Wills, Trusts & Estates Prof Blog

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

Thursday, April 16, 2020

Prudential Suspends Applications for Some Life Insurance Policies

InsuranceOne of the insurance industry's major players, Prudential, recently announced coronavirus-related changes that now limit American's choices for life insurance policies. The company said it would suspend its acceptance of applications for 30-year term life insurance policies due to “unprecedented market volatility” and “the anticipated low interest rate environment for the foreseeable future.” The suspension will be in place until at least June.

Prudential is the second-largest life insurer in the country based on net premiums written and the third-largest seller of individual life insurance based on new and recurring premiums. Les Masterson, managing editor at Insure.com, said it is quite possible other insurance companies could take steps of their own to limit risk, further limiting the choices of those seeking policies during this crisis.

When it comes to whether your insurance will pay out for deaths from coronavirus, experts at NerdWallet said most people are covered under traditional and term life insurance policies already in place.

See Brittany De Lea, Prudential Suspends Applications for Some Life Insurance Policies, Fox News, April 7, 2020.

April 16, 2020 in Current Affairs, Death Event Planning, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0)

Tuesday, April 14, 2020

Can You Amend a Trust With a Post-It Note?

Post itIn Pena v Day, Anderson created a revocable trust in California in 2004 in which he was both the settlor and the trustee. The Trust specifically provided that amendments “be made by written instrument signed by the settlor and delivered to the trustee.” The Court was presented a question of whether Anderson validly amended the trust through the use of handwritten interlineations and a Post-it Note.

The settlor formally amended the trust in 2008, but then Anderson was diagnosed with abdominal cancer and then brain cancer in 2010, and Grey Dey moved in with him to care for him until his death in 2014. In February 2014, Anderson called an attorney regarding amending the trust document as well as other estate planning document, and the attorney requested that he send him copies of the documents that Anderson sought to amend. Anderson wrote on the trust document, crossed out some beneficiaries, added Dey and two other beneficiaries, and changed the distribution percentages. Attached to the trust documents was a Post-it Note that said: "Hi Scott, Here they are. First one is 2004. Second is 2008. Enjoy! Best, Rob." Anderson passed away before the attorney prepared the amendment for his signature.

The California probate court determined that the handwritten interlineations were not a valid amendment to the California trust as a matter of law. The Court ruled that interlineations in this case constituted a written instrument separate from the trust instrument. Because Anderson signed the Post-it Note, the Post-it Note being a separate writing," simply identifying the enclosed documents," and thus no signature was provided on the handwritten interlineations. Therefore, there was no effective amendment to the trust document.

See Can You Amend a Trust With a Post-It Note?, Probate Stars, April 10, 2020.

April 14, 2020 in Estate Administration, Estate Planning - Generally, New Cases, Non-Probate Assets, Trusts | Permalink | Comments (0)

Monday, March 30, 2020

Congress Suspends Required Minimum Distributions for 401(k)s and IRAs for 2020, Opening Window to Tax Savings

IRAThe bipartisan COVID-19 stimulus bill recently signed by President Trump includes welcome tax relief for retirees: The required minimum distribution (RMD) rules for Individual Retirement Accounts and 401(k)s are waived for 2020. This is the same as what occurred in 2009 during the Great Recession. For retirees, this means that instead of taking money out of their IRA this year, their investments can continue to grow.

Of course, for retirees that depend on their RMD to pay for expenses, the waiver is moot. For others, there may be benefits to still take some money out. Ed Slott, a CPA and IRA expert in Rockville Centre, New York, says “There are opportunities here. You might want to look at your tax bracket and get money out at low rates. If anything is obvious, it’s that tax rates are going to go higher.” 

The rules for who was required to take 2020 RMDs were already altered because of the SECURE ACT, passed in late December, which changed the age triggering RMDs from 70 ½ to 72, effective January 1, 2020. Children, grandchildren and others who have inherited IRAs (pretax IRAs and Roth IRAs) must take annual withdrawals regardless of their own personal age. If you have already received a distribution from your own IRA or one inherited from a spouse for 2020, you can roll it back into your IRA within 60 days of receipt.

See Ashlea Ebeling, Congress Suspends Required Minimum Distributions for 401(k)s and IRAs for 2020, Opening Window to Tax Savings, Forbes, March 27, 2020.

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

March 30, 2020 in Current Affairs, Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0)

Wednesday, March 25, 2020

Planning Amid Turmoil: 6 Gifting and Tax Strategies for the Current Environment

StockmarketMany investors may seem powerless with the market in such turmoil with heightened volatility and falling interest rates. The truth is that there are still many things one can control in this environment, including opportunities to provide for one's family and others that do not come around very often.

  • Donate to Support Your Communities
    • In 2020, you can deduct up to 60% of your adjusted gross income for gifts made to a public charity, and these deductions can offset normal earnings, such as salaries and bonuses, as well as dividend and interest payments and even capital gains.
  • Help Family Members Ride Out the Storm
    • Under the gift tax annual exclusion, an inidividual can give up to $15,000 in 2020 to each recipient without tax consequences, and for a married couple, the total is $30,000 per recipient.
  • Provide Long-Term Support by Using Your Exemption Amounts
    • Giving away assets that a person expects to appreciate as values recover makes use of their exemption while also shifting that appreciation to the next generation.
  • Use GRATs and CLTs to Make Additional Tax-Free Gifts
    • Grantor Retained Annuity Trusts (GRATs) and Charity Lead Trusts (CLTs) allow a person to pass the appreciation in the value of assets over a hurdle rate set by the IRS to their beneficiaries tax-free. Currently, the IRS hurdle rate is 1.8% and in April, the rate will drop to 1.2%. 
  • Refinance Your Debt and Family Loans
    • With interest rates at rock-bottom levels, it could make sense to refinance existing debt obligations such as a home mortgage and reduce the interest rate on any loans made to family members.
  • Convert Your Traditional IRA to a Roth
    • Since the taxes resulting from a conversion are based on the IRA’s balance at the time of conversion, depressed market prices help reduce the tax liability if an individual decides a ROTH conversion makes sense.

See Bryan Kirk, Planning Amid Turmoil: 6 Gifting and Tax Strategies for the Current Environment, Fiduciary Trust, March 18, 2020.

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

March 25, 2020 in Current Affairs, Estate Planning - Generally, Estate Tax, Gift Tax, Non-Probate Assets, Trusts | Permalink | Comments (0)

Article on How Should Non-Probate Transfers Matter in Intestacy?

IntestacyMary Louise Fellows and E. Gary Spitko recently published an Article entitled, How Should Non-Probate Transfers Matter in Intestacy?, Wills, Trusts, & Estates Law eJournal (2020). Provided below is the abstract to the Article.

As American family structures have become more heterogeneous, status-based intestacy statutes have become less suited to promoting donative intent. Indeed, numerous scholars of wealth transfer law have noted the critical need for intestacy law reform to address the needs of decedents whose donative intent does not comport with traditional family norms. We propose addressing this concern by looking to intestate decedents’ non-probate transfers, such as a revocable trust, life insurance policy, 401(k) account, brokerage account, or joint tenancy with right of survivorship deed. In 2010, we, along with a co-author, published the first study to consider the relationship between donative intent with respect to the probate estate and donative intent as expressed in non-probate transfers. That study utilized a factorial research design to assess public attitudes and offered support for our new heir hypothesis, that, depending on the identity of the non-probate transfer beneficiary and the identity of the existing heir, a decedent would want a non-probate transfer beneficiary who is not otherwise an heir to be treated as an heir. The instant two-part study of estate planners produces additional knowledge about how best to integrate non-probate transfers into intestacy statutes. In the first part of our study, we conducted a paper survey of forty-five estate planners. The responses to this survey greatly influenced the second part of our study in which we conducted in-person or telephone interviews with nineteen estate planners. The findings reported in this study provide the framework for statutory reform. This study demonstrates that the new heir reform increases the likelihood of promoting intestates’ donative intent in a growing number of twenty-first century familial situations. 

March 25, 2020 in Articles, Estate Administration, Estate Planning - Generally, Intestate Succession, Non-Probate Assets, Trusts | Permalink | Comments (0)

Friday, March 20, 2020

Article on Tearing Down the Wall: How Transfer-on-Death Real-Estate Deeds Challenge the Inter Vivos/Testamentary Divide

DeedDanaya C. Wright and Stephanie Emrick recently posted an Article entitled, Tearing Down the Wall: How Transfer-on-Death Real-Estate Deeds Challenge the Inter Vivos/Testamentary Divide, Wills, Trusts, & Estates Law eJournal (2019). Provided below is the abstract to the Article.

This Article will examine one of the most recent will substitutes, the transfer-on-death (“TOD”) real-estate deed. Nearly half of the states have recognized, through common-law forms or legislation, a mechanism to allow for the transfer of real property on death without using a will, without following the will formalities, and without necessitating probate. This new tool in the estate planner’s toolbox is invaluable: revocable trusts have proven too expensive for decedents of modest means, and wills continue to require formalities that can easily frustrate non-lawyer-drafted estate documents. But the variety of TOD deed rules and mechanisms that the different states have adopted has led to disparity and uncertainty in form and outcome, resulting in litigation and frustration of decedent’s intent.

We believe this uncertainty and frustration will continue as even more states adopt the Uniform Real Property Transfer on Death Act (“URPTODA”), which purports to stabilize the law and facilitate testamentary intent. States grappling with this new form interpose significant differences, and lawyers and judges are not all on the same page as to the consequences. One source of confusion is the URPTODA’s provision that TOD deeds are non-testamentary and, at the same time, the Uniform Act provides that the property rights do not transfer until death.

Although it is one thing to declare that TOD deeds are non-testamentary even though property rights don’t transfer until death—which in itself goes against centuries of formal legal rules—it is quite another to get all the other legal consequences to fall into place accordingly. For instance, would a state’s anti-lapse statute apply to save a beneficiary designation if the deed is deemed non-testamentary, even though the intent is to have the real property transfer upon death?

In our opinion, the TOD deed pushes the juridical binary of inter vivos and testamentary transfers beyond coherence and rationality. The law of will substitutes has already undermined the rationality of maintaining the divide, and in this Article, we will argue that the time has finally come to reject the division between inter vivos and testamentary transfers and seek a rational and holistic set of tools and formalities to gain the benefits of probate avoidance that will substitutes provide with the ease of control and full revocability of wills. Elevating form over functionality, although a characteristic of the common law, inevitably disserves the interests of those who cannot afford lawyers who can easily draft around the sometimes-arcane distinctions between testamentary and inter vivos transfers to gain the benefits of each while avoiding the burdens.

March 20, 2020 in Articles, Current Events, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0)

Friday, March 13, 2020

Lawsuit Over FEGLIA Benefits Dismissed From Federal Court Over Lack of Subject Matter Jurisdiction

Lifeinsurance2Last month, the Sixth Circuit Court of Appeals dismissed a case pertaining to the Federal Employee’s Group Life Insurance Act (FEGLIA) for lack of subject matter jurisdiction. The FEGLIA is the largest group life insurance program in the world, covering over 4 million federal employees and retirees, operated by the Office of Personal Management (OPM).

In Miller v. Bruenger, 949 F.3d 986 (6th Cir. 2020), a couple was issued a divorce, and pursuant to their property settlement agreement, the surviving spouse was to remain the beneficiary of the decedent’s life insurance policy, and it was included in the court order. FEGLIA requires that the court order be sent to OPM or the employing agency prior to death, and in this case, it was not. Upon the death of the policy holder the death benefit was paid to his only child, and the former spouse made a claim in state court. By agreement of the parties, the claim was dismissed. However, the daughter then filed an action for declaratory relief in federal court, seeking a declaration that she is the rightful owner of the death benefit.

The case was dismissed for lack of subject matter jurisdiction in the federal district court, and the Appeals Court affirmed, holding that no federal cause of action existed to allow for the enforcement of a marital settlement agreement in federal court regarding FEGLIA death benefits. According to the Court, FEGLIA does not contain an express cause of action for one private party to sue another private party over death benefits governed by FEGLIA, only suits against the federal government are expressly authorized.

See Lawsuit Over FEGLIA Benefits Dismissed From Federal Court Over Lack of Subject Matter Jurisdiction, Probate Stars, March 10, 2020.

March 13, 2020 in Current Events, Estate Administration, Estate Planning - Generally, New Cases, Non-Probate Assets | Permalink | Comments (0)

Friday, February 21, 2020

‘The Good, The Bad And The Ugly’ Of The SECURE ACT

SecureactpiggybankThe Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed by the House over the summer and the Senate on December 19th before being signed by President Trump on December 20th as part of the Further Consolidated Appropriations Act, 2020. The legislation has a combination of good aspects, negative portions, and possible 'ugly' outcomes.

The positive aspects of the Act are geared towards senior workers and improving retirement, including allowing IRA contributions beyond age 70½ if the contributor is still working and the required minimum distributions (RMDs) has been raised to age 72 rather than 70½. It will be simpler for part-time workers that have been employed long term to be able to join their company's 401(k) plan. Family planning will be easier now because each parent can withdraw up to $5,000 penalty-free when a child is born or adopted.

But one of the more non-positive parts of the legislation is the removal of the stretch IRA, which allowed a non-spousal beneficiary of a qualified plan to withdraw their distributions each year over their lifetime, based on the IRS rules and life expectancy table. Now, a non-spouse beneficiary of the IRA must withdraw all distributions within 10 years, and pay the subsequent taxes of the payout, usually while they are still working.

That slides right into the ugly part of the Act. IRAs are intended to assist during retirement, but many beneficiaries will be forced to take out significant distributions will employed. Many part time workers or employees of smaller businesses that were meant to benefit from the legislation, are not in a position to take advantage of the new rules and save more for retirement because they spend all the income on a month to month basis.

See Michael Chamberlain, ‘The Good, The Bad And The Ugly’ Of The SECURE ACT, Forbes, February 12, 2020.

Special thanks to Mark J. Bade (CPA, GCMA, St. Louis, Missouri) for bringing this article to my attention.

February 21, 2020 in Current Affairs, Estate Administration, Estate Planning - Generally, New Legislation, Non-Probate Assets | Permalink | Comments (0)

Monday, February 17, 2020

Dear Mom and Dad: Are Your Finances Ready for Retirement?

RetirementCameron Huddleston, the author of Mom and Dad, We Need to Talk, says that the conversation with your parents about how they are going to financially survive after retiring can happen organically, even with premeditation. Many parents can be uncomfortable with the shift in the care dynamic - the child is placing themselves in the position to care for the parent. Amanda Clayman, a financial therapist and financial wellness advocate for Prudential, advises that the child can tie the conversation to their own life as a way to maintain the original roles. The parent can explain their own choices as an example to their children, and both sides can offer insight to each other.

Carol Levine, a senior fellow at the United Hospital Fund in New York, says that it is best not to bring up these difficult subjects during the holidays. Timing if important, of course, and adult children can get together before broaching the subject with their parents as a unit.

A simple guess of combining Social Security and a 401(k) may not be enough. Online retirement calculators such as AARP’s for the Social Security benefits and NerdWallet’s or T. Rowe Price’s can provide a better start, but eventually any person or couple will need to consult with a financial planner. Another tough subject to attack: whether the parent would want to move in with the child if the time should come that their independence becomes limited. Multi-generational homes are not as common in America as they are in other countries, but many parents may prefer it over living in a long-term care facility among strangers.

See Erin Lowry, Dear Mom and Dad: Are Your Finances Ready for Retirement?, New York Times, February 13, 2020.

Special thanks to Matthew Bogin, (Esq., Bogin Law) and Lewis Saret (Attorney, Washington, D.C.) for bringing this article to my attention.

February 17, 2020 in Current Affairs, Estate Planning - Generally, Non-Probate Assets | Permalink | Comments (0)

Thursday, February 13, 2020

Top 10 Tax Planning Tips for 2020


  • Evaluate the benefits of scheduling qualified charitable distributions from your IRAs. They can satisfy all or part of your required minimum distribution, and the portion transferred to the charity becomes non-taxable.
  • Your tax advisor can help ensure you have a proper amount of withholding taken out of any standard IRA distributions.
  • As you make charitable contributions throughout the year, save the documents in one spot, both cash and non-cash gifts.
  • Store tax documents in ONE SPOT as they come in the mail.
  • 1040-SR, US Tax Return for Seniors, is now available for taxpayers who are 65 or older, and feature longer fonts
  • This is the second filing season under the Tax Cuts and Jobs Act of 2017, expect your tax preparer to work on cleaning up and formalizing documentation rather than looking for any big changes.
  • If you are paying an individual caregiver, make sure you speak with your CPA about payroll tax reporting requirements if you haven't already. If the person receiving the care is chronically ill as certified by a health practitioner, the payments may be deducted as medical expenses.
  • Consult with your estate planning attorney about planning large gifts, as each taxpayer can gift $15,000 per year per recipient without having to file a gift tax return.
  • Payments made directly to medical providers or tuition payments made to educational institutions on another person's behalf do not count towards your lifetime gifting limit - such as paying your child's or grandchild's.

See Top 10 Tax Planning Tips for 2020, Chambliss Law, February 6, 2020.

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

February 13, 2020 in Current Affairs, Estate Planning - Generally, Gift Tax, Income Tax, Non-Probate Assets | Permalink | Comments (0)