Educational FYI's
Educational FYI's are written on topics that effect various aspects of estate planning and the laws that govern it. They are published and posted to this site when news worthy events happen that we feel you should be made aware of. The purpose of an Estate Planning Update is to bring important information to the financial advisors in the community. Our hope is that this information better equips you to assist your clients.
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Personal Representative's Attorney Fees Chargeable Against Estate
The personal representative, in an estate administration contest, filed a seventh accounting and a request that the estate be closed. Family members objected, accusing the personal representative of conflicts of interest and failure to advise the beneficiaries about actions proposed to be taken by the decedent's partner (who was also a client of the personal representative). The personal representative retained counsel and the parties participated in extensive litigation resulting in the trial court removing the personal representative, denying requests for surcharge against him, and denying his request for payment of $589,441.28 in attorney's fees and costs.
Constructive Trust Imposed on Proceeds of Property Sale Transferred to Joint Ownership
The agents under a durable power of attorney arranged for sale of real property (specifically devised in principal's will to her stepson) to agents' relatives for substantially less than the assessed value of the property. The proceeds were placed in bank accounts in joint names with agents. After the principal's death, the agents were appointed as personal representative of the principal's estate and stepson sued.Exception to Privileged Communications for Will Drafter Does Not Apply Where No Will Prepared
A Testator consulted his long-time law firm about drafting a new will, but no new will was ever prepared. A few days later the Testator signed a new will prepared by another, unrelated law firm.Kaiser Commission Releases Report on the Impact of the Federal Deficit Reduction Act of 2005
The Kaiser Commission on Medicaid and the Uninsured has issued a report that summarizes the Medicaid provisions of the federal Deficit Reduction Act of 2005 (DRA) signed on February 8, 2006 and discusses the implications of the proposed changes. The changes would net projected reductions in Medicaid spending of $4.8 billion over the next five years and $26.1 billion over the next ten years.Genetic Link to Parkinson's Disease Found
A recent study has identified a single genetic mutation that accounts for more than 20 percent of all cases of Parkinson's disease in Arabs, North Africans and Jews. This is a major surprise, as genetics was thought to play a relatively minor role in the cause of Parkinsons disease. Although the mutation is rare in people with ethnic roots outside the Middle East, its discovery raises the prospect that undiscovered mutations may be major causes of Parkinson's in other groups.Drugs Effective in Treating Mild to Moderate Alzheimer's Disease
Three drugs -- Aricept, Razadyne, and Exelon -- may make some modest improvement in mental function for those persons suffering from mild to moderate impairment in mental functions due to Alzheimers disease. The finding come from a review of 13 studies of the drugs. The review appears in The Cochrane Library, a research journal.New Findings on Cause of Alzheimer's Disease
If confirmed, several new findings on the origins of Alzheimer's disease could overturn prevailing theories on the cause of the disease. Scientists reporting in the Journal of Neuroscience said the neurodegenerative disease may be triggered when adult nerve cells, or neurons, try to divide.Undernourishment Screening Tool
Undernourishment is one of the major risks to the good health of elders.Important Update from Leimberg re Trust-Owned Life Insurance
Steve Leimberg was kind enough to allow us to share the following e-newsletter regarding fiduciary liability for monitoring trust owned life insurance, You can find out more about the Leimberg e-newsletters by using the link at the end of this FYI.Effect of the Federal Estate Tax on Family Farms and Small Businesses
Recent discussion of the federal estate tax has focused in part, on how it affects family farms and small businesses -- particularly the possibility that having to pay the tax might jeopardize those operations.Social Security and Medicare Trustees Release Annual Reports
Annual reports released from both the Social Security Administration and the U.S. Centers for Medicare Medicaid Services.Wealthy People Less Likely to Die in Pain
A University of Michigan study finds that wealthier elders are significantly less likely than poorer ones to suffer pain at the end of their lives.Groups Campaigning Against Repeal of Estate Tax
Anti-estate tax repeal groups have begun a campaign targeting moderate Democrats and Republicans in a campaign to retain the estate tax. The campaign is helped by the efforts of many major life insurance companies as well as charitable organizations.Spendthrift Trust Not Reachable for Debts Incurred by Beneficiary Acting as Trustee
Two testamentary trusts were created in the decedents will, one for the benefit of each of her sons. One son became trustee of both trusts, and proceeded to empty his brother's trust by investing in his own business, and thereafter failed to account to the other brother. The court entered a surcharge against the trustee-brother and forfeited the surety bond he had posted. The court then gave a judgment in favor of the surety against the defalcating trustee-brother.Health Affairs Journal has published three articles about the Schiavo case and the costs of end-of-life care.
Federal Housing Programs That Offer Assistance for the Elderly
A number of federal housing programs provide assistance, including rent subsidies, mortgage insurance, and loans and grants for the purchase or repair of homes, to low-income renters and homeowners.Qualified Roth Contribution Programs Gain Attention
Beginning in 2006, 401-K retirement plans may be amended to permit employees to designate some or all of their contributions as Roth contributions pursuant to a "qualified Roth contribution program." Contributions to a qualified Roth contribution program are made on an after-tax basis, but distributions (including earnings) are tax-free.Alzheimer's Disease Symptoms Reversed in Mice
Mice with memory loss have had their condition reversed, a discovery that should help refine the search for a cure for Alzheimer's disease and other dementias.Will Effectively Exercised Power of Appointment Even Though Not Admitted to Probate
Father (who died in 1981) established a living trust that divided into survivor's and family shares, with the former giving his surviving wife a general testamentary power of appointment and the latter giving her a power of appointment exercisable by will, deed, conveyance, bill of sale, gift or any other written instrument. If Mother did not exercise the powers of appointment, the survivor's trust would pour into the family trust, which would in turn be distributed unequally among daughter, granddaughter and grandson. Mother executed a will in 1985 purporting to appoint the entire trust corpus of both trusts; the survivor's trust was appointed outright to daughter and the family trust in equal shares among daughter, granddaughter and grandson; Mother died in 1997. Relying on advice of counsel, the trustee and family members decided not to seek probate of Mother's will.Will's Assertion of Mistreatment by Disinherited Child is Not Grounds for Invalidity
Decedent's will specifically disinherited his only child and some of his grandchildren "by reason of their ... treatment" of him. Son challenged the will, claiming that it was improperly executed, and also that the decedent had operated under "an insane delusion that four of his grandchildren did not care about him."Disclaimer Reformed to Avoid GST Tax
Daughter signed disclaimers of her interests in her mother's property in two different states. After the disclaimers were completed, she learned that her mother's GST exemption was only $650,000 and that the disclaimed property would be subject to the tax. She signed an affidavit indicating that she had disclaimed by mistake, and sought reformation of one or both disclaimers. State high court rules that reformation of the two disclaimers is permitted, and remands to the trial court for entry of an order authorizing the reformation.An elderly woman was befriended by a law student, who helped her to transfer over $90,000 (in several transactions) to the law student, allegedly because the woman wanted to help her with tuition. The woman's nephew, who had power of attorney, discovered the transactions and moved to secure conservatorship and set aside the transactions.
Undue Influence and Constructive Fraud Claims Should Have Been Submitted to Jury
After her husband became ill, an elderly woman who had never managed finances during their married life summoned her children to meet with her and to help decide how to handle the family ranch and other properties. After the family discovered that her husband had incurred $54,000 in credit card debt the children agreed to take responsibility for that debt in return for their mother transferring shares of stock in the ranch to them; she made transfers of substantially all of the stock based on that understanding.Malpractice Claim May Be Brought By Successor Fiduciary Against Agent of Prior Fiduciary (CA)
During the pendency of a will contest, an attorney was appointed as administrator of a decedent's estate. He hired another law firm to assist with complicated tax issues. At some point, the administrator wrote to the tax lawyers confessing that he had misappropriated substantial funds from the estate; the tax lawyers initially attempted to help him borrow money to repay the estate, but ultimately wrote to him (in February) indicating that they withdrew from further representation and advising him to secure other assistance. In May the administrator died; the tax lawyers turned their file over to another attorney in July. In September the deadline ran out for filing IRS form 843, which would have extended the time for claiming a tax refund by three years. In November, after resolution of the will contest, a new executor was appointed and he brought a malpractice action against the two groups of tax attorneys. Both law firms argued that the plaintiff lacked privity with them, since they had been hired by the original administrator, and the trial court granted judgment for the defendants. The intermediate state appellate court affirmed, and the estate appealed to the state Supreme Court. That court now reverses, finding that the state probate code gives a successor fiduciary all the powers that his or her predecessor would have, impliedly including the power to bring an action such as the one here.Power of Attorney, Lacking Gift-Giving Authority, Does Not Authorize Gifts to Agent
Mother, suffering from mild dementia, executed a general power of attorney in favor of her son--the power of attorney did not include any language specifically authorizing gifts. Shortly thereafter she moved in and lived with him, and after about eight months moved to a nursing home. At the time of her move to the nursing home the son, using his power of attorney, transferred all her real property, stocks and other assets to himself. The mother died a little over a year later, leaving a will that devised all her assets equally to her son and daughter. After securing appointment as executor of the estate, daughter filed suit to recover the remaining assets, arguing that the purpose of the original conveyance was solely to protect the assets from being depleted by nursing home expenses and that with the mother's death they should be re-conveyed to her estate. Trial court ordered reconveyance and on appealed. Intermediate state appellate court affirms, noting that without a specific gift-giving provision in the power of attorney, a gift to the agent "carries with it a presumption of impropriety and self-dealing." In order to overcome that presumption, the recipient of the gift must make "the clearest showing of intent" on the part of the principal; evidence that the mother in this case trusted her son more, wanted him to manage her money, and may even have been fearful of her daughter did not meet that high standard of evidence.The plaintiff, who had been seeking to provide cash for his daughter to pay anticipated estate taxes, established an irrevocable life insurance trust in 1991 and paid $300,000 in premiums for a $4.2 million second-to-die policy. The insurance agent's projections, assuming a 10% return, showed no further premium payments would be required. The ILIT Trustee, a CPA, sought independent advice which indicated that the initial premium payment would need to earn a 24% return for 28 years to cover all premiums, but the settlor instructed him to follow the insurance agent's direction.
Testamentary Effect of Trust Provision Requires Compliance With Will Formalities - Arnold v. Davis
A decedent (the widow of country music recording artist Jim Reeves) had established a trust to hold her considerable assets, though her capacity to sign or approve of a trust was later called into question. When she died while conservatorship proceedings were pending, the court granted an interpleader request and ordered that all her trust assets and all income from sale of her late husband's music and real estate holdings be paid to an administrator while the validity of the trust was resolved.A victim that was vulnerable to exploitation made a videotaped statement to police officers two days before she died and a statement to a social work supervisor shortly before her death.
As the testatrix lay dying in a hospital bed, a lawyer relative contacted a long-time associate and asked him to visit her at the hospital to help her prepare a will. The relative also provided the lawyer with details about the testatrix' estate plan, including her intention to leave him (the lawyer relative) a significant bequest. The drafting lawyer, the lawyer relative and the testatrix all met together at the hospital, and the drafting lawyer prepared a will and supervised its execution. After the testatrix' death a will contest was filed, with the result that $620,000 was made unavailable to the residual beneficiaries (the opinion does not relate the particulars of the will contest or the identity of any contestant, or indicate how much of the $620,000 was attorney's fees incurred in defense of the will and how much a payment to contestants).
Legal Malpractice in Estate Planning Case Runs From Discovery - Watkins v. Hedman, Hielman & LaCosta
An attorney prepared a complicated estate plan for a married couple. The wife advised the attorney that they wanted to make sure their trusts were and remained revocable, that they minimized estate taxes, and that they avoided probate. The attorney never consulted with the husband, but sent documents home with wife and had her staff witness and notarize them upon return, even though they had never spoken with husband."Direct Lineal Descendants" in Old Trust Does Not Include Adopted Children - McGehee v. Edwards
Several trusts were established in 1929, 1930 and 1931. Each trust limited benefits to the "direct lineal descendants" of the settlor or the settlor's parents. Although state law was amended in 1978 to presumptively include adopted children in the terms "issue" or "descendant," the new law by its terms did not extend to prior trusts. The trustees of the trusts, concerned about potential liability for their determination of the approximately 142 trust beneficiaries, filed an action to determine "who are, or may be direct lineal descendants ... and specifically whether children born out of wedlock" would be beneficiaries. Counsel for one beneficiary answered, asking the court to also determine whether adopted children would qualify, whereupon the trial court appointed guardians ad litem for "persons adopted by lineal descendants, persons born out of wedlock to lineal descendants, persons born to lineal descendants through assisted conception, and legitimate minor beneficiaries and parties unknown."The guardian of person and estate filed a petition requesting compensation for services as guardian. The ward died before hearing on the petition, and guardian filed a second petition seeking additional compensation. Almost two years after the ward's death, the trial court summarily denied the compensation requests. The Florida Court of Appeals reverses the denials, noting that no one objected to the compensation requests, the guardian was not given notice of the pending denial of compensation, and the trial court did not conduct a hearing into the reasonableness or propriety of the fees. The summary denial "violated the guardian's right to due process of law."
Before a husband began chemotherapy treatment he arranged for freezing and storage of semen in case he became sterile. The treatment was unsuccessful and husband died within two months. In-vitro fertilization, begun ten months after his death, was successful and twins were born eighteen months after his death. The wife thereupon filed for Social Security Survivor's benefits for the children, and was denied by the Social Security Administration, an Administrative Law Judge, and a Federal District Court Judge.
State Must Permit Payment of Taxes on Special Needs Trust Termination - Stell v. Boulder Co. DSS
A self-settled special needs trust was established for the benefit of an SSI recipient who also received Medicaid benefits. The SNT provided that upon termination (by death of beneficiary, for instance), funeral, burial, and administrative expenses, and taxes would be paid first, and that the state Medicaid agency would then be required to submit a claim for reimbursement before the trust would repay Medicaid expenses. The Department of Social Services disqualified the trust and the beneficiary appealed.Probate Court's Removal of Fiduciary in Six Cases Upheld - Guardianship of Monus
A professional fiduciary, who is the director of a faith-based social service agency, had served as guardian, conservator or trustee for a number of years in six separate cases. The amounts involved in the estates varied from about $13,000 to about $210,000. In each case inventories were filed late or not at all, accountings were sporadic and incomplete, and requests were made for approval of expenditures after the fact. The probate court determined that the fiduciary had violated his obligation to account fully, and removed him from all six cases.Wrongful Death Action Dismissed Against Pharmacy in Death of Nursing Home Resident - Estate of Sharp
The estate of a deceased nursing home resident sued the pharmaceutical provider which had contracted with the nursing home to provide medications. The claims alleged that the pharmacy had failed to monitor administration of controlled substances, to observe that the drugs were either being misused or stolen, or to train the facility's staff in proper drug administration procedures. Relying on cases limiting the liability of pharmacists in wrongful death actions, the trial court dismissed the complaint with prejudice.Prior to establishment of a guardianship, a ward had signed and funded a revocable living trust. Prior to her death, the guardianship court had authorized the trustee to sell her home, and directed that the proceeds be held in the trustee's attorney's trust account. After the ward's death, the trustee sought and gained court approval to pay burial expenses, but when the trustee requested authority to pay the trustee's attorney (which would have exhausted the remaining proceeds), the guardianship court refused and directed instead that the trustee pay fees to the guardian and the guardian's attorney, plus previously unpaid court fees associated with the guardianship. The trustee appealed, and the Florida Court of Appeal reversed and remanded for further proceedings.
After their father became incapacitated, his children from a prior marriage filed an action to prevent his wife from taking charge of or dissipating his assets, which were largely held in a self-settled trust naming some of the children as successor trustees. As settlement of that matter, the parties agreed that the children would take over as trustees, that the wife would continue to make care decisions for the husband, and that the husband's trust would pay $25,000 per month to the wife for his care -- and specifically directing that the wife would not be a trustee. Some time later the children became concerned that the money was not in fact being used for their father's care, and sought an accounting from his wife. She successfully objected, arguing that the settlement agreement specifically precluded a finding of a trust relationship, and that they could have (but did not) required an accounting as part of the settlement.
When a proposed ward objected to a pending guardianship proceeding, state law mandated appointment of both an attorney to represent him and a guardian ad litem to evaluate him. The guardian ad litem questioned the physician (whose opinion was that the proposed ward did not lack capacity) and then arranged for appointment of and evaluation by a second physician. The guardian ad litem testified as an expert witness at trial, and provided opinion testimony based in part on hearsay evidence she had accumulated. After a jury found the proposed ward to be incapacitated and the court appointed a guardian, counsel for the ward appealed, arguing that the GAL's testimony should not have been admitted as expert testimony, that she should not have been permitted to rely upon or recite hearsay evidence, and that she should not have been permitted to characterize herself as "the eyes and ears of the court."
Bequest Does Not Fail for Indefiniteness of Charitable Beneficiary - Hays v. Harmon
A decedent's will left residue of his estate to a trust "to provide for poor relief to worthy and needy individuals who reside in Crawford County, Indiana...." The decedent's only child contested the will, alleging both that his father lacked capacity and that the trust was insufficiently precise to constitute a valid charitable trust.Number of Americans With Long-Term Care Insurance Unchanged from 2002
More than 85% of American older than 45 years old do not have long-term insurance, according to a second annual survey released by the Long-Term Care Financing Strategy Group, Washington D.C., a think tank affiliated with the American Health Care Association. The study, entitled "Index of Long-Term Care Uninsured," shows the number, at 82 million, has not changed since last year¹s study. The study reveals that approximately 16% of those aged 65 and over have private long-term care insurance.Treasury Eyeing Estate Tax Shelters Involving Charities
Treasury officials speaking at the American Institute of Certified Public Accountants conference on November 1-2, 2004, warned accounting and estate planning practitioners to expect a continued crackdown on many of the mechanisms being used to reduce estate tax liability, particularly those involving charities.Post-Nuptial Agreement Does Not Violate Public Policy - Bratton v. Bratton case
A year after his marriage, a medical student hand-wrote and signed a letter indicating that he promised never to be the cause of a divorce, and if he ever did he assigned 50% of his assets and 50% of his future earnings to his wife. Two months later the couple signed a more formal post-nuptial agreement, drafted by an attorney (the parties disputed whether the attorney represented the husband or the wife), which made a similar provision if the husband "was guilty of statutory grounds for divorce."Interest Accrues on Pecuniary Devise Despite Pendency of Will Contest - Estate of Holan Case
The decedent's will left the family farm to one son, but subject to that son's payment of a percentage of the appraised value of the farm to each of the decedent's other children over a fifteen year period with interest. Other children sought introduction of a later will, but the probate court ultimately found that will to be the product of undue influence and the South Dakota Supreme Court affirmed.The Section 7520 rate for December 2004 is 4.2%
Proposed Regs Require Registered or Certified Mail to Prove Timely Filing
Taxpayers would need registered or certified mail to prove timely filing under proposed regsPreamble to Prop Reg; Prop Reg 301.7502-1(e)(1); Prop Reg 301.7502-1(g)(4)
IRS Releases Inflation Adjusted Figures for LTCI; MSAs and HSAs
Inflation-adjusted figures for long-term care insurance, Archer MSAs and HSAsSummary of American Jobs Creation Act of 2004
Congress has recently passed the American Jobs Creation Act of 2004 and the president has indicated that he will sign it.Ohio Bill Would Cut Interest Rate on Unpaid, Overpaid Estate Taxes
Under Ohio HB 260, which was approved on November 9, 2004 by the Ohio House with a vote of 81 to 14, the interest rate on unpaid and overpaid estate taxes is lowered to the federal short-term rate, and the penalty for late payments would be 10 percent of the unpaid tax regardless of how late the payment is.April 2005 section 7520 rate released
The IRS has released the Applicable Federal Rate for the month of April, 2005. Each month the Service surveys interest rates and publishes the rate that is applicable for gift calculations. The rate for April is 5.0%. The rate for March was 4.6%.Illinois Governor OKs Modification of Estate Tax
On August 2, 2005, Illinois Governor Rod Blagojevich (Dem.) signed legislation (HB 1570, now PA 94-0419) that changes the credit for estate and inheritance taxes paid to other states. The new law eliminates one option of the options previously available as to how the credit is calculated for taxes paid to other states.Greenspan Rejects Estate Tax Repeal
On June 21, 2005, Federal Reserve Chairman Alan Greenspan testified before the Senate Banking, Housing and Urban Affairs Committee, during which time he reiterated his opposition to tax-cut proposals that increase the deficit and made clear that this opposition applies to proposals that repeal or drastically reduce the estate tax without fully offsetting the costs.Photocopy of Will is Not "Duplicate Original"
After a decedent's death, his original 1987 will could not be located. However, a photocopy of that will was in his personal papers. There was no indication of any intent to revoke the will other than the fact that the original was missing.Equitable Estoppel Doctrine Not Available Where Medicaid Eligibility Worker Gave Wrong Advice
A State Medicaid eligibility worker advised the son of a beneficiary that her estate would not be subject to a claim after her death, and that if he wanted to preserve the family home all he needed to do was to state that his mother intended to return home. The worker was wrong.Insurance on Retirement Accounts Increased
The FDIC and Credit Union insurance coverage on retirement assets such as Individual Retirement Accounts and 401(k)s has recently been increased to $250,000 from $100,000.Article of Interest on Intestacy
You may be interested in reviewing the article on the laws of intestacy in the various states.The Section 7520 rate (used to calculate life and remainder interests) for June 2006 will be 6.0%. This is slightly higher than the May and April rates.
House Passes Bill to Raise Applicable Exclusion Amount to $5 Million
On Thursday, June 22, 2006, the House of Representatives passed legislation, by a vote of 269 to 156, that would raise the applicable exclusion amount to $5 million for an unmarried person and $10 million for couples. The marginal estate tax rate on estates up to $25 million would be set at the same tax rates that apply to capital gains -- now 15 percent but scheduled to rise to 20 percent in 2011. The marginal estate tax rate for estates worth more than $25 million would be twice the capital gains rate.Estate Tax Repeal Vote Fail in Senate
Late Thursday, August 3, 2006, the Senate voted on an estate tax reform proposal that was came to close to full repeal and the republicans did not get the 60 votes they needed to pass it. The vote was 56-42!Why Can't a NY Lawyer Counsel FL Residents on NY Law?
This article from the ABA Journal summarizes the case of a NY licensed attorney wanting to give advise to FL residents about NY matters. It does a good job of summarizing FL's position on unlicensed practice of law in FL.Senate Resolution Freezes Estate Tax for Two Years
Senate Resolution 21, 110th Cong. 1st Session, passed the Senate by a vote of 91 - 1.New Study Finds Changes Needed to U.S. Health System to Accommodate Needs of Boomers
The aging baby boom generation is likely to increase the nation's disabled population, and a study says the United States needs a better system to provide care for them. More than 40 million Americans currently have some sort of disability, the Institute of Medicine reported Tuesday.Ward's Preference for Conservator May Be Bypassed by Court (Matter of Iwen)
In a proceeding to appoint conservator of the person and estate, the ward expressed preference for one child's appointment. In addition, the ward had previously executed a power of attorney naming same son, and nominating him to serve if conservatorship was ever required. Another son initiated the conservatorship proceeding, alleging that her care was inadequate and that she was unsafe in her home. Court appointed neutral conservator, who arranged for move to adult care home.Prior to his death the decedent had given his fiance the name of his attorney, his safe deposit box key, and instructions that everything she would need to take care of herself in the event of his death could be found in the box. When he died a search of the box turned up a typewritten page with the decedent's and his attorney's names plus, in the decedent's handwriting, the words "In case of death - goes to [decedent's fiance]." The fiance retained counsel (first one attorney and, later, a replacement) to represent her interests, and when her claim was dismissed she filed suit against her own attorneys claiming that they negligently failed to protect her interests.
Attorney for Conservator-Thief Not Liable to Surety Company (Capitol Ind Corp v. Fleming, et al)
An attorney represented a conservator in two successive annual accountings, which reflected unauthorized gifts and "loans" to the conservator's family members. The conservator was later removed and indicted. The conservator's surety was unable to recover full amount of losses from ex-conservator and sued attorney for failing to disclose evidence of conservator's criminal misconduct.Federal Court Says Feds and States Have Failed to Implement Olmstead
On August 19, 2003 the National Council on Disability released an online version of its comprehensive analysis of federal and state implementation of the Supreme Court's Olmstead decision. The federal government and the states have largely failed to adhere to a Supreme Court decision requiring them to move people with disabilities out of institutions and into communities, says the report. The National Council on Disability blames the problem on a shortage of housing subsidies, Medicaid requirements that states must pay for care in nursing homes but not in community settings, and a lack of public awareness.An elderly unmarried couple lived together in a woman's home for several years before they entered into a written agreement not to change their existing wills favoring one another without consent of the other party. Several years later the man left the home, announced that he had no intention of returning and that he wanted no further contact with the woman. Thereafter he signed a new will revoking the will which had been the subject of the agreement. The woman brought suit against him for anticipatory breach of the contract not to make a will. The man died during the pendency of the action and his estate was substituted as a party. The estate sought dismissal for various reasons (including alleged lack of venue, since none of the executors of the decedent's estate lived in the county where the litigation was pending) and the woman sought summary judgment. The trial court determined that there was sufficient evidence of an immoral relationship to allow the enforceability of the agreement to be decided by the jury and refused to grant the woman summary judgment.
Governors Back House Medicare Plan Covering Dual Eligibles
Calling it their "top legislative priority," the governors of all 50 states gathered in Indianapolis on August 17 for their annual summer meeting reiterated a plea to Congress, as it deliberates on a Medicare prescription drug benefit, for the federal government to pick up the costly prescription drug tab for more than six million poor, elderly Americans under the Medicare-Medicaid dual eligible program. States spend approximately $40 billion per year on "dual-eligibles;" of that $7 billion is on prescription drugs. The governors endorsed the House Medicare measure as they did August 1, in a letter to Congress, which was signed by governors from every state. The House measure would slowly phase out the states' financial responsibility over a 15-year period. The governors are highlighting this unanimous agreement over "dual eligibles" after failing to agree on comprehensive Medicaid reforms debated by a bipartisan task force of 10 governors earlier this year.Bad News May Be Ahead for Retired Public Employees
In order to prop up public pension plans hit hard by stock market losses, states will contribute $9.6 billion to the nation's 12 biggest state pension plans this year, a USA TODAY survey found. That is a 35% increase in the past two years, but it is still billions of dollars less than what is needed to fund retirement benefits guaranteed to public employees. The 123 public pension funds that operate statewide, covering both state and local workers, have $180 billion less in assets than they need to cover their long-term benefit obligations, reports Wilshire Associates, an investment adviser in Santa Monica, Calif. That amount is almost twice the size of California's annual state budget.Interesting Reading in Probate and Property
The July / August 2003 issue of Probate and Property has several articles of interest.The defendant, a resident of one state, traveled to another to assist his elderly cousin with financial matters. While there, the defendant secured a power of attorney and arranged to be named as joint tenant on some of the elderly cousin's accounts. Thereafter, the defendant arranged to move his cousin to the state where he lived. After a short stay there, the cousin decided to move to a third state.
New Services at IRS Replace Distinct EIN Hotline Number
The IRS has announced two new services for business taxpayers that have allowed the IRS to close its distinct telephone number for obtaining an employer identification number. Taxpayers needing an EIN now should use either the new business and specialty tax line, (800) 829-4933, or the new Online EIN Internet application at http://www.irs.gov.Treasury Releases Final Regs on Split Dollar Life Insurance
The Treasury Department and IRS have issued final regulations for split dollar life insurance. The final regulations provide that the tax treatment of split-dollar life insurance arrangements will be determined under one of two sets of rules, depending on who owns the policy. If the executive owns the policy, the employer's premium payments are treated as loans to the executive. Consequently, unless the executive is required to pay the employer market-rate interest on the loan, the executive will be taxed on the difference between market-rate interest and the actual interest.This electronic version of a popular brochure issued by the Administration on Aging contains 2002 statistics on older Americans in 13 key subject areas, including population data, health status, income, and poverty. It includes both narrative and statistical charts.
Increasing Fear of Downside to Medicare Drug Benefit
There is increasing concern that an introduction of a prescription drug benefit to Medicare could deprive many recipients of more extensive coverage. Many employers provide prescription drug coverage to retired employees. These retired employees fear that the employers will end that benefit upon the introduction of a Medicare prescription drug benefit. Because it is likely that the Medicare benefit will not be as generous as the employer plan, these retired employees would be worse off upon the passage of a Medicare prescription plan. The New York Times has a good article on this.New Split Dollar Regs Apply to Arrangements Entered Into After Today
The new Split Dollar Regs apply to any split-dollar life insurance arrangements entered into AFTER today, September 17, 2003.A long-term care insurance policy was purchased in 1989, which included a provision requiring a three-day hospitalization before nursing home placement. There was no change in the policy terms before the insured was admitted to a nursing home in 1998, but Pennsylvania law adopted in 1992 prohibited the "prior institutionalization exclusion." The insurance company denied coverage and the insured sought declaratory judgment and claimed bad faith and unfair trade practices.
A vulnerable mother lived with her adult daughter. According to the state protective services agency, the mother had complained of pain and suffered injuries, but daughter did not seek medical attention. After several administrative proceedings, the state protective services agency entered a finding that daughter neglected mother under state law prohibiting abuse or neglect of vulnerable adults. The daughter appealed to state trial court, which upheld the finding.
A mother who was the income beneficiary under three trusts filed litigation against her children as the trustees of the trusts. A son responded (in part) by filing a guardianship proceeding alleging the mother's inability to make responsible decisions regarding her property or person. The court appointed an attorney "to serve as counsel ... to appear and answer the [guardianship] petition ... and to act as [the mother's] temporary guardian of her property. The attorney also appeared in the trust litigation, participated in negotiations leading to resolution and secured the court's approval of the settlement, then brought action to compel the trustee/son to sign settlement agreement -- which provided for payment of attorney's fees from trust principal.
Attorney Suspended for Forging Clients' Signatures on Pleadings (In re Uchendu)
In at least sixteen instances over a two-year period, an attorney signed his client's names to probate court pleadings (including inventories, notices and certificates required to be signed by fiduciaries rather than counsel). In most but not all cases, he included his initials next to the signature. In four cases, he notarized his own signature, indicating that the client had signed in his presence.October Applicable Federal Rates
The Service has released the applicable federal rates for October 2003. They are up slightly from September. The new rate under Section 7520, used to value life estates and remainder interests, is 4.4%.Interesting Article on Changes to Medicaid Benefits
States are making cutbacks in Medicaid services to reduce budget deficits.Ttee's Atty Not Entitled to Fees from Trust for Unsuccessful Defense of Amendment (Est. of MacAdams)
The trustor, shortly before his death, changed both the trustee and the principal beneficiary of his living trust. After his death, the trustee named in the original instrument sought to declare the amendment invalid, and the California Court of Appeals ultimately ruled that he did not have standing. A beneficiary named in the original document then brought action to challenge amendment and was ultimately successful.Selling Annuities to Seniors: Keep It Simple Seminars Work, Says Marketing Group
The president of the Millennium Marketing Group explains how to sell fixed annuities to seniors: "The 'Keep It Simple' philosophy appeals to the widest range of potential clients. Generally speaking, those who attend senior seminars are not there to receive an MBA in Finance over a 2 - 3 hour period of time. Instead, they are looking for simple solutions to simple problems. The majority of attendees are seniors (60+) who are looking to put their safe (retirement) money -- or what's left of it -- in a safe place. Many have stayed too long in the stock market and lost money, renewed their CD's at abysmally low rates or are stuck in an older annuity with a shaky company and/or poor renewal rates. The purpose of the 'KISS' concept is to help these clients identify their problems and show them how fixed annuities can provide a solution -- on a simple basis."Toll Free Number Reserved for Practitioner Community
The IRS encourages practitioners to use the toll free Practitioner Priority Services (PPS) number at 866-860-4259.Distinct EIN Hotline Number to be Disconnected
Two new services for business taxpayers have allowed the IRS to close its distinct telephone number for obtaining an employer identification number.District Court Rules Irrevocable Trust is Revocable (Thompson v. Barnhart)
John Thompson was seriously injured in a boating accident in West Virginia and began receiving SSI. He later was awarded a settlement relating to the injury, which was placed in a (d)(4)(A) Trust. Mr. Thompson was both the trust's grantor and its sole beneficiary. The trust states that Mr. Thompson "shall have no interest in either principal or interest of this trust." Upon Mr. Thompson's death, Medicaid is to be reimbursed and any residue paid in accordance with Mr. Thompson's will or to his "heirs-at-law."Assignment of Tort Recovery to State Bars Claim for Future Medical Expenses (Guzman v. U.S. West)
Anissa Guzman, age seven, was struck and injured by a motor vehicle while trying to cross the street from behind an illegally parked truck owned by telecommunication provider U.S. West. Anissa suffered permanent injuries, including brain damage. She and her mother sued U.S. West and the driver of the truck. As a condition for Anissa's receipt of Medicaid benefits, her mother assigned all of her "rights to medical support and third party payments" to the state. The state filed a medical-assistance lien and later settled all its claims against U.S. West. Anissa and her mother then settled their remaining claims against U.S. West, except their claim for future medical expenses, estimated to exceed $5 million.IRS Continues to Reject Formula Gifts
In TAM 200337012 (September 12, 2003), the IRS has specifically rejected the effectiveness for gift tax purposes of a clause attempting to make a gift of whatever percentage of interest in a family limited partnership equal to a stated dollar amount.Trust Distributions Characterized as Advancements of Future Trust Income (Frazier v. Brechler)
A trust provided for mandatory distribution of income and discretionary distribution of principal to husband after death of the Trustor. When the Trustor died there was insufficient trust income to make distributions over the next few months, and so trustees distributed "advances" against future income in each of the three months after the Trustor's death. Later in the same year the trustees reduced the total income distributions to the husband. The husband brought an action to compel the trustees to distribute the full amount of the income and the trial court determined that the "advances" were really discretionary distributions of principal and ordered distribution of an additional $113,397.07 to the husband (the full amount of the trust's annual income, none of which had been distributed under the trial court's calculations).Will Beneficiary Has No Claim Against Lawyer for Failure to Deliver or File Will (Munnich v. Yost)
Several months after death of his wife, husband consults an attorney about estate planning. The husband delivered the wife's original will to attorney. The attorney neither advised the husband to act to probate his wife's estate or to notify devisees -- and the attorney took no action himself. Several months later, the couple's son filed a petition for determination of intestacy, and the husband notified attorney. The attorney thereupon filed original will with the court.Two relatives filed competing conservatorship proceedings with regard to elderly woman. Testimony at trial (including from subject of the proceedings) indicated that she had let one of the relatives handle most of her finances, that she regretted having done so and did not know what had become of her assets, and that she believed she could handle her property once again.
A testamentary trust directed that a ranch be used as a stock ranch and, if funds were available, as a boarding ranch to teach young children about farm life. Any excess funds (and the residue of the trust 20 years after the death of income beneficiaries) was to pay higher education costs for children from two counties.
A $7.5 million marital trust included a provision providing for accountings to be delivered only to the surviving spouse and giving her, as income beneficiary, the sole and absolute authority to settle the accountings. The mother of residual beneficiaries demanded more information and accountings, and trustees refused. The trustees then petitioned the court for a finding that the trust provision giving sole accounting approval to the surviving spouse was valid, and that they had discharged their duties.
Will Does Not Compel Satisfaction of Mortgage with Non-Probate Property (Est. of Vincent)
A decedent's will provided that the Executor was to pay "all my just debts," and specifically authorized the Executor to continue to pay mortgage payments on real property that had been transferred to a nephew during the decedent's life. No payments were made and the note went into default; the holder of the note filed a claim against the estate for the note balance of $128,341.62. The nephew sought exoneration of the note by the estate, citing the will language permitting payments and the direction to pay "just debts. The trial court found that the property was not part of the probate estate and that the nephew was not entitled to an exoneration of the debt.The September 2003 Trusts Estates magazine has several articles of potential interest.
Heir / Devisee Has Standing to Contest Will Despite Receiving More Under Challenged Instrument
Aunt's will left all her personal and household effects to her nephew, who was also one of her heirs at law. Nephew sought to challenge the validity of the will, but the Personal Representative argued that he lacked standing because he would receive more under the challenged instrument than he would receive under prior wills. Trial court agreed and dismissed the nephew's will contest.After his wife's death a widower befriended a neighbor woman and began taking most of his meals at her home. Eventually the widower moved in with the neighbor and she provided personal care services for him for four years. After the widower's death the neighbor filed a claim against his estate for housing, cooking, laundry, transportation, and other care-giving services. The neighbor claimed an oral agreement that the decedent would pay for the care she provided.
Unmentioned Grandchild is Covered by Pretermitted Child Statute (Alexander v. Est. of Alexander)
When a decedent executed his will, one child had died leaving a surviving son. No mention of deceased child or living grandchild was included in the decedent's will, which instead left the decedent's entire estate to one of two surviving children of the decedent. The son of the deceased child, by his mother, brought an action to be identified as pretermitted child under the Arkansas statute, which creates a forced heirship for unmentioned issue. The trial court found that the will's language on Rule Against Perpetuities (which mentions "issue" generically) evidenced decedent's intent to disinherit unmentioned issue.Creditor Entitled to Notice of Final Account in Probate Estate (Estate of Spencer)
An informal probate (in a UPC state) was filed without prior notice to the heirs / devisees / creditors. Notice was timely given to a possible creditor, which did not file claim until after expiration of claims period. The personal representative nonetheless partially allowed the claim and gave notice. The creditor took no action until one day after time for filing a complaint of petition. Thereafter, the personal representative filed a formal petition to close the estate, listing the creditor's claim as disallowed because not timely filed. Relying on the notice standards for informal probate proceedings, the personal representative did not give notice of the final account / closing petition to the creditor and the Probate Court approved the account and discharged the personal representative. The creditor filed a notice of appeal more than six months after expiration of the appeal time.Vote for Estate Tax Repeal Delayed; Senator Kyle Prepares Amendment to H.R. 8
Aides to several key Senators have announced that there will be no vote of estate tax repeal in the Senate until after all the relief for the hurricane victims has been secured and the rebuilding in Louisiana, Mississippi and Alabama begins. Therefore, we can expect that nothing should happen for at least several weeks.Final Regulations on Ordering Rules for Charitable Remainder Trusts Issued
The Internal Revenue Services has issued final regulations on the ordering rules of section 664(b) of the Internal Revenue Code for characterizing distributions from charitable remainder trusts (CRTs).IRA Gifts to Charity Temporarily Unlimited
As part of the tax relief provided by Congress, unlimited donations of IRAs or pension plans to charities will be allowed for a short period of time.Leavitt Endorses Many of Governors' Medicaid Proposals
On August 2, Department of Heath and Human Services Secretary Mike Leavitt discussed various health topics in an interview with Associated Press editors and reporters. On Medicaid, Leavitt said that the commission he appointed to recommend ways to cut $10 billion from Medicaid over five years would "likely look" at proposals from the National Governors Association and determine that they "are pretty well thought-out ideas."IRS Releases December 7520 rate
The 7520 rate for December 2005 is 5.4%, up significantly from November's 5.0%. This rate is what is used to actuarially value life estates, remainder interests, etc. A higher 7520 rate makes some transactions, such as QPRTs more attractive, while some other transactions less attractive.DC Circuit: Lawyers Exempt from Sending Gramm-Leach-Bliley Privacy Notices
The Gramm-Leach-Bliley Act has provisions which require "financial institutions" to send annual privacy disclosure notices. This applies to banks, brokerage houses, etc. The Federal Trade Commission had taken the position that this also applied to attorneys holding financial information. The American Bar Association filed suit for a declaratory judgment. The ABA won in the District Court. Now, the U.S. Court of Appeals for the District of Columbia has affirmed the District Court's judgment.IRS Increases PLR Fees, In Some Cases Dramatically
New PLR User Fees
The IRS has released the 2006 Revenue Procedures outlining fees for Private Letter Ruling Requests. Continue on to see some of the outlined changes:
Social Security Death Benefit Eliminated in Bush Budget Proposal
The $255 Social Security death benefit will be eliminated under the Budget proposal submitted to Congress on February 7, 2006 by the President. White House officials defended the proposals and estimated costs would be trimmed by $3.4 billion over the next decade with the elimination of the stipend. Congressional aides said Jo Anne Barnhart, the Social Security Commissioner, had told them during a closed-door briefing that the $255 one-time death benefit has become an administrative burden, since it is not paid in all cases. Mark Lassiter, a spokesman at the Social Security Administration, said the benefit "bears no relation to what a person's funeral expenses are or to any of workers' earnings levels. We believe that eliminating it is not going to cause an appreciable financial hardship to a survivor."Commission Considers Separating LTC Component of Medicaid
The Medicaid Commission, which is looking into ways to improve the government program is mulling over the possibility of separating long-term care financing from Medicaid.
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