Wills, Trusts & Estates Prof Blog

IRS Final Rules Identify Syndicated Conservation Easements as Abusive Tax Transactions

The IRS and U.S. Treasury Department have finalized regulations identifying certain syndicated conservation easement transactions as "listed transactions," marking them as abusive tax schemes that must be reported. Released on October 7, these rules aim to curb tax avoidance strategies involving inflated charitable deductions through conservation easements. These easements allow property owners to limit land use for conservation and claim tax breaks, but the IRS has found that many are misused through exaggerated valuations. The new regulations require participants and advisers in these transactions to disclose their involvement to the IRS, with penalties for non-disclosure.

IRS Commissioner Danny Werfel stated that the regulations target abusive syndicated conservation easements, which have been used as tax shelters through inflated land appraisals. The Senate Finance Committee’s investigation into these schemes revealed that they often involve partnerships designed solely to generate tax deductions, with no genuine business purpose. By inflating land values, participants could claim excessive deductions, exploiting tax provisions meant for genuine conservation efforts. The new rules are part of an effort to enhance transparency and hold participants accountable.

The final regulations amend the Income Tax Regulations under 26 CFR Part 1, requiring taxpayers and advisers to file specific forms—Form 8886 for taxpayers and Form 8918 for advisers. These regulations took effect on October 8 and apply to open tax years. The IRS’s crackdown comes after several promoters were sentenced to over 20 years in prison for orchestrating a large-scale easement tax scam that caused the IRS $450 million in losses.

For more information see Tom Ozimek "IRS Final Rules Identify Syndicated Conservation Easements as Abusive Tax Transactions" The Epoch Times, October 6, 2024.

‘Scottish Widows sent my dad’s life insurance policy to my estranged nephew’

A woman who had been caring for her late father, a former Royal Marine commando, has given up her fight with Scottish Widows after the company sent her father's £10,000 life insurance payout to her estranged nephew. The daughter had been living with her father in Cyprus, ensuring his care until his passing in April 2019. Before his death, her father requested Scottish Widows transfer his life insurance policy to her for safety reasons, a request the company initially acknowledged. However, after her father's death, it was discovered that the payout, along with two other accounts amounting to £37,000, was sent to her nephew, who was still the power of attorney.

The problem stemmed from a discrepancy between the deed of assignment and the power of attorney, causing the life insurance transfer to become invalid. Alan Lakey, a financial adviser, explained that financial transactions before death must involve the power of attorney, potentially nullifying the assignment the daughter believed had been completed. The daughter filed complaints with Scottish Widows and escalated the matter to the Financial Ombudsman Service, which later refused to take on the case, citing jurisdiction issues. Frustrated, the daughter expressed her disappointment in how Scottish Widows handled the matter, considering her long-standing relationship with Lloyds Bank, which owns the insurance company.

This case reflects a broader issue, with complaints against Scottish Widows rising significantly. The daughter discovered a Facebook group dedicated to complaints about the company, connecting with others who experienced similar frustrations. Campaigners, including Mark Radin, have been advocating for changes, as complaints about the company surged by 63% last year. Scottish Widows responded by saying they had made efforts to address customer service issues, including training and staff reallocation, but the company could not comment on the specific case due to the legal complexities involved.

For more information see Ruby Hinchliffe "Scottish Widows sent my dad’s life insurance policy to my estranged nephew" The Telegraph, October 6, 2024. 

Special thanks to Laura Galvan (Attorney, San Antonio, Texas) for bringing this article to my attention.  

Article: Trust Law and Colonialism

Masayuki Tamaruya (University of Tokyo) recently published, Trust Law and Colonialism, 2024. Provided below is an Abstract:

This chapter examines the evolution of trust law through the lens of colonialism, tracing its roots from the English Court of Chancery to its adoption in diverse jurisdictions worldwide. While trust law has been shaped by various factors such as legal traditions, judicial attitudes, and economic conditions, colonial history has played a significant yet often overlooked role. The chapter explores how the establishment of British colonies and the arrival of English settlers impacted local trust laws, while also highlighting how independence from colonial rule or resistance to colonial pressures could profoundly influence legal developments. It delves into the broader context of colonial rivalry, particularly between Britain and France, and how these dynamics shaped the evolution of trust law. By analyzing the interplay between colonialism and trust law across the British Empire, the Americas, and Asia, this chapter reveals the enduring influence of colonial legacies on global trust law practices.

Article: Dismissed at Death: Reassessing The Intersection of Joint Tenants’ Rights of Survivorship and Partition at Death In Battle v. Howard

Liam Cronan (U.S. District Court for the District of Massachusetts) recently published, Dismissed at Death: Reassessing The Intersection of Joint Tenants’ Rights of Survivorship and Partition at Death In Battle v. Howard, 2024. Provided below is an Abstract:

In 2022, the Massachusetts Supreme Judicial Court issued the most recent in a long line of cases, Battle v. Howard, addressing a seemingly simple property law question: what happens when a joint tenant sues for partition and then dies? Through the right of survivorship, all joint tenants have a right to their co-owners’ share in the property at death. And through the right to partition, joint tenants can unilaterally sue to terminate a joint tenancy and prevent the right of survivorship from taking effect. But when a joint tenant sues for partition and dies before the partition suit is complete, the right of survivorship and the right to partition inherently conflict. Battle, like most cases in the past half-century, resolved this conflict by holding that the partition must be dismissed because the right of survivorship takes precedent at a joint tenant’s death. That result, however, is inherently at odds with centuries of legal history. Although at common law partition actions ended with the death of any party, many jurisdictions have long amended this rule by statute. England was the first to do so as early as 1696 with the Partition Act, which required that no partition could “abate” (i.e., be dismissed) because of “the death of any joint tenant.” Today, many U.S. states still maintain similar statutory modifications. Massachusetts is among them, but Battle, like some cases before it, declined to recognize this longstanding statutory change to the common law rule that a partition ends with a party’s death. The 1696 Act and its progeny have been all but forgotten in American law. In resurrecting this neglected area of real property law, this Article will impart a historically informed understanding of the impact of a joint tenant’s death on the right to partition and offer a revived interpretation of the many statutes, derived from the 1696 English antecedent, that expressly allow a partition action to survive a parties’ death. In so doing, this Article will first survey the decision in Battle and analogous decisions from other jurisdictions. It will then draw from centuries of Anglo-American legal history, from fourteenth century case law to Blackstone’s Commentaries, to deconstruct the intersection between the common law right of survivorship and statutory right to partition. Lastly, it will revisit the case law in light of this history to offer a new approach for courts and practitioners when reckoning with a partition action that coincides with death. In all, this unexplored area of legal history will provide relevant insights to a property law issue whose proper, historically grounded resolution has eluded courts and scholars for decades.

 

Article: Nine Points About Solicitors’ Equitable Liens

Mark Leeming (The University of Sydney - Faculty of Law) recently published, Nine Points About Solicitors’ Equitable Liens, 2024. Provided below is an Abstract:

This note identifies, by reference to recent decisions, nine points of interest and potential confusion concerning the "equitable lien" enjoyed by a solicitor in respect of the fruits of a judgment or compromise.

 

The Giant Trump-Era Gift Tax Exemption Expires Next Year. Why Private Fund Managers Better Take Note

Private equity and venture capital managers need to carefully plan their gifting strategies before the current elevated gift and estate tax exemption expires at the end of 2025. Currently, individuals can gift up to $13.6 million tax-free, and couples up to $27.2 million. After the exemption expires, it will revert to around $7 million per person. If fund managers mishandle the gifting of carried interest—profits from investment funds—they could inadvertently trigger large, unplanned tax liabilities.

A key issue for fund managers is complying with Section 2701 of the U.S. tax code, which requires that both carried interest and capital interest be transferred proportionately when gifting carried interest. If this rule is ignored, the entire fund interest could be deemed transferred, potentially leading to unintended consequences. The “vertical slice” technique allows managers to avoid this by gifting a proportionate amount of both interests. For example, gifting 10% of carried interest requires also gifting 10% of capital interest.

With the tax exemption set to expire soon, there is uncertainty about whether Congress will extend the higher limits or let them revert to lower levels. Republicans generally favor maintaining the current exemption, while Democrats support allowing it to decrease. Given the lengthy process of firming up valuations, addressing family goals, and drafting documents, managers are encouraged to act swiftly to avoid last-minute complications.

For more information see Karen Hube "The Giant Trump-Era Gift Tax Exemption Expires Next Year. Why Private Fund Managers Better Take Note" The Barrons, October 1, 2024.

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

Richard Simmons' brother shares 'little secret' about late fitness guru's burial: 'Not too many people know'

 

Richard Simmons, the iconic fitness guru famous for his energetic "Sweatin' to the Oldies" workout videos, was honored in a celebration of life in New Orleans following his passing. His brother, Lenny Simmons, shared a heartfelt detail about Richard's burial, revealing that he was laid to rest in his signature tank top and shorts. This was done as a tribute to his fun-loving spirit and his lifelong commitment to helping people stay fit. Lenny added that the family believes Richard is now helping "the saints and the angels get into shape" in the afterlife.

Simmons passed away on July 13, 2024, at the age of 76, after suffering a fall two days prior. He had spent the day before his death in bed recovering from the fall and experiencing leg pain, but he declined to go to the hospital, telling his caretaker, Teresa Reveles, that he wanted to wait until after his birthday, which was on July 12. Tragically, he was found unresponsive the following morning in his home. The Los Angeles County Medical Examiner ruled his death an accident, with heart disease and injuries from the fall contributing to his passing.

Simmons' caretaker described him as peaceful at the time of his death, with his hands balled into fists, a sign she recognized from her own heart attack experience. He was laid to rest five days later in a private ceremony attended by close family and friends. The Simmons family spokesperson confirmed there was no foul play involved, and the fitness icon's legacy continues to inspire his fans and followers.

For more information see Christina Dugan Ramirez "Richard Simmons' brother shares 'little secret' about late fitness guru's burial: 'Not too many people know'" Fox News, October 5, 2024. 

Wealthy Families Increasingly Question Where in the World to Keep Their Assets

Ultra-wealthy families are increasingly faced with the challenge of deciding where to locate their assets as their businesses and family members spread across multiple countries. Traditionally, these families managed their wealth through a single-family office in the country where their business was based. However, globalization has introduced new complexities, making it necessary to professionalize decisions regarding asset location. A report by Citi Private Bank, which works with 1,800 family offices, highlights this growing trend.

Citi's clients are often global, with 53% having assets in multiple countries and 44% having family members spread across various nations. Changes in tax regulations, particularly in Europe and Latin America, could further drive this global movement of wealth. Citi emphasizes four key criteria for selecting a family office location: political and economic stability, financial and legal infrastructure, access to talent and cost efficiency, and convenience based on where family members live and work.

Wealth centers like the U.S., Switzerland, and Singapore are commonly favored for their robust infrastructure, but other jurisdictions, such as Monaco and the Bahamas, are also popular due to their favorable tax systems and strategic locations. Some ultra-wealthy individuals adopt "tax nomad" strategies, legally managing their residency across different countries to minimize tax liabilities. As the global landscape becomes more unpredictable, families are advised to plan for contingencies, including securing backup locations through residency programs in countries like Spain and New Zealand.

For more information see Abby Schultz, "Wealthy Families Increasingly Question Where in the World to Keep Their Assets" Barron's, September 24, 2024. 

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

Friend's compassion—even in death—inspired my own 'David's Will'

David Breaux, known as the "Compassion Guy" in Davis, California, for his dedication to spreading compassion. After his tragic murder, his wish to forgive his killer inspired the author, Tom Williams, to write a "David's Will" outlining his own wishes if killed. This will emphasizes forgiveness, restorative justice, and ending cycles of violence.

Williams believes a "David's Will" can prevent family conflict over justice and reduce calls for revenge. By making these wishes clear, individuals can contribute to breaking cycles of violence.

The author also reflects on how violence affected him personally, including the murder of another friend in a mass shooting. Creating his will became a way to honor his losses and foster peace. Williams encourages others to consider making similar commitments to compassion.

For more information see Tom Williams "Friend's compassion—even in death—inspired my own 'David's Will'" ABA Journal, October 2, 2024. 

 

People Without Kids Are Leaving Money to Surprised Heirs

As childlessness becomes more common, especially among older generations, many estates are being inherited by distant relatives, charities, or even pets. Without children to pass on their wealth, many individuals, particularly those without wills, unintentionally leave their assets to extended family members they may have little contact with. This trend has led to what estate planners call "laughing heirs," who unexpectedly receive inheritances.

Childless individuals are also more likely to leave their money to causes and friends. Some people, like Kelley Gilpin McKeig, who inherited money from a distant cousin, are prompted to create or update their wills to ensure their assets go to those they care about. Pets, too, are becoming common beneficiaries, with people like writer Rebecca Fornwalt and financial coach Susan Lassiter-Lyons leaving provisions for their animals in their estate plans.

A significant concern for childless individuals, beyond inheritance planning, is ensuring they have support in old age. Without children to rely on for help, such as medical care or daily tasks, many wonder who will assist them as they grow older. Financial advisors stress the importance of planning for both retirement and care needs, and of choosing executors who will honor their wishes.

For more information see Tali Arbel "People Without Kids Are Leaving Money to Surprised Heirs,"The Wall Street Journal, October 2, 2024. 

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