Wills, Trusts & Estates Prof Blog

CLE on Irrevocable But not Irredeemable: How to Fix or Modify a Trust

The American Law Institute is holding a webcast entitled, Irrevocable But not Irredeemable: How to Fix or Modify a Trust, on Wednesday, December 5, 2018 at 12:00 p.m. to 1:00 p.m. Eastern. Provided below is a description of the event:

Why You Should Attend

Your client undoubtedly had excellent reasons for creating an irrevocable trust in the first place. He may have created an irrevocable trust to protect his own assets from the hands of creditors. He may have created an irrevocable trust to provide funding for his children without giving them direct access to those funds. He may have created an irrevocable trust for transfer tax planning purposes. But as time passes, the terms of that trust may no longer suit the needs of your client or the trust beneficiaries. Fortunately, their irrevocable trust can likely be modified and brought up-to-date to suit their current needs.   This practical one-hour audio program will give you the tools to determine when an irrevocable trust can and should be modified, and teach you about various methods to modify the trust.  

What You Will Learn

Topics to be covered include:

Determining when a trustee should modify an irrevocable trust;

Understanding the techniques to modify the trust; and

Drafting irrevocable trusts in light of a possible modification in the future

  This program was originally presented on July 25, 2018. Faculty questions will be answered by email within two business days.   Need this information now? Purchase the on-demand course here. Questions submitted on-demand will be answered within two business days.  

Who Should Attend

Estate planning attorneys who are drafting and advising on irrevocable trusts.

New PLR Addresses Special Trustee's Power to Limit or Eliminate Testamentary General Power of Appointment

The IRS recently issued a private letter ruling addressing key issues with respect to an independent special trustee’s power under a trust instrument to limit or eliminate a testamentary power of appointment granted in favor of the primary trust beneficiary. Significant, the IRS acknowledged that a testamentary general power of appointment is not considered to be exercisable during the lifetime of the power holder.

The private letter ruling is particularly interesting in that certain trust assets that would otherwise be included in the Primary Beneficiary’s gross estate may now be excluded from the Primary Beneficiary’s gross estate if the special trustee exercises its power to limit or eliminate the Primary Beneficiary’s testamentary power of appointment.

The IRS accepted the taxpayer’s position that the power of appointment set forth in the trust agreement is conditioned upon the Primary Beneficiary dying before an independent trustee limits or eliminates the power of appointment. The result of this ruling is that if the independent trustee were to exercise its discretionary power under the trust agreement to eliminate the Primary Beneficiary’s testamentary power of appointment, then such power of appointment would not exist upon the Primary Beneficiary’s death, and the trust assets would not be included in the Primary Beneficiary’s gross estate.

See Ashley L. Gill, New PLR Addresses Special Trustee's Power to Limit or Eliminate Testamentary General Power of Appointment, Mitchell Williams Law, November 6, 2018.

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

CLE on Top Ten Estate Planning Techniques After the 2017 Tax Act

The New York City Bar is holding a conference and webcast entitled, Top Ten Estate Planning Techniques After the 2017 Tax Act, on Wednesday, November 14, 2018 at 6:00 p.m. - 9:00 p.m. at the New York City bar in New York City, New York. Provided below is a description of the event:

When attorneys meet with clients to discuss estate planning, there is an assortment of ideas that are considered, discussed, and presented to clients. This program covers the ten estate planning techniques that the speakers most frequently consider. The goal of the program is to discuss how each technique works, including some of the more pressing (or troublesome) technical considerations, who it works for, as well as the salient planning considerations. Some of the techniques covered include lifetime planning, GRATs, QPRTs, sales to IDITs, Family Limited Partnerships, CRUTS, CLATs, insurance trusts, and a few other common planning techniques.

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

A To-Do List for Widows, and How to Protect the Identity of a Dead Loved One

Widows and widowers are often facing debilitating grief while attempting to get their lives, futures, and finances in order. Having an effective plan and to-do list in place could make this difficult time more emotionally manageable. Also, having a deceased loved one's identity stolen can be a painful reminder of their absence, and a great violation to their memory, so taking steps to prevent it are important.

• Inform Social Security of the loved one's death and notify all credit bureaus as well to freeze the person's credit.
  • Death Certificate and letters testamentary will be required.
• Notify tax preparer, and financial institutions.
  • In the event that there is a non-qualified account then there should be a step-up in basis on at least 50% of the account and possibly 100% of the account, depending on the circumstances.
  • And IRA can be treated as a rollover account for a spouse
• Review life insurance policies and see your options so you can decide what makes the most sense based on cash flow needs.
• Meet with an estate planning attorney if there was a will or trust to understand the loved one's final wishes.
• Have a tax projection prepared.
• Sign proper forms for all brokerage accounts and new account forms in order to reflect the new ownership and title.

See Karin Price Mueller, A To-Do List for Widows, and How to Protect the Identity of a Dead Loved One, NJ.com, November 6, 2018.

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

Billionaire Family Feud Widens as Son Sues Sister

One of Canada's richest family's drama and intrigue thickens. Former Magna International Inc. Chief Executive Officer Belinda Stronach is now being sued by her brother Andrew, claiming that he has lost faith in her and that she should be removed from a family trust. Andrew wants her to be replaced by their billionaire father, who is also suing Belinda at a tune of $520 million Canadian dollars.

Both disputes arise from Belinda handling of the family trusts after her father, Frank Stronach, handed over control of them to pursue politics in his native country of Austria. The latest suit, filed November 1, claims Belinda and trustees “have undertaken a number of improvident and costly investments that have resulted in significant losses.” The lawsuit also alleges that Andrew was not giving proper accounting of the trust. “To date, Andrew’s proper and reasonable requests for information have been ignored, or only partially answered after lengthy delays and following repeated requests for disclosure,” according to documents filed with the Ontario Superior Court.

“The filing on behalf of my brother is an extension of my father’s legal pursuit against me and my children, and the allegations remain just as untrue,” Belinda Stronach said in a statement Monday. “We will be responding formally in due course. It saddens me greatly that we have reached this juncture in our family.” A spokesperson said that both claims were completely without merit.

See Doug Alexander & Fredric Tomesco, Billionaire Family Feud Widens as Son Sues Sister, Financial Advisor, November 8, 2018.

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

Estate-Planning Strategies for Art and Collectibles Explained

On November 1 at Bonhams in New York City, three experts in the field of trusts and estate planning discussed the various options available to clients regarding planning for art disposition, the need for appraisals and the importance of communicating one’s wishes with the next generation.

“Intentional planning is the most important issue to address with your clients,” Sherri Cohen, vice president and director of valuations, Trusts & Estates at Bonhams stated. Many clients also seem to overlook the big picture of disposing or transferring a collection. Many pieces may have monetary value but others may have emotional value, possibly due to knowing the artist that produced a piece or simply because the client has had that piece for decades.

Warren K. Racusin, a partner and chair of the trusts and estates group at Lowenstein Sandler LLP in New York City, noted that, “collectors are good with acquisitions but often make mistakes regarding the four methods of disposing their art.” Those method are selling, gifting, bequeathing, and donating to a charitable organization or charitable remainder trust. Appraisals are necessary to establish basis, no matter how the pieces are disposed of from the estate.

Communication within a family when it comes to art collections is vital, and lack of it is a prime cause of litigation. Parents must be transparent about their reasons for disposing of their art and ascertain their children’s preferences. If parents want to dispose of their art, the first question to the children should be: “Do you want this stuff?”

See Dawn S. Markowitz, Estate-Planning Strategies for Art and Collectibles Explained, Wealth Management, November 5, 2018.

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

Article on Dealing with RMD Shortfalls

Seymour Goldberg recently published an Article entitled, Dealing with RMD Shortfalls, Ed Slott's IRA Advisor Newsletter (November 2018). Provided below is the introduction to the Article.

The basic required minimum distribution (RMD) rules are well known, by advisors and by many clients. IRA owners must take RMDs once they reach their required beginning date, as per an IRS table, or face a 50% penalty for any shortfall.

That said, many IRA owners in that category fail to take RMDs, or any distributions at all. This might go on for many years, leaving a huge potential tax obligation for the IRA owner, a beneficiary, a trustee, or even an executor.

What should an advisor keep in mind, when faced with RMD noncompliance? Tax professionals must comply with specific rules; advisors who are not tax pros may face difficult decisions.

Beating GST Tax with HEETs

For the client that wishes to leave assets to their grandchildren, they are often hindered by the generation skipping transfer tax, or GST tax. This tax is the IRS's method of taxing this special type of transfers, but advisors and attorneys have their own method of assisting their clients with this predicament.

A Health and Education Exclusion Trust (HEET), as the name implies, can only pay for the medical and/or educational needs of the clients’ grandchildren and their descendants. But there is also another catch: one of the designated beneficiaries is required to be a charitable organization, and it is recommended to transfer 6-10% of the trust income to the charity annually. This stipulation allows the trust to be different than other generation-skipping trusts and  pass IRS scrutiny.

Unlike a 529 plan, a HEET can be used to fund education at any level, from kindergarten to graduate school. Though the trust cannot directly benefit the grandchild, it can do so by taking away this particular financial burden from the grandchild's parents. The trust can also pay insurance premiums, so another load off of a parent's shoulders.

See Beating GST Tax with HEETs, Wealth Counsel, October 26, 2018.

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

Insolvent Estates of Wealthy Decedents

The Internal Revenue Service has been emboldened by the strength of federal law and a recent case in which federal taxes were deemed a higher priority than fiduciary fees, thus creating issues for unwitting executors for insolvent (yet materially wealthy) estates. These type of estates usually involve an impressive menagerie of assets anchored with debts, such as homes with large mortgages, promissory notes in favor of closely held businesses, and high credit card balances.

The messy web of debts may also be coupled with tangled relationships with ex-spouses, children, and disputes with present or former business associates. There could be obligations from a divorce decree or settlement that must be performed before other responsibilities, so an advisor should work with the executor to lay out a plan. It should succinctly explain all assets and liabilities and a strategy for locating other assets and liabilities, and understand state statutory requirements to prioritize certain claims if the estate cannot sufficiently pay all claims. Many states are modeled after the Uniform Probate Code, but may have subtle differences.

The executor is free to negotiate with creditors in the best interest of the estate, and many creditors are willing to do so. They may believe that some money is better than no money at all.

Lastly, devise a method to protect the executor. On the opening of the estate, the executor should consider filing in the probate court a request for authority to pay fiduciary compensation and other expenses of administration, even if those expenses are still unknown at the time.

See Mark D. Brandenburg, Insolvent Estates of Wealthy Decedents, Wealth Management, October 31, 2018.

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

CLE on Estate Planning and Administration: The Complete Guide

The National Business Institute is holding a conference entitled, Estate Planning and Administration: The Complete Guide, on Wednesday, January 23, 2019 - Thursday, January 24, 2019 in San Diego, California. Provided below is a description of the event.

Program Description

Find Out How Key Estate Planning Tools are Drafted and Implemented

Every client's estate is unique in its assets composition, family dynamics and future needs, but all are ruled by the same principles and are subject to the same tax and legal limitations. In this comprehensive legal guide, experienced attorney faculty will guide you through the process of estate planning and administration and show you how to select the best trust instruments and wield them skillfully to avoid mistakes at probate. They will also teach you how to properly administer the estate and tackle potential mistakes of improperly drafted documents, changed circumstances and newly arising conflicts. Become fully prepared to protect your client's legacies - register today!

• Get an update on the current tax regime and other key regulations.
• Get the case off on the right foot with a thorough and thoughtful client intake.
• Compare key trust structures and their effect on the grantor and beneficiary tax future burdens.
• Help clients plan for and fund long-term care.
• Ensure confidentiality before and after the client's death.
• Get useful checklists for key dates and tasks in estate administration.
• Clarify what can be distributed through non-probate transfers and how to do it correctly.
• Explore creditor issues in estate administration and get trouble-shooting tips from the pros.
• Find out how much planning can still be done after the client's passing.
• Discuss the duties and powers of fiduciaries, their limits and real-life application.
• Get tips for closing the estate to prevent future disputes.

Who Should Attend

This basic-to-intermediate level seminar on estate planning and administration is designed for:

• Attorneys
• Accountants and CPAs
• Paralegals
• Tax Managers
• Trust Officers
• Certified Financial Planners
• Investment Advisers

Course Content

DAY 1: ESTATE PLANNING AND TRUST BASICS

1. Key Laws and Client Intake/Goal Setting
2. Planning for Long-Term Care and End-of-Life Decisions
3. Testamentary Documents - Drafting Do's and Don'ts
4. Common Trust Structures and When They're Used
5. Transfers During Life and Inter-Vivos Trusts
6. Tax Consequences of Trusts

DAY 2: PROBATE AND ESTATE ADMINISTRATION

7. Probate Process Overview
8. Marshalling Assets and Dealing with Creditors
9. Post-Mortem Tax Planning Options
10. Legal Ethics in Estate Practice
11. Trust Administration and Termination Basics
12. Closing the Estate