Wednesday, April 16, 2014

The New York Budget bill made changes not only in the estate tax arena, as previously reported on this blog, but also to the income taxation of certain trusts.

Under law prior to the passage of the Budget bill, a resident trust created by a New Yorker was entirely exempt from New York income tax if there was (i) no New York resident trustee, (ii) no assets located in New York and (iii) no New York source income. The new law, effective for calendar years beginning January 1, 2014, provides that a New York resident beneficiary receiving a distribution of income from a New York State resident trust which is exempt from New York State income tax, will be taxed on that “accumulated distribution”. The new accumulation distribution tax, will not apply if the accumulated income was earned before 2014 or if the trust itself is subject to New York State income tax or for periods before the beneficiary become a New York resident. This is also not applicable to grantor trusts, where the income of the trust is taxed to the grantor, rather than the trust or its beneficiaries. (more…)

Tuesday, April 8, 2014

statuteoflibertyAs previously reported on this blog, Governor Cuomo and the New York State legislature, both Assembly and Senate, were busy at work on the budget which contained modifications for the trusts and estates arena. A bill has finally been passed, which looks different from some of the earlier proposals. The new bill impacts the estate and trust world as follows:

Basic Estate Tax Exclusion Amount increases are to be phased in as follows for New York residents or non-residents owning real property located in New York State during the period listed:

 

 

 

  • April 1, 2014 – March 31, 2015 – $2,062,500;
  • April 1, 2015 – March 31, 2016 – $3,125,000;
  • April 1. 2016 – March 31, 2017 – $4,187,500;
  • April 1, 2017 – December 31, 2018 – $5,250,000;
  • January 1, 2019 and beyond, the basic annual exclusion amount corresponds with the Federal exemption ($5,000,000 indexed for inflation beginning in 2010).

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Friday, March 14, 2014

The term March Madness may take on new significance to New Yorkers this year. In addition to contributing to NCAA pools, New Yorkers should consider making gifts this month. Following up on prior blog post, New Yorkers may have a very small window of opportunity to take advantage of gifting significant sums of money prior to April 1, 2014. Currently New York State has no gift tax. New Yorkers can make gifts of any size to anyone without incurring any New York gift tax consequences at all. However, the gift and estate tax rules may change shortly. Governor Cuomo has proposed a change to New York’s estate and gift tax law that will require all taxable gifts made by a New York resident after March 31, 2014 to be included as part of the gross estate for purposes of calculating the New York estate tax. However, the proposal would not apply to gifts made prior to April 1, 2014. (more…)

Monday, March 3, 2014

Originally posted on bryancavefiduciarylitigation.com

Knowing when to initiate guardianship proceedings for a loved one can be a difficult and personal decision.  When it comes to substance abuse, those proceedings can enter a grayer area than proceedings involving dementia, injury, or developmental disability.  At what point is an addict or alcoholic incapacitated?  What happens during moments of sobriety?  In In re Guardianship of Esterly (unpublished), the Court of Appeals of Minnesota dealt with some of these difficult questions. (more…)

Thursday, February 27, 2014

With drafting assistance provided by our extern from Washington University School of Law, Rachael Lynch.

According to the Columbia Daily Tribune, effective immediately, same-sex marriages will be recognized in Boone County, Missouri for purposes of collecting unclaimed property.  This means that same-sex spouses legally married in a state other than Missouri (Missouri’s Constitution currently bans same-sex marriage) may have a right to some of the almost $68,000 held by the county.  Boone County Treasurer, Nicole Galloway, announced that this transition was merely an extension of the full-faith and credit that her office gives to legal documents from every state (and follows Missouri Governor Jay Nixon’s executive order that Missouri would recognize jointly filed income tax returns from legally-married same sex couples who file jointly for federal purposes).

Friday, February 21, 2014

Maintaining property in a family for generations to come can be tricky.  As the parties in Hoefer v. Musser found out, the intention of a decedent speaks volumes and can overcome procedural deficiencies such as an improper recording of a warranty deed.  In Hoefer, the Missouri Court of Appeals (Southern Division) recently held in favor of a decedent’s wishes to keep a farm in his family for “generations and generations.”  See Hoefer v. Musser, No. SD 32576, 2013 WL 6800823 (Mo. App. S.D. Dec. 23, 2013).

In Hoefer, the decedent’s nephew (Hoefer) was appointed as successor trustee to decedent’s irrevocable trust—the “Vineyard Dwain Hoefer Trust,” created during Hoefer’s lifetime.  Musser, the decedent’s niece, was appointed as personal representative to Hoefer’s estate.  The trust’s only asset was the decedent’s farm, which he intended to keep in his family for as long as possible by granting the farm to Hoefer until his death, then to Matthew Hoefer until his death, then to Matthew Hoefer’s living children or lawful heirs.

After executing the trust documents and warranty deed transferring ownership of the farm to the trust, the decedent’s attorney gave him the original copies of the documents and instructed him to record both the trust and warranty deed.  Approximately three months after execution of the trust, Musser called Hoefer to indicate that the trust had not yet been recorded.  Hoefer recorded the trust shortly thereafter.

Following Hoefer’s recording of the trust, the farm house burned down–resulting in a total loss of the property.  Less than a year after the farm’s destruction, Hoefer, with the decedent’s permission, built a house on the farm.  Not long after Hoefer built the house on the farm, the decedent passed away.  Musser, in her capacity as personal representative of the decedent’s estate, instituted a probate action and listed the farm land as an asset of the estate.

Hoefer moved to quiet title, or in the alternative, unjust enrichment for the cost of the improvements done on the farm.  Hoefer argued that the decedent had let him build the home on the farm because it was Hoefer’s property.  Musser argued that the decedent never recorded the warranty deed, and therefore the transfer of the farm as an asset to the trust never occurred.

After a bench trial, the trial court ruled in favor of Hoefer, finding that the intentions of the decedent pointed his desire to keep the farm in his family.  Hoefer provided evidence and witness testimony regarding the decedent’s actions and intentions.  For example, witnesses testified that decedent had offered the farm to other members of his family and even Musser herself, who all declined, before the decedent granted the property to Hoefer.

Although the decedent’s intentions were a substantial focus of the trial court’s ruling, the crux of the case came down to a procedural aspect: the decedent’s failure to record the warranty deed transferring the farm to the trust.  Musser presented evidence that although she was present for the execution of the trust, she did not see the warranty deed in the papers given to the decedent for him to record.  Furthermore, the original warranty deed had been given to the decedent with instructions on how to record, and was presumed to have been lost in the fire that destroyed the farm.  The parties did not contest that the warranty deed had in fact, never been recorded.

After the trial court ruled in Hoefer’s favor, Musser appealed, arguing that the farm was never properly transferred to the trust in that the deed delivering title to the trust was not accepted by the grantee nor recorded.  The Missouri Court of appeals was bound to uphold the trial court’s ruling unless there existed no substantial evidence to support judgment, the judgment was against the weight of the evidence, or the trial court erroneously declared or applied the law.

A deed must be delivered for it to operate as a transfer of ownership of land because the delivery gives the instrument force and effect.  Rhodes v. Hunt, 913 S.W.2d 894, 900 (Mo. App. S.D. 1995).  Here, the burden of showing that the deed was not delivered was upon Musser, as the party contesting its delivery.  The Missouri Court of Appeals looked at case law precedent holding that although recording creates a presumption of delivery, it does not operate as delivery of the deed.  In fact, delivery may be made even though the grantor remained in possession of the deed.  O’Mohundro v. Mattingly, 353 S.W.2D 786, 792 (Mo. 1962).

The court also looked to precedent that held that the failure to record a deed conveying title to property to a trust does not affect the validity of the trust.  Newtom v. Winsatt, 791 S.2.2d 823, 829 (Mo.App.S.D. 1990).  Under Newton, the Court found substantial evidence for the trial court to find an effective delivery and acceptance of the warranty deed.

Finding that it was undisputed that the decedent intended to keep the farm in his family, and that he intended to convey the farm by warranty deed to the trust, the Court of Appeals upheld the trial court’s decision.  In doing so, the Court deferred to the trial court’s credibility determinations, and the weight given by the trial court to witness testimony.

Although certain technical requirements were lacking in Hoefer’s case, the overwhelming evidence of decedent’s intentions to maintain the farm in his family for “generations and generations” ultimately prevailed.

Monday, January 13, 2014

There is has been much talk recently about changing the New York State estate and gift tax structure. Currently, New York State estate tax is based on Federal law from 1998.  New York State imposes a state estate tax on estates valued at $1M. Just this week Governor Cuomo proposed increasing the estate tax threshold from the current $1M to $5.25M and lowering the top estate tax rate to 10% over the next four years. His hope would be that beginning in 2019, the New York State estate tax exemption would equal the Federal exemption, which is indexed to inflation.  This plan would ultimately exempt nearly 90% of estates from New York state estate tax and would eliminate any incentive for New Yorkers to move out of state and migrate to states with no estate tax imposed on its residents.

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Thursday, January 2, 2014

The Missouri Court of Appeals recently issued an opinion in Robert T. McLean Irrevocable Trust v. Ponder,[1] a case involving the question of whether a Trust Protector could be held liable in not exercising the right to remove and replace the Trustees of a special needs Trust.

The Robert T. McLean Irrevocable Trust (the “Trust”) was created with settlement proceeds from Robert McLean’s (“Robert”) personal injury case.  Ponder was appointed “Trust Protector” of the Trust with the right to remove the Trustee and appoint a successor Trustee.  The Trust Protector was also given the right to appoint a successor Trust Protector and to resign as Trust Protector.  The Trust also provided that the “Trust Protector’s authority was conferred in a fiduciary capacity” and that the Trust Protector was not liable for any actions taken “in good faith.”  The Trust did not provide Ponder with any power or duty to supervise the Trustees or direct their activities.

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Friday, December 20, 2013

With research and drafting assistance from Washington University extern, Kelsey Delong.

In Williams v. Hubbard, et. al., the Missouri Court of Appeals addressed the issue of whether a beneficiary of a decedent’s estate would be entitled to funds from the decedent’s account if the payable on death (“POD”) beneficiary or joint owner of the account was found to have procured the beneficiary or ownership interests through undue influence. In this case, the court found that the beneficiary could have rights to some of the decedent’s multiple accounts, but not all of them.

In this case, Betty Margaret Reynolds (“Betty”) hired Respondent Kenneth Nelson to draft several of her estate planning documents, including a beneficiary deed, a 2000 Will, and a 2006 Will. The beneficiary deed named Appellant Eric Williams as the sole beneficiary of certain real estate owned by Betty. The 2000 Will drafted named Norma Lamp and Erma Baughman as equal beneficiaries. The 2006 Will named Respondent Sandra Nelson and Appellant Eric Williams as equal beneficiaries. (more…)

Wednesday, November 27, 2013

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.