Wednesday, March 27, 2013

Update: The United States Supreme Court heard oral arguments today in Windsor v. United States.

Update: On Friday, December 7, 2012, the Supreme Court announced that it would hear arguments in Windsor v. United States and Hollingsworth v. Perry. These cases, addressing the Defense of Marriage Act (DOMA) and California’s Proposition 8 will mark the first time the Supreme Court has addressed the question of same-sex marriage.

Update: On October 18, 2012, the Second Circuit Court of Appeals issued an opinion striking down the so-called “Defense of Marriage Act” (“DOMA”) in the ACLU and NYCLU’s Windsor v. United States case. The Court decided that when government discriminates against lesbians and gay men, the discrimination should be presumed to be unconstitutional. The Second Circuit was not the first appeals court to strike down DOMA, however. The First Circuit Court of Appeals found DOMA unconstitutional in May of 2012. But, the significant difference between the two legal opinions may mark the beginning of an important legal shift in the way DOMA cases are decided. The First Circuit evaluated DOMA under what is known as “rational basis review.” This test requires that the government action be “rationally related” to a “legitimate” government interest. In spite of this, the Second Circuit became the first federal appeals court to decide that a higher standard of review, intermediate scrutiny, applies to decisions of discrimination based on sexual orientation. In order to overcome the intermediate scrutiny test, it must be shown that the law or policy being challenged furthers an important government interest in a way that is substantially related to that interest. This legal standard, if ultimately accepted by the Supreme Court, would dramatically raise the burden on government to defend the constitutionality of laws that discriminate on the basis of sexual orientation, like same-sex marriage, as seen in Windsor v. United States. (more…)

Tuesday, March 26, 2013

Today and tomorrow, the U.S. Supreme Court will be hearing oral arguments in two cases that could change the scope of marriage in the United States. Today, the Court is hearing oral arguments in Hollingsworth v. Perry, and tomorrow, the Court will be hearing oral arguments in the case of United States v. Windsor.

The cases contain a myriad of questions, but if the Court decides to get past the procedural questions and issue rulings on the substance, significant changes could be in store regarding the Defense of Marriage Act (“DOMA”) and the federal treatment of same-sex marriages. For a discussion of all of the various constitutional issues the Court may address in these cases, see Erwin Chemerinsky’s article, “Chemerinsky: Same-sex marriage battle goes before the Supreme Court“. (more…)

Thursday, March 21, 2013


Time to get into the weeds on the scope of a trustee‘s powers.  There are basically two sources of power for a trustee – the trust instrument and state law.  Where those two intersect, overlap, conflict, or diverge is where you will likely find the bulk of fiduciary litigation about trustee powers. (more…)

Tuesday, March 19, 2013

The 7520 rate for April 2013 has stayed level at 1.40%.

The Federal Interest Rates for April can be found here.

Friday, March 15, 2013

Written with assistance from our Spring Extern Debra Faulkner

When the American Taxpayer Relief Act was enacted in early January, for many Americans, it all but eliminated the concern over the estate and gift taxes by making the $5,000,000 exemption (indexed for inflation) permanent. While the new law provides clarity and a sense of permanency, beware of becoming too complacent: 21 states and the District of Columbia still have estate or inheritance taxes. Two states – Maryland and New Jersey – have both.

The state estate and inheritance tax legislation, much like the federal estate tax legislation, has been notoriously volatile. In 2001, all 50 states had some form of death-time transfer tax, either an estate or an inheritance tax. In 2013, only 21 states have an estate or inheritance tax and in two of those states – Delaware and Tennessee – the taxes are set to expire. The exemption rate, like the questionable persistence of the estate tax itself, is uncertain and subject to constant fluctuation. Illinois, for example, has changed its estate tax exemption three times in as many years. While many states, like Illinois, Maine, and Tennessee, have scheduled exemption increases, Connecticut lowered its estate tax exemption in 2011 from $3,500,000 to $2 million. The current state estate tax exemptions range from $675,000 in New Jersey to $5,250,000 (the federal estate tax exemption) in Delaware, Hawaii, and North Carolina. The corresponding estate tax rates range from less than 1% up to 16%.

Unlike an estate tax, which is levied upon the estate of an individual after death, an inheritance tax is a tax levied upon heirs that inherit property. Inheritance tax rates vary widely based upon the heir’s relationship to the decedent. For example, in Indiana, a spouse or charity is not subject to any tax on inherited property but a friend must pay a 10-15% inheritance tax on the value of property received that exceeds $100. In Maryland, lineal descendants take property free of tax, while property passing to other individuals is subject to a 10% tax. The inheritance tax rates range from 0% for certain classes of heirs (such as spouses) to 20% for non-relatives in some states. Like the estate tax, the inheritance tax changes frequently. Of the six states with the tax, two states – Tennessee and Indiana – have already enacted legislation to phase-out the tax. According to current law, Tennessee will no longer have an inheritance tax in 2016, and Indiana’s tax is set to be repealed entirely in 2022.

While the ever-changing nature of the estate and inheritance taxes undoubtedly concerns residents of the 21 tax-levying states, residents of other states may also be on the hook for these taxes. Property located within an estate tax-levying state is subject to the tax, even if the owner of the property lived and died elsewhere. Similarly, inheritance tax may be owed by heirs who receive property from a decedent who lived in a state with inheritance tax. The perpetual unpredictability of these taxes underscores the importance of regular estate planning reviews.

For more information on state inheritance and estate taxes, see the links below to the applicable statutes.

States that impose estate and inheritance taxes:
Estate Tax
Inheritance Tax
New Jersey
Inheritance Tax
Estate Tax

States that currently impose an inheritance tax:

States that impose an estate tax:
District of Columbia
New York
North Carolina
Rhode Island

*Nebraska has inheritance taxes, but unlike other states, the tax is collected at the county level.

Tuesday, March 5, 2013

Marshall appealOn February 28, several Bryan Cave lawyers, including Bill HibsherLee Marshall,  Katherine Keating, David Greene, Robert Esposito, and Liz Kukura, filed an amicus curiae brief in the United States Supreme Court case of Hollingsworth v. Perry, et al.  Their brief, filed pro bono on behalf of the Family Equality Council and five other family and children groups, focuses on the impact that marriage inequality has on the children of LGBT parents.

Sunday, March 3, 2013

The 7520 rate for March 2013 has risen to 1.40%.

The Federal Interest Rates for March can be found here.

Friday, March 1, 2013

New Irvine Partner Renee Gabbard and New York Of Counsel Edward Peck were highlighted Feb. 22 in The Am Law Daily for their recent move to the firm. Both will practice with our Private Client Group. Also joining them from their old firm is Associate Megan Acosta, who will work in our Irvine office.

New York Counsel Alan Appel was quoted Feb. 14 by Law360 concerning the U.S.- Switzerland FATCA agreement. Switzerland recently agreed to implement a tough law requiring its banks to turn over information on accounts held by U.S. citizens in an effort to help catch U.S. tax evaders. Getting Switzerland to sign on to FATCA – the Foreign Account Tax Compliance Act – was a big step forward in extending the law’s reach, Appel said. “It shows Switzerland is not going to fight this and they’ve ordered their financial institutions to comply,” he said.