Wills, Trusts & Estates Prof Blog

Article on Crummey Powers: Still a Powerful Estate Planning Tool

Robert J. Adler recently published an Article entitled, Crummey Powers: Still a Powerful Estate Planning Tool, Probate & Property Magazine, Vol. 34 No. 1 (Jan/Feb 2020). Provided below is the introduction to the Article.

In the usual case, an unfunded irrevocable life insurance trust will rely on gifts from the trust grantor to provide funds necessary to pay future premiums. These gifts are subject to the gift tax. IRC § 2503(b) provides for a gift tax annual exclusion of up to $15,000 (as indexed through 2019) per donee per year for gifts of present interests. Gifts of a future interest do not qualify for the annual exclusion. Consequently, gratuitous transfers in trust of cash to pay life insurance premiums would ordinarily be future interest gifts for which no annually excludable amount is available.

Article on Discretionary Dilemma: Trustee Consideration of Beneficiary Financial Resources

Jacob L. Geierman recently published an Article entitled, Article on Discretionary Dilemma: Trustee Consideration of Beneficiary Financial Resources, Probate & Property Magazine, Vol. 34 No. 1 (Jan/Feb 2020). Provided below is the introduction to the Article.

Trust instruments often provide trustees with discretion to distribute trust assets to or for the benefit of the beneficiaries. By their nature, discretionary trusts often create difficulties in ongoing administration. One common, but often overlooked, difficulty is administrating discretionary trusts is determining whether and how the trustee should consider beneficiary financial resources when making discretionary distributions.

Article on Victoria Meets Confucius in Singapore: Implied Trusts of Residential Property

Kelvin F.K. Low recently published an Article entitled, Victoria Meets Confucius in Singapore: Implied Trusts of Residential Property, Wills, Trusts & Estates Law eJournal (2019). Provided below is an abstract of the Article.

Co-ownership of residential property is commonplace in Singapore. This is the result both of necessity (as private property is expensive) and incentives (generous subsidies are made available to family units purchasing public property). Yet the rules on implied trusts (both resulting and constructive) governing such ownership have resisted developments seen in other common law jurisdictions such as England and Australia or even Hong Kong. This has led to criticisms that the rules perpetrate gender inequality. This may strike observers as odd given the progressive views on gender of the Singapore government, as can be seen in in its enactment of the Women’s Charter as early as in 1961. It is less odd, however, when viewed from the conservative Confucian perspective of the family as the basic unit of society. The cases therefore demonstrate not so much an objective of marginalising women but of preserving the especial place of the family, conceived of as a man and a woman in a formal State-recognised marriage, values conveniently found in some of the Victorian laws inherited by Singapore as a former British colony. Developments in trust law that threaten the hallowed status of the formally State-recognised family unit are viewed by the courts with suspicion and trepidation. This paper considers if this apprehension continues to be viable in the face of a changing society.

New SECURE Act Affects Estate Planning for Retirement Plans

The Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect January 1st of 2020 and for the foreseeable future drastically changes estate planning with retirement plans. Prior to the Act, beneficiaries could stretch out the distributions from an inherited IRA over thir lifetime to get the tax-deferred benefits. That is no longer the case and many may need to review their plans.

Now most inherited retirement plans must be fully distributed within 10 years of the participant's death, unless they fit into these 5 categories: (1) the participant's spouse; (2) the participant's minor children; (3) disabled beneficiaries; (4) chronically ill beneficiaries; and (5) beneficiaries less than 10 years younger than the participant. A surviving spouse can also still roll over inherited benefits into their own IRA.

Conduit trusts may become a relic under the Act as they could cause punitive income tax consequences. Also, trusts with conduit provisions no longer provide the long-term control or protection of retirement benefits and their proceeds for beneficiaries that many plan participants previously expected. An accumulation trust could still be an option for plan participants which allows the required distributions to collect inside a trust, with the trustee maintaining discretion regarding distributions to trust beneficiaries. The retirement account must still be fully distributed to the trust within 10 years.

See Sarah B. Bowman and Catherine (Cat) N. L. Connell, New SECURE Act Affects Estate Planning for Retirement Plans, K&L Gates Hub, January 13, 2020.

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

Article on Testate Succession Under Ukrainian Law

Iryna Dikovska recently published an Article entitled, Testate Succession Under Ukrainian Law, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

The article analyses the legal aspects of the development of testate succession in Ukraine. In particular, it focuses on the notion of the will, the capacity of its making, special types of wills and their form. The content of wills is being viewed through the principal of testamentary freedom. The article offers the solution of such controversial issues of Ukrainian succession law as the legal nature and content of joint wills, the consequences of the death of one of the spouses, as well as the nullity or dissolution of marriage for joint wills, the requirements to the conditions in conditional wills. It critically examines the order of recording of wills. The article reveals the legal nature of the relationships caused by the legacy. It compares the legacy with other special testamentary dispositions. The article compares certain solutions of Ukrainian succession law with the legal rules of some other countries.

Lifetime Transfers Considered an Advance on Inheritance

California’s second appellate district recently ruled in Sachs v. Sachs that lifetime transfers of property to a person can be treated as an at death transfer, and therefore as an advance on any inheritance. The transferor kept a record of when he periodically certain amounts to his children, and the court found that the writing satisfied California Probate Code section 21135.

David Sachs created a trust in 1980 and named his two children, Benita and Avram, as the main beneficiaries. He began to keep a written log of distributions under what he labeled "The Permanent Record" in 1989 and told the children about it. After a stroke that triggered cognitive issues, David had a bookkeeper maintain logging the distributions. The bookkeeper said David had mentioned "keeping the list was important so that payments made to his children could be deducted from their respective inheritances.”

David's care became expensive, and Benita became trustee. Avram was adamant about continuing distribution and that he was fine with it being put on "The Permanent Record." After David’s death, Benita filed a Petition for instructions to equalize the distribution of assets from the trust, claiming that the disparity in lifetime distributions and transfers in favor of the other beneficiary should be deducted from their distributive share of the Trust and considered an advance on his inheritance. The trial court agreed with Benita, and Avram appealed. The appellate court held that the permanent record was a writing that satisfied the requirements of section 21135 because:

• It was in the testator's hand.
• It was contemporaneous.
• Had no other purpose other than to equalize distributions between the children.

See Lifetime Transfers Considered an Advance on Inheritance, Probate Stars, January 8, 2020.

Article on Resolving the Status of the Bare Trust

Robert Flannigan recently published an Article entitled, Resolving the Status of the Bare Trust, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article.

A number of diverse arrangements commonly are described as “bare trusts.” Trustees are said to be bare trustees where, for example, they have no active duties, they are controlled by settlors or beneficiaries, or their trustee status is imposed on them for arrangements they create, actions they take or wrongs they commit. The question that arises is whether the bare trust designation describes a distinct legal form. Do these arrangements constitute a class of trust that is regulated in ways that other trusts are not, or is the bare trust designation no more than a convenient descriptor for a functional difference that has no substantive legal significance? I shall explain that bare trusts do not differ in kind from other trusts. They simply are trusts that have a narrow function. The function of the trustee is, or becomes, merely to hold legal title to the trust assets, whatever other relations or obligations might be involved ex ante or concurrently. I shall explain that bare trustees, to the extent of their trustee capacity, are not subject to unique rules. I will illustrate that primarily by refuting the assertion that bare trustees are not status fiduciaries. I will coincidentally refute the assertion that a controlled bare trustee is a novel amalgamation of trust and agency status.

CLE on 2020 Tax Updates for Trusts and Estates

The National Business Institute is holding a video webcast entitled, 2020 Tax Updates for Trusts and Estates, on Thursday, January 30, 2020 from 9:00 AM - 4:00 PM central. Provided below is a description of the event.

Get the Latest Information and Tools to Save Clients on Taxes

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!

• • Clarify recent changes in tax law and regulation and prepare for their potential effects.
  • Analyze the most important case law of the year to glean future threats and opportunities for your clients.
  • Hear about new tax tools to add to your arsenal.
  • Get an advance look at future developments coming down the pike.

Who Should Attend

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

Course Content

• • Current Relevant Federal Tax Laws, Rates, Exemptions
  • Trust Tax Deductions under TCJA: Core Changes and Clear Guidance
  • IRS Tax Forms and Procedures Updates
  • Unpacking the Section 199A Changes and Opportunities
  • SECURE Act and Its Effect on IRA Planning
  • Current IRS Guidance and Enforcement Initiatives
  • Cross-Border Tax Issues Every Estate Planner Needs to Know
  • Reassessing and Repairing/Replacing Old Tax Planning Techniques
  • Legal Ethics and Tax Planning
  • Looking Ahead

Article on The Sub-Trust in Scots Law

Patrick J. Follan recently published an Article entitled, The Sub-Trust in Scots Law, Wills, Trusts, & Estates Law eJournal (2019). Provided below is an abstract of the Article. 

The paradigmatic trust involves three parties: a settlor (who transfers property to another) a trustee (who holds the property in trust) and a beneficiary (for whom the trust property is administered and who ultimately receives the benefit of that property). The law of trusts allows a number of variations on this theme, of which the 'sub-trust' is one. In a sub-trust, the beneficiary declares a trust over his or her trust interest and so becomes a 'sub-trustee' in a chain of relationships of management and entitlement. The sub-trust occurs relatively often in commercial practice but has been the subject of little detailed study, particularly in Scots law.

This paper considers the idea of the sub-trust within the broader framework of the Scottish law of trusts. Beginning with an introduction to the concept, the paper discusses how it might be accommodated with reference to the predominant model of the trust in Scotland. Having established a possible conceptual basis for the sub-trust, the paper anticipates four difficulties which arise in its operation. Possible solutions are suggested in each case: account is taken in particular of the experience of English law where more frequent use has given rise to a larger body of rules dealing with sub-trusts. The paper demonstrates not only that sub-trusts can be satisfactorily accommodated in Scots law, but that they represent a fruitful area of study in Scotland and further afield.

Article on Non-Charitable Purpose Trusts: The Missing Right to Forego Enforcement

Kelvin K.F. Low recently posted an Article entitled, Non-Charitable Purpose Trusts: The Missing Right to Forego Enforcement, Wills, Trusts, & Estates Law eJournal (2017). Provided below is the abstract of the Article.

Orthodox trust law invalidates non-charitable purpose trusts on the basis of the beneficiary principle. However, in the last two decades, various offshore trust jurisdictions have begun to provide for non-charitable purpose trusts via legislation and Hayton has even suggested that they may be permitted by simple drafting through the provision of an enforcer even in onshore trust jurisdictions without special legislation. This paper sets out the reasons why Hayton is wrong and explains the true basis for the objection to the non-charitable purpose trust. It also explains why charitable trusts are a hybrid of public and private law.