Wills, Trusts & Estates Prof Blog

CLE on Ownership of Cooperative Apartments and Condominiums by Trusts: An Overview of Popular Trusts and Obtaining Transfer Approval from Cooperative Boards

The New York City Bar is holding a webcast entitled, Ownership of Cooperative Apartments and Condominiums by Trusts: An Overview of Popular Trusts and Obtaining Transfer Approval from Cooperative Boards, on Tuesday, November 27, 2018 at 6:00 p.m. to 8:00 p.m. Provided below is a description of the event:

This course presents an overview of estate planning under the 2017 Tax Reform Act and its temporary doubling of the Federal estate, gift and generation-skipping tax exemptions. It covers the more common types of trusts and trends in transfer requests for permission to transfer apartments to such trusts, including Grantor Trusts, Qualified Personal Residence Trusts, Spousal Lifetime Access Trusts and Dynasty Trusts. It describes the tax attributes of these trusts and why some trusts are more effective, as a result of recent tax changes and the current interest rate environment. It forecasts which trusts will likely be more popular under the 2017 Tax Reform Act.

The program will discuss the role of counsel to coop boards in reviewing these requests and how practitioners can structure their trusts to increase the likelihood of approval. It will also address cooperative and condominium requirements when owning an apartment in a trust. Specifically, the speakers will discuss what documents will be reviewed, whether attorneys’ opinion letters will be necessary and whether buildings require ancillary documents such as guaranty, occupancy agreement or escrow.

Article on The Discovered Country: Wyoming's Primacy as a Trust Situs Jurisdiction

Amy M. Staehr recently published an Article entitled, The Discovered Country: Wyoming's Primacy as a Trust Situs Jurisdiction, 18 Wyo. L. Rev. 283-320 (2018). Provided below is an introduction to the Article.

The world is shrinking; it is becoming known. The global community, of which we are all a part, has embraced information sharing, transparency, and collaboration between jurisdictions. Thanks to legislation and enforcement efforts both at home and abroad, governments are collecting long overdue taxes on unreported foreign gains, continuing to close tax and reporting loopholes, and using multinational tools to combat money laundering. To be sure, these efforts have been going on for quite some time and their value is crucial to the viability of nations, to our general safety as citizens of the world, and in ensuring that enacted tax and financial laws are enforced against everyone. As these efforts progress, so do their corollary impacts. Aside from the benefits mentioned above,these efforts have resulted in increased reporting burdens for individuals, banks, money managers, and trust companies; a glut of shared financial information that some governments have little ability to sift through and make use of; and potentially increased peril for individuals living in certain parts of the world. As the intimate nature of our world increases, the laws within jurisdictions and governing interactions between them continue to evolve. As a result, families and the people who advise them are in the unique position of being able to consider a variety of jurisdictions—both new and established—and select the one with the right opportunities, sufficient flexibility, and appropriate safeguards in which to locate trusts to hold a portion or all of a family’s wealth.

In 2010, as part of the Hiring Incentives to Restore Employment (HIRE) Act, Congress passed the Foreign Account Tax Compliance Act (FATCA) in an effort to target non-compliance by U.S. taxpayers making use of foreign accounts, including those utilized by offshore trusts. As a result, U.S. jurisdictions gained popularity as trust situs locations. Wyoming began to be recognized as a safe, stable, and friendly jurisdiction in which to locate a trust, offering accommodating and evolving trust legislation, a state-income-tax-free climate, and enhanced creditor protection. Christopher M. Reimer’s comprehensive 2011 Wyoming Law Review article entitled The Undiscovered Country: Wyoming’s Emergence as a Leading Trust Situs Jurisdiction details Wyoming trust law as compared to other leading jurisdictions at that time.

Since the publication of that article, neither the scrutiny of offshore trust jurisdictions nor the corresponding interest in U.S. jurisdictions has subsided. The FATCA-generated financial information sharing between the U.S. and foreign governments spurred a global initiative, headed by the Organization for Economic Co-operation and Development (OECD), to implement similar information exchanges across the global community. In 2014, the OECD approved the Common Reporting Standard (CRS), under which at least ninety-five jurisdictions have agreed to the automatic exchange of financial information. The OECD based the provisions of CRS largely on FATCA, with the result that financial institutions around the world, including trusts and some business entities, share account ownership and other detailed financial information with participating governments. Although the U.S. joined the 2014 Declaration on Automatic Exchange of Information in Tax Matters, which endorses the general principles of CRS, it has not signed onto the Multilateral Competent Authority Agreement. The FATCA regime already provides the U.S. government with the information it deems useful; further, joining requires legislative action. Nevertheless, the U.S. has avoided being deemed non-cooperative according to OECD standards.

Article on Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds

Paul Rose recently published an entitled, Article on Public Wealth Maximization: A New Framework for Fiduciary Duties in Public Funds, 2018 U. Ill. L. Rev. 891-923. Provided below is an abstract of the Article.

This Article challenges the standard doctrine that public pension funds should be managed solely for the benefit of plan participants and their beneficiaries. Instead, economic logic suggests that public pension fund trustees owe their duties to the public collectively. This analysis is driven by the fact that, in practice, individual pension fund claimants function more like senior creditors than the residual claimants that are the typical recipients of fiduciary duties, and that the public—and current and future taxpayers specifically—are the true residual risk bearers for public pension funds.

This reframing of fiduciary duties in public funds has dramatic consequences for the investment policies of the funds. Most importantly, a shift in the locus of fiduciary duties to public wealth maximization will require fund managers to more fully consider the externalities accompanying their investments, which should serve to help them fully and accurately price their investments. Private investors might ignore certain negative effects, such as uncompensated harms from pollution or depleted natural resources, because the government absorbs the costs of such externalities. Indeed, a strict fiduciary duty to act in the interests of the fund would obligate a private investor to ignore such externalities, so long as they do not negatively affect the returns of the fund’s investments. The government—and by extension, the public who funds the government—that absorbs the cost of these externalities, however, should view investments differently. They should view it with an eye to minimizing negative externalities, particularly those that are significantly more expensive to remediate than to prevent. Similarly, a strict reading of fiduciary duty would suggest that funds should ignore positive externalities from investments that benefit society but not the plan participants. A focus on public wealth maximization would suggest that positive externalities should also be taken into account in investment decisions, which might, as a consequence, result in more investment in sustainable enterprises and long-term projects.

Stan Lee’s Tangled Web of Estate Planning ­and How to Avoid it in Your Own Life

Stan Lee, former Marvel Comics publisher and chairman, passed away this week at the age of 95. Lee is survived by his 68-year-old daughter J.C., who also had the challenge of handling her mother's passage this past year as well. Stand and Joan were married for almost 70 years. It is yet unknown if Lee had a trust or a will. Several celebrities have foregone estate planning documents recently, including Aretha Franklin and Prince.

Estate planning can be an emotional process, and maintaining one can be especially tricky as a person ages, especially if the person has cognitive degeneration. This was a potential concern for Lee, who first claimed that his daughter had befriended three men and that all four individuals were conspiring to take advantage of him, then rescinded the claim three days later. It is best to decide the issues of who will take care of personal and financial decisions before an elderly person declines. “Older people get less confident in what they’re doing, and they get more susceptible to being influenced by other people who may not have the best of intentions," said David Lehn, partner in the private client and tax team of Withers.

Lee admitted that in the beginning he worked with several attorneys and managers that either did not have the best intentions or were simply not trustworthy. Now, one of the greatest complications of Lee’s estate, and specifically his daughter, will be dealing with the numerous documents potentially floating around because of these past relationships. Even people without millions of dollars and a career creating iconic superheroes should prepare for the future they will and will not be in.

See Alessandra Malito, Stan Lee’s Tangled Web of Estate Planning ­and How to Avoid it in Your Own Life, Market Watch, November 17, 2018.

Special thanks to Carissa Peterson (Hrbacek Law Firm, Sugar Land, Texas) for bringing this article to my attention.

Seven Estate Planning Considerations for Blended Families

Blended families are becoming increasingly common, and with that comes specific considerations. When one of the parents/step-parents pass away, it leaves both step-children and biological children depending on the remaining person to make testamentary decisions that would have been supported by both. Unfortunately, that is not always the case.

Here are seven specific tips for second (or third, fourth, etc.) marriage couples:

1. Upon the death of the first spouse, a trust can be established for the benefit of the surviving spouse to provide them with income and perhaps principal. The spouse should not be the only trustee, and consider giving a children a bequest upon the first death.
2. If spouses want to sign a joint trust then the trust should be drafted so that it becomes irrevocable upon the first death.
3. As troubling as it may be on the facade, consider worst case scenarios and open a separate bank account with the children named as beneficiaries.
4. Discuss funeral arrangements and plans with family members proactively, and sooner rather than later.
5. Consider naming your spouse and one of your children as co-attorneys in fact.
6. Communicate, communicate, communicate! Make sure everyone is on the same page, knows your wishes, and does not feel betrayed.
7. Beneficiary designations trump a well drafted estate plan, so double check them.

See Meredith Murphy, Seven Estate Planning Considerations for Blended Families, Salawus, November 13, 2018.

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

How to Choose the Right Guardian

If you have minor children, selecting the right person to be the guardian for them in the tragic instance that you die or become incapacitated is one of the most important planning decisions that you have to make. Failing to do so could put the future of your precious offspring in the hands of an impersonal court system.

Tackling the responsibility of another person's child or children is not one that should be taken lightly, and thus should be accepted willingly and with a complete understanding of the duty. A proper guardian should be reliable and stable, with sound judgment and values that are similar to your own so the person can be an appropriate surrogate parent. Though being a family member is often seen as a necessary factor in being a guardian, it is not required. But having an established and caring relation with the child or children can be considered immensely valuable.

Children can be inherently expensive, from sports to education to medical bills. Asking a person to be the guardian for your children is also asking them to be responsible for their financial obligations as well. Therefore, it is important to work with a knowledgeable estate planner who can help arrange financial support not only directly for your child, but also if necessary, for the personal costs that the guardian incurs in taking care of your children. Depending on the circumstances and the people or person you choose, the trustee for your children's trust can be the same person or different from the person who choose to be the children's guardian.

See Cheryl E. Hader & Jonathan Kane, How to Choose the Right Guardian, Kramer Levin, November 8, 2018.

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

Paul Allen's Will Sheds Little Light on What Will Happen to Estate

Paul Allen’s six-page will was filed with King County on October 24, the same day that his sister, Jody, was announced as his executor and trustee of his estate. His will did not provide as much clarification as anticipate, instead pointed to a living trust established decades ago. The disposition of the assets within the trust are not expected to be made public. Forbes has estimated his wealth at $20 billion.

Allen died on October 15 at age 65 from complications of non-Hodgkin lymphoma. He was a co-founder of Microsoft, owned the Seattle Seahawks, donated significantly to the arts community and scientific research, and ran the multifaceted Vulcan Inc., which reshaped the real-estate landscape of South Lake Union.

Jody Allen said last month that “I will do all that I can to ensure that Paul’s vision is realized, not just for years, but for generations.” Allen signed the will on July 18, with two Vulcan employees as witnesses.

See Rachel Lerman, Paul Allen's Will Sheds Little Light on What Will Happen to Estate, Seattle Times, November 8, 2018.

Special thanks to Adam J. Hirsch (Professor of Law at the University of San Diego School of Law) for bringing this article to my attention.

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.