When a will contains a so-called no contest clause or in terrorem clause that would cause a beneficiary to lose his or her interest in the deceased’s estate in the event the beneficiary contests the validity of the will, the court is often called upon to determine whether to enforce the forfeiture against the beneficiary if he or she loses the will contest. Just such an issue faced the Mississippi Supreme Court in Parker v. Benoist.
In this case, Bronwyn Benoist Parker (“Parker”) filed a will contest, contesting the validity of her father’s 2010 will. The 2010 will changed the disposition of the father’s estate from an equal division between Parker and her brother, William Benoist (“Benoist”), to a disposition where Benoist received a significantly greater portion of their father’s estate and Parker received a significantly lesser portion of the estate. (more…)
Many people in their 20s and 30s are more interested in checking off a bucket list than addressing important issues related to estate planning. Young professionals are already quite busy juggling all sorts of concerns – new jobs, new families, new home, adjusting to a new stage of life, but few include estate planning on this list. Despite the popular mantra from Ke$ha to “live like you’re going to die young”, few young adults actually anticipate the possibility of doing so. The following are a few simple steps to enable you to ease the burden on loved ones before life becomes even more complicated.
1. Who do you want to receive your stuff? Put it in writing.
Estate planning does not just involve mass amounts of money – we all have assets in some form, and they need to go somewhere when we die. Beyond real property, you have a lot of “stuff” – various bank accounts, furniture, life insurance policies, vehicles, hobby gear, jewelry, clothing, retirement accounts, pets… Without a valid will, all of your “stuff” will likely pass to the designated person under your state’s intestacy statute. If you don’t know who that may be, it’s worth finding out. For most unmarried individuals, their “stuff” will likely go to their parents, who probably won’t appreciate your snowboard as much as a good friend. Maybe you know someone could use your kitchen table, someone who your dog gets super excited to see when he/she comes over, or a roommate that you help accessorize every morning with your jewelry? Did you and brother draw straws over a piece of furniture you inherited? Take the opportunity to be thoughtful and generous towards others in your life by writing them into your will. (more…)
Recent news stories such as that of Marlise Muñoz in Texas and auto racing star Michael Schumacher serve as a reminder of the importance of discussing your wishes with others regarding end-of-life care. Select someone you trust to make those decisions on your behalf in case you become incapacitated, and sign the documents required to empower that person to act for you if necessary.
Most Americans say they want to die at home, surrounded by family and friends. But data from Medicare shows only about a third of elderly patients die this way. Taking a few small steps now can go a long way toward ensuring that your wishes are respected when the time comes.
You can start by talking to your family, your friends, and your doctors about your wishes in terms of death-delaying care in the event you are unable to make those decisions for yourself. Do you want “extraordinary” measures taken to prolong your life, such as major surgery or a mechanical respirator? What about artificial nutrition and hydration? Under what conditions? Is the cost of procedures to be taken into consideration? Do you wish to remain at home rather than be transferred to a hospital or nursing facility? Do you want to be an organ donor? Do you want to be buried or cremated? For help getting the conversation started, visit deathoverdinner.org. The website was launched last year for precisely this purpose. It provides invitation language, reading materials, conversation prompts, and hosting tips, among other things.
After you’ve shared your wishes with others, it’s important to select the person (or persons) you would like to have act on your behalf, if necessary. Typically referred to as an “agent,” a “health care surrogate,” or an “attorney-in-fact for health care decisions,” this person is authorized under an advance directive or a healthcare power of attorney to communicate with your physicians and make medical decisions for you if you are incapacitated. This should be someone you trust and who knows your wishes regarding medical treatment and end-of-life care and will be able to make decisions for you in accordance with those wishes. Typically you would designate only one person at a time to serve as your attorney-in-fact for health care decisions. However, you may be able to designate multiple individuals as your attorneys-in-fact for health care decisions. If more than one person is designated – my three children acting jointly, for example – consider whether any one or more of the persons designated may act alone, or if you want decisions made by majority rule. And be sure to appoint one or more successor attorney(s)-in-fact for health care decisions, to serve if your first choice is unable or unwilling to serve.
Put it in writing. According to the New York Times, only about 47% of Americans over age 40 have advance directives or living wills. State law governs what you will need in order to authorize another person to make medical decisions for you. Depending on your state, you may need what’s called an advance directive, a living will, and/or a healthcare power of attorney. A good resource for state forms and other information related to end-of-life issues is caringinfo.org. For questions regarding how to complete forms, you should consult your attorney.
Revisit and update your documents periodically. Have your wishes regarding medical treatment or end-of-life issues changed? Are the people you designated as your attorneys-in-fact and successors still aware of your wishes and able to act on your behalf? Have you moved to a new state? State requirements differ, so it’s important to sign documents that conform to your new home state’s specifications when you move.
Not surprisingly, doctors are more likely than the rest of us to have advance directives. This is one easy lesson in medicine that doesn’t require an M.D.
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.
Originally posted on bryancavefiduciarylitigation.com
Individual trustees who must administer real property often attempt to save the trust money by personally making certain improvements, repairs, or maintenance to the property. They then charge the trust for the work they performed. As the Nebraska Court of Appeals points out in In re Estate of Robb, however, these acts – however well-intentioned – may be self-dealing and can put the trustee in a position of a conflict of interest, which can warrant removal from that fiduciary position.
When Mason D. Robb died, his son, Theodore, became the personal representative of his estate and the trustee of the inter vivos Mason D. Robb Revocable Living Trust. The trust contained three pieces of real estate.
Under the terms of the trust, the trustee was to hold and use the trust property to pay administrative costs and the debts of the settlor and for the benefit of the Mason D. Robb QTIP Family Trust. The trust directed the trustee to separate the funds in the family trust into two equal shares: one for Theodore’s benefit and one for the benefit of his sister, Linda. Theodore’s share was to be delivered to him outright while Linda’s share was to be held in trust. Linda was also entitled to income distributions from her share of the family trust. (more…)
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…)
The terms of James Gandolfini’s December 2012 Last Will and Testament were made public last week when it was filed in New York County Surrogate’s Court. There are a series of specific bequests to his teenage son by his first marriage and some friends and relatives, but the bulk of his probate assets is disposed of as his “residuary estate” and is divided among his sisters, his wife and his baby daughter.
The tax clause of his Will directs that all estate taxes are to be paid from his residuary estate. What does that mean to his beneficiaries? And what does that mean to the IRS and to the NYS Department of Taxation and Finance? Only the 20% of the estate that passes to James Gandolfini’s widow will qualify for the Federal and NYS estate tax marital deduction. (For a more detailed discussion of the federal marital deduction, see our prior post in anticipation of a ruling in the recently decided Windsor case, Will SCOTUS Eviscerate DOMA? What Effects Could That Have on Tax Planning?) As a result, his estate could be subject to taxes at a combined rate of about 50% over his unused lifetime exemption, which is $1M for NYS and $5.25M for the IRS.
It is rumored that Mr. Gandolfini’s estate is worth approximately $70M. The total estate tax due is likely be over $25M and will be due a mere nine months after Mr. Gandolfini’s untimely death. In all likelihood, assets will need to be sold to generate liquidity to meet this estate tax bill. (more…)
The Bankruptcy Court for the Western District of Washington has now joined other states in invalidating transfers to a self-settled trust on a variety of grounds in the latest asset protection self settled trust case, In re Huber, 2012 Bankr. LEXIS 2038 (May 17, 2013). The Trustee in this case successfully obtained a summary judgment invalidating Donald Huber’s transfers to the Donald Huber Family Trust made shortly before he filed bankruptcy, on the grounds that: (1) the Trust was invalid under applicable state law, (2) Huber’s transfers were fraudulent under § 548 (e)(1) of the Bankruptcy Code, and (3) Huber’s transfers were fraudulent transfers under the Washington State Fraudulent Transfers Act.
Donald Huber was a real estate developer who had been involved with real estate development in the State of Washington for over 40 years. He resided in Washington, his principal place of business was Washington, and almost all of his assets were located in Washington. In 2008, due to the economic downturn, particularly in the real estate market, Huber sought to raise additional cash for his business, but was unsuccessful in that endeavor. He fell behind in most of his loans and by mid 2008 most of his creditors were threatening foreclosure and litigation. (more…)
What is the extent of the settlor’s intent required to find that a transfer to an irrevocable asset protection trust is a transfer in fraud of creditors? If the trustee has been directed to pay the settlor’s current creditors, is that sufficient to negate a finding that the transfer to the trust was a fraudulent transfer? That was what the Court was called on to decide in United States v. Spencer, 2012 U.S. Dist. LEXIS 142195 (October 2, 2012).
In this case, Anthony Spencer (“Spencer”) pleaded guilty to 37 criminal tax offenses and was sentenced to 63 months in the Federal penitentiary. Just before Spencer’s report date, the IRS sent him the “Tax Examination Changes” showing tax due of just under $500,000. Shortly thereafter and just before he began serving his sentence, Spencer received a $600,000 divorce settlement payment from his former wife, which he placed in an account titled jointly with his accountant and co-defendant in this case, Patrick Walters (“Walters”). Walters then used $495,000 from this account to create and fund the Spencer Irrevocable Trust (“Trust”), of which Walters was serving as sole Trustee. Spencer provided Walters with written instructions regarding the Trust administration, directing Walters as Trustee “to take my entire worth and invest, then reinvest it, and do this over and over till you either make me enough to pay the IRS or lose it all trying.” The Trust instrument designated Spencer as the beneficiary, to receive the residue of the Trust once the income tax liability had been paid, with the payment to be made in four years. (more…)