The 7520 Rate for December 2013 is holding steady at 2.0%.
The December 2013 Federal interest rates can be found here.
On Tuesday, the House approved legislation that would delay a Labor Department regulation that would impose fiduciary standards for financial advisors. The measure, sponsored by Rep. Ann Wagner, R-Mo., would prohibit DOL from proposing its regulation until 60 days after the Securities and Exchange Commission finalizes a similar rule to raise standards for brokers providing retail investment advice. The bill attracted the support of 30 Democrats. On Monday, the Obama administration threatened to veto the legislation, saying that it undermines DOL efforts to protect workers and retirees from conflicted investment advice for 401(k) plans and individual retirement accounts. Supporters of the bill say the SEC must go first to ensure coordination between the agencies and avoid duplicative and costly fiduciary-duty requirements that would ultimately limit access to investment advice for smaller investors. Opponents say it would effectively kill the DOL rule if the SEC declines to propose its own regulation.
The legislation, which also would require the SEC to prove that investors are being harmed by the differences between the advice standards governing investment advisers and brokers before it proceeds with its own rule, faces an uncertain future in the Democratic-led Senate. The DOL is expected to repropose the fiduciary rule which was originally proposed in 2010 and withdrawn amid fierce financial industry backlash.
A Missouri Court recently ruled in In the Estate of Betty Jean Collins v. Tina Shoemaker (Mo. App. W.D. #75448, August 6, 2013) that a person who had died was not “incapacitated” for purposes of a Health Care Power of Attorney (HCPOA). The court decided that the right of sepulcher expressly granted by Collins in her HCPOA to her great-niece did not ever become effective so that, on the death of Collins, her great-niece as her health care attorney in fact had no power to carry out Collins’ wishes to have her body cremated.
The right of sepulcher, that is the right to choose and control the burial, cremation or other disposition of a dead body, is governed by statute in Missouri (R.S. Mo. § 194.119), as it is in many states. This statute sets out the order in which various persons have this right, and grants the right of sepulcher first to “[a]n attorney in fact designated in a durable power of attorney wherein the deceased specifically granted the right of sepulcher over his or her body to such attorney in fact.” However, here, since the court ruled that the HCPOA never became effective, the court determined that the “next of kin”, the next in line with the right of sepulcher under the statute, had this power instead of the great-niece. Collins had no surviving spouse, so that her children, appellants in this case, who wanted her buried and not cremated, had the right of sepulcher. (more…)
The IRS this week released inflation-adjusted numbers for 2014 for several transfer tax items. These include the following:
With research and drafting assistance from Washington University School of Law student, Kelsey DeLong.
In Estate of Lambur, the Missouri Court of Appeals addressed the issue of whether an attorney-in-fact is permitted to gift the principal’s property to herself when the gift is not expressly authorized in the power of attorney.
In 2005, Verna Irene Lambur (“Irene”) executed a durable power of attorney naming her nephew’s wife, Anna Stidham (“Anna”), and Jackie Johnson (“Jackie”) as her attorneys-in-fact. The power of attorney granted Irene’s attorneys-in-fact the following power:
“To establish, change or revoke survivorship rights in property or accounts, beneficiary designations for life insurance, IRA and other contracts and plans, and registrations in beneficiary form; to establish ownership of property or accounts in my name with others in joint tenancy with rights of survivorship and to exercise any right I have in joint property; to exercise or decline to exercise any power given to me to appoint property [sic]; to disclaim or renounce transfers to me of property; to make inter vivos gifts of my property to my lineal descendants, including my attorneys in fact, in amounts that are equal by line or class and in an amount for any person that does not exceed in any year the annual gift tax exclusion[.]”
Shortly after the execution of the power of attorney, Anna and Jackie transferred assets that Irene owned, individually, into two new accounts, each titled in the names of Irene, Jackie, and Anna, with rights of survivorship. Upon Irene’s death in May, 2005, the combined value the two accounts was $129,134.46. (more…)
The IRS today announced that, in light of the Supreme Court’s decision in United States v. Windsor, all legal same-sex marriages will be recognized for federal tax purposes, regardless of whether the couple’s state of residence recognizes the marriage.
For the full announcement, click here.
Originally posted on bryancavefiduciarylitigation.com.
Effective earlier this month, Delaware once again amended its trust statutes. In what has become an (almost) annual ritual, Delaware has tweaked its trust statutes in an effort to make the state a more appealing jurisdiction for trust administration. A full look at the law is here, but here are some of the highlights:
Children Born Out of Wedlock
Section 1 of the Act amending the trust statutes cross-references the legitimation process elsewhere in the Delaware Code for purposes of intestate succession for persons born out of wedlock.
Definition of “Governing Instrument”
The definition of “governing instrument” now also expressly includes “any instrument that modifies a governing instrument or, in effect, alters the duties and powers of a fiduciary or other terms of a governing instrument.”
No Duty to Inquire to Satisfy Prudent Person Standard
The amendments clarify that a fiduciary has no duty to inquire as to the nature and extent of investments held by the fiduciary in an investment directed trust or an investment directed account within a trust for the fiduciary to satisfy the Code’s prudent person standard.
Governing Instrument May Override Trust Law
The amendments also clarify that a governing instrument may expand, restrict, eliminate, or otherwise vary ”provisions of general application to trusts and trust administration.”
Creditor Claims against Revocable Trusts
This section was tweaked to reflect Delaware’s recognition of same-sex marriages by changing references from “husband and wife” to “spouses.” It also cleaned up some unnecessarily convoluted language regarding creditors’ remedies against spouses who have contributed property held as joint tenants to revocable trusts.
Appointment of Successor Trustee
The new laws provide a procedure for non-judicial appointment of successor trustees in certain situations:
If a trust has no serving trustee because of the death, incapacity or resignation of the last serving trustee of the trust, and if the provisions of the governing instrument do not include any provisions which can be effectively used to appoint a successor trustee, and if the only remaining dispositive provisions of the trust then require distribution of the remaining property of the trust to one or more beneficiaries (whether outright, or to one or more other trusts which do have a serving trustee), then the taking beneficiaries of the trust, by unanimous vote, may name a successor trustee of the trust without the approval of the Court of Chancery. For purposes of the preceding sentence, the person entitled to vote with respect to a beneficiary which is another trust which has a serving trustee is the trustee or trustees of such trust.
Claims Against Revocable Trusts
The following language was added to address claims against revocable trusts:
Following the death of the trustor of a trust that was revocable immediately prior to the trustor’s death, all claims against the trust that, but for any applicable period of limitations, could have been brought against the trustor’s estate, whether due or to become due, absolute or contingent, liquidated or unliquidated, founded on contract, tort or other legal basis, if not barred earlier by other statute of limitations, are barred against the trust when and to the same extent barred against the trustor’s estate by any applicable statute of limitations or statute of repose on claims against the estate including any such statute of limitations or repose enacted by jurisdictions other than this State.
Failure to Exercise Decanting Power
Absent willful misconduct, no trustee or adviser has a duty to exercise the power to decant.
Virtual representation may be available if there are no “material conflicts of interest” between the person doing the representing and the person being represented. The statute now includes three situations in which a material conflict of interest is presumed:
1. a situation in which the representative would, as a result of the judicial proceeding or nonjudicial matter, be appointed to a fiduciary or nonfiduciary office or role relating to the trust unless the representative presently serves in a fiduciary or nonfiduciary office or role relating to the trust and will not receive greater authority, broader discretion, or increased protection by reason of the new appointment;
2. a situation in which the representative currently holds a fiduciary or nonfiduciary office or role relating to the trust and, as a result of the judicial proceeding or nonjudicial matter, will receive greater authority, broader discretion, or increased protection by reason of the judicial proceeding or nonjudicial matter; and
3. a situation in which the representative has any other actual or potential conflict of interest with the represented beneficiaries with respect to the particular question or dispute, including but not limited to a conflict resulting from a differing investment horizon or an interest in present income over capital growth.
Non-Judicial Settlement Agreements
Delaware has now adopted language similar to the UTC’s non-judicial settlement language:
§ 3338. Non judicial Settlements Agreements.
(a) For purposes of this section, “interested persons” means persons whose consent would be required in order to achieve a binding settlement were the settlement to be approved by the Court of Chancery.
(b) Except as otherwise provided in subsection (c), interested persons may enter into a binding nonjudicial settlement agreement with respect to any matter involving a trust (other than a trust described in § 3541 of this title).
(c) A nonjudicial settlement agreement is valid only to the extent it does not violate a material purpose of the trust and includes terms and conditions that could be properly approved by the Court of Chancery under this title or other applicable law.
(d) Matters that may be resolved by a nonjudicial settlement agreement include:
(1) the interpretation or construction of the terms of the trust;
(2) the approval of a trustee’s report or accounting;
(3) the direction to a trustee to refrain from performing a particular act or the grant to a trustee of any necessary or desirable power;
(4) the resignation or appointment of a trustee and the determination of a trustee’s compensation;
(5) the transfer of a trust’s principal place of administration; and
(6) the liability of a trustee for an action relating to the trust.
(e) Any interested person may bring a proceeding in the Court of Chancery to interpret, apply, enforce, or determine the validity of a nonjudicial settlement agreement adopted under this Section, including but not limited to determining whether the representation as provided in § 3547 of this title was adequate.”
The 7520 rate for September 2013 is staying steady at 2.0%.
The September interest rates are as follows:
Beginning this year, individuals, estates and trusts will be subject to a Medicare contribution tax equal to 3.8% of the trust’s undistributed net investment income for the tax year, complicating the administration of estates and trusts. (IRC § 1411) As a result of the enactment of the new tax, every trust that owns an interest in a trade or business must now determine whether or not the trust materially participates in that trade or business in order to determine whether the trust’s undistributed income may be subject to the tax.
Net investment income is income from passive activities. Whether an activity constitutes a passive activity is determined in accordance with IRC § 469, which sets forth the law with regard to passive activity losses and credits. A “passive activity” is a trade or business activity in which the taxpayer does not materially participate. A taxpayer is treated as materially participating in a trade or business activity only if the taxpayer is involved in the operations of the trade or business on a regular, continuous and substantial basis. One way a taxpayer may be deemed to materially participate in a trade or business activity is if the taxpayer participated in that trade or business for more than 500 hours during the tax year. (more…)
On June 26, the US Supreme Court decided the case of United States v. Windsor, holding (1) that the Court had jurisdiction to consider the merits of the case, and (2) that Section 3 of the Defense of Marriage Act (“DOMA”) is unconstitutional as a deprivation of the equal liberty of persons that is protected by the Fifth Amendment. For a description of the previous history of the case, see our prior posts here and here. In a 5-4 opinion, Justice Kennedy delivered the opinion of the Court. Justices Ginsburg, Breyer, Sotomayor and Kagan concurred, while Justices Scalia, Roberts, Alito, and Thomas dissented.
Edith Windsor (“Windsor”) and Thea Spyer (“Spyer”), New York residents, were legally married in Ontario, Canada, in 2007, after being in a relationship since 1963. Prior to their marriage, the two had registered as domestic partners when New York City gave that right to its citizens in 1993. While New York did not legalize same-sex marriage in New York until 2011, in 2008, the State of New York began recognizing marriages of same-sex couples validly performed elsewhere as valid marriages for purposes of New York law; Therefore, starting in 2008, New York recognized Windsor’s and Spyer’s Ontario marriage as a valid marriage. Spyer died in 2009, leaving her entire estate to her wife, Windsor.
As we’ve discussed in a prior post anticipating this decision (see here), the federal government allows an unlimited marital deduction for the federal estate tax for certain gifts on death to the decedent’s spouse. In this case, however, DOMA prevented Windsor from being able to claim the marital deduction on Spyer’s federal estate tax return because theirs was not a marriage between one man and one woman. (more…)