Originally posted on bryancavefiduciarylitigation.com
Testators may want to keep careful track of who has copies of their will and where those copies are. If only a copy of a will – and not the original – is found, it may raise a question about whether the testator destroyed the original in an attempt to revoke it. Such was the argument made by the caveators in Johnson v. Fitzgerald. Let’s see why the Georgia Supreme Court felt like a copy was good enough to admit to probate in solemn form.
The executor of an estate offered a copy of a will for probate in solemn form, requesting that it be admitted to probate upon proper proof. The original could not be found. The testator’s heirs at law filed a caveat alleging that the will had been revoked by the testator’s destruction of it.
Under Georgia law, if the original of a will cannot be found for probate, there is a presumption that the testator intended to revoke the will. But this presumption can be overcome if a copy is established by a preponderance of the evidence to be a true copy of the original and if it is established by a preponderance of the evidence that the testator did not intend to revoke the will. Here, there was “ample evidence” that the testator intended for provisions in his will to continue in force.
Under the propounded will, $50,000 was bequeathed to a church for the use of its cemetery fund, $50,000 was bequeathed to an individual, and the will named a trust which benefited a foundation as the residuary beneficiary. The Georgia Supreme Court highlighted the following evidence that supported a conclusion that the testator did not intend to revoke the will:
- The testator executed a document guiding the trust referenced in the will, and he later amended the trust;
- In discussions with his attorney about the trust amendment, the testator understood that his assets had grown to a point that the church named as the primary beneficiary of the trust might not have need for the full amount, and he wanted to give the trustees of the trust the flexibility to fund charitable contributions from the money that would pour over from the estate to the trust;
- The testator told the pastor of the church that he was leaving money for the cemetery fund in his will;
- The testator expressed disdain for what he considered his relatives’ greed, stating that he did not wish for them to have his money; and
- Prior wills were consistent with the propounded will insofar as they left money for the cemetery fund and excluded the caveators.
Once again, the Internal Revenue Service reminds us in PLR 201330011 that a distribution from an IRA to a residuary beneficiary will not result in recognition of IRD (also known as income in respect of a decedent) to the estate or trust, as only the residuary beneficiary will recognize the IRD.
Here the Decedent’s Estate was the beneficiary of the Decedent’s IRA. Under the provisions of the Decedent’s Will, his Estate poured over to his Revocable Trust on his death. His Revocable Trust provided that each of two Charities were to receive a percentage of the residue of his Trust, and further provided that the Trustee could satisfy this percentage gift in cash or in kind and also could allocate different assets to different residuary beneficiaries in satisfaction of their percentage interest in the trust residue.
Of course, the IRA constitutes income in respect of a decedent (IRD), and pursuant to IRC § 691 (a)(2) and Reg. § 1.691(a)-4(b)(2), the transfer of an item of IRD by an estate, such as by satisfying an obligation of the estate, will cause the estate to recognize the IRD, but if the estate transmits the item of IRD to a specific legatee of the item of IRD or to a residuary beneficiary (emphasis added), only the legatee or the residuary beneficiary will recognize the IRD. (more…)
Effective December 31, 2012, Congress passed The American Tax Relief Act of 2012 (the “Act”) to avoid the fiscal cliff and President Obama is expected to sign the bill into law. The full text may be obtained by clicking here. In a Chronicle of Philanthropy article (which may be obtained by clicking here), Doug Donovan writes that the Act may hurt charitable giving in light of the fact the Act “reinstates a provision eliminated in 2010 that reduces itemized deductions by 3 percent of the amount that household income exceeds $300,000.” Mr. Donovan goes on to explain that “[w]rite-offs grow more limited the more taxable income a person has and could reduce the value of deductions by up to 80 percent for the highest-income taxpayers, according to the Tax Policy Center.” (more…)
Tax practitioners have long believed that donations could be made to single member LLCs wholly owned by section 501(c)(3) organizations on the theory that, for tax purposes, the donation was treated as made to the charity and not the LLC. In long awaited guidance, the IRS has finally agreed in Notice 2012-52. The analysis in the notice is not surprising, and is in fact, exactly what tax practitioners have been arguing ever since disregarded entities came into existence.
Generally, a business entity that has a single owner and that is not a corporation is treated as disregarded as an entity separate from its owner. These “business entities” are typically limited liability companies. If an entity is disregarded, its operations and activities are treated in the same manner as a sole proprietorship, branch, or division of the owner, and the owner generally reports all income, loss, deductions, and credits on its own tax return. Thus, any contribution to a disregarded entity would be reported on the owner’s return as a contribution. Practitioners believed that this result meant that the donor was treated as contributing to the charitable organization, rather than the LLC, and was thus entitled to a charitable contribution deduction. Prior to the recent guidance, the IRS was unwilling to agree or disagree with this position.
On July 31, however, the IRS finally ruled that donations to a domestic single member LLC whose sole owner is a section 501(c)(3) organization will be treated as donations to a branch of the 501(c)(3) organization. Accordingly, donors will be entitled to a charitable contribution deduction. The IRS has also asked, but not required, that charities disclose in a acknowledgment or other statement to the donor that the single member LLC is wholly owned by a charity and treated by the charity as disregarded.
I’ve noticed a trend in our estate planning practice — an increasing interest in establishing private non-operating foundations. This is interesting given the advantage that donor-advised funds provide over foundations, most notably the reduced administrative burdens on a family who opts for donor-advised funds over foundations. There are also extremely well run donor-advised funds to pick from, funds with great track records and high customer satisfaction ratings. So what is the reasoning? I think it stems from a desire of a parent to teach philanthropy to their children, grandchildren, and possibly great-grandchildren. Family members are typically on the board of directors of the foundation so they are forced to come together and make decisions about how grants are made. The hope is having family members convening in one place and spending time discussing charitable gifts will provide a springboard for other charitable giving. Even though the foundation document typically provides family members with fairly easily methods of terminating the foundation, at least a vehicle is in place for family philanthropy that can last generations.