Wills, Trusts & Estates Prof Blog

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

Sunday, August 11, 2019

Beware, the IRS is Eyeing Your Inherited Money

TaxlawThose that attained their wealth through inheritance are always on guard in case laws change that can affect their taxes. Two recently passed legislative measure may cause wealthy individuals an appropriate level of paranoia.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 passed the House of Representatives almost unanimously, with a vote of 417-3. The Act says that its intention is to encourage more businesses to offer retirement plans and expand opportunities for workers to invest their retirement account funds. It increases the age that a person must take out required minimum distributions (RMDs) from their IRAs, from 70.5 to 72. All that sounds good, but here is the nefarious part: instead of using an IRS table to allow a beneficiary to drain an inherited IRA, non-spouse beneficiary must eliminate the IRAs funds within 10 years of the person's death.

The Tax Cuts and Jobs Act dramatically increased the federal gift and estate tax exemption, and each following year until 2026 will be adjusted for inflation. But the exemption is scheduled to revert back to the much-lower pre-TCJA level in 2026. What tax ramifications would there be for large gifts made during this time? Proposed IRS regulations issued late last year would provide some protection by stipulating that folks who make large gifts while the exemption is in place would not be penalized if the exemption reverts back.

See Beware, the IRS is Eyeing Your Inherited Money, Wealth Advisor, July 15, 2019.

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

August 11, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Estate Tax, Gift Tax, New Legislation, Non-Probate Assets | Permalink | Comments (0)

Wednesday, July 31, 2019

Life Insurance Developments and How to Protect the Insured

Life_InsuranceLawrence J. Rybka recently authored an article entitled Life Insurance in the Client's Best Interest. Here is the introduction to his article:

Life insurance is a unique and important financial product for many clients and the only product that can protect clients’ families and businesses against the risk of early death. Properly designed life contracts
also allow the client to benefit from some unique tax benefits afforded only to life insurance products.
But standards for life insurance advice have not kept pace with the marked increase in types of life products or the complexity of these products. Most state insurance regulators have not modernized consumer protections or duties to clients to keep pace with protections offered by banking regulation, securities laws, trust laws or pension laws where greater duties are owed to clients both when a recommendation is made and on an ongoing basis. Many complex modern life products involve important tradeoffs that are not well understood by consumers or perhaps by most agents who sell them. Nor is there any ongoing requirement to monitor and advise the client after the product is placed. This white paper will explore how two upcoming changes may bring life insurance standards into the modern era.

There are two important developments in 2019 that will impact the standard by which life insurance recommendations are made to clients. The first was the CFP Board’s change in their Code of Ethics and Standards of Conduct (“Code and Standards”). The new standards now extend to any financial advice including all life insurance recommendations. These recommendations must now be in the client’s best interest and advice about them offered under a fiduciary standard.

The second change is a regulation by the State of New York, Regulation 187,1 that takes effect on February 1, 2020, for a recommendation to purchase life insurance products and August 1, 2019, for annuity products sold in the state. This regulation requires agents and insurance companies to make life insurance recommendations that are both suitable for the client and in the client’s best interests. Both new standards change how advisors will need to document life insurance recommendations and substantially raise the standard for life insurance advice. This white paper will explore what it means to make a life insurance recommendation either as a CFP® under the new standards or under New York’s best interest standard.

Follow this link to read this interesting article: Download Life_Insurance_In_the_Client's_Best_Interest.

July 31, 2019 in Articles, Non-Probate Assets | Permalink | Comments (0)

Tuesday, July 23, 2019

Risks of Premium Financed Indexed Universal Life Policies Revealed

Castle_CloudsIn How to Retire in the Magical Retirement Income Castle in the Clouds, Lawrence J. Rybka explains "the use of premium financed Indexed Universal Life (IUL) policies to provide retirement income for clients. It explores the major assumptions in the IUL policies and in the bank loans used to finance them. Most importantly, it reveals undisclosed risks often taken by clients in these transactions."

This important and innovative article is available by following this link: Download Magical_Retirement_Castle.

July 23, 2019 in Articles, Non-Probate Assets | Permalink | Comments (0)

Saturday, May 11, 2019

Beneficiary Provisions and Designations – Plan Now for More Simplicity Later

PolicyBeneficiary provisions and designations under qualified plans tend to receive little attention until the death of the policy owner. Unfortunately, death may spotlight or uncover less desirable provisions and once-hidden ambiguities. With some minor review and planning now you can better prepare for simplicity later.

  • Disentangle Your Waterfall Provision
    • A waterfall provision provides instruction for what happens to a benefit when the participant dies before that benefit begins and there is either no beneficiary designation or no designated beneficiary survives the participant. When using one, abstain from creating unnecessary complications. Shorter provisions generally avoid the thorny determinations that can otherwise occur.
  • Address Deaths of Beneficiaries
    • Beneficiary provisions should provide not only what happens when the policy owner dies, but what happens in case the primary beneficiary dies.
  • Be Ready for Small Estates and Minor Children
    • Many states allow for distribution via small estate affidavits, provided the amount in question does not exceed a dollar threshold. Also, under the Uniform Transfers to Minors Act, the plan can distribute benefits to the minor with the benefit of state protection. Knowledge of minor child beneficiaries and compliance with the applicable state transfers to minors act should allow for a more timely and safer distribution.
  • Specify When Determinations Are Made
    • Review your beneficiary provisions and designation forms to ensure that it’s clear when beneficiary designations are reviewed and determined for approval. The difference in timing can affect who becomes the beneficiary, especially if a participant is married and the beneficiary is other than the participant's spouse.

See Isaac J. Morris, Beneficiary Provisions and Designations – Plan Now for More Simplicity Later, National Law Review, April 29, 2019.

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

May 11, 2019 in Current Affairs, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Wills | Permalink | Comments (0)

Thursday, May 9, 2019

How Social Security Woes Change Retirement Planning

SsiThere is a fact that the majority of financial advisors agree on: Social Security will not be going away, but it definitely will have some changes. The program has been running in the red since the 80s, and in 15 years it will no longer be fully funded. The most likely kind of change to Social Security will be more cuts.


While advisors at one end of the spectrum are warning their clients that they should plan on getting nothing from a system they’ve paid into for decades, at the other end, clients with fewer resources are likely over-relying on what they will receive. Some of the advisors on the low end project that their clients will receive 5-10% of their retirement income from Social Security. This has many clients worried about their retirement; 59% of those recently surveyed by the AARP said it was only “somewhat likely” or “not at all likely” that the combination of their savings, investments and Social Security benefits would be sufficient to cover their financial needs through retirement.

Mark Friedenthal, the founder and CEO of Tolerisk, a Marlton, New Jersey-based firm that makes software for advisories, says that advisors should broach the subject of Social Security cautiously with their clients. Especially those that are well-prepared. He says that, “it may also be prudent to exclude Social Security for those [clients] with likely taxable income of $250,000 [present value] or more in retirement." This outlook is for clients with considerable defined benefit pension incomes, $10 million-plus in taxable assets or $5 million-plus in traditional IRA/401(k) assets.

See Gregory Bresiger, How Social Security Woes Change Retirement Planning, Financial Advisor, April 25, 2019.

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

May 9, 2019 in Current Affairs, Disability Planning - Health Care, Disability Planning - Property Management, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0)

Tuesday, May 7, 2019

CLE on Wills and Trusts 101

CLEThe National Business Institute is holding a seminar entitled, Wills and Trusts 101, on Monday, June 17, 2019 - Tuesday, June 18, 2019, from 9:00 AM - 4:30 PM on June 17 and 9:00 AM - 4:30 PM on June 18 at the Courtyard Fort Lauderdale North/Cypress Creek in Fort Lauderdale, Florida. Provided below is a description of the event. 

Program Description

Your Definitive Guide to Wills and Trusts

Wills and trusts may seem straightforward, but have you fully mastered the building blocks that lead to rock-solid foundations? Don't let your clients' estate plans collapse around them. You can't afford to overlook the basics if you want to create wills and trusts that stand the test of time. This two-day seminar will give you the knowledge you need to draft and execute wills, set up and fund trusts, and more. No matter if you are new to estate planning or are an experienced practitioner in need of a refresher, you are sure to get the information your clients need. Register today!

  • Recognize when you should use a will and when you should use a trust.
  • Get the sample documents you need to draft airtight wills.
  • Smooth the will execution process with useful tips and checklists.
  • Avoid critical errors attorneys commonly make when creating wills and trusts.
  • Know when you should use a revocable vs. an irrevocable trust.
  • Draft personalized trust forms and amend existing trusts.
  • Fund trusts the right way - know how to handle key assets.
  • Get the latest estate tax updates your clients depend on you to know.

Who Should Attend

This basic level program is designed for:

  • Attorneys
  • Accountants
  • Trust Officers and Personal Representatives
  • Estate Planners
  • Paralegals

Course Content

Day 1

  • Wills vs. Trusts: Weighing Pros and Cons
  • Wills: Key Elements, First Steps and More
  • Will Drafting - With Checklists and Sample Documents
  • Will Execution
  • Updating Existing Wills
  • Ethical Considerations
  • Top Will Mistakes Attorneys Make - and How to Avoid Them

Day 2

  • Long-Term Care, Incapacity and End-of-Life Decisions: Trusts and Other Documents
  • Trusts: Structures and Principles
  • Trust Funding
  • Drafting Personalized Trust Forms - With Sample Documents
  • Trust Taxation
  • Aligning Trusts with Estate Plans
  • Top Trust Mistakes - and How to Avoid Them

May 7, 2019 in Conferences & CLE, Disability Planning - Health Care, Elder Law, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Saturday, May 4, 2019

Memo on The Secure Act (HR 1994) and the Stretch Payment Rule Changes as it Relates to IRA Account Owners

ScalesSeymour Goldberg recently drafted a Memo entitled, The Secure Act (HR 1994) and the Stretch Payment Rule Changes as it Relates to IRA Account Owners, explaining three shortfalls of the drafted Act. He suggests that for the first issue that it be amended, and for the other two issues that grandfather clauses be inserted to waive liability for trustees of IRA trusts created prior to the new legislation.

The first issue mentioned is that HR 1994 has no provision providing for a minor who is not a child of the IRA owner who has not reached the age of majority under the general rule (cut off rule).  This means that if an IRA owner names their grandchild or other relative that is not their own child as beneficiary, and that child is still a minor 10 years after the IRA owner's death, they are forced to receive the IRA disbursement. Because of the windfall, many jurisdictions would require the hassle of setting up a guardianship for the minor to receive the funds, pay the income taxes, and everything else that this entails. Though this can be avoided if the IRA custodial agreement rules provide that payments can be made to a Custodian under the Uniform Transfers to Minors Act or a parent of the minor, there is no guarantee the IRA document will contain this provision.

The second issue deal with IRA trusts named as beneficiaries of the IRA, and the general cut off rule in the new HR 1994. The new legislation requires payment to be made to the IRA trust beneficiary at age 50 under the general cut off rule, but many IRA trusts have named other ages for vestment, including over the lifetime of the beneficiary. A violation of the general cut off rule would then trigger a 50% penalty on the shortfall amount of the required minimum distribution that is mandated under the new legislation. Yet the trustee is now violating the terms of the IRA trust. The most efficient fix would be to allow existing IRA trusts drafted and executed prior to the legislation be exempt from the new general cut off rule.

For more information, you can read the memo in its entirety here.

May 4, 2019 in Current Affairs, Elder Law, Estate Administration, Estate Planning - Generally, Income Tax, New Legislation, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)

Friday, May 3, 2019

CLE on Probate and Trust Administration

CLEThe National Business Institute is holding a seminar entitled, Probate and Trust Administration, on Thursday, May 23, 2019, in Sacramento, California, at the Four Points by Sheraton Sacramento International Airport, from 8:30 AM to 4:40 PM. Provided below is a description of the event.

Program Description

What You Need to Know About Probate and Trust Administration

Working through issues that arise through probate and trust administration can be daunting. Are you well-equipped with the tools you need to succeed? This insightful course will take you through steps in probate administration, including information on creditor and debt issues, tax and more. You will also get valuable insight on trust administration, including the handling of accounting, distributions and taxes. Don't miss this opportunity to hone your probate and trust administration skills - register today!

  • Take a closer looks at the initial step for filing the estate.
  • Discuss what needs to be done to handle creditor claims and debts.
  • Make sure everything is in order for the final distribution of the estate.
  • Review what issues need to be addressed concerning taxes in probate administration.
  • Get the latest information on taxation concerns associated with trusts.
  • Explore the different types of trusts and how they are used.
  • Learn ways to manage, sell and distribute property and assets in trust administration.
  • Gain a better understanding of the distinctions between trust fiduciary accounting and income tax accounting.

Who Should Attend

This basic level seminar is designed for professionals who want to be more effective in the probate and trust administration process, such as:

  • Attorneys
  • CPAs and Accountants
  • Tax Professionals
  • Financial Planners and Wealth Managers
  • Trust Officers
  • Paralegals

Course Content

  • Probate Process and Overview
  • Assets, Creditor Claims and Debt Considerations
  • Distributions, Final Accounting and Closing the Estate
  • Tax Issues in Probate Administration
  • Trust Taxation Issues
  • What You Need to Know About Trusts
  • Accounting/Distributions in Trust Administration
  • Ethics and Estate Administration

May 3, 2019 in Conferences & CLE, Current Affairs, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Professional Responsibility, Trusts, Wills | Permalink | Comments (0)

Tuesday, April 30, 2019

CLE on Drafting IRA Trusts

CLEThe National Business Institute is holding a webinar entitled, Drafting IRA Trusts, on Thursday, May 9, 2019, at 9:00 AM to 4:00 PM Central. Provided below is a description of the event.

Program Description

Provide Your Clients with a Thorough Understanding of IRA Trusts

Be prepared for specific challenges associated with IRA trusts by understanding their unique characteristics. Our essential primer will provide you with a comprehensive overview of these popular trusts, including drafting tactics, advantages of an IRA trust and critical sample forms needed to complete the process. Register today!

    • Determine the pros and cons of establishing an IRA over other trusts.
    • Gain a better understanding of IRA minimum distribution rules, such as individuals as beneficiaries and trusts as beneficiaries.
    • Learn different tax issues associated with an IRA trust, including income and estate tax.

This is a rebroadcast of the original webcast delivered by Karen L. Brady, Justin H. Brown and Thomas J. Murphy on October 18, 2018. Faculty will be available to answer your questions after the program.

Who Should Attend

This legal program is designed for attorneys looking to increase their knowledge of IRA trusts. This course may also benefit accountants and CPAs, estate planners, and trust officers.

Course Content

    • Overview of IRA Trusts
    • IRA Required Minimum Distribution Rules
    • Retirement Account Rollover Rules and Mistakes
    • Drafting an IRA Trust
    • Tax Issues
    • Sample Forms
    • Using Self-Directed IRAs to Create LLCs for Non-Traditional Investments
    • Ethics in Estate Planning Practice
    • Distribution and Termination of IRA Trusts in Estate Administration

April 30, 2019 in Conferences & CLE, Current Affairs, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Professional Responsibility, Trusts | Permalink | Comments (0)

Monday, April 29, 2019

6 Estate Planning Tips For Blended Families

MarriageNo matter how every parent that remarries hopes things will go well, not every blended family has the same harmony as the Brady Bunch. A step-parent may not have the same affection for their step kids as much as they have for their biological children, especially if there are no adoptions. Years after one spouse dies, the children of that spouse may worry about their stepmother or stepfather including them in their estate plan if the majority of their parent's estate went to their spouse.

Here are 6 tips for blended families when it comes to estate planning.

  • A simple will probably will not cut it.
    • Our society is seeing less nuclear families with simple family trees, so the simple wills of yesterday will not be sufficient in these circumstances.
  • Consider a trust that leaves assets to your spouse for her lifetime, with the balance passing to your children on her death.
    • This way, your spouse can be taken care the rest of his or her days, but your assets will ultimately pass to your children.
  • Choose a knowledgeable and sophisticated trustee.
    • Just in case there is tensions between your spouse and your children years down the road after your death, it is important to have an experienced trustee to invest properly and act as referee.
  • Plan for the possibility that your surviving spouse will remarry.
    • It could happen. A trust can ensure that the assets are protected.
  • Consider leaving some assets to your biological children on your death.
    • This can ease tensions and make it so that your children are not waiting around and hoping for their stepparent to pass away.
  • Decide who will make health care decisions.
    • Most states only allow you to name one person to make health care decisions. This can cause issues between a stepparent and an adult child as it is not uncommon for one to cut off the other from seeing an incapacitated parent. This should be an in-depth conversation with your family.

See Christine Fletcher, 6 Estate Planning Tips For Blended Families, Forbes, April 26, 2019.

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

April 29, 2019 in Current Affairs, Death Event Planning, Disability Planning - Health Care, Estate Administration, Estate Planning - Generally, Non-Probate Assets, Trusts, Wills | Permalink | Comments (0)