comments (0)

Thursday, March 21, 2019

Article on Online Tools under RUFADAA: The Next Evolution in Estate Planning or a Flash in the Pan?

ToolsJustin H. Brown and Ross E. Bruch recently published an Article entitled, Online Tools under RUFADAA: The Next Evolution in Estate Planning or a Flash in the Pan?, Probate and Property Magazine, Vol. 33 No. 2, March/April 2019. Provided below is an introduction to the Article.

Over the past five years, the estate planning process for digital assets has dramatically transformed. Much of this transformation is the result of the United Law Commission's introduction of the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) in September 2015, which a majority of US states and territories have adopted with some variations. RUFADAA, like its predecessor, UFADAA, was drafted with the intent to unify and clarify states laws with respect to a fiduciary's ability to access an individual's digital assets and electronic communications. However, unlike UFADAA, which presumed a decedent's consent for the decedent's personal representative to access her digital assets, RUFADAA places the burden on the decedent to provide express consent through the decedent's will or another mechanism. Under RUFADAA, an individual may use an "online tool," which is an account-specific feature that an online custodian (e.g., Apple, Google, Yahoo) may offer that enable its users to provide directions for disclosure or nondisclosure of digital assets to a designated person. Online tools are account-specific - in other words, using Google's online tool will not dictate how information held in the decedent's Apple account should be shared. Any assets that are not addressed with an online tool are subject to the terms of a testator's estate planning documents. When digital assets are not addressed by an online tool or an estate planning document, a providers terms of service agreement will dictate access and disclosure of a decedent's digital assets and electronic information.

March 21, 2019 in Articles, Current Events, Estate Administration, Estate Planning - Generally, New Legislation, Technology, Wills | Permalink | Comments (0)

Wednesday, March 20, 2019

Article on Estate Planning for Mary Jane and Other Marijuana Users

WeedGerry W. Beyer and Brooke Dacus recently published an Article entitled, Estate Planning for Mary Jane and Other Marijuana Users, Probate and Property Magazine, Vol. 33 No. 2, March/April 2019. Provided below is the introduction of the Article.

An estate planner is more likely to encounter a client who regularly uses marijuana than a client who needs estate and gift tax planning, given that 55 million Americans are current users. Christopher Ingram, How Many Americans Regularly Use Pot: The Number Is, errr, Higher Than You Think, Wash. Post, April 20, 2018. At least 32 states and the District of Columbia currently exempt qualified users of medicinal marijuana from penalties imposed under state law. Additionally, ten states, Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, Washington, and the District of Columbia authorize purely recreational use. See Legal Recreational Marijuana States and DC, ProCon.org (last visited Nov. 11, 2018). Accordingly, practitioners need to be aware of the interface between marijuana and estate planning.

This article provides a discussion of the major issues that arise in this context including: (1) impact of marijuana use on capacity; (2) interpretation of clauses conditioning benefits on the non-use of illegal drugs; (3) life insurance issues; and (4) marijuana-based assets in a decedent's estate or trust.

March 20, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation, Trusts, Wills | Permalink | Comments (0)

Tuesday, March 19, 2019

Article on Intestate Inheritance Rights for Unmarried Committed Partners: Lessons for U.S. Law Reform from the Scottish Experience

IowaE. Gary Spitko recently published an Article entitled, Intestate Inheritance Rights for Unmarried Committed Partners: Lessons for U.S. Law Reform from the Scottish Experience, 103 Iowa L. Rev. 2175 (2018). Provided below is an abstract of the Article.

No U.S. state affords intestate inheritance rights to the unmarried and unregistered committed partners of a decedent. This omission has become more and more problematic in recent years as cohabitation rates in the United States has risen and marriage rates have decline. Indeed, the phenomenon of increasing cohabitation rates and declining marriage rates is observed across the developed word. Unlike in the United States, however, a significant number of foreign jurisdictions have reformed their law to afford intestate inheritance rights to a decedent's surviving unmarried committed partner.

This Article looks to Scottish law to inform consideration of how U.S. states might best reform their intestacy statutes so as to provide intestate inheritance rights to a surviving unmarried committed partner. Examination of Scottish law should provide especially fruitful for U.S. law reformers. The relevant Scottish statutory provisions have been in effect since 2006 and have been extensively critiqued by Scottish courts, academics, and practitioners. Indeed, the Scottish Law Commission ("SLC"), whose recommendations led to adoption of the current scheme, has called for repeal of these intestacy provisions, and has offered a replacement scheme. Moreover, Scottish succession law and U.S. succession law share significant norms valuing certainty and preferring fixed entitlements and limited judicial discretion.

The Article evaluates the Scottish statute with respect to three major issues of principle that should be at the center of U.S, reform discussions: fulfillment of purpose, implications for certainty and administrative convenience, and implications for marriage. The Article similarly evaluates the SLC's proposal to replace the current statute. Finally, the Article reflects upon the Scottish statute and the SLC proposal in considering which element of Scottish law a U.S. state might profitably borrow or should reject in an effort to craft a more inclusive approach to the intestate inheritance rights of unmarried committed partners consistent with the principles of U.S. succession law. The jumping off point for this discussion is this author's previously published proposal for a model statute that implements an accrual/multi-factor approach to intestate inheritance rights for unmarried committed partners. After describing the significant features of this proposal, the Article considers how one might evolve the proposed accrual/multi-factor approach to incorporate the lessons learned from the Scottish experience.

March 19, 2019 in Articles, Current Affairs, Estate Planning - Generally, Intestate Succession, New Legislation | Permalink | Comments (0)

Saturday, March 16, 2019

Article on Family Protection in the Law of Succession: The Policy Puzzle

PuzzleRichard Storrow recently published an Article entitled, Family Protection in the Law of Succession: The Policy Puzzle, Wills, Trusts, & Estates Law eJournal (2018). Provided below is an abstract of the Article.

To promote the protection of families, succession law diminishes the power of testation in a variety of ways that shield surviving spouses and children from disinheritance. The article conducts a survey of the law in fifty states, five main territories, and the District of Columbia and uncovers a remarkable diversity of family-protection provisions. Less apparent than the substance of the provisions themselves are the policies behind them. In a comprehensive study, this article concludes that family-protection provisions seek to prevent decedents from using their testamentary freedom in ways that impoverish those who are dependent upon them or that work unfairness against family members who have contributed in important ways to the accumulation of their wealth. In addition to these concerns is a notable ambivalence about the extent to which family protection statutes should undercut the expectations of those who have been promised a share of a decedent’s estate.

March 16, 2019 in Articles, Current Affairs, Estate Administration, Estate Planning - Generally, Intestate Succession, New Legislation, Trusts, Wills | Permalink | Comments (0)