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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2010 May Be a Good Year to Die
The Economic Growth and Tax Relief Reconciliation Act of 2001 provides that in 2010 the estate tax is repealed and there is no estate tax. Therefore, from a tax perspective, 2010 may be a very good year to die. But, we don't know for sure, as many experts expect Congress to act to prevent the repeal of the estate tax. This article written by Steve Hartnett, Associate Director of the American Academy of Estate Planning Attorneys spells out the process for getting a new estate tax measure passed in Congress and the impact of the delays.
$250 Recovery Payments to go to SS and SSI beneficiaries in May 2009.
The Sunday, September 9, 2007 issue of Parade magazine contains an article by Gail Sheehy on family caregiving. It will recount some of her own experiences as a spousal caregiver to her husband.
Roy R. Trudel, a Technical Director at the Center for Medicare and Medicaid Services ("CMS") recently opined that a state agency has the option of imposing a transfer penalty on an institutionalized spouse if the community spouse transfers protected resources after the institutionalized spouse's eligibility has been determined. Mr. Trudel's opinion, which is a reversal from statements made by previous CMS (HCFA) officials, came about as the result of an email exchange between elder law attorney Robert Mason of North Carolina and himself.
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.Senate Resolution Freezes Estate Tax for Two Years
Senate Resolution 21, 110th Cong. 1st Session, passed the Senate by a vote of 91 - 1.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.Georgetown University Study on Medicaid Financing of Long Term Care
This article summarizes the role of Medicaid in financing long term care costs. The article also touches on how DRA will affect the ability of portions of the elderly population to get access to long term care.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!Article on Boomer Inheritances
This USA article highlights how inheritances by boomers are not meeting earlier projections. The reason behind this is the increased life expectancies of seniors and the higher then projected costs for health care.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.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.
An Essay on Issues Involving the Older Driver
Eighty-six year-old George Weller's killing of 10 when he accelerated instead of braked at a Santa Monica, California market in July 2003 captured the public's attention dramatically. The Weller tragedy again reminded us that we face a growing problem: The aging process will in some way affect the driving habits and skills of most of our clients. Court intervention regarding older drivers is increasing in that probate judges address driving as fiduciary concerns for guardians and conservators. George Weller's court intervention came through the criminal bench as he was indicted on 10 counts of manslaughter in January 2004. Ideally, family members, health care providers, elder-law attorneys/estate planners and fiduciaries should assist aging loved ones/patients/clients in planning before driving skills decline and address what happens after the car is gone.Article of Interest on Intestacy
You may be interested in reviewing the article on the laws of intestacy in the various states.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.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.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.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.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.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."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.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:
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.Undernourishment Screening Tool
Undernourishment is one of the major risks to the good health of elders.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.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.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."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.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.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.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).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.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.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.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.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.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.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%.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.
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.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.The Section 7520 rate for December 2004 is 4.2%
IRS Statistics for 2003 Estate Tax Returns
The IRS data for the 2003 Estate Tax Returns are now available from the IRA. This data include gross estate by type of property, deductions, taxable estate, estate tax and tax credits, and by size of the gross estate.A decedent established a self-settled trust naming herself as trustee and her son as successor trustee. During the last few years of her life, the decedent was taken advantage of by her son. On her death the trust provided for specific distributions to two children and a granddaughter, with the remainder to be distributed to her son; if son failed to survive, the remainder would pass to the granddaughter. The granddaughter filed an action alleging that the son had committed elder abuse and, pursuant to the terms of a California statute, should be disinherited. The Son moved to dismiss the suit for lack of standing. The trial court found that granddaughter had standing and ultimately found that son had abused his mother and that such abuse effected his disinheritance.
Statements to Beneficiary Do Not Support Establishment of a Trust - Hubbard v. Shankle
Prior to his death, the decedent had changed the beneficiary on his life insurance policy to name his girlfriend of three months. He told her that he was making the change because he wanted her to have the proceeds and he wanted her to take care of college expenses for his two- year-old daughter. When he died the girlfriend received $110,000 from the policy, of which she immediately spent $45,000.The District Mental Retardation and Developmental Disabilities Administration (MRDDA) filed petition for appointment of guardian of the person for a 33-year-old developmentally disabled patient recently placed in a community setting as part of a court-ordered deinstitutionalization process. The trial judge found that the proposed ward qualified pursuant to the guardianship statute for appointment of a guardian, but expressed concern that there was no real emergency medical care problem and that appointment of a guardian in a case such as this one would simply encourage the MRDDA to file petitions in other cases, and that there was "no real crisis going on" to justify the guardianship.
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.Summary 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.IRS Releases Inflation Adjusted Figures for LTCI; MSAs and HSAs
Inflation-adjusted figures for long-term care insurance, Archer MSAs and HSAsTreasury 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.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)
A law firm secured a $300,000 judgment against its former bookkeeper for embezzlement. The bookkeeper's mother gave the law firm a brokerage account check for $60,000 (for reasons not clear from the record). The law firm, now aware of the fact that the brokerage account was titled in joint tenancy between mother, bookkeeper and mother's other child, executed against the account. The mother intervened in the garnishment proceeding and argued that she was the sole contributor to the account, that her two children were joint tenants only as a matter of convenience, and that she had not intended to make a gift.
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 November 2004 is 4.2%.
A father established a testamentary trust for the benefit of his son, which included a spendthrift provision. The trust gave the trustee discretion to distribute or withhold all income and up to $1,200 per year of principal, and the trust language indicated that the discretion should be exercised "for the comfortable support and maintenance" of his son. The trustee secured a court order authorizing payment of a fixed amount each month to the son, increasing that amount over several years as his condition declined.
After an auto accident injured an already-disabled benefits recipient, his mother successfully sought court approval to establish a special needs trust with the $115,377.56 of net proceeds from a lawsuit. The trust and its establishment apparently satisfied the Social Security Administration, and his SSI benefits continued to be available. The State, however, determined that establishment of the trust was a disqualifying transfer for Connecticut's SSI supplement program and terminated his benefits.
Debt of the Elderly and Near-Elderly 1992-2001
American families with a family heads who are age 55 or older had approximately the same level of debt payments relative to income and of debt levels relative to assets in 2001 as they did in 1992, according to a new report by the Employee Benefit Research Institute. In terms of retirement security, the EBRI report noted that, on the whole, the new data are positive that most older families did not appear to be overburdened by debt in 2001. However, there has been an increase in the percentage of heavily indebted families -- defined as those with debt payments exceeding 40 percent of income -- especially for family heads in the two oldest groups (ranging from 5 to 10 percent of all near elderly and elderly families).Parents executed wills and powers of attorney naming one of four children as personal representative, sole devisee and agent. At the death of second parent to die, virtually all of parents' assets had allegedly been diverted to the favored child. The disinherited children filed an action for intentional interference with an expectancy, and the favored child / personal representative moved to dismiss on grounds that probate proceedings provided an adequate remedy.
A daughter and granddaughter of elderly woman filed competing petitions for appointment as the woman's guardian. The daughter requested appointment of a temporary guardian, alleging an emergency. At the hearing, the granddaughter acknowledged that she had loaned or transferred over $450,000 to herself using a power of attorney, but alleged that the transfers and purchase of an annuity were for Medicaid planning purposes. When specifically challenged about a $100,000 annuity (on which she had collected a commission on purchase, and naming her children as beneficiaries), the granddaughter characterized her failure to list it as an asset of her grandmother's estate as a "scrivener's error."
An elderly woman moved from her home state to an assisted living center near her granddaughter, who lived in another state. Her granddaughter, who is an attorney, was an agent in the elderly woman's power of attorney. Granddaughter was also named as the sole beneficiary of her estate. Shortly after the move she began to "slip," and when she learned that her granddaughter had expressed concern about her drinking she became more antagonistic. An old drinking friend made contact with the grandmother and began living with her, though not paying any rent or contributing to her expenses, and allegedly increased her alcohol use.
Uniform Trust Code Does Not Permit Termination of Spendthrift Trust - Estate of Somers case
A trust provided for payment of $100 / month each to two grandchildren of trustor, with remainder on their death to go to charity. The trust contained a spendthrift provision preventing the alienation of grandchildren's interests. Nearly fifty years after the trustor's death, the trust corpus had grown to $3.5 million. Grandchildren and remainder beneficiary entered into agreement to terminate trust and to distribute $150,000 to each of the grandchildren and the balance to the remainder beneficiary. The corporate trustee declined to act on the agreement, and charity and grandchildren filed a joint petition to terminate the trust.An elderly woman, with the assistance of her long-time attorney, created a will, a charitable trust and a power of attorney naming a personal friend as executor, trustee and agent. Some years later, after significant deepening of dementia and at the instigation of a caretaker who was disgruntled with the agent's refusal to change her to the day shift, the woman visited an attorney selected by her family members and revoked the prior planning documents and executed new documents naming those family members as the agents, trustees and executors.
Attorney Not Liable for Failure to Undo Estate Plan - DiStefano v. Milardo case
Client, a serious alcoholic, utilized the services of an attorney to establish a trust, will and power of attorney. After several institutionalizations, she approached the attorney to undo her plan, and particularly to remove her son as agent, trustee and personal representative. The attorney reminded her that she had established her plan precisely to protect against her own mismanagement, and did not take steps to unravel her planning. A year later (and after another institutionalization for alcoholism and depression), she revoked the trust and power of attorney on her own, and then sued her attorney for malpractice, alleging that his failure to undo her estate plan was the proximate cause of alleged losses from theft by her agent.AFRs for October 2004 Announced
The Section 7520 rate for October 2004 is 4.4%Trust Amendment Effective Even Though Unsigned by Trustee - Godley v. Valley View State Bank case
A trust provided that the trustor retained the power to amend, and that amendments became effective upon delivery to the trustee. The trustor signed a trust amendment which removed her stepchildren as remainder beneficiaries (and named caregivers in their stead), and named a corporate trustee (effectively resigning as trustee). The attorney who prepared the amendment then sent it to the corporate trustee for acceptance and signature. The corporate trustee did not immediately sign the amendment, and two weeks later the trustor died; thereafter, the corporate trustee declined to serve as trustee and returned the original, unsigned amendment to the attorney.Bush Renews Call for Privatization of Social Security
In his acceptance speech at the Republican National Convention, President Bush promised major changes in American society's most basic pillars: its health care system, pension plans, tax code and workplaces. Revising the Social Security system to give younger Americans the option of investing part of their tax contribution would be the most dramatic piece of his second-term domestic agenda. "We must strengthen Social Security by allowing young workers to save some of their taxes in a personal account," Bush said in his prepared speech, "a nest egg you can call your own and government can never take away." The president made a similar proposal four years ago, but political resistance, a budget deficit, and other priorities blocked his efforts.Greenspan Again Calls for Social Security and Medicare Fix
Federal Reserve Chairman Alan Greenspan again took aim at the pending Social Security and Medicare crises, asserting that retirees will face "abrupt and painful" choices if Congress does not act swiftly. Greenspan acknowledged that addressing the problem by raising payroll taxes was problematic as this would make it harder for employers to hire new workers. The 78-year old Fed chairman has said that he favors raising the age at which full Social Security benefits are delivered to retirees.Utah Tops List of Best Places to Die
Geography determines much about an individual's final days: the kind of care received, where he or she will get it, and how much a decedent can pass on to heirs. This Forbes article ranks the states top to bottom. On top: Utah. At the bottom: IllinoisTax Proposals from Republican and Democratic Campaigns
As the Presidential campaign heats up, a few details have emerged on how the incumbent and the challenger would approach federal income taxes. Here's a thumbnail review.IRS Wins Victory in Thompson FLP Case
The Third Circuit Court of Appeals has upheld the IRS Tax Court victory using an IRC 2036 attack. Unfortunately, bad facts (death bed FLP) make for bad case law. We will reconcile this case with the recent taxpayer victory in the appeal of the Kimbell case in an upcoming memo to members. In the meantime, we have attached a copy of the Third Circuit opinion. Finals briefs are due from the Department of Justice today on the appeal of the Strangi case, so we will see whether that court follows the logic of Kimbell or Thompson within a few months.HCFA Transmittal 64 Tables for Medicaid Planning Available on the Web
A useful resource for Medicaid Planning with annuities and life estates is the HCFA Transmittal 64 Tables, but these are often difficult to find. The link below will take you to the Tables on the Centers for Medicare and Medicaid Services website.Tax Fraud Promoters Associated with "We the People" Convicted
Seven individuals associated with a tax fraud group known as "We the People" were convicted May 4, 2004 on various federal charges related to the promotion of bogus tax shelters that falsely promised to limit exposure to federal income taxes.The section 7520 rate for August 2004 is 4.8%.
Law Firm Ordered to Comply with IRS Summonses
Jenkens and Gilchrist Ordered to Comply with IRS SummonsesVarious States Address Estate Taxes
On April 27, 2004 the Virginia Senate approved a tax plan passed by the Senate Finance Committee the night before that would cap at $950 million the amount the state reimburses localities for "car tax" relief and would reinstate the Virginia estate tax.For purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2004-66 indicates the charitable federal midterm rate under section 7520 for July 2004 is 5.0%; up 0.4% from the June rate of 4.6% and up 1.2% from the May rate of 3.8%.
IRS Offers Tips for Accurate Schedule K-1 Filing
Correct filings can prevent unnecessary notices when IRS matches K-1 income reports to the recipients' tax returns. For tax year 2002, approximately 25 million Schedule K-1 forms were filed reporting over $1 trillion in income to partners, shareholders and some trust beneficiaries. A matching program to ensure all Schedule K-1 income is being reported is critical to IRS tax administration policies.The Service has released the Applicable Federal Rates for June 2004. The 7520 rate, used to value life estates, remainder interests, etc., is 4.6%. This is a substantial increase from the 3.8% rate in effect in April and May 2004.
IRS Releases Form 8855, Election to Treat Trust as Estate
New Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate, has been released. Instead of having to write a statement as outlined in the IRS regulation under IRC Section 645, we should now use this form to make this election.Attorneys' Fees Award Against Losing Party in Trust Contest Upheld
Mother/son team unduly influenced a demented multimillionairess to modify three trusts of which she was settlor, naming son as successor trustee and changing the trusts' ultimate distribution to substantially benefit the mother and son. Several months later the former trustee filed a petition for appointment of a guardian ad litem for the settlor. After setting aside the changes, the trial court ordered the mother and son to repay the trusts all of their legal fees (which had been paid from trust assets) but declined to order payment of the prior trustee's or the trust beneficiary's attorneys' fees and costs.Nebraska Estate Tax Reform Moves Ahead
LB 1034, a bill that would change Nebraska's estate tax rates, has been advanced to final reading in the Nebraska Legislature. The bill would reduce estate taxes on the first $100,000 of an estate but increase them for estates of more than $3.5 million.Parental Support Statute Does Not Authorize Suit Against Child of Patient With Assets
Father was admitted to the hospital for what turned out to be his final illness. Days before his death approximately $1.2 million was deposited into a trust for his benefit in settlement of a personal injury action. At the time of his death the hospital believed that Medicare would cover his care, and so submitted a bill for $42.73, which the father's estate paid and for which it secured a release of further liability from the hospital.Private Annuity Contract With Irrevocable Trust is Subject to Medicaid Transfer Penalty
Husband and wife established an irrevocable trust, and then transferred $150,000 in assets to the trust. The Trust executed a private annuity agreement with wife to pay $1,424.55/month to her. Husband then applied for Medicaid eligibility. Medicaid agency denied first application due to inadequate documentation, excess assets and a transfer penalty occasioned by the transfer to trust. After a second Medicaid denial based on excess income, husband appealed.Agent Personally Liable for Unpaid Nursing Home Bills After Medicaid
Daughter of nursing home resident held a power of attorney for her mother. Daughter/agent signed nursing home contract as "responsible party," promising to use mother's assets for her welfare (specifically including nursing home costs). Thereafter, daughter/agent made gifts to herself of just under $50,000 and paid a companion $31,760 over a period of years. Mother's husband had apparently also transferred $285,000 into a revocable trust prior to nursing home placement.Kansas House Tax Committee OKs Increase in Trust Taxation
The Kansas House Taxation Committee has approved SB 390, which would significantly expand the state's income taxation of resident trusts and effectively earmark the additional $6 million in revenues for expanding the homestead property tax refund program.Connecticut Committee Approves "Millionaire Tax"
On March 27, 2004, the Finance, Revenue, and Bonding Committee of the Connecticut General Assembly voted to impose a "millionaire's tax" effective from January 1 and to increase the inheritance tax for estates that are worth more than $1 million.Michigan Will Be Last State to Implement Medicaid Estate Recovery
Michigan health officials have begun considering regulations to comply with a federal law requiring state Medicaid programs to recoup assets from deceased beneficiaries to offset the cost of nursing home care. Michigan will be the last state to comply with the "fiscally sound, politically yucky" law, which is "so politically sensitive" that Gov. Jennifer Granholm (D) cannot find a lawmaker to sponsor legislation to address it. Earlier this year, Georgia passed legislation authorizing estate recovery.2003 A Profile of Older Americans
The 2003 edition of A Profile of Older Americans is now available on the U. S. Agency on Aging Web site. This Web-based publication includes statistics on older Americans in key subject areas such as population (including the latest population estimates and future growth projections), income and poverty, marital status, living arrangements, health, and much more. It includes both narrative and statistical charts.Does HIPAA Affect Patients' Access to Care?
An article from the March 29, 2004 Detroit News examines concerns from health care providers that the Health Insurance Portability and Accountability Act medical privacy rules have affected patients' access to care. Providers must obtain consent from patients before they can disclose medical records in "non-routine" cases. Providers who violate the rule can face fines between $100 to $250,000 and as many as 10 years in prison. Providers maintain that they are so wrapped up in complying with the privacy standards that they are distracted from doing their jobs, which can cause patients to wait longer for care.Follow-up to February 2004 FaxAlert
The February FaxAlert was about a Ninth Circuit (Arizona) case that shielded assets in a spendthrift trust from the bankruptcy trustee for the beneficiary under the trust. Steve Leimberg has just released an e-newsletter with further information on that case and has graciously agreed to let me pass it on to members. Information on how to subscribe to Steve's e-newsletters appears at the end of the email.The Section 7520 rate for May 2004 is 3.8%.
Senate Finance Committee Chairman Rejects Request for Earlier Repeal of Estate Tax
On March 5, 2004, the Senate Budget Committee issued a proposed federal budget, including a non-binding request that the Senate Finance Committee produce legislation repealing the federal estate tax in 2009, rather than in 2010.CCH issued a report which contained many good tax planning strategies you may want to suggest to your clients.
DON'T BE TAKEN IN BY TAX SCAMS...The IRS reminds taxpayers not to fall victim to a variety of tax scams. These schemes take numerous shapes, ranging from promises of special tax refunds to illegal ways of "untaxing" yourself.
The 7520 Rate for April is 3.8%. This is down from 4.0% in March and 4.2% in February.
Abusive Home Based Business Tax Schemes
The Internal Revenue Service is cautioning the public about promoters who are selling the concept that taxpayers can operate any type of unprofitable "business" out of their home and claim personal expenses as business expenses. Taxpayers should be wary of these programs.Virginia House OKs Estate Tax Repeal; VA Senate Approves Measure
By a 69-29 vote on February 10, 2004 the Virginia House of Delegates approved legislation (HB 4) that would eliminate Virginia's estate tax by October 1, 2005.Proposal to Permanently Repeal the Estate Tax
The federal budget proposal for fiscal year 2005 to make permanent the provisions of the 2001 and 2003 tax acts (which includes repeal of the estate tax) can be found in the General Explanations of the Administration's Fiscal Year 2005 Revenue Proposals at pages 4 -5.On March 10, 2004, the U.S. Senate enacted a new rule, the "Feingold Amendment." Under this rule, any tax cut or spending increase will require 60 votes for passage unless an offsetting revenue provision is included in the legislation. For example, a bill cutting taxes by $100 million would have to include an offsetting tax increase or spending cut of $100 million or it would have to have 60 votes to pass.
Action for Tortious Interference with Inheritance Not Possible During Life
Two siblings brought an action to set aside transfers from their mother to two other siblings, alleging both undue influence and tortious interference with expectancy of inheritance. Guardian of property sought to intervene as a plaintiff. State trial court dismissed sibling's tortious interference claims, but declined to dismiss guardians.Institute of Medicine Proposes Universal Health Insurance by 2010
The Institute of Medicine released a report that recommends that the federal government guarantee that by 2010 everyone in the United States should have health insurance.Nebraska Releases LTC Reform Study
The state of Nebraska recently published a report, "The Heartland Model for Long-Term Care Reform," addressing ways to reduce the cost of long-term care. The report was researched and written by the Center for Long-Term Care Financing.The Attorney General of Maryland has released a report on Alzheimer's disease that practitioners from other states should find useful. The 115- page report examines the regulation of nursing homes, long-term care insurance and Medicaid. Policy goals include protecting patients against abuse, neglect, and financial exploitation and improving state-regulated facilities.
The Nebraska Revenue Committee is examining bills that would decouple Nebraska from the federal estate tax legislation. The decoupling would be in response to the reduction (and elimination next year) of the federal state estate tax credit.
Proper Standard for Appointment of Conservator of Estate is "Management Competency Test"
Sisters disagreed over the management of their mother's finances and the operation of a family business, and one sister sought appointment of herself as conservator of the person and estate. After a three-day court trial, the other sister was appointed conservator of the person and a public conservator as conservator of the estate.Purchase of Life Estate in Daughter's Home Treated as Transfer
The daughter of a Medicaid applicant, utilizing a durable power of attorney, purchased a life estate in her own home for the applicant for $43,953.13. The Medicaid agency treated the purchase as an uncompensated transfer, arguing that the applicant received nothing of value, and denied eligibility.Greenspan Congressional Testimony
Federal Reserve Chairman Alan Greenspan testified before the House Budget Committee today. In his remarks, he stressed the need to fix the Social Security system so that it survives the wave of retirements expected with the Baby Boom generation. Greenspan presented possible solutions including increasing the age at which retirees can draw social security and reducing the cost of living adjustment formula for benefits.Ambiguous Trust Established By Couple is Available Resource for Surviving Spouse
In 1996 a married couple established an irrevocable trust for their own benefit, requiring distribution of income to themselves. The trust document was silent as to the trustee's authority to distribute principal to the beneficiaries, though it does permit payment of "personalty" to the couple or the survivor of them. Husband died four months later; five years after that wife applied for Medicaid eligibility.Arizona Senate Unanimously Repeals Uniform Trust Code
The UTC was not viewed as favorable legislation by many estate planning attorneys in Arizona. Arizona originally passed the UTC in 2003 and it was to go into effect January 1, 2004. Due to the uproar over its terms, the effective date was postponed and now the Arizona Senate has unanimously voted to repeal the legislation.Department of Justice Lawsuits Involving Washington, Oregon and Nevada Taxpayers
The Department of Justice filed two suits in Washington and Oregon to stop tax scams. They also enjoined a tax preparer in Las Vegas from preparing income tax returns.Betting on Death: The Risk of Life Annuities versus Phased Withdrawal Plans
How might retirees consider deploying the retirement assets accumulated in a defined contribution pension plan?Pension Benefit Guaranty Corporation Reports $11.2 Billion Deficit in 2003
The Pension Benefit Guaranty Corporation, the federal insurer of more than 31,000 private pension plans, yesterday reported a year-end deficit of $11.2 billion.IRS Wins Another FLP Tax Court Case
In Estate of Abraham, TC Memo 2004-39, the Tax Court denied any discount for three separate Family Limited Partnerships. It found the FLPS to be testamentary devices.Erosion of Retiree Health Benefits Continues
A new survey by the Kaiser Family Foundation and Hewitt Associates documents the increasing costs of retiree benefits for both large private-sector employers and their retirees.AFR for March 2004 Drops to 4%
The Applicable Federal Rate (AFR), used in calculating life and remainder interests in many planning techniques such as QPRTs, CRTs, GRATs, etc..., is set at 4% for March of 2004, down from 4.2% in January and February.Physical and Mental Decline in Elderly Not Inevitable
Years of laboratory testing indicate that the abilities to think quickly, remember accurately, and reason clearly decline beginning in young adulthood. A growing body of research is challenging the depth of this decline and its impact, suggesting that most healthy seniors can work, drive, and live independently well into their golden years.Property Owner Successfully Sues to Rescind Gift Deed for Undue Influence
The owner of 258-acre ranch signed a series of wills prepared by three different attorneys over a short period of time, culminating in a will leaving the ranch to acquaintances. Shortly after that, the acquaintances took the owner on a picnic to the property (which had been her grandfather's homestead) and described their plans to rebuild her grandfather's cabin. The property owner, overcome with emotion, announced her intention to transfer the property immediately. The acquaintances had one of the lawyers involved in estate planning prepare a warranty deed and the property owner signed it. When it was returned to her after recording, she became agitated and demanded that the property be returned to her name; the acquaintances would agree only to transfer the property into joint tenancy with the original owner.Elderly Driver's Estate Not Liable For Traffic Accident Resulting From Heart Attack
An elderly driver suffered a fatal heart attack, swerved into oncoming traffic and collided with victims' vehicle. The victims sued the driver's estate for negligence, alleging that he knew he had a family history of heart disease, he had suffered a prior heart attack and was under treatment for heart disease, and he knew or should have known that he posed a danger to the motoring public when driving.Attorney Not Permitted to Appear on Behalf of Ward
A proposed ward objected, through court-appointed counsel, to appointment of a guardian. The trial court guardianship order was granted over the ward's objection. Just over one year later, the trial judge vacated the appointment of counsel nunc pro tunc to the date of the final guardianship order. The next day the attorney filed a notice of appearance on behalf of the ward; no motions or petitions were then pending in the guardianship matter. The guardian moved to strike counsel's notice of appearance, and the trial court not only found that the ward lacked capacity to retain counsel but also ordered counsel not to have "any interactions" with the ward regarding legal matters without the guardian's consent.Rehearing on Medicare Lien Case Changes Reasoning, but Not Result
On Motion for Rehearing, the Fifth Circuit Court of Appeals modifies its reasoning but reaches the same conclusion: that the Medicare Secondary Provider statute does not grant an enforceable lien against personal injury settlement proceeds which do not qualify as a "self-insurance plan" of the defendant in the personal injury litigation.Medicaid Eligibility Order Remanded Without Addressing Effect of Single-Premium Annuity
The husband of a nursing home resident purchased a $90,000 five-year, single-premium, assignable annuity naming husband as initial beneficiary and couple's sons as contingent beneficiaries, then made Medicaid application. The Arkansas Medicaid agency determined that the annuity remained an available resource (at a value of $70,000 as of the time of application) and denied eligibility. The Wife appealed her denial, and both applicant and the Medicaid agency agreed that the sole issue on appeal was whether the annuity remained available.Remainder Beneficiaries Entitled to Intervene in Will Contest and Challenge Attorney's Fees
A decedent's 2001 will and trust left his entire estate to the caretaker who had assisted him and his demented wife (who survived him). The decedent's 1985 will left his estate in trust for his wife, and upon her death was to be distributed equally among his son and two grandchildren. The decedent's son challenged the validity of the 2001 will and trust. Shortly after the filing of the challenge, the decedent's surviving spouse also died. Within a few months of her death the two contestants entered into an agreement to divide the entire estate equally. The two grandchildren filed a motion to intervene and to set aside the agreement and resulting judgment forty-one days later.SEC Rules Would Require Mutual Fund Costs Disclosures
The Securities and Exchange Commission has proposed rules that would require securities and investment companies to make disclosures of mutual fund transaction costs and of breakpoint discounts by mutual funds. The proposals are issued amidst concerns that mutual fund companies have been charging excessive fees to investors.IRS Issues Guidance on Health Savings Accounts
The Treasury Department and the IRS issued their first round of guidance for health savings accounts (HSAs). HSAs are new tax-favored vehicles created by the Medicare Prescription Drug, Improvement and Modernization Act of 2003 that individuals covered by high deductible health plans can use to pay for certain medical expenses.Two Reports on Quality and Disparities in Nation's Health Care Released
"The National Healthcare Quality Report," represents the first national comprehensive effort to measure the quality of health care in America. "The National Healthcare Disparities Report," represents the first national comprehensive effort to measure differences in access and use of health care services by various populations. Both of these reports were developed by the Agency for Healthcare Research and Quality (AHRQ), U.S. Department of Health and Human Services.CMS Creates Web Page on Medicare Reform Implementation
On December 8, 2003, President George W. Bush signed into law the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The U. S. Centers for Medicare Medicaid Services has created a Web page on its site that will be frequently updated with information over the next several months as CMS begins implementation of the benefits and reforms of the Act, including the Medicare Prescription Drug Discount Card and Transitional Assistance Program.Social Security Protection Act Passes Senate
On December 9, 2003, the Senate amended and passed H.R. 743 by unanimous consent. The Social Security Protection Act of 2003 makes the following changes to the way the Representative Payees program is managed.CBO's Latest Long-Term Budget Outlook
This Congressional Budget Office report extends previous long-term analyses by CBO, examining pressures on the federal budget over the coming decades and the kinds of policy choices that lawmakers face as they consider ways to alleviate those pressures.SSA Proposes Changing Regs on Counting Resources and Income for SSI
The Social Security Administration proposes to revise its regulations that explain how it determines an individual's income and resources under the supplemental security income (SSI) program in order to achieve three program simplifications.Interesting Ninth Circuit Asset Protection Case
The Ninth Circuit recently affirmed the denial of availability of assets in a third party spendthrift trust to the trustee of a Chapter 7 bankruptcy estate. This is another example of the effectiveness of using trusts as asset protection vehicles for beneficiaries.IRS Tightens Reins on Lawyers, Accountants, Other Tax Advisers
The Treasury Department and the IRS issued four items of administrative guidance as part of their ongoing effort to halt abusive tax avoidance transactions and maximize effective use of IRS audit resources.The Internal Revenue Service and Treasury Department issued a notice to advise taxpayers that the IRS intends to disallow improper deductions for charitable contributions of patents and other intellectual property. Taxpayers claiming improper deductions may be subject to penalties. In addition, the notice advises promoters and appraisers that the IRS intends to review promotions of transactions involving these improper deductions and that promoters and appraisers also may be subject to penalties.
Medicare Bill Affects Cancer Care
The new Medicare legislation includes little known provisions that significantly reduce the reimbursement available to oncologists for Chemotherapy treatment. According to the American Society of Clinical Oncology, a trade organization, these cuts could result in oncologists ceasing to provide chemotherapy through their offices.IRS Reports Increased Use of Online EIN Application
Businesses and tax professionals are turning to an online application form on IRS.gov to get new employer identification numbers ("EIN"). The Internal Revenue Service has issued more than 498,081 of the numbers through its online application since it became available in April 2003.Forbes magazine interviewed several leaders in the insurance industry about Long Term Care Insurance and has issued a report on their findings.
Federal Estate Tax Returns, 1998-2000
An estimated 103,982 Federal estate tax returns were filed for decedents who died in 1998 with gross estates of at least $625,000, the filing threshold in effect for that year. These relatively wealthy 1998 decedents, whose gross estates totaled $195.6 billion, represented 4.4% of the overall U.S. decedent population that year. However, fewer than half of these returns, 50,089, reported a tax liability, which totaled almost $22.8 billion. This 54-page special report from the IRS reviews the history of the federal estate tax and analyzes federal estate tax returns from 1998-2000.Fiduciary Handbook - Prudent Investment Practices
The term "fiduciary" is inclusive of more than five million people who have the legal responsibility for managing someone else's money, including members of investment committees of retirement plans, foundations, and endowments; trustees of private trusts; and investment advisors. The primary purpose of the Fiduciary Handbook - Prudent Investment Practices, prepared by the Foundation for Fiduciary Studies, is to outline uniform fiduciary standards of care and practices that are intended to define a prudent investment process. The handbook covers 27 practices culled from federal and state legislation, regulatory opinion letters, and relevant case law. The handbook states: "Fiduciary liability is not determined by investment performance, but rather on whether prudent investment practices were followed. It's not whether you win or lose, it's how you play the game."Handwritten Trust Distribution Schedule is Not Holographic Will
A decedent had signed a pre-printed living trust form, one portion of which was a "Schedule of Beneficiaries and Distributive Shares." The schedule was handwritten by decedent. Named distributees attempted to introduce the schedule as a "holographic" will under state law permitting wills substantially in the decedent's handwriting and signed by the decedent, though unwitnessed. The trial court denied admission of the alleged will and determined that the decedent had died intestate.Mere Fact of Power of Attorney Does Not Create Presumption of Undue Influence
A decedent's son had held a power of attorney for financial matters, but had exercised it for very limited purposes. The decedent had also executed a will leaving her entire estate to her son, and specifically disinheriting her daughter. The daughter challenged the will arguing that decedent did not have testamentary capacity and that she had been unduly influenced by son.Guardianship Order Does Not Itself Preclude Joint Tenants from Withdrawing Joint Accounts
When the guardian of the estate was appointed for an elderly woman, her primary liquid asset was a bank account naming her two sons as joint tenants. After the guardian was appointed, the sons withdrew the balance of the joint account. The guardian sought an order compelling the return of account balance.Missing Person's Date of Death Not Set by Judicial Determination of Death
A surviving spouse began receiving benefits under late husband's pension plan in 1977, but disappeared in 1982. The pension plan administrators suspended payments, but acknowledged that they would be liable if she reappeared. Fifteen years later missing beneficiary was declared dead and her estate's administrator sought payment of unpaid pension benefits from date of disappearance until presumption of death arose seven years later. The trial court granted summary judgment to missing spouse's estate, ordering payment of seven years' pension benefits.CMS Faces Massive Task of Implementing New Medicare Law
December 2003 President Bush signed the Medicare prescription drug legislation (H.R. 1), putting the task of implementing the massive 700-page bill into the hands of the U. S. Centers for Medicare & Medicaid Services, which will have to interpret more than 300 provisions in what is likely to be the most-scrutinized process ever undertaken by the agency, according to industry sources and others.Baby Boomers' Retirement Prospects: An Overview by CBO
Over the past 15 years, the retirement prospects of the baby-boom generation (people born from 1946 to 1964) have become a source of public concern. Some experts contend that low saving by boomers could limit economic growth in the United States and compound the financial pressures that face government programs such as Social Security and Medicare. A November 2003 Congressional Budget Office (CBO) study -- prepared at the request of the Chairman of the Senate Budget Committee -- updates and expands on a 1993 CBO report on the retirement preparedness of boomers. It places the baby-boom retirement issue in historical and policy context, describes the methodologies used to analyze that issue, reviews numerous studies of retirement preparedness that have been published since 1993, and draws general conclusions from their findings.States Moving to Toughen Medicaid Eligibility Rules
Plagued by revenue shortfalls, some states are asking the federal government for permission to toughen the Medicaid rules that govern eligibility for nursing home and other health care. But changing the rules may have dire consequences. "If these rules are changed," warns Cheryl Matheis, director of AARP's State Affairs Department, "an individual who helped out a child or made a donation to a charity may, years later, be denied critical medical care. And they may be denied such care even though they lack the funds to pay for it."New IRS Page for Self Employed / Small Businesses
Take a look at some of the changes you will find on the Small Business/Self-Employed Community on IRS.gov.DOJ Lawsuit Filed to Stop Tax Scam Targeting African-Americans
DOJ Press Release - Washington, D.C.
The Department of Justice filed a lawsuit against several Texas individuals to stop the promotion of a tax scheme.
Updated IRS Publication 17 on Web
The IRS comprehensive tax guide for individuals has been updated for tax year 2003 and is now available at IRS.gov. IRS Publication 17, "Your Federal Income Tax", has been published annually by the IRS for more than 60 years and has been available on the IRS Web site since 1996.CBO Projects Record Budget Deficit
According to the Congressional Budget office, the federal deficit will hit a record $477 billion this year. In the CBO wintertime economic outlook, issued today, the nonpartisan agency projected the total deficit through 2013 to be $2.4 trillion. The CBO August report projected a deficit of only $1.4 trillion through 2013. The increased deficit was due in part to additional spending initiatives and tax cuts.Treasury and IRS Shut Down Abusive Foreign Currency Transaction
The Treasury Department and the Internal Revenue Service issued guidance to bar transactions in which taxpayers dispose of a pair of offsetting options, claiming a loss on one of the options but contending that they never have to recognize the corresponding gain on the other. These transactions are now listed transactions. Taxpayers who have entered into these transactions must disclose them to the IRS, and advisors promoting their use will be required to maintain lists of participating taxpayers.IRS Releases 2004 Housekeeping Revenue Procedures
The IRS has issued updated procedures for requesting letter rulings, closing agreements, determination letters, and information letters for estate tax matters, as well as many types of employee plan and exempt organization matters in Rev. Procs. 2004-1 through 2004-8.Tax Planning Actions to Be Taken by December 31, 2003
The following checklist represents a list of actions that must be taken by the end of the year if a taxpayer wants to take advantage of the opportunity for the 2003 tax year.IRS Publishes 2004 Long-Term Care Premium Tax deduction Amounts
In Revenue Procedure 2003-85, the IRS sets forth the limitations under IRC 213(d)(10) for deduction of eligible long-term care premiums includible in the term "medical care"There are some instances when you may not be required to file a federal income tax return. But keep this in mind more than 70 percent of those who file are due a refund, so it may be to your advantage to file even if you are not required to.
Should You Itemize on Your Tax Return?
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. According to the IRS, money paid for medical care, mortgage interest, taxes, contributions, casualty losses, and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.Property Owners Unsuccessful in Effort to Reform Gift Deed Alleging Mistake
Parents, after consulting a Medicaid-planning attorney, signed a quitclaim deed for their family farm to their three children. Five years later their daughter and son-in-law began divorce proceedings, and the parents brought suit to reform the deed to retain a life estate for themselves. The drafting attorney testified that the parents understood the effect of the deed, and that he had cautioned them that retaining a life estate might cause problems with the Medicaid agency. After refusing to accept parol evidence, the trial court found that there was no evidence of mistake in the execution of the deed; it also refused to impose a constructive trust on the parents' theory that they had understood that they would receive a life income from the property.February AFR Rate Holds Steady at 4.2%
For purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest, Revenue Ruling 2004-9 indicates the charitable federal midterm rate under section 7520 for February 2004 is 4.2%, unchanged from both the January and December rates.Judge Grants Request of IRS Office of Professional Responsibility to Disbar CPA
An administrative law judge has issued a decision and ordered that Joseph R. Banister be disbarred from practice before the Internal Revenue Service. Banister is a Certified Public Accountant from San Jose and former IRS criminal investigation agent.Heritage Foundation Perspective on the Estate Tax
The Heritage Foundation published a 9-page "Backgrounder" by Gary Robbins entitled "Estate Taxes: An Historical Perspective". Whether or not you agree with its conclusions, the paper has a helpful, concise history of estate taxes and some interesting statistical analysis of historical FET exemptions and rates.More Options Hinder Use of 401-K Plans?
Although extensive choice seems appealing, research shows that it may hinder motivation to buy and decrease subsequent satisfaction with purchased goods. A paper by the Pension Research Council at Wharton School of Business examines whether these findings generalize to employees who are making decisions about whether to invest in 401-K retirement saving plans. Using data from nearly 800,000 employees, the authors tested the hypothesis that employee 401-K participation rates fall as the number of fund options increase. Their results confirm that participation in 401-K plans is higher in plans offering a handful of funds, as compared to plans offering ten or more options.Will Inheritance Bail Out Boomer Generation?
Will inheritances received by baby boomers play an important role in their financial security as they approach retirement? In this AARP Public Policy Institute (PPI) Data Digest, the authors use recent data from the Federal Reserve Board to explore whether boomers are going to inherit large amounts of wealth from their parents, the implications for retirement security, and how inheritances might influence decisions to work and retire.A Case for Reverse Discrimination (Gen. Dynamics v. Cline)
The Age Discrimination in Employment Act outlaws discrimination against employees because of their age. But is it illegal when the employee being discriminated against is younger than the worker receiving the favored treatment? On November 12, the U.S. Supreme Court heard arguments in General Dynamics Land Systems v. Cline, a major employment case examining whether the 1967 statute is intended exclusively to protect older workers, or whether it also authorizes so- called reverse-discrimination claims by younger workers. The case holds important implications for many retirement benefit plans and early-retirement packages. To the extent that such plans offer increasingly generous benefit levels triggered solely by age, they could become the litigation targets of younger employees complaining about illegal disparate treatment.Swedish Government Signals Willingness to Reconsider Wealth, Inheritance Taxes
Union leaders and delegates of employer organizations will meet with Swedish Prime Minister Goran Persson to discuss tax policies to promote economic growth, including the possibility of abolishing the net wealth tax and reducing or revoking the inheritance tax.IRS Simplifies Reporting Requirements for U.S. Persons With Canadian Retirement Plans
On November 26, 2003, the Internal Revenue Service issued guidance simplifying the U.S. reporting rules that apply to U.S. persons with interests in two common types of Canadian retirement plans. U.S. persons holding interests in Canadian Registered Retirement Savings Plans and Canadian Registered Retirement Income Funds are required to include on a statement attached to their U.S. tax returns. The IRS is developing a simple form for this information reporting.IRS Helps Military Personnel Get New Law's Tax Breaks
The Internal Revenue Service is helping taxpayers use a new law providing income exclusions for death benefit payments and certain home sales. Both provisions are retroactive, so some qualifying taxpayers must file amended returns to claim these tax breaks. The IRS asks them to put the words "Military Family Tax Relief Act" in red at the top of such returns to speed processing.Disclaimer Precluded by Listing of Trust Assets in Credit Applications
A trust provided for income for life to surviving spouse, the remainder to children. During the surviving spouse's life one son, a practicing lawyer, listed the trust as an asset on his professional and personal loan applications (and annual renewals of those loans) over a six-year period. After business setbacks, the lawyer son and remainder beneficiary filed a disclaimer of his interest -- three days before he filed for bankruptcy protection.Power of Attorney Did Not Authorize Change of Beneficiary Designation
A mother purchased an annuity, naming one son as beneficiary. Later, she executed a codicil to her will specifically devising the same annuity to the same son. Subsequently she entered into a revocable trust arrangement with a local bank, and gave the bank a power of attorney as well. The bank transferred ownership and beneficiary designation of the annuity to the trust, utilizing the power of attorney. On mother's death, son who was named as original beneficiary of annuity objected, arguing that the bank had no authority to change his mother's estate plan using the power of attorney. The trial court agreed.Power of Attorney Does Not Include Authority To Make Gifts of Real Estate
A caretaker niece procured a general power of attorney for ailing, diabetic amputee. Because he was unable to sign himself, the caretaker signed the power of attorney for him, at his direction. Later, the caretaker transferred the principal's real estate to herself, allegedly at principal's request and partially in payment of the caretaking services she provided. After the principal's death, his heirs challenged the transfers, and the trial court granted summary judgment, finding that the power of attorney did not authorize real estate gifts and that there was inadequate evidence of consideration for any payment.Germany Considers Inheritance Tax Hike
German Chancellor Gerhard Schroeder's governing Social Democratic party said, 19 November, it would move to increase the inheritance tax rate on large legacies.Stepchildren Disinherited by Death of Their Mother and Remarriage of Stepfather
A decedent left a surviving spouse, four children from a prior marriage and four stepchildren from his deceased wife's prior marriage. The decedent's will, written before the death of his earlier wife, left one-half of his estate to her if she survived him and the residue to be divided equally among his children and stepchildren. After his first wife died, he remarried, but did not change his will. The stepchildren persuaded the probate court that the decedent's intent had been to leave one-half to his new wife and the other half to be divided among children and stepchildren.Illicit Relationship is Not Per Se Evidence of Undue Influence (Matter of the Estate of Schlagel)
For five years a husband had employed a caretaker for his wife based on wife's declining physical and mental condition. At some point the husband and the caretaker began a romantic relationship. The couple's three children disapproved and eventually filed a conservatorship petition seeking to gain control of wife's assets and care. After the husband was appointed as conservator of wife's estate (by agreement, the children were appointed as guardians of her person), the husband prepared a new will leaving his estate in trust for his wife, with remainder to the caretaker or, if she did not survive, to his grandchildren.The decedent and her first husband had entered into a property settlement agreement in which she promised to name their children as beneficiaries on any life insurance policy she obtained through her employment. She remarried and took a new job, which included $217,000 in life insurance benefits (including one policy for which premiums were deducted from her check).
The decedent left a $25,000 life insurance policy naming one child as beneficiary. The same child was named as personal representative in the decedent's will, and was to receive 42.5% of residual estate. Another child (a 10% residuary beneficiary) objected to final accounting of probate estate, arguing that the life insurance proceeds should have been included in the estate. The objector sought to introduce testimony of a third child (who was, incidentally, also a 42.5% beneficiary of the residue) about the decedent's intention that the life insurance policy would pay the costs of administering her estate, but was prevented from adducing the testimony by the Dead Man's Statute. The trial court denied request to impose a constructive trust.
Anti-Lapse Statute Not Abrogated by Language Indicating Intent to Disinherit Unnamed Heirs
A decedent's will left his entire estate to his spouse or, if she died before him, to his nephew. No provision for alternate devisee was included. Both the spouse and the nephew predeceased decedent. The Missouri anti-lapse statute provided that bequest to a relative does not lapse if relative predeceases, but instead passes to relatives issue; but that the will may over-ride the default provision with appropriate language.Apparent Delivery of Deed to One Joint Tenant is Effective to Complete Transfer of Ownership
Several years before his death, the decedent had signed deeds transferring real property to himself and two of his siblings as joint tenants. Sometime before the decedent's death one of the brothers named in the deeds had possession of the actual documents and showed it to the other brother's wife. At some point the decedent had handed the original deeds to another sibling, a sister, and instructed her to put them where no one would ever find them. After the brother with apparent possession of the deed and the original owner of the property both died within a few days of one another, the original deeds were found in the decedent's home, but in a location he would not have had physical access to from before the time of signing.Attorneys Suspended For Preparing Wills Naming Themselves as Beneficiaries
In these two unrelated but similar cases arising in the same state within a month of one another, two attorneys were indefinitely suspended from the practice of law for preparing wills in which they were named as beneficiaries.Paternity of Ninety-One-Year-Old Decedent Challenged (Est. of Thompson)
The birth certificate of decedent (who was born in 1908) listed the mother's husband by name as father of the decedent. Evidence introduced at the contested heirship proceeding, however, suggested that the mother and the named father might never have been married, and that the putative father may never have known either the mother or the child.Trustee's Failure to Act in Timely Fashion Can Not Preclude Beneficiary's Claim (Edmunds v. Edmunds)
A mother established a trust for the benefit of daughter and son, and named the daughter as trustee. A dispute arose between daughter and son after the mother's death, and both parties agreed (through counsel) to submit the dispute to arbitration. The arbitration agreement provided that each side would submit the names of proposed arbitrators within a short period of time, and that if the son failed to file his arbitration petition within thirty days his objections would be dismissed with prejudice. The son submitted names of proposed arbitrators, but daughter/trustee took no action on those names until after the thirty-day time limit had expired. Since no arbitration petition had been filed, she then moved for dismissal of the objections. The trial court enforced the time limitation and dismissed with prejudice.Journal Says Living Wills are Too Ambiguous
The language used in living wills is so ambiguous that clinicians cannot apply them consistently in different critical care situations, according to a report in the November 1st issue of the British Medical Journal. "Living wills are always open to interpretation," lead author Dr. Trevor Thompson told Reuters Health. "It's impossible to write a living will that will definitely be interpreted in a particular way." Dr. Thompson, with the University of Bristol, UK, and colleagues conducted a study to examine the effect of advance directives on health professionals' decision making. Based on the ambiguities in interpretation and the subjective nature of clinical judgments, the investigators conclude that legislation to mandate strict adherence to advance directives would be difficult to enforce.Federal Court Issues Injunction Against "American" Citizenship Tax Scam
On November 3rd the Justice Department announced that a federal court issued a preliminary injunction against a Colorado couple to stop the promotion of a tax scam.Inflation-Adjusted Tax Items for Tax Year 2004 Now Available
The IRS has announced the Inflation-Adjusted Tax Items for Tax Year 2004 in Revenue Procedure 2003-85.IRS Issues New Guides for Charitable Organizations
The IRS has issued two new brochures to help charities understand the tax laws conferring tax-exempt status.IRS Commissioner Tells Congress IRS Firmly Committed to Curbing Abusive Tax Shelters
On November 20, IRS Commissioner Mark W. Everson testified before a Senate subcommittee that Treasury and the IRS have responded and taken aggressive actions against participants in and promoters of abusive tax avoidance transactions.Gifts to Charity Not Eligible for Charitable Deduction (PLR 200341002)
In PLR 200341002, Frank created an irrevocable trust and designated his daughter, Andrea, as the trustee. Andrea, her husband, her brother, and four charities were the beneficiaries. During Frank's life, the trustee had the discretion to pay to any individual beneficiary income and principal for health, education, maintenance and support. During the trust term, ALL beneficiaries had the right to withdraw proportionate amounts as specified for each transfer made to the trust (Crummey powers). No amount withdrawn could exceed $10,000 per year. The powerholder had thirty days to exercise its withdrawal rights.IRS Has Substantially Revised Form 709
The IRS has substantially revised Form 709, Gift and Generation Skipping Transfer tax return and has "obsoleted" (don't you love the new IRS terms) Form 709-A, the Short Form Gift Tax Return.Contingency Fee in Will Challenge Case Subject to Reasonableness
After decedent's will was admitted to probate, "numerous" heirs filed an objection through counsel, alleging irregularities in the signing of the will. After investigation, the executrix and her attorney agreed that the will should be withdrawn, and the probate proceeded through the administrative process. Meanwhile, the attorney for the contesting heirs sought distribution of one-third of those heirs' shares, pursuant to their contingency fee agreement. Because the estate turned out to be worth over $2.4 million the fee amounted to $600,000. One of the firm's clients objected, and the probate court determined that the fee agreement was enforceable.An attorney was appointed to represent a proposed ward in guardianship proceeding, and ultimately was appointed as guardian of her person. After the ward's death two daughters engaged in extensive litigation over ward's will, capacity and possible undue influence. After one trial resulted in the appellate court ordering new trial, one daughter sought to depose the ward's appointed attorney about conversations, records, reports and information obtained in his investigation while representing her. The attorney objected on grounds of privilege, attorney work-product and attorney confidentiality bases. The trial court directed testimony and production of reports.
Personal Care Agreement is Enforceable, Defeats Election Against Will
The decedent, a married woman, had executed a will disinheriting her husband. She had also entered into an employment agreement with her children from a prior marriage, promising payment of $2 million in return for their agreement to provide food, shelter, comfort, companionship and protection for the rest of her life. The promise to pay was secured by mortgages, bonds, a security agreement, an assignment of judgment, an assignment of assets and a bill of sale. At the same time the decedent had filed a divorce petition. Prior to executing all of those documents she had alleged spousal abuse and secured a protective order against her husband. The decedent died before the divorce was final, and her husband chose to elect against the will.State Law Permits Guardian to Fund "Medicaid Payback Trust"
The guardian of 41-year-old developmentally disabled son sought court authorization to establish a special needs trust with the proceeds from Vaccine Compensation Act settlement, including past payments from a ten-year period. The Wisconsin Medicaid agency objected to the nunc pro tunc portion of the order, but did not object to establishment of a trust pursuant to 42 USC 1396p(d)(4)(A) for prospective payments. After Medicaid agency and guardian had difficulty agreeing on precise terms of such a trust, the trial court ruled that it had no authority to approve a (d)(4)(A) trust at all under state guardianship law.Administrator's Attorney's Fees for Unsuccessful Will Defense Payable by Estate (Enders v. Parker)
A special administrator of the estate sought probate of 1983 will and argued that a 1997 will was invalid because of undue influence and insane delusions of testator. After a seven-day evidentiary hearing court found that later will was valid and appointed the personal representative named in that document.A husband's will established a trust for his wife, with all income payable to her and discretion as to distributions of principal. Contemporaneous with the will execution, the wife signed a "consent to the will, accepting the rights established in the eventual trust in lieu of her spousal entitlements...." The husband died 17 years later and wife probated his estate -- she did not elect against her husband's will.
There are a few articles of interest which appear in the November / December 2003 issue of the Tax Management Estates, Gifts and Trust Journal.
IRS Webcast to Highlight Major Tax Law Changes on Dec. 9
Tax Talk Today will highlight major tax law changes in the live webcast scheduled for December 9, 2003, 2PM - 3PM ET.HH Bonds to Be Discontinued in 2004
The Treasury Department has announced its intention of discontinuing the issuance of Series HH Savings Bonds in mid-2004.Gifts by Agent Exceed Authority Conveyed in Power of Attorney; Eviction Fails (James v. James)
A husband gave a power of attorney for property to one of his children. The POA included the specific authority to make gifts to his issue, though this power was limited to $10,000 per child per year. The agent used power of attorney to transfer husband's real property to the children in equal shares.Hearsay Evidence and Original Codicil May Be Used to Destroy Presumption of Will Revocation
A testator took a copy of his existing will to a lawyer, who prepared a new codicil changing only administrative provisions and reconfirming the original will. When the testator died unexpectedly three years later the original will could not be found. The proponent of the will sought to introduce a copy, arguing that the evidence showed that the original was lost rather than destroyed with intent to revoke the instrument. The probate court refuses probate, ruling that the proponent had not overcome the presumption.Arbitration Clauses in Nursing Home Admission Contracts Work Hardship on Residence
It is increasingly common to see arbitration clauses inserted in form contracts prepared by large organizations, and the practice has begun to appear in nursing home admission agreements.The IRS has just announced the IRC 7520 Rate is 4.2% for December 2003.
Long-Term Care Insurance Costs Rising
The cost of long-term care insurance costs is rising. As the relatively young industry matures, more customers are filing claims, and companies have begun to realize the market is not as profitable as they thought it would be. And the industry faces more challenges as the baby boomers age.Corruption in Financial Services Industry
Benchmark Financial Services conducts investigations on behalf of pensions and others who feel they have been treated poorly by money managers, pensions consultants or brokers. The work is somewhat legal in nature but frequently focuses upon little-known business practices which may be commonplace in the securities or money management industries but are, on occasion, especially harmful.Medicare Premium Changes for 2004 Announced
The Department of Health and Human Services (HHS) announced Thursday, October 16, 2003, the 2004 rates for the Medicare Part A deductible and Part B monthly premium amounts paid by beneficiaries. The Medicare Part B monthly premium will be $66.60 in 2004, $7.90 more than 2003 and a 13.5% increase. This is the third-highest increase ever. The largest premium increase was in 1988, at 38.5%, followed by 1993, when the jump was 15.1%. The Part B premium covers physician services, hospital outpatient care, durable medical equipment and other services outside hospitals.Center for Medicare Advocacy Promotes Purchase of Medigap Policies
Judith Stein, the Director of the Center for Medicare Advocacy is concerned that the cost sharing responsibilities for Medicare beneficiaries continue to increase. Two of the expenses which most all Medicare beneficiaries will need to meet will see increases. The inpatient hospital deductible will increase $36, to $876. Most significantly, the monthly Part B premium will increase almost 15%, from $58.70 per month in 2003 to $66.60 per month in 2004.Social Security COLA, Etc. Changes for 2004 Announced
On October 16, 2003, the Social Security Administration announced that Social Security and Supplemental Security Income benefits will increase 2.1% in 2004, up from last year's 1.4% increase. The 2.1% increase will begin with benefits that Social Security beneficiaries receive in January 2004. For SSI beneficiaries, the increased payment will begin December 31. For Social Security beneficiaries, the average monthly benefit amount for all retired workers will rise from $903 to $922; for a couple, from $1492 to $1523. The maximum federal SSI monthly payment to an individual will rise from $552 to $564. For a couple, the maximum federal SSI payment will rise from $829 to $846.An attorney prepared will naming himself as executor and directing residue to a foundation to "promote education, historical restoration and preservation, ecological, geological and the environmental projects" in several surrounding counties. The attorney and his wife were named as trustees of the foundation. The decedent's heirs at law objected that the will was the product of undue influence by the attorney, and the state Attorney General intervened to protect the interests of the potential beneficiaries of the foundation. After settlement negotiations the Attorney General and the heirs entered into an agreement and submitted it for approval. The attorney / draftsman / executor / trustee objected and the probate court approved the settlement over that objection.
Spousal Impoverishment Rules Proposed for Veterans Nursing Home Care
The U. S. Department of Veterans Affairs has proposed to amend VA's medical regulations by modifying provisions regarding how it computes copayments for extended care services provided to veterans. This proposal enhances the protection of veterans' spouses by not counting certain assets as available resources for computing these copayments.The November 2003 issue of Trusts & Estates magazine has a few articles which may be of interest to you.
State Medicaid Director Survey on Annuities
The National Association of State Medicaid Directors, the Annuities Workgroup, has released a report, "The Role of Annuities in Medicaid Financial Planning: A Survey of State Medicaid Agencies."How Primary Care Doctors Can Spot Elder Abuse and Neglect
Elder neglect and abuse have many clinical presentations ranging from the overt appearance of bruises and fractures, to the subtle appearance of dehydration, depression, and apathy. The risk factors are varied and may be categorized by victim or perpetrator. Dependency, on the part of the victim or perpetrator, and caregiver stress are frequent common denominators in abusive situations. Dr. Jeffrey Levine examines the latest research on this widespread and largely undiagnosed problem in the United States.Medicare Web Site Unveils Quality Measures for Home Health
On November 3, 2003, the U. S. Centers for Medicare & Medicaid Services published quality data for the approximately 7,000 home health agencies certified by Medicare. The mandatory Home Health Quality Initiative uses 11 measures to assess the quality of care home health agencies provide. The measures gauge improvement in patients' mental health, mobility, and ability to dress, bathe and meet other basic needs, as well as the incidence of medical emergencies.Massachusetts Gay Marriage Decision
The Massachusetts Supreme Judicial Court today ruled that the Massachusetts Constitution does not allow the state to discriminate between heterosexual and same sex couples in marriage. The court, in a 4-3 decision, allowed the legislature 180 days to consider legislative reaction to the decision.Senator Kyl Still Fighting for Repeal of Estate Tax
Senate Finance Committee member Jon Kyl, R-Arizona, on October 23rd tried to clear up an October 22nd article in The Washington Post that claimed Senator Kyl is abandoning his push for repeal of the estate tax in favor of another plan to reform the tax.Millions in Refund and Child Credit Checks Returned to IRS
Taxpayers have until Dec. 5 to claim 115,744 undelivered checks from this summer's advance child tax credit. After the December cut-off, taxpayers cannot claim the money until they file their tax returns next year.IRS Releases Materials to Keep Pension Plans Eligible for Favored Status
The Internal Revenue Service released new materials, including a CD-ROM, to help small businesses and plan administrators understand how to keep employee retirement plans eligible for tax-favored status. These materials, in various formats, explain the IRS programs available to assist employee-retirement plan administrators navigate the complex tax laws. The CD-ROM, which includes video clips, is an excellent reference tool for tax practitioners and plan sponsors, says the IRS in a press release, as well as for businesses that maintain plans for their employees.IRS Releases Important IRA PLR
In PLR 200343030, the taxpayer died at age 71. His IRA listed the beneficiary of the IRA as his estate. The taxpayer's will left his estate to his three children.Medicaid Planning Numbers for 2004
The Center for Medicare and Medicaid Services (CMS) has released the following figures for 2004 Medicaid planning purposes.Consumer Reports Article on LTCI is Largely Negative
If you cant take care of yourself when youre old, there are plenty of resources from which to choose: home-health services, adult day-care centers, assisted-living facilities, or nursing homes. Finding the money to pay for such help, however, presents a dilemma.Medicaid Directors Ask CMS to Close Annuity Loophole
Directors of State Medicaid Agencies have authored a report asking CMS to close the loophole allowing use of annuities in Medicaid planning. They claim the use of annuities has deprived federal and state coffers of as much as $1 billion per year.Bush Hails Economic Growth, Attributes Gains to Tax Cut Policies
President Bush drew attention October 30 to new economic figures that showed the economy grew at an annual rate of 7.2 percent during the third quarter this year, and he credited the growth to the tax cuts he has signed into law since taking office.Power of Attorney Creates Confidential Relationship, Presumption of Undue Influence
After her husband of 28 years died, an ailing widow moved into her daughter's home. One week later daughter made an appointment with an attorney for the widow to have new estate planning documents executed. The lawyer met with the widow and the daughter's husband, then immediately prepared a power of attorney naming the son-in-law as her agent. The son-in-law took widow to nearby funeral home to sign and notarize the document. Two weeks later the widow signed a will prepared by the lawyer disinheriting her other children and leaving everything to the daughter she was living with. On her death eight months later, the widow's other children objected to the admission of the will, arguing fraud, lack of capacity and undue influence. After a jury trial court dismissed the fraud allegations, the jury found for the will proponents on capacity issue. However, the jury found for the objectors on the issue of undue influence.Missing Will Raises Presumption of Destruction With Intent to Revoke (Remington v. Roberson)
A decedent died in a nursing home, where he had lived for ten months. His personal papers did not include the original of his 1997 will, but a copy was among his possessions. Also among his possessions was a note apparently in the decedent's handwriting and signed, but not dated. Arkansas law recognizes holographic wills.A decedent's will left a trust for her son and four named grandchildren, then provided that upon the son's death the residue was to be distributed among his children "as heretofore named." A decade after decedent's death, her son adopted a stepdaughter.
Adoption May Be Challenged After Finality Because Adoptive Parents Did Not Take Custody
After a mother quarreled with her ex-husband over child support, they agreed that he would relinquish all parental rights and she would not pursue any arrearages. With the consent of the mother and ex-husband, the mother's parents then adopted the couple's child. The child continued to live with the mother, who also lived with her parents for a considerable time. After the mother remarried and quarreled with her parents, they took custody of the child and announced that they would curtail or cut off the mother's visitation rights. The mother then sought to set the adoption aside, even though it had been final for almost five years. (nice family, huh)Will Directing Distribution of Assets Held in Revocable Living Trust Has No Effect (Wright v. Rains)
A trustor established a revocable living trust naming a number of family and friends as beneficiaries after his death. The trustee of the trust was a national brokerage house. Seven years later, the trustor signed a new will leaving all his stock in the national brokerage house to friends with whom he had been living for several months. The trustor did not own any stock in the brokerage house, the trustee did. When the trustor died, the friends successfully sought the introduction of his will and then demanded distribution of all trust assets to themselves as executors of his estate. When the brokerage house refused, the friends brought suit to compel distribution, brokerage house counterclaimed and trust's remainder beneficiaries responded.Personal Representative and Counsel Not Entitled to Extraordinary Fees (Venis v. Greenspan)
A state statute provides for sliding fee for personal representatives, based on the size of the estate. In an $8.3 million dollar estate, the Personal Representative and his attorney sought fees beyond the statutory $206,460 and $177,345, respectively, for "extraordinary services" of satisfying a claim against the estate, taking responsibility for holding estate securities, obtaining appraisals, resolving a claim in a bankruptcy proceeding, satisfying a mortgage and transferring title on the decedent's residence, selling horses, managing and leasing two warehouses and handling a charitable pledge. The Probate court found that the services were not extraordinary and denied the additional fee request.Oregon Governor OKs Statute with Gradually Increasing Estate Filing Threshold
Oregon Governor Ted Kulongoski (Dem.) has signed HB 3072, which sets a gradually increasing filing threshold for the Oregon state estate tax.IRS, FTC and State Regulators Urge Care When Seeking Help from Credit Counseling Organizations
Federal and state regulators are concerned that some credit counseling organizations using questionable practices may seek tax-exempt status in order to circumvent state and federal consumer protection laws. State and federal statutes regulating credit counseling agencies often do not apply to Section 501(c)(3) tax-exempt organizations.Consumer Reports Casts Critical Eye at Long-Term Care Insurance
Consumers should look carefully before buying long-term care insurance, says the November issue of Consumer Reports. This type of coverage is too risky and too expensive for many consumers, the magazine says. And the policies themselves often aren't worth the money. Of 47 policies investigated, Consumer Reports found only three that met its criteria. The bottom line, according to Consumer Reports, is that there are not a lot of good choices out there.IRS Acquiesces to Walton GRAT Decision
Notice 2003-72 announces that the IRS will follow the Tax Courts decision in Walton v. Commissioner holding that section 25.2702-3(e), Example 5, of the Gift Tax Regulations is invalid.IRS Issues Summer 2003 Statistics of Income Bulletin
The IRS Summer 2003 Statistics of Income Bulletin - almost 300 pages of tax statistics - is now available.IRS Announces Pension Plan Limitations for 2004
Many of the pension plan limitations will change for 2004. For most of the limitations, the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. Furthermore, several limitations, set by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), are scheduled to increase at the beginning of 2004.IRS Increases Standard Mileage Rates for 2004
The IRS has released the optional standard mileage rates for 2004 for employees, self-employed individuals, or other taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes and expanded the business standard rate option so that more businesses may now be eligible to use the standard mileage rate.Tax Professionals to Send Some Returns to Different IRS Centers Than Last Year
The Internal Revenue Service is urging tax professionals to be aware of changes that will affect where they send tax returns and payments for clients in 10 states starting in 2004. The changes are a result of redistributing workload among the ten IRS processing centers to provide better service.Ways to Obtain IRS Transcripts
When you need a transcript of your client's tax return, contact us by phone or mail. We will send the transcript - showing line items from the tax return as originally filed - directly to you, if you have a valid Power of Attorney i.e. Form 2848.IRS Releases November 7520 Rate
The Service has released the applicable federal rates for November 2003. The rate to be used to value life estates and remainder interests, the 7520 rate, will be 4.0%. This is down somewhat from October's 4.4%.Robert Abrams, founder and CEO of myziva.net, has completed a comprehensive study of our nation's Nursing Homes. He distributed his findings September 24, 2003, at the NASPAC National Conference in Washington, D.C.
750,000 Small Businesses To Update Retirement Plans
Approximately 750,000 small and mid-size businesses using "off-the-shelf" retirement plan documents must update their plans by Sept. 30, 2003, to maintain the tax benefits. Businesses that act after the deadline must pay a compliance fee to avoid loss of tax benefits.IRS Announces Decrease in Interest Rates
The Internal Revenue Service announced a decrease in the interest rates for the calendar quarter beginning October 1, 2003.The Social Security Administration has announced the cost of living allowance adjustment for 2004. Benefits will be adjusted upwards by 2.1%. In 2003, the COLA adjustment was 1.4%.
Grant Thornton Summons Enforcement
The U.S. Department of Justice, Tax Division, on behalf of the IRS filed a petition in the U.S. District Court, District of Columbia to enforce nine administrative summonses issued to Grant Thornton LLP. Grant Thornton LLP is a global public accounting firm.IRS and States Announce Partnership to Target Abusive Tax Avoidance Transactions
The Internal Revenue Service and state tax officials have announced the establishment of a new nationwide partnership to combat abusive tax avoidance. Under agreements with individual states, the IRS will share information on abusive tax avoidance transactions and those taxpayers who participate in them.PA Abolishes Common Law Marriages
PHILADELPHIA - Tossing aside centuries of tradition, a Pennsylvania appeals court abolished common-law marriages, saying it is no longer necessary to give longtime live-in couples the benefits of marriage without a license.Over-the-Counter Drugs To Be Covered by Health Care Flexible Spending Accounts
The Treasury Department and the IRS announced over-the-counter drugs can be paid for with pre-tax dollars through health care flexible spending accounts. Treasury and IRS issued guidance clarifying that reimbursements for nonprescription drugs by an employer health plan are excluded from income. Thus, reimbursements by health flexible spending arrangements (FSAs) and other employer health plans for the cost of over-the-counter drugs available without prescription are not subject to tax if properly substantiated by the employee.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.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.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.
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.The September 2003 Trusts Estates magazine has several articles of potential interest.
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.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.
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.
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.
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.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).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.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.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."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.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.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."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.Holding Period of Series EE and I Bonds Extended to 12 Months
The Treasury Department published a final rule in the Federal Register of January 17, 2003, increasing the period of time that owners of United States Series EE and I Savings Bonds must hold their bonds before the bonds are eligible for redemption. The mandatory holding period increased from 6 months to 12 months for bonds purchased on or after February 1, 2003.Interesting Article on Changes to Medicaid Benefits
States are making cutbacks in Medicaid services to reduce budget deficits.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%.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.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.
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 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.
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.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.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.
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.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.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.
Interesting Reading in Probate and Property
The July / August 2003 issue of Probate and Property has several articles of interest.A Medicaid applicant and her husband had transferred their home to an irrevocable trust, retaining a life estate. The terms of the life estate indicated that it would terminate on the death of both grantors or at such time that the grantors no longer occupied the residence for a 120 day period. Medicaid was denied on the basis of uncompensated transfer of the residence, and applicant appealed.
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.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.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.
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.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.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.
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.MetLife Study on Nursing Homes (Including Nationwide Costs for Care)
Metlife put out an excellent study regarding long term care alternatives and the average cost of nursing homes nationwide.IRS Announces Fee for Offers in Compromise
The IRS has announced that beginning November 1, 2003, it will start charging a $150 application fee for the processing of offers in compromise. The IRS expects that this fee will help offset the cost of providing this service, as well as reduce frivolous claims.District of Columbia Approves Increase in Estate Tax Filing Threshold
Legislation increasing the filing threshold for the District of Columbia's estate tax from $675,000 to $1 million is pending congressional review. After it was passed and signed by Mayor Anthony Williams (Dem.), it became D.C. Act 15-106.Alzheimer's Cases Could Triple by 2050
Doctors warn of a coming epidemic in Alzheimer's Disease cases in the WebMD article.Applicable Federal Rates for September 2003
The Service has released the applicable federal rates for September 2003. The 7520 rate, which is used to value life and remainder interests, increased a full percentage point, to 4.2%. Rev Rul 2003-101, 2003-36 IRB.Disclaimer by Administrator Not Qualified (Est. of Engelman)
The Tax Court has held that a disclaimer by the special administrator of a decedent's estate was not a qualified disclaimer under Code Sec. 2518 because the decedent had already accepted the interest at the time the administrator disclaimed it.Statement by ABA President Alfred P. Carlton, Jr. regarding ABA v. FTC
Excellent Article on Managing Liability in an EP Practice
In today's litigious society, estate planners must be more vigilant in their practice to protect against potential problems. Exposure to many of these problems can be avoided through advance planning and appropriate actions. Find out more about this in the August 2003 Journal of Estate Planning article entitled "Managing the Risk of Liability in an Estate Planning Practice".Will Preparer Not Estopped from Later Challenging Validity of Document (Estate of Carlton)
The testator had three sons. One son, using computer software, prepared a will for his father and presented it to him for signature. Father did not inquire about the contents, did not read document but signed and had signature witnessed and notarized. The son took the original document with him and never discussed it with his father. On his father's death, the second son sought admission of will but son who had prepared and kept the document objected to its admission.Attorney Owed No Duty to Beneficiaries to Determine or Document the Testator's Competence
The testator's long-time estate plan had disinherited one of nine children, based on his belief that the child had already received substantial benefit. During the testator's final illness, the attorney who had prepared the previous plans met with testator and prepared a complete revision of the estate plan, leaving the entire family business to the child who had previously been disinherited. After the testator's death the other children filed an action alleging that the testator had been incapacitated at the time of the revision; that action was settled without a final determination of whether the testator had been competent.Attorney for Incapacitated Person May Make Claim Against Estate & Trust (Novotny v. Est. of Dantone)
An attorney in one state was hired by elderly woman to help organize her estate and move her from an assisted living facility back to her home in another state. Upon her return to her home state the elderly woman's daughter initiated a guardianship proceedings and was ultimately appointed as the guardian of her person (but, since she had previously executed a valid trust, no guardian of the estate was appointed).A Medicaid recipient recovered $600,000 on a personal injury claim against one of two tortfeasors; the other, more culpable, defendant was uninsured and judgment-proof. Medicaid asserted a lien for $141,422.19. The trial court conducted a hearing and determined that full damages would have been $4,000,000 and reduced the lien amount proportionally, to $21,213.33.
Non-Signer of Nursing Home Contract May Not Counter Sue for Misrepresentation (SWA, Inc., v. Straka)
Daughter signed nursing home admission contract on behalf of herself, the patient (her mother) and her sister. After Medicare coverage ended and Medicaid denied coverage because of excess resources, nursing home sued both daughters as guarantors. Second daughter counterclaimed, alleging that she had not signed the contract in any capacity, that the nursing home was prohibited by federal law from requiring a guarantor, that the nursing home fraudulently misrepresented (in its admission agreement) that transfer of residents' assets was a federal crime, and that the nursing home violated state consumer protection laws. When the nursing home realized that daughter had not in fact signed the agreement, it dismissed its complaint and filed an unjust enrichment action against the other, signatory daughter. When it was paid its claim it ultimately dismissed its second complaint and successfully sought summary judgment on the counterclaims of the non-signatory daughter.Father, 85, contracted with an "estate planning service" for the preparation of a living trust. The estate planning service salesman was also an insurance salesman, and ultimately he sold the father $840,000 worth of annuities. When father received notice of capital gains recognized as a result of sale of his stock to purchase the annuities, his two children both became aware of the purchase of annuities.
Property Transfers May Have Been Product of Undue Influence (Sepulveda v. Aviles)
After a fire damaged the apartment building she owned, an elderly woman sold the building to a new acquaintance for $50,000. She was represented at the sale by an attorney she had never previously met, who was referred to her by the buyer's attorney. The buyer also was heard to promise her that he would take care of her for life in return for her sale of the building, and he also used at least $45,000 of her money from credit card withdrawals, failure to deposit mortgage payments after the purchase and similar measures.Good Article on Exempt Organizations
The July 2003 issue of California Lawyer has a very good article entitled "Keeping Exempt Organizations Exempt" by Marshall Glick. Although many aspects of the article are California specific, there is very valuable information about avoiding pitfalls in the administration of an exempt organization that would cause it to lose its exempt status.IRS Issues New Regs on 419 Plans
The Treasury Department and IRS issued final regulations on requirements which must be met for a welfare benefit fund to meet the safe harbor test allowed under Code Section 419A(f)(6) for 10 or more employer plans. (A 10 or more employer plan is a plan to which more than one employer contributes and to which no employer normally contributes more than 10 percent of the total contributions contributed under the plan by all employers.)Treasury Department Curtails Abusive Use of Life Insurance and Annuity Contracts
The Treasury Department and the IRS issued two Revenue Rulings designed to curtail the abusive use of life insurance and annuity contracts to avoid current taxation on investment earnings. Life insurance and annuity contracts receive favorable treatment under the Internal Revenue Code, including deferring tax on the investment earnings of those contracts, because they provide life insurance protection or a way to save for retirement.IRS Issues Notices to Advance Child Tax Credit Recipients
On July 22, 2003, the Internal Revenue Service mailed the first of more than 25 million letters to taxpayers to be followed on July 25 by the first advance payment checks provided under a recent tax law change. The letters contain the advance payment amount and should be saved with other records that will be needed to complete the 2003 tax returns next year.A recent article in a D.C. area paper tells the story of a sister (the closest relative of a hospital patient who is bipolar) who is frustrated by the hospital's refusal to provide any information to her about her sister's condition. Asked for a reaction to this situation, a Department of Health and Human Services spokesman said that many hospitals and other covered entities are being too restrictive in implementing their HIPAA privacy procedures. The spokesman suggested that persons confronting an overly cautious medical provider to call the HHS HIPAA privacy hotline at 866-627-7748.
The Staggering High Cost of Treating Chronic Illness
The cost of health care in the United States -- $1.5 trillion a year -- is staggering. But one in five people in the United States never goes to the doctor in any given year. So who is responsible for all that spending? It is people with chronic illnesses. One percent of the population accounts for thirty percent of all health spending, according to Epidemic of Care, a new book by George C. Halvorson, chair and chief executive of Kaiser Permanente, and Dr. George J. Isham, medical director for HealthPartners, a Minnesota health plan.Pension Reform in Europe Carries Broad Implications for United States
Pension reform is the urgent political issue of the moment in Germany, Austria, France and other countries. Many experts see it as a harbinger of things to come, a sign of a demographic shift with important implications not only for the welfare of retirees but also for European societies as a whole. The crucial factor is age.Clarifications Proposed by FDIC Regarding Insurance on Living Trust Accounts
The Federal Deposit Insurance Corporation has published proposed rules to amend its deposit insurance regulations. The purpose of the rulemaking is to clarify and simplify the regulations on the insurance coverage of living trust accounts.Government Finds Pot of Gold to Finance Social Security and Medicare?
One of the most talked-about documents circulating around Washington these days is a highly technical, statistics-laden, paper by economist Michael Boskin of the Hoover Institute.Revenue Ruling 2003-94 indicates the August federal midterm rate under section 7520 is 3.2%. The AFR for July and June were 3.0% and 3.6%, respectively.
Article on Recent KY Medicaid Changes
An article on important changes to Kentucky Medicaid.Kansas Considers Adoption of Stand-Alone Estate Tax
A Kansas interim Special Committee on Assessment and Taxation has been appointed to review a number of tax issues, including the adoption of a "stand-alone" estate tax and the implementation of various sales tax "streamlining" changes.Statutory Preference for Parents as Guardians of Minor Child Not Absolute (NV)
A maternal aunt sought guardianship of her sister's ten-year-old child. The child was born with cystic fibrosis and cerebral palsy, and mother was in final stages of terminal cancer. Child's mother supported appointment of aunt, but child's father objected, citing Nevada law indicating strong preference for parents to act as guardian of children. The statue cited permits the court to overcome presumption in favor of parent(s) by finding that the parent is not "qualified and suitable."Seventh Circuit Court Affirms IRS Victory in Hackl
Unfortunately, the Seventh Circuit Court of Appeals has just affirmed the Tax Court's holding in Hackl v. Comm'r., 118 T.C. 279 (2002), that the gifts of the LLC interests by Mr. and Mrs. Hackl were not present interest gifts and therefore the $10,000 annual gift tax exclusion was unavailable to shield such gifts from gift taxation. The Seventh Circuit agreed that the restrictions on the LLC interests were such that the children to whom the interests were gifted had no present economic benefit from the units.Parent, Not Uncle, Entitled to Appointment as Personal Representative (DeVaughn v. DeVaughn)
The decedent, age 19, was sitting on a lawn chair when he was hit by a vehicle involved in a high-speed police chase. He had been living with his paternal uncle since his parents had been involved in a police raid on their home, although no formal guardianship was initiated at the time. His mother had not seen the decedent since he was four years old, though she claimed that she had tried to make contact with him during the intervening years. When the uncle filed a petition to be appointed as personal representative of the decedent's estate (listing as heirs the parents and himself and his wife as "de facto parents"), the mother objected and sought her own appointment as personal representative.Lawyer Censured for Overcharging (Cortinez v. AR Supreme Court Committee on Prof Conduct)
A client contacted a lawyer when she was unable to secure her husband's release from the hospital. The lawyer quoted a flat $750 fee to assist with the release of the husband and then telephoned his physician and followed up with a fax to the physician. Several days later, after the husband had been transferred to a transitional living area within the hospital, wife once again contacted lawyer, who quoted a $5,000 fee to secure husband's release. Although the husband was shortly released from the transitional living area, the lawyer testified in this proceeding that he "did not know if he 'sprung' [the husband]" or if he would have been released in any event.Lawyer Disbarred For Taking Funds from Incapacitated Seniors (In the Matter of Butin)
Disciplinary proceedings were initiated in connection with three separate but similar cases. In one, the lawyer represented an agent under a durable power of attorney for property and had the agent sign blank withdrawal forms which he used to transfer over $144,000 into his business account over a seventeen-month period. At times his business account balance dropped below $40,000. When challenged, the lawyer asserted that he was owed between $25,000 and $75,000 in legal fees, though he had never presented a bill to the agent.Lower Social Security Benefits Reduce Mortality
In this National Bureau of Economic Research study, "The Impact of Income on Mortality: Evidence From the Social Security Notch," the authors explore a way to analyze the correlation between income and life expectancy. Does lower income mean poor health?Disabled Older Americans Foresee Dismal Future
People over 50 with disabilities want more control over their daily lives, but lack affordable services to help them stay independent, according to a report released April 29 by the AARP.
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