Educational FYI's
Educational FYI's are written on topics that effect various aspects of estate planning and the laws that govern it. They are published and posted to this site when news worthy events happen that we feel you should be made aware of. The purpose of an Estate Planning Update is to bring important information to the financial advisors in the community. Our hope is that this information better equips you to assist your clients.
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Personal Representative's Attorney Fees Chargeable Against Estate
The personal representative, in an estate administration contest, filed a seventh accounting and a request that the estate be closed. Family members objected, accusing the personal representative of conflicts of interest and failure to advise the beneficiaries about actions proposed to be taken by the decedent's partner (who was also a client of the personal representative). The personal representative retained counsel and the parties participated in extensive litigation resulting in the trial court removing the personal representative, denying requests for surcharge against him, and denying his request for payment of $589,441.28 in attorney's fees and costs.
Constructive Trust Imposed on Proceeds of Property Sale Transferred to Joint Ownership
The agents under a durable power of attorney arranged for sale of real property (specifically devised in principal's will to her stepson) to agents' relatives for substantially less than the assessed value of the property. The proceeds were placed in bank accounts in joint names with agents. After the principal's death, the agents were appointed as personal representative of the principal's estate and stepson sued.Exception to Privileged Communications for Will Drafter Does Not Apply Where No Will Prepared
A Testator consulted his long-time law firm about drafting a new will, but no new will was ever prepared. A few days later the Testator signed a new will prepared by another, unrelated law firm.Kaiser Commission Releases Report on the Impact of the Federal Deficit Reduction Act of 2005
The Kaiser Commission on Medicaid and the Uninsured has issued a report that summarizes the Medicaid provisions of the federal Deficit Reduction Act of 2005 (DRA) signed on February 8, 2006 and discusses the implications of the proposed changes. The changes would net projected reductions in Medicaid spending of $4.8 billion over the next five years and $26.1 billion over the next ten years.Genetic Link to Parkinson's Disease Found
A recent study has identified a single genetic mutation that accounts for more than 20 percent of all cases of Parkinson's disease in Arabs, North Africans and Jews. This is a major surprise, as genetics was thought to play a relatively minor role in the cause of Parkinsons disease. Although the mutation is rare in people with ethnic roots outside the Middle East, its discovery raises the prospect that undiscovered mutations may be major causes of Parkinson's in other groups.Drugs Effective in Treating Mild to Moderate Alzheimer's Disease
Three drugs -- Aricept, Razadyne, and Exelon -- may make some modest improvement in mental function for those persons suffering from mild to moderate impairment in mental functions due to Alzheimers disease. The finding come from a review of 13 studies of the drugs. The review appears in The Cochrane Library, a research journal.New Findings on Cause of Alzheimer's Disease
If confirmed, several new findings on the origins of Alzheimer's disease could overturn prevailing theories on the cause of the disease. Scientists reporting in the Journal of Neuroscience said the neurodegenerative disease may be triggered when adult nerve cells, or neurons, try to divide.Undernourishment Screening Tool
Undernourishment is one of the major risks to the good health of elders.Important Update from Leimberg re Trust-Owned Life Insurance
Steve Leimberg was kind enough to allow us to share the following e-newsletter regarding fiduciary liability for monitoring trust owned life insurance, You can find out more about the Leimberg e-newsletters by using the link at the end of this FYI.Effect of the Federal Estate Tax on Family Farms and Small Businesses
Recent discussion of the federal estate tax has focused in part, on how it affects family farms and small businesses -- particularly the possibility that having to pay the tax might jeopardize those operations.Social Security and Medicare Trustees Release Annual Reports
Annual reports released from both the Social Security Administration and the U.S. Centers for Medicare Medicaid Services.Wealthy People Less Likely to Die in Pain
A University of Michigan study finds that wealthier elders are significantly less likely than poorer ones to suffer pain at the end of their lives.Groups Campaigning Against Repeal of Estate Tax
Anti-estate tax repeal groups have begun a campaign targeting moderate Democrats and Republicans in a campaign to retain the estate tax. The campaign is helped by the efforts of many major life insurance companies as well as charitable organizations.Spendthrift Trust Not Reachable for Debts Incurred by Beneficiary Acting as Trustee
Two testamentary trusts were created in the decedents will, one for the benefit of each of her sons. One son became trustee of both trusts, and proceeded to empty his brother's trust by investing in his own business, and thereafter failed to account to the other brother. The court entered a surcharge against the trustee-brother and forfeited the surety bond he had posted. The court then gave a judgment in favor of the surety against the defalcating trustee-brother.Health Affairs Journal has published three articles about the Schiavo case and the costs of end-of-life care.
Federal Housing Programs That Offer Assistance for the Elderly
A number of federal housing programs provide assistance, including rent subsidies, mortgage insurance, and loans and grants for the purchase or repair of homes, to low-income renters and homeowners.Qualified Roth Contribution Programs Gain Attention
Beginning in 2006, 401-K retirement plans may be amended to permit employees to designate some or all of their contributions as Roth contributions pursuant to a "qualified Roth contribution program." Contributions to a qualified Roth contribution program are made on an after-tax basis, but distributions (including earnings) are tax-free.Alzheimer's Disease Symptoms Reversed in Mice
Mice with memory loss have had their condition reversed, a discovery that should help refine the search for a cure for Alzheimer's disease and other dementias.Will Effectively Exercised Power of Appointment Even Though Not Admitted to Probate
Father (who died in 1981) established a living trust that divided into survivor's and family shares, with the former giving his surviving wife a general testamentary power of appointment and the latter giving her a power of appointment exercisable by will, deed, conveyance, bill of sale, gift or any other written instrument. If Mother did not exercise the powers of appointment, the survivor's trust would pour into the family trust, which would in turn be distributed unequally among daughter, granddaughter and grandson. Mother executed a will in 1985 purporting to appoint the entire trust corpus of both trusts; the survivor's trust was appointed outright to daughter and the family trust in equal shares among daughter, granddaughter and grandson; Mother died in 1997. Relying on advice of counsel, the trustee and family members decided not to seek probate of Mother's will.Will's Assertion of Mistreatment by Disinherited Child is Not Grounds for Invalidity
Decedent's will specifically disinherited his only child and some of his grandchildren "by reason of their ... treatment" of him. Son challenged the will, claiming that it was improperly executed, and also that the decedent had operated under "an insane delusion that four of his grandchildren did not care about him."Disclaimer Reformed to Avoid GST Tax
Daughter signed disclaimers of her interests in her mother's property in two different states. After the disclaimers were completed, she learned that her mother's GST exemption was only $650,000 and that the disclaimed property would be subject to the tax. She signed an affidavit indicating that she had disclaimed by mistake, and sought reformation of one or both disclaimers. State high court rules that reformation of the two disclaimers is permitted, and remands to the trial court for entry of an order authorizing the reformation.An elderly woman was befriended by a law student, who helped her to transfer over $90,000 (in several transactions) to the law student, allegedly because the woman wanted to help her with tuition. The woman's nephew, who had power of attorney, discovered the transactions and moved to secure conservatorship and set aside the transactions.
Undue Influence and Constructive Fraud Claims Should Have Been Submitted to Jury
After her husband became ill, an elderly woman who had never managed finances during their married life summoned her children to meet with her and to help decide how to handle the family ranch and other properties. After the family discovered that her husband had incurred $54,000 in credit card debt the children agreed to take responsibility for that debt in return for their mother transferring shares of stock in the ranch to them; she made transfers of substantially all of the stock based on that understanding.Malpractice Claim May Be Brought By Successor Fiduciary Against Agent of Prior Fiduciary (CA)
During the pendency of a will contest, an attorney was appointed as administrator of a decedent's estate. He hired another law firm to assist with complicated tax issues. At some point, the administrator wrote to the tax lawyers confessing that he had misappropriated substantial funds from the estate; the tax lawyers initially attempted to help him borrow money to repay the estate, but ultimately wrote to him (in February) indicating that they withdrew from further representation and advising him to secure other assistance. In May the administrator died; the tax lawyers turned their file over to another attorney in July. In September the deadline ran out for filing IRS form 843, which would have extended the time for claiming a tax refund by three years. In November, after resolution of the will contest, a new executor was appointed and he brought a malpractice action against the two groups of tax attorneys. Both law firms argued that the plaintiff lacked privity with them, since they had been hired by the original administrator, and the trial court granted judgment for the defendants. The intermediate state appellate court affirmed, and the estate appealed to the state Supreme Court. That court now reverses, finding that the state probate code gives a successor fiduciary all the powers that his or her predecessor would have, impliedly including the power to bring an action such as the one here.Power of Attorney, Lacking Gift-Giving Authority, Does Not Authorize Gifts to Agent
Mother, suffering from mild dementia, executed a general power of attorney in favor of her son--the power of attorney did not include any language specifically authorizing gifts. Shortly thereafter she moved in and lived with him, and after about eight months moved to a nursing home. At the time of her move to the nursing home the son, using his power of attorney, transferred all her real property, stocks and other assets to himself. The mother died a little over a year later, leaving a will that devised all her assets equally to her son and daughter. After securing appointment as executor of the estate, daughter filed suit to recover the remaining assets, arguing that the purpose of the original conveyance was solely to protect the assets from being depleted by nursing home expenses and that with the mother's death they should be re-conveyed to her estate. Trial court ordered reconveyance and on appealed. Intermediate state appellate court affirms, noting that without a specific gift-giving provision in the power of attorney, a gift to the agent "carries with it a presumption of impropriety and self-dealing." In order to overcome that presumption, the recipient of the gift must make "the clearest showing of intent" on the part of the principal; evidence that the mother in this case trusted her son more, wanted him to manage her money, and may even have been fearful of her daughter did not meet that high standard of evidence.The plaintiff, who had been seeking to provide cash for his daughter to pay anticipated estate taxes, established an irrevocable life insurance trust in 1991 and paid $300,000 in premiums for a $4.2 million second-to-die policy. The insurance agent's projections, assuming a 10% return, showed no further premium payments would be required. The ILIT Trustee, a CPA, sought independent advice which indicated that the initial premium payment would need to earn a 24% return for 28 years to cover all premiums, but the settlor instructed him to follow the insurance agent's direction.
Testamentary Effect of Trust Provision Requires Compliance With Will Formalities - Arnold v. Davis
A decedent (the widow of country music recording artist Jim Reeves) had established a trust to hold her considerable assets, though her capacity to sign or approve of a trust was later called into question. When she died while conservatorship proceedings were pending, the court granted an interpleader request and ordered that all her trust assets and all income from sale of her late husband's music and real estate holdings be paid to an administrator while the validity of the trust was resolved.A victim that was vulnerable to exploitation made a videotaped statement to police officers two days before she died and a statement to a social work supervisor shortly before her death.
As the testatrix lay dying in a hospital bed, a lawyer relative contacted a long-time associate and asked him to visit her at the hospital to help her prepare a will. The relative also provided the lawyer with details about the testatrix' estate plan, including her intention to leave him (the lawyer relative) a significant bequest. The drafting lawyer, the lawyer relative and the testatrix all met together at the hospital, and the drafting lawyer prepared a will and supervised its execution. After the testatrix' death a will contest was filed, with the result that $620,000 was made unavailable to the residual beneficiaries (the opinion does not relate the particulars of the will contest or the identity of any contestant, or indicate how much of the $620,000 was attorney's fees incurred in defense of the will and how much a payment to contestants).
Legal Malpractice in Estate Planning Case Runs From Discovery - Watkins v. Hedman, Hielman & LaCosta
An attorney prepared a complicated estate plan for a married couple. The wife advised the attorney that they wanted to make sure their trusts were and remained revocable, that they minimized estate taxes, and that they avoided probate. The attorney never consulted with the husband, but sent documents home with wife and had her staff witness and notarize them upon return, even though they had never spoken with husband."Direct Lineal Descendants" in Old Trust Does Not Include Adopted Children - McGehee v. Edwards
Several trusts were established in 1929, 1930 and 1931. Each trust limited benefits to the "direct lineal descendants" of the settlor or the settlor's parents. Although state law was amended in 1978 to presumptively include adopted children in the terms "issue" or "descendant," the new law by its terms did not extend to prior trusts. The trustees of the trusts, concerned about potential liability for their determination of the approximately 142 trust beneficiaries, filed an action to determine "who are, or may be direct lineal descendants ... and specifically whether children born out of wedlock" would be beneficiaries. Counsel for one beneficiary answered, asking the court to also determine whether adopted children would qualify, whereupon the trial court appointed guardians ad litem for "persons adopted by lineal descendants, persons born out of wedlock to lineal descendants, persons born to lineal descendants through assisted conception, and legitimate minor beneficiaries and parties unknown."The guardian of person and estate filed a petition requesting compensation for services as guardian. The ward died before hearing on the petition, and guardian filed a second petition seeking additional compensation. Almost two years after the ward's death, the trial court summarily denied the compensation requests. The Florida Court of Appeals reverses the denials, noting that no one objected to the compensation requests, the guardian was not given notice of the pending denial of compensation, and the trial court did not conduct a hearing into the reasonableness or propriety of the fees. The summary denial "violated the guardian's right to due process of law."
Before a husband began chemotherapy treatment he arranged for freezing and storage of semen in case he became sterile. The treatment was unsuccessful and husband died within two months. In-vitro fertilization, begun ten months after his death, was successful and twins were born eighteen months after his death. The wife thereupon filed for Social Security Survivor's benefits for the children, and was denied by the Social Security Administration, an Administrative Law Judge, and a Federal District Court Judge.
State Must Permit Payment of Taxes on Special Needs Trust Termination - Stell v. Boulder Co. DSS
A self-settled special needs trust was established for the benefit of an SSI recipient who also received Medicaid benefits. The SNT provided that upon termination (by death of beneficiary, for instance), funeral, burial, and administrative expenses, and taxes would be paid first, and that the state Medicaid agency would then be required to submit a claim for reimbursement before the trust would repay Medicaid expenses. The Department of Social Services disqualified the trust and the beneficiary appealed.Probate Court's Removal of Fiduciary in Six Cases Upheld - Guardianship of Monus
A professional fiduciary, who is the director of a faith-based social service agency, had served as guardian, conservator or trustee for a number of years in six separate cases. The amounts involved in the estates varied from about $13,000 to about $210,000. In each case inventories were filed late or not at all, accountings were sporadic and incomplete, and requests were made for approval of expenditures after the fact. The probate court determined that the fiduciary had violated his obligation to account fully, and removed him from all six cases.Wrongful Death Action Dismissed Against Pharmacy in Death of Nursing Home Resident - Estate of Sharp
The estate of a deceased nursing home resident sued the pharmaceutical provider which had contracted with the nursing home to provide medications. The claims alleged that the pharmacy had failed to monitor administration of controlled substances, to observe that the drugs were either being misused or stolen, or to train the facility's staff in proper drug administration procedures. Relying on cases limiting the liability of pharmacists in wrongful death actions, the trial court dismissed the complaint with prejudice.Prior to establishment of a guardianship, a ward had signed and funded a revocable living trust. Prior to her death, the guardianship court had authorized the trustee to sell her home, and directed that the proceeds be held in the trustee's attorney's trust account. After the ward's death, the trustee sought and gained court approval to pay burial expenses, but when the trustee requested authority to pay the trustee's attorney (which would have exhausted the remaining proceeds), the guardianship court refused and directed instead that the trustee pay fees to the guardian and the guardian's attorney, plus previously unpaid court fees associated with the guardianship. The trustee appealed, and the Florida Court of Appeal reversed and remanded for further proceedings.
After their father became incapacitated, his children from a prior marriage filed an action to prevent his wife from taking charge of or dissipating his assets, which were largely held in a self-settled trust naming some of the children as successor trustees. As settlement of that matter, the parties agreed that the children would take over as trustees, that the wife would continue to make care decisions for the husband, and that the husband's trust would pay $25,000 per month to the wife for his care -- and specifically directing that the wife would not be a trustee. Some time later the children became concerned that the money was not in fact being used for their father's care, and sought an accounting from his wife. She successfully objected, arguing that the settlement agreement specifically precluded a finding of a trust relationship, and that they could have (but did not) required an accounting as part of the settlement.
When a proposed ward objected to a pending guardianship proceeding, state law mandated appointment of both an attorney to represent him and a guardian ad litem to evaluate him. The guardian ad litem questioned the physician (whose opinion was that the proposed ward did not lack capacity) and then arranged for appointment of and evaluation by a second physician. The guardian ad litem testified as an expert witness at trial, and provided opinion testimony based in part on hearsay evidence she had accumulated. After a jury found the proposed ward to be incapacitated and the court appointed a guardian, counsel for the ward appealed, arguing that the GAL's testimony should not have been admitted as expert testimony, that she should not have been permitted to rely upon or recite hearsay evidence, and that she should not have been permitted to characterize herself as "the eyes and ears of the court."
Bequest Does Not Fail for Indefiniteness of Charitable Beneficiary - Hays v. Harmon
A decedent's will left residue of his estate to a trust "to provide for poor relief to worthy and needy individuals who reside in Crawford County, Indiana...." The decedent's only child contested the will, alleging both that his father lacked capacity and that the trust was insufficiently precise to constitute a valid charitable trust.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.Treasury Eyeing Estate Tax Shelters Involving Charities
Treasury officials speaking at the American Institute of Certified Public Accountants conference on November 1-2, 2004, warned accounting and estate planning practitioners to expect a continued crackdown on many of the mechanisms being used to reduce estate tax liability, particularly those involving charities.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.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.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.Forbes magazine interviewed several leaders in the insurance industry about Long Term Care Insurance and has issued a report on their findings.
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.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.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.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.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.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.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.
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"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 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.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.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.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.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.
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.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."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.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.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.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.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.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."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.AFRs for October 2004 Announced
The Section 7520 rate for October 2004 is 4.4%The Section 7520 rate for November 2004 is 4.2%.
Proposed Regs Require Registered or Certified Mail to Prove Timely Filing
Taxpayers would need registered or certified mail to prove timely filing under proposed regsPreamble to Prop Reg; Prop Reg 301.7502-1(e)(1); Prop Reg 301.7502-1(g)(4)
IRS Releases Inflation Adjusted Figures for LTCI; MSAs and HSAs
Inflation-adjusted figures for long-term care insurance, Archer MSAs and HSAsSummary of American Jobs Creation Act of 2004
Congress has recently passed the American Jobs Creation Act of 2004 and the president has indicated that he will sign it.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.The Section 7520 rate for December 2004 is 4.2%
Ohio Bill Would Cut Interest Rate on Unpaid, Overpaid Estate Taxes
Under Ohio HB 260, which was approved on November 9, 2004 by the Ohio House with a vote of 81 to 14, the interest rate on unpaid and overpaid estate taxes is lowered to the federal short-term rate, and the penalty for late payments would be 10 percent of the unpaid tax regardless of how late the payment is.April 2005 section 7520 rate released
The IRS has released the Applicable Federal Rate for the month of April, 2005. Each month the Service surveys interest rates and publishes the rate that is applicable for gift calculations. The rate for April is 5.0%. The rate for March was 4.6%.Illinois Governor OKs Modification of Estate Tax
On August 2, 2005, Illinois Governor Rod Blagojevich (Dem.) signed legislation (HB 1570, now PA 94-0419) that changes the credit for estate and inheritance taxes paid to other states. The new law eliminates one option of the options previously available as to how the credit is calculated for taxes paid to other states.Greenspan Rejects Estate Tax Repeal
On June 21, 2005, Federal Reserve Chairman Alan Greenspan testified before the Senate Banking, Housing and Urban Affairs Committee, during which time he reiterated his opposition to tax-cut proposals that increase the deficit and made clear that this opposition applies to proposals that repeal or drastically reduce the estate tax without fully offsetting the costs.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.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.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.
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.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.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.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.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.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.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.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.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.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.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.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.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.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.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.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.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.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.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.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.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?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.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.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.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.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.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.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.
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.
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.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.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.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.
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.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.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.The 7520 Rate for April is 3.8%. This is down from 4.0% in March and 4.2% in February.
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.
CCH issued a report which contained many good tax planning strategies you may want to suggest to your clients.
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.The Section 7520 rate for May 2004 is 3.8%.
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.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.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.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.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.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.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.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.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.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.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.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.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 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.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%.
Various 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.Law Firm Ordered to Comply with IRS Summonses
Jenkens and Gilchrist Ordered to Comply with IRS SummonsesThe section 7520 rate for August 2004 is 4.8%.
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.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.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.Tax 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.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: IllinoisGreenspan 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.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.Vote for Estate Tax Repeal Delayed; Senator Kyle Prepares Amendment to H.R. 8
Aides to several key Senators have announced that there will be no vote of estate tax repeal in the Senate until after all the relief for the hurricane victims has been secured and the rebuilding in Louisiana, Mississippi and Alabama begins. Therefore, we can expect that nothing should happen for at least several weeks.Final Regulations on Ordering Rules for Charitable Remainder Trusts Issued
The Internal Revenue Services has issued final regulations on the ordering rules of section 664(b) of the Internal Revenue Code for characterizing distributions from charitable remainder trusts (CRTs).IRA Gifts to Charity Temporarily Unlimited
As part of the tax relief provided by Congress, unlimited donations of IRAs or pension plans to charities will be allowed for a short period of time.Leavitt Endorses Many of Governors' Medicaid Proposals
On August 2, Department of Heath and Human Services Secretary Mike Leavitt discussed various health topics in an interview with Associated Press editors and reporters. On Medicaid, Leavitt said that the commission he appointed to recommend ways to cut $10 billion from Medicaid over five years would "likely look" at proposals from the National Governors Association and determine that they "are pretty well thought-out ideas."IRS Releases December 7520 rate
The 7520 rate for December 2005 is 5.4%, up significantly from November's 5.0%. This rate is what is used to actuarially value life estates, remainder interests, etc. A higher 7520 rate makes some transactions, such as QPRTs more attractive, while some other transactions less attractive.DC Circuit: Lawyers Exempt from Sending Gramm-Leach-Bliley Privacy Notices
The Gramm-Leach-Bliley Act has provisions which require "financial institutions" to send annual privacy disclosure notices. This applies to banks, brokerage houses, etc. The Federal Trade Commission had taken the position that this also applied to attorneys holding financial information. The American Bar Association filed suit for a declaratory judgment. The ABA won in the District Court. Now, the U.S. Court of Appeals for the District of Columbia has affirmed the District Court's judgment.IRS Increases PLR Fees, In Some Cases Dramatically
New PLR User Fees
The IRS has released the 2006 Revenue Procedures outlining fees for Private Letter Ruling Requests. Continue on to see some of the outlined changes:
Social Security Death Benefit Eliminated in Bush Budget Proposal
The $255 Social Security death benefit will be eliminated under the Budget proposal submitted to Congress on February 7, 2006 by the President. White House officials defended the proposals and estimated costs would be trimmed by $3.4 billion over the next decade with the elimination of the stipend. Congressional aides said Jo Anne Barnhart, the Social Security Commissioner, had told them during a closed-door briefing that the $255 one-time death benefit has become an administrative burden, since it is not paid in all cases. Mark Lassiter, a spokesman at the Social Security Administration, said the benefit "bears no relation to what a person's funeral expenses are or to any of workers' earnings levels. We believe that eliminating it is not going to cause an appreciable financial hardship to a survivor."Commission Considers Separating LTC Component of Medicaid
The Medicaid Commission, which is looking into ways to improve the government program is mulling over the possibility of separating long-term care financing from Medicaid.Photocopy of Will is Not "Duplicate Original"
After a decedent's death, his original 1987 will could not be located. However, a photocopy of that will was in his personal papers. There was no indication of any intent to revoke the will other than the fact that the original was missing.Equitable Estoppel Doctrine Not Available Where Medicaid Eligibility Worker Gave Wrong Advice
A State Medicaid eligibility worker advised the son of a beneficiary that her estate would not be subject to a claim after her death, and that if he wanted to preserve the family home all he needed to do was to state that his mother intended to return home. The worker was wrong.Insurance on Retirement Accounts Increased
The FDIC and Credit Union insurance coverage on retirement assets such as Individual Retirement Accounts and 401(k)s has recently been increased to $250,000 from $100,000.Article of Interest on Intestacy
You may be interested in reviewing the article on the laws of intestacy in the various states.The Section 7520 rate (used to calculate life and remainder interests) for June 2006 will be 6.0%. This is slightly higher than the May and April rates.
House Passes Bill to Raise Applicable Exclusion Amount to $5 Million
On Thursday, June 22, 2006, the House of Representatives passed legislation, by a vote of 269 to 156, that would raise the applicable exclusion amount to $5 million for an unmarried person and $10 million for couples. The marginal estate tax rate on estates up to $25 million would be set at the same tax rates that apply to capital gains -- now 15 percent but scheduled to rise to 20 percent in 2011. The marginal estate tax rate for estates worth more than $25 million would be twice the capital gains rate.Estate Tax Repeal Vote Fail in Senate
Late Thursday, August 3, 2006, the Senate voted on an estate tax reform proposal that was came to close to full repeal and the republicans did not get the 60 votes they needed to pass it. The vote was 56-42!Why Can't a NY Lawyer Counsel FL Residents on NY Law?
This article from the ABA Journal summarizes the case of a NY licensed attorney wanting to give advise to FL residents about NY matters. It does a good job of summarizing FL's position on unlicensed practice of law in FL.Senate Resolution Freezes Estate Tax for Two Years
Senate Resolution 21, 110th Cong. 1st Session, passed the Senate by a vote of 91 - 1.New Study Finds Changes Needed to U.S. Health System to Accommodate Needs of Boomers
The aging baby boom generation is likely to increase the nation's disabled population, and a study says the United States needs a better system to provide care for them. More than 40 million Americans currently have some sort of disability, the Institute of Medicine reported Tuesday.The IRS has recently released Revenue Procedure 2001-38, 2001-24 I.R.B. 1335, which holds that a QTIP Election will be disregarded if at the death of the first spouse to die, there would not have been an estate tax in any event.
New Addresses for Filing Estate Tax Returns
Beginning January 1, 2002, the address' for filing ALL federal estate and gift tax returns will change to:Thanks to business appraiser Jeff Wolpin, CBA, CREA, CCRA, MBA, for forwarding me the following information. Jeff can be reached at 877-825-8283 or jwolpin@earthlink.net. Jeff will be speaking at Core II about valuing interests in FLPs and FLLCs, as well as undivided fractional interests in real estate.
New Addresses for Filing Estate Tax Returns
Beginning January 1, 2002, the address for filing ALL federal estate and gift tax returns:The subject matter of this week's CCC deals with Buy-Sell Agreements. The recently decided valuation case of Estate of True v. CIR, which resulted in a $75,935,883 tax deficiency and a $30,328,153 penalty to the taxpayer's estate, will discussed in-depth during the CCC. An analysis of another recent valuation case dealing with buy-sell restrictions, Estate of Schwan v. CIR, Memo 2001-174, follows.
Care should be taken by well-meaning grandparents who desire to set aside money in Section 529 college-savings plans for the grandchildren. Should these grandparents later seek Medicaid assistance in paying for long term care costs, they will be forced to revoke those accounts to pay for long-term-care expenses before becoming eligible for Medicaid coverage.
The IRS has ruled in PLR 200127007 that a creative post-mortem estate planning strategy of proposed disclaimers of the benefit conferred by the waiver of a section 2207A right of recovery under the tax clause of a decedent's Will are qualified disclaimers under IRC 2518.
Shepherd FLP Case Appealed to 11th Circuit!
Many of you should recall the FYI and FaxAlert issued late last year on the Shepherd case, one of several Tax Court FLP cases that were decided in November of 2000. In his brief for the Eleventh Circuit Court of Appeals, the petitioner-appellate ("Shepherd")argues that the valuation of the gifts he transferred to each of his sons should be measured taking into account the terms of the partnership agreement that created, define and govern those property interests. As you may recall, in this case the Tax Court held that there was an indirect gift of the underlying real property interests to his sons.Treatment of IRAs in Bankruptcy
Steven Hartnett, our new Associate Director of Education, pointed out the attached study of the treatment of IRAs and certain return retirement in bankruptcy proceedings in various states. This is important information to know if you are recommending transfers of funds from qualified plans, which generally have very good creditor protection, to IRAs, which generally have lesser creditor protection.As a follow-up to my email on Wednesday, August 29, 2001, The Wall Street Journal has two interesting topics in their Tax Report column.
IRS to Provide Tax Relief for Victims of Terrorist Attacks
IRS has granted some immediate tax relief for victims of the September 11 terrorist attacks on the World Trade Center and the Pentagon, and has announced that it will be issuing broader relief in the near future.Some insurance analysts indicated that there is currently talk among insurance executives about denying insurance due to the terrorist attacks.
House Passes Estate tax relief for Victims of Terrorist Attacks
On September 11, 2001, the House of Representatives passed H.R. 2884 - The Victims of Terrorism Relief Act of 2001 - on a voice vote of 418-0.CCH is reporting that, based on recently released inflation figures, the section 2503(b) annual exclusion for present interest gifts will increase to $11,000 in 2002. The annual exclusion is inflation adjusted and rounded down to the nearest $1,000.
The following periodicals have some articles that may be of interest to some of you:
- Probate and Property magazine, September / October 2001 issue
- ALI-ABA Estate Planning Course Materials Journal, August 2001
- California Trusts and Estates Quarterly, Summer 2001 issue
Further Reading Recommendations
There are a few articles worth reading in:Those members concerned with the Gramm / Leach / Bliley law may wish to join the ABA Grassroots Action Team outlined below.
The following Bureau of Labor Statistics Website may prove useful if your ever need to calculate a number inflated for the CPI for a given time period. There is a calculator on the website about one-third of the way done the page. http://stats.bls.gov/text%5Fonly/cpihome%5Ftxt.htm
How Lower Interest Rates Effect Estate Planning
As with many other aspects in our lives, timing can be very important to estate planning. At the moment, stock prices are volatile and interest rates are approaching long time lows. So which estate planning techniques are benefited, and which are hurt by our current financial environment?Article in October 2001 Trusts and Estates magazine
There is a very good article on asset protection for beneficiaries of trusts in the October 2001 Trusts and Estates magazine. It is written by Steven Oshins and Christopher Riser, and is entitled "Scheffel v. Krueger: The Effectiveness of Statutory Spendthrift Trust Protection". This is a subject I have been trying to convey to members for over one year now. Hopefully with the assistance of members, the Academy will be able to expand on the article and generate a state by state analysis on creditor protection for surviving spouse and child beneficiaries to a Living Trust.Other good articles in this issue are:
October 24, 2001 the Wall Street Journal reports that Standard & Poor's "State of the States" report indicates that the states are having revenue shortfalls because of the economic slowdown. These shortfalls are expected to increase in the wake of the terrorist attacks. This increases the chances of states enacting independent estate taxes as the federal credit for state death taxes is phased out.Also in today's Journal, former House Ways and Means Chair Archer says that the capital gains tax cut is dead this year. He indicates that, even though it had support in the House, the Democratic Senate will not pass it because it is seen as only helping the wealthy.
The November 7520 rate will be 5.0%. This is a very significant decline form October's 5.6%. There may be some transactions you will want to put off until November in order to use the lower rate (a CLT for example). Other transactions you may wish to complete during October so you do not lose the ability to use the August rate of 6.0% (a CRT for example).
The Summer 2001 issue (vol. 13, no. 3) of the NAELA Quarterly has a number of interesting articles dealing with structuring distributions from a Special Needs Trust. I encourage those of you active in this field to read them:
Clifton Kruse, Jr., "The Progeny of Link-Cricchio"
Cynthia Barrett, "Distribution Standard for the Special and Supplemental Needs Trust"
Roger Bernstein, "Special Needs Trusts: Administration and Compliance"
Robert Fleming and Stuart Morris, "Taxation of Special Needs Trusts"
The October 2001 "The Tax Adviser" (published by the AICPA) has several articles of interest this month.
Cases of Interest #1: Lane v. Spriggs
Here is a case I thought members might want to keep in the back of their minds when doing trust administrations. In Lane v. Spriggs the Tennessee Court of Appeals held that an unsigned but notarized real estate deed was effective to convey title after the death of the grantor.Cases of Interest #2: Matter of Flack
An attorney in Kansas is disciplined for his affiliation with a trust mill which also sold annuities to seniors.Cases of Interest #3: Estate of Neely
Estate of Neely, a Tennessee Court of Appeals case, held that a confidential relationship raises a presumption of undue influence.IRS Announces Tele-Tin Changes
The IRS established a work group in January 2001 to collect data and hold meetings with external customers (including the AICPA) in May 2001 to solicit suggestions for improvement to the IRS Tele-Tin Program.IRS Finally Acquiesces to Gallenstein JT Case
The IRS has finally announced its acquiescence to a 1998 Tax Court case that followed two Courts of Appeals decisions that allowed a surviving spouse to get a 100% basis step-up for a joint tenancy that was created before 1977 solely with the funds of the deceased spouse who died after 1981. Previously, the IRS had taken the position that the survivor was limited to a 50% basis step up in situations like this. (See Hahn v. CIR, 110 T.C. 140 (1998), acq. AOD 01-06, 10/19/2001).IRS Chief Counsel Recommends Revision of Form 4868
IRS Chief Counsel Advice Memorandum 200140079 has concluded that the current Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, should be revised to ensure that payments are properly applied when a taxpayer seeks an extension for income and gift tax.New 10% Rate Extended to Dependents
The IRS has just released the 2001 Forms 1040 and 1040A Instructions.IRS Owes Money to 390,000 Taxpayers
According to a recent release by the IRS, more than 390,000 taxpayers who are entitled to tax rebates and refunds have not received their checks.Democrats Push For Stimulus Plan
Following a week of sharp interest-rate cuts by the Federal Reserve and its European and British counterparts, investors will continue to follow government efforts aimed at forestalling a steep, prolonged downturn in the economy.Effective January 1, 2002, the standard mileage rate for the cost of operating a car are as follows:
Annual Exclusion and GST Exemption Adjustment
The September 19th's Wall Street Journal reported that CCH stated that based on recently released inflation figures the 2503(b) annual exclusion would be $11,000.Trust & Estates Mag. Articles of Interest
The following articles in the November 2001 Trusts and Estates magazine may be of interest:Will Revoked By Evidence of New, But Lost, Will
A North Carolina Court of Appeals case, Matter of McCauley (November 6, 2001) holds that evidence of the preparation of a new Will, which cannot be found among the decedent's possessions, is sufficient to revoke all previous Wills.Modification of Trust Requires Proper Notification
The Court of Appeals in California, in Estate of Sigourney (October 31, 2001), holds that constitutional due process standards require that notice be given to all parties with a property interest in a trust modification proceeding.Lowest IRC 7520 Rate Ever Announced
The IRS has announced in Rev. Rul. 2001-58, that for purposes of determining the present value of an annuity, an interest for life or a term of years, or a reversionary interest, the mid-term rate under IRC 7520 is 4.8%. This is the lowest rate ever. This is especially favorable for strategies such as Charitable Lead Trusts, GRITS, GRATs, PATs, SCINs, and Sales to Defective Grantor Trusts.Estate of Trotter - Gift of Residence in Estate Under IRC 2036
It appears the IRS may be expanding its limited success in using IRC 2036 to attack Family Limited Partnerships to an attack of other gifts with retained use by the donors.Claim Against Estate in Same Sex "Meretricious" Case
The Washington Supreme Court, in Vasquez v. Hawthorne (November 1, 2001) held that the "meretricious relationship" is not limited to "married" couples and may be applied in the case of same sex partners.Beneficiaries Estopped by Statute of Limitations
The South Carolina Court of Appeals, in Mayer v. M.S. Bailey and Son, Bankers (November 5, 2001) held that the remainder beneficiary of a trust had sufficient notice of corporate trustees actions to bar a subsequent claim at the income beneficiary's death.Probate Settlement Not Finalized But Still Enforceable
The Wyoming Supreme Court, in Matter of Maycock, 2001 Wyo. 103 (October 31, 2001) found that various writings between the Personal Representative and the beneficiaries of estate constituted an enforceable settlement that did not violate the Statute of Frauds.For those of you looking to enter into the investment advisory field, here are what I consider the top five books to read. For those of you working with investment advisors, you might want to pass this list on to them, in case they missed one or two of them.
The following articles are well worth devoting some free time toward reading:
Here are some excellent books on the marketing:
Executor Has Fiduciary Duty to Pay Estate Taxes
U.S. v. Tomlin, 266 B.R. 350 (ND Tex 2001)Article on Partnership Taxation
For those members who create Family Limited Partnerships and Family Limited Liability Companies taxed as partnerships, there is a very good basic to mid-level article on the income taxation of partnerships in the Fall 2001 The Practical Tax Lawyer magazine:The Case of the Fraudulent Will
With an extraordinarily complicated plot worthy of a cheap mystery novel, the Alaska Supreme Court in Crittell v. Bingo.Presidential Commission to Strengthen Soc Sec Weighs Options
On Friday, November 9, the President’s Commission to Strengthen Social Security began laying out the framework of a plan to let younger workers invest a portion of their payroll taxes in the stock market.Estate Quiet Title Action Case
In Ruzicka v. Ruzicka, 262 Neb. 824 (November 16, 2001), the Nebraska Supreme Court held that remainder beneficiaries of an estate have standing to contest a Quiet Title Action brought against the estate.Budget Surplus? What Budget Surplus?
Two articles discuss the case of the disappearing budget surplus:Adopted Child Not Included in 1939 Will
The Court in Lutz v. Fortune, Indiana Court of Appeal (November 15, 2001), held that an adopted descendant of decedent did not take under a 1939 Will.A few members have emailed or called the Education Department over the past few weeks about how the reduction of the State Death Tax Credit will affect the funding formula in DAP 3.1 and previous versions of DAP (as well as the vast majority of trusts drafted by other attorneys for the past 15+ years).
State Legislatures May Cut Medicaid Budgets
With a potential funding crisis looming, a number of states have taken measures to cut their growing Medicaid expenses.Social Security Commission Presents Three Plans
On Thursday, November 29, President Bush’s Commission to Strengthen Social Security announced that it will set out three options for allowing workers to establish individual investment accounts. Initially, the President's Commission had been expected to present a single plan.Bush Administration Predicts Federal Deficits to 2005
More on "Surplus, What Surplus?"Case of Defective Will Used to Show Testator's Intent
In the case, Estate of Venator (November 28, 2001), the Iowa Court of Appeal looked to the intent on the Testator in determining a distribution of assets despite the Will's failure to deal with the precise circumstances at issue.Oral Court Agreement Binding on Parties
The Mississippi Court of Appeals in Davis v. Davis (November 27, 2001) affirmed that an oral court agreement was binding on all parties, despite reservations expressed by one of the parties regarding income taxation issues.Case Law: Defective Pleading Not Fatal to Fraud Claim
The daughter of decedent ("mother") alleged that her sibling may have dissipated mother's assets during life and therefore demanded an accounting.AMT Not An Alternative Tax For Much Longer
According to Treasury economists in a recent Tax Notes article, the provisions of EGTRRA will subject almost one out of three U.S. taxpayers to the Alternative Minimum Tax ("AMT") by 2010!Articles in December Bloomberg
There are a few goods articles in December's edition of the Bloomberg Wealth Manager magazine:Inflation Adjusted Numbers for 2002
The IRS has recently released Rev. Proc. 2001-59 (Section 3.19), which provides the inflation-adjusted numbers for 2002.Chairman Bill Thomas (R-CA) of the House Ways and Means Committee says his committee is probably the most appropriately named committee of the House of representatives.
As a follow-up to the FYI on AMT a few days ago, the Wall Street Journal Tax report column of December 5, 2001 has a small feature on concern about the rapid growth of AMT payers. David Glickman, an attorney with Baker and McKenzie, is quoted as saying "[t]he AMT is 'a disaster waiting to happen'."
The IRS announced that the rate under Section 7520 will be 5.4% for January 2002. Note that this rate is somewhat higher than December's 4.8%.
Yesterday Congress passed the victim's tax relief bill. It passed the Senate on a voice vote and now goes to the White House where it is expected that it will be signed promptly.
The IRS has elected to appeal its defeats in the following FLP cases to the Circuit Courts:
- Kerr v. Comm'r., 113 T.C. 449 (1999), appealed to the 5th Circuit Court of Appeals;
- Shepherd v. Comm'r., 115 T.C. 376 (2000), appealed to the 11th Circuit Court of Appeals; and
- Strangi v. Comm'r., 115 T.C. 478, (2000) appealed to the 10th Circuit Court of Appeals.
Christmas Reading - More About TRUs
I hope you are all having a great holiday season and are not stuck trying to get last minute work out the door. The following are excellent articles about Total Return Trusts and its interaction with the new Uniform Principal and Income Act:Property Tax Consequences for FLP Transfers - Kodaira v. County of L.A.
Those of you that have heard me speak about the formation of FLPs and LLCs at CORE II know that I caution members to investigate the "property tax" and "income tax" consequences of transferring real estate to a FLP or LLC, and not just concentrate on the gift and estate tax savings. This is especially important in California, where property is reassessed for property tax purposes upon transfer, unless such transfer meets certain exceptions.Cook GRAT Case Affirmed by Ninth Circuit
The results of the Cook v. Comm'r. case, 115 T.C. 15 (2000), and the Walton v. Comm'r. case, 115 T.C. 589 (2000).Americans Ignorant of Long Term Care Options
According to an AARP Study, more than half of Americans over age 45 say they are somewhat familiar with their options for long term care services, but the majority are uninformed about the costs and funding sources available for such care.TN Appellate Court Affirms Fee Reduction - Estate of Wakefield
The Tennessee Court of Appeals, in Estate of Wakefield (December 10, 2001) , affirmed the reduction of the fees of a lawyer and accountant acting as Co-Executors.The IRS phone and fax numbers for obtaining EINs (TINs) have been inoperative in many localities for the past few weeks as it has crossed-over its computers to a new system for obtaining EINs (TINs).
CAUTION RE: ANNUAL EXCLUSION GIFTS
As you should all know by now, the FEDERAL annual gift exclusion amount has been increased to $11,000 for 2002.Articles of Interest from Probate & Property magazine
The following articles from the January 2002 Probate and Property magazine might be interest:Interesting Retirement Income Article Issued by TIAA-CREF
The TIAA-CREF Institute has issued an interesting article regarding retirement income derived from investment portfolios. Using two different methodologies - a historical analysis of investment returns, and a Monte Carlo simulation, the article explores the sustainability of investment portfolio withdrawals and thereby addresses the risk of extreme longevity.Social Security Commission Releases Final Report
The President's Commission to Strengthen Social Security had completed its work and issued its final report.Statistics on Growth of World's Elderly Population
A report issued by the U.S. Census Bureau and the National Institute on Aging predicts that this phenomenon of global aging will continue well into the 21st century.Practitioner's Priority Service
To the best of our knowledge (as of 01/03/02), service for EINs/TINs are still not available from the IRS.IRS Issues Another Split Dollar Notice
Almost a year to the day after it released its last Split Dollar Notice, Notice 2001-10, the IRS has now released a new Notice dealing the income tax treatment of Split Dollar Life Insurance.Jointly Held Powers of Appointment
Professor Jerry Kasner, who will be a keynote speaker on Saturday morning of the Fall Event, wrote the following commentary on PLR 200150020 for Steve Leimberg's Estate Planning Email Newsletter of 1/10/2002.The IRS has just issued its final version of the NEW SS-4 form.
We had the opportunity to review Natalie Choate's new edition of "Life and Death Planning for Retirement Benefits" and would highly recommend it as an addition to your office research library.
Articles from Financial Planning Magazine
Articles of interest in the January 2002 Financial Planning magazine.Trust and Estates Articles for Jan. 2002
Articles of interest from the January 2002 issue of Trusts and Estates magazine.EIN backlog: Light at the end of the tunnel?
The IRS has admitted that taxpayers and tax professionals who have phoned, mailed or faxed an employer identification number request within the last few weeks have been met with busy signals and longer than expected response time.A member contacted the Service about EINs and was told that they had boxes and boxes of SS-4s in their NY office waiting for processing. If you really need a number quickly, perhaps the telephone is the best way to be sure it gets expedited. The Service issued this member the EIN over the phone.
Estate Tax Law Change in the Offing?
Recently, both the President and the members of the Senate have been talking about taxes. The President has been pushing to have the sunset provision of EGTRRA repealed, making the law permanent. The Democratic Senate leaders have been talking about freezing the law or repealing it.
More (California) Reading Material
For those members in California and elsewhere, there are some very good articles in the current issue of California Trusts and Estates Quarterly (Winter 2001).The Service released the AFRs for February. The new rate under Section 7520 is 5.6%, up from 5.4% in January and 4.8% in December.
The following articles of interest are in the Winter 2001 issue of the ACTEC Journal:
The Eleventh Circuit has followed the Ninth Circuit's lead in upholding the contempt order for the grantor of an offshore trust, notwithstanding the grantor's argument that he cannot get to the funds under the terms of the trust.
The Service released the AFRs for February. The new rate under Section 7520 is 5.6%, up from 5.4% in January and 4.8% in December.
Foreign Property in a U.S. RLT
A week or two ago we had an email on the Member ListServ about transferring Canadian real estate into a U.S. RLT and a discussion about how that is not desirable.Subscribe to Free Financial Planning Magazines
For those of you interested in learning more about financial planning and investments, the following three magazines are available for free.Automatic Allocation of GST Exemption to Crummey ILIT
The following is an excerpt from the January 23, 2002 Steve Leimberg Estate Planning Newsletter regarding PLRs 200201002 and 200201003 and the automatic allocation of GST Exemption to an ILIT with Crummey Withdrawal powers. Commentator Jerry Kasner uses two recent rulings to make some important points about the GST and guidelines on obtaining the annual gift tax exclusion.The Wall Street Journal has a short, but excellent, article on investment diversification and rebalancing of portfolios in the February 8, 2002 edition. The article, entitled "Time for a Portfolio Trick: Rebalancing" appears on page C1.
Does ERISA Preempt Community Property
There is an excellent article in the Winter 2002 issue of California Tax Lawyer. It is authored by David W. Molzen and is entitled "In the Context of Estate Reporting, Does ERISA Law Preempt Community Property". I highly recommend it for members in community property states.Bloomberg Articles of Interest
You might find the following articles in the February 2002 issue of Bloomberg Wealth Manager magazine interesting.This morning the Senate voted 56-42 in favor of a nonbinding "Sense of the Senate" resolution to the effect that estate tax repeal should be made permanent.
The Wall Street Journal Tax Report column for February 13, 2002 makes reference to the growing number of taxpayers being JAILED because of the use of abusive trusts.
Retirement plan commentator Bob Keebler speculates about the possibility of new Treasury regulations under IRC 4019(a)(9), rumored to be released any day now.
More on Estate Tax Repeal Redux
As a follow-up to my earlier FYI, here is more information about the vote in the Senate to make the estate tax permanent:In what I think is only common sense given the 2001 tax cut, the Congressional Budget Office has projected reduced budget surpluses in the next decade.
More Info on 2003 Federal Budget
In a follow-up to the previous "Budget" FYI - here is some additional information:Estate Tax Repeal Redux, Part III
For a further prospective on the possibility of making the estate tax repeal of EGTRRA permanent, see the following on President Bush's FY 2003 budget, which includes a proposal to repeal the federal estate tax permanently.Trust Established by Agent Held Invalid
The California Court of Appeals, in Schubert v. Reynolds (January 10, 2002) upheld a lower court's finding that a trust established by a decedent's agent was invalid.IRS Finds More Then 1 Million Errors
The IRS has reported that more than 1 million returns filed so far for the 2001 tax year have incorrectly reported the rate reduction credit.Attorney Sanctioned for Bring Undue Influence Suit - Foster v. Ross
Foster v. Ross (Mississippi Supreme Ct., January 10, 2002)W VA Loses Medicaid Estate Recovery Battle
Last year West Virginia lost a lawsuit in federal district court that challenged a federal requirement that states must pursue Medicaid estate recovery. That case is now on appeal to the Fourth Circuit.Deceased Lottery Winners Estate Must Pony Up Taxes
The U.S. Tax Court, in Estate of Doster v. Commissioner, TC Memo 2002-2 (January 4, 2002)held in favor of the IRS, denying the estate of the decedent's desire to spread the estate taxes associated with lottery winnings over ten years.In its policy brief released in January 2002, the Urban Institute discusses the estate tax and its impact of the tax on saving, entrepreneurship, and family farms. It also discusses alternative policy options.
Web Site for Income Tax Rates in All States
Should you ever have the need to compare the individual income tax rates in the various states, you might find the following link of interest:Guardian Has No Authority to Alter Estate Plan - In re Falucco
In the Pennsylvania case, In re Falucco (January 4, 2002), the Pennsylvania Superior Court held the guardian of a mother's estate did not have the authority to alter the mother's estate plan.The Service just released the Applicable Federal Rates for March 2002. The interest rate under Section 7520 (the interest rate to be used, e.g., for calculating the actuarial value of life estates and remainder interests) is 5.4% for transfers made in March 2002. This is a slight decrease from the February rate of 5.6%.
Financial Planning Magazine Articles of Interest
The following articles in the February 2002 Financial Planning magazine may be of interest:Article of Interest in Financial Advisor Magazine
There is a new financial planning magazine called "Financial Advisor" which you MAY be able to subscribe to on a FREE basis.There are two very good articles in the March / April 2002 issue of Probate and Property magazine.
Information about nursing homes in your area.
National Taxpayer's Advocate Report Released
The annual National Taxpayer Advocate Report to Congress has been released and is now available at the IRS web site.A Little Humor (Dumb Laws Website)
I thought when you have a few minutes, you might like to visit the following website for a few laughs.The Service has released the applicable federal rates for April 2002. The 7520 rate is now 5.6%, up from 5.4% in March, but the same as in February. The full text of Revenue Ruling 2002-17 follows.
The Supreme Court denied cert, upholding the Ninth Circuit's decision in Estate of Branson. Last year, the Ninth Circuit upheld a Tax Court decision to allow "equitable recoupment" in an estate tax claim for income taxes oeverpaid. The doctrine of equitable recoupment allows a party litigating a tax claim in a timely proceeding to recoup in that same proceeding a related and inconsistent, but time-barred, tax claim arising from the same transaction. The Court in Estate of Branson, 88AFTR2d 2001-5726, allowed the taxpayer to offset their estate tax liability by the income tax overpayment even though the taxpayer would have been barred by the statute of limitations on the income tax issue.
Ways and Means Approves Post-Enron Pension Reform Bill
The House Ways and Means Committee approves 36-2 the chairman's mark of post-Enron retirement plan reform legislation (H.R. 3669).New Deprecation Forms Available from IRS
The IRS has posted to its website the revised forms relating to depreciation and expects to shortly add the new instructions for claiming net operating losses soon.The following articles in the March 2002 Trusts and Estates magazine may be of interest:
Interesting Articles from Practical Tax Lawyer
The following articles in the Winter 2002 issue of The Practical Tax Lawyer (available from ALI-ABA) may be of interest to members:Reciprocal Trust Doctrine Applied
Steve and I responded to a recent thread on the Member Listserve regard gifts to 529 Plans by stating that just because something is technically legal under the Code and Regs doesn't mean that it cannot be attacked by the IRS under the reciprocal trust doctrine, step-transaction or substance over form lines of reasoning.The following case, where the gifting that was done was perfectly legal under the law, is an illustration of what Steve and I were pointing out.
Tax court rules gift of LLC interest not present interest
Yesterday, the Tax Court ruled that a gift of an LLC interest did not qualify for the annual exclusion.Excellent Time Management Book
I thought the members should be made aware of an excellent time management book that may prove helpful in your work environment:The following case summary, on Bratcher v. Moriarty, Donoghue & Leja, P.C. (Massachusetts Appeals Court, March 4, 2002) is about the liability of an attorney for a Co-Administrator of an estate to the other, non-client Co-Administrator
Decedent's Conversations with Children Do Not Alter POD Accounts
In spite of conversations that the Decedent had with his children about his intent as to how to distribute his estate assets, the Court in "In the Matter of Estate of Fields, ' 2002 OK Civ. App. 14 (January 18, 2002) ruled that the assets would be transferred as provided under the Decedent's POD Accounts.Estate of Kaila (Domestic Partner Challenges No Contest Clause)
In the California Appellate case, Estate of Kaila, (December 27, 2001) the court held that a Domestic Partner's claim for a share of assets might not violate a Will's no contest provision.Estate of Murphy (Election Against Will by Deceased Wife's PR
In Estate of Murphy (Tenn. App. December 27, 2001), the question is raised whether a personal representative of the Deceased Wife may elect against the Will of her Deceased Husband.PLR 200211036: Subdivided Property Qualifies as Residence for QPRT
In PLR 200211036, the IRS has ruled that property owners who subdivided their land, which contained two homes, a cottage, a detached garage, and a barn into two lots could treat the subdivided lot containing the home in which they resided, the garage and the cottage as their personal residence for purposes of the favorable gift tax rules that apply for personal residence trusts.In Cavallaro v. United States, the 1st Circuit held that the attorney-client privilege does not extent to an accounting firm that was not engaged by the law firm when the accounting firm's duties were not essential to the deliberations of the law firm for the client.
The Service has issued a Revenue Ruling, 2002-19, which indicates that the cost of a weight loss program can be deductible as a medical expense. Of course, the expense would have to exceed the 7.5% AGI floor on medical expenses. In the ruling, the Service treats obesity itself as a disease.
Medicare Fraud Convictions Reversed
In U.S. v. Whiteside (11th Cir., March 22, 2002), a health care organization, several providers it owned, and a number of corporate officers were charged with fraud and, in the case of several officers, conspiracy to commit fraud against Medicare, Medicaid and CHAMPUS.Constitution Protection Not Afforded to Unsophisticated Taxpayers
In Koester v. Comm'r, (USTC March 28, 2002), the estate of the decedent claimed that the imposition of an estate tax on an unsophisticated taxpayer is unconstitutional. Not surprisingly, the Tax Court rejected the estate's argument.Legally Recognized Heirs Do Not Inherit
Blanchard v. DeLoache-Powers (March 28, 2002), an Eleventh Circuit case, involved a decedent who died in 1959, leaving a trust for his only son. The trust terms provided that on the son's death, the trust proceeds would be distributed to his child or children, if any - or to contingent beneficiaries if son had no children.Proposed MRD Information-Reporting Rules Eased
Responding to industry criticism, the IRS has eased its stance on information reporting of MRDs (Minimum Required Distributions) by IRA trustees, custodians, and issuers. The 2001 Proposed Treasury Regs would have required them to report the amount of the Minimum Required Distributions to both the account owner and the IRS. But the IRS has announced through Notice 2002-27 that it will drop this reporting burden.Articles of Interest: Bloomberg Wealth Manager
The following articles in the April 2002 issue of Bloomberg Wealth Manager may be of interest to members:Problems Confront Taxpayers Regarding EGTRRA's Retirement Provisions
Serious problems will confront taxpayers in many states that have not yet modified their tax laws to correspond to retirement provisions of federal tax law that were changed last year. While some states have begun to respond to this problem, others have not. The American Benefits Council released an update on March 11 covering the issue of state tax conformity with the retirement provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).The 2002 edition of Tax Hints, a Practitioner's Guide to the Filing Season, is now available at the Tax Professionals area of irs.gov.
There is a very good article over viewing the financial planning and estate planning benefits of 529 Plans, as well as explaining some of the differences in various states' plans, in the April 2002 issue of Financial Planning magazine.
IRS Issues Final Regs for IRAs and Qualified Plans: Part II
As I mentioned in the first installment of this FYI, the IRS has issued its new Final Treasury Regulations for IRC 401 and other Code Sections dealing with IRAs and Qualified Plans. The new Treasury Regulations include a NEW MRD Table to be used in most circumstances. The new MRD Table is effective for distributions beginning in 2002.Joint Tenancy Account is Available Medicaid Asset
In Tierney v. Dept. of Human Services (March 28, 2002), the Rhode Island Supreme Court held that joint tenancy accounts established by father and his children were available assets of mother during her lifetime.House Passes Bill to Make Estate Tax Repeal Permanent
In what is largely political maneuvering for the coming elections, the bill repealing the sunset provision of EGTRRA. The bill, "Tax Relief Guarantee Act of 2002," (H.R. 586), passed by a vote of 229 to 198. The bill would make permanent the 10-year, $1.35 trillion tax cuts, including the estate tax repeal, which are set to expire at the end of 2010.Pain and Suffering Claim Not Subject to Medicaid Lien
In the Michigan Supreme Court case, Martin v. City of Rochester (March 21, 2002) the Plaintiff, a passenger, was injured in a single-car auto accident. The Plaintiff became mentally incompetent as a result of his injuries and required total care, which was provided by the state Medicaid agency. The Plaintiff brought suit against the car's driver and the state and county. The Plaintiff named the Medicaid agency as an involuntary party, noting that it had required that his estate assign its interest in any claim for medical costs as a condition of receiving Medicaid.Probate Court Has Jurisdiction to Compel Return of Assets
The Missouri Supreme Court case of Ryan v. Spiegelthalter (January 8, 2002) involved a mother who purchased a home from her daughter and son-in-law, but never received title.Beginning on April 15, CMS (Centers for Medicare and Medicaid Services, formerly known as HCFA) will provide nursing home ratings based on nine quality measurements on every nursing home in six pilot states
This is an enhanced version of the Excel spreadsheet for calculating the new MRDs under the just released Final Treasury Regs.
Effort to make EGTRRA permanent
Today, the House of Representatives is scheduled to consider the Tax Relief Guarantee Act (H.R. 586), that would make EGTRRA permanent.Tenancy by the Entirety Creditor Protection
The US Supreme Court today handed down its decision in United States v. Craft.Interesting Estate Planning Reading
The following articles from Trusts and Estates magazine may prove of interest to members from the April and May 2002 issues.Permanent Estate Tax Repeal / Responsible Wealth
The Senate is scheduled to vote sometime next month on the permanent repeal of the estate tax. At this time it looks unlikely that the Senate will be able to garner enough votes to accomplish this, but groups such as Responsible Wealth are currently heading campaigns to contact Senators and convince them that it is irresponsible to vote for this bill, especially in light of our current economic condition.The Spring 2002 issue of The Practical Tax Lawyer, published by ALI-ABA, has several articles of interest, including...
Deaths of Seniors Related to Falls
The Senate Health, Education, Labor and Pensions Committee aging subcommittee, at its June 11 hearing, revealed that billions of dollars are spent on medical bills, elderly advocates and caregivers as a result of falls suffered by some 12 million elderly Americans each year.The Fifth Circuit Court of Appeals has remanded that Estate of Strangi case back to the Tax Court to deal with the IRC 2036 issue which the Tax Court did not let the IRS raise at trial because the Tax Court found the issue was not timely raised.
Handyman Gets Widow's Assets: Rice v. Clark (case)
In a recent California Supreme Court case, Rice v. Clark (June 10, 2002), the Court held that a beneficiary who caused the preparation of transfer documents was not disqualified from receiving the transfer.Outlays for Medicare, Medicaid and Soc Sec Projected to Double GDP
"A 125-Year Picture of the Federal Government's Share of the Economy, 1950 to 2075," is a Congressional Budget Office ("CBO") report presenting a 125-year picture of the financial affairs of the federal government. The report shows the size of the federal budget in relation to the general economy from the middle of the last century through the projected retirement years of the children of the post-World War II baby boomers.SNF Arbitration Clause Not Enforceable; Pagarigan v. Libby Care Center, Inc. (case)
Daughters of the decedent had signed her into SNF, and had signed admission agreement including mandatory arbitration clause for all disputes "between resident and facility, including actions for any injury or death arising from facility's negligence, medical malpractice, intentional tort, and/or statutory causes of action."Budget Deficit Balloons to $149 Billion
The total budget deficit for the first eight months of fiscal year 2002 was $149 billion, a new report by the Congressional Budget Office ("CBO") estimates -- a sharp reversal from the $137 billion surplus recorded for the same period in 2001.Ways and Means Marks Up Long Term Care Insurance Bill
On June 19, the House Ways and Means Committee approved H.R. 4946, the "Improving Access to Long-Term Care Act of 2002," which would provide an above-the-line tax deduction for a percentage of qualified long-term care insurance premiums up to the present-law dollar limitations that apply under the itemized deduction.Creditors Reach IRA Assets! (Lampkins case)
In another example of "bad facts make bad law", the Sixth Circuit may have eliminated creditor protection for IRAs. The question is whether the decision in the case of Lampkins v. Golden, Trustee, et al. (6th Circuit 2002) is meant to be read broadly, or only on the narrow facts of the case.Homestead for Multi-Family Home Allowed to Stand (Brizida case)
In the recent case of In re Antonio Brizida and Maria Brizida, 2002 Bankr Lexis 387 (April 24, 2002), the U.S. Bankruptcy court case for the District of Massachusetts had to decide whether the state homestead protection extends to the entire value of a multi-family dwelling rather than just to the apartment occupied by the debtors. The Court held that the homestead applied to the entire multi-family dwelling.Natalie Choate Comments on EGTRRA and QPRTs
Natalie Choate recently commented in a Steve Leimberg eNewsletter about the interaction of some aspects of EGTRRA (automatic GST allocation rules, loss of stepped-up basis in 2010, and new Section 121 rules) with a Qualified Personal Residence Trust ("QPRT"), as follows...IRC 401(a)(9) Regulations: 8 Questions - 8 Answers
When the IRS requested commentary on its proposed IRA regulations of early 2001, many IRA experts, including Barry Picker, complied with its request. Here are a summary of eight of his comments and the response from the IRS in the forms of its final IRC 401(a)(9) Regulations issued in April of this year:Final IRC 401(a)(9) Regs are Good News For Some; Bad News for Others
The final minimum distribution regulations issued by the Internal Revenue Service on April 17, 2002 represent good news for most taxpayers. These regulations finalized proposed regulations issued in January, 2001. The proposed regulations simplified the computation of lifetime distributions and were supposed to simplify the computation of post-death distributions to beneficiaries. At the time of the issuance of the proposed regulations, it was thought that the new rules could only help taxpayers. But Barry Picker, noted IRA expert and contributor to Steve Leimberg's Employee Benefits and Retirement Planning Newsletter, points out that for some taxpayers, there may be bad news.Eleventh Circuit Upholds Shepherd FLP Case
This FYI is an expansion of the brief FYI sent earlier regarding the Shepherd v. Comm'r case, in which the Tax Court found an indirect gift of real estate to an FLP.IRS Begins K-1 Matching Program
Earlier this year the IRS began matching K-1s from partnerships, trusts, estates, etc..., against the K-1 beneficiary's individual income tax return. The initial stage of the program was to be under the Automated Underreporter Program, in which the IRS would issue CP-2000 Letters to taxpayers who had reporting discrepancies in other areas of the return in addition to that of the K-1.The July 2002 issue of Financial Advisor magazine has an interesting article on variable life insurance policies entitled: Joseph Maczuga, "Understanding VUL Policies: Hypothetical Projections Used to Sell Them Are Misleading. Here's Why."
Three Probate & Property Articles of Interest
The July / August 2002 issue of Probate and Property magazine has three articles that may be of interest.By 2050, the Old Will Outnumber the Young
According to a report issued by the United Nations Population Division issued February 28, 2002, the number of people 60 or older will grow to nearly 2 billion in 2050, for the first time in recorded history outnumbering those who are younger than 15 -- a trend that will have an impact on economic growth, investment strategies, tax policy and elections around the world.Elective Share Claim Isn't Defeated by Prenuptial Agreement
A wife signed a prenuptial agreement that contained no specific language regarding elective share or any other rights in the other spouse's estate. After the husband's death, the wife claimed an elective share, exempt property and family allowances. The Executor denied the claims, arguing that the prenuptial agreement was a waiver of all claims and that the spouses were permanently separated at time of husband's death. The Probate Court found that prenuptial agreement's recitation that it would be sole determinant of the spouses' rights against one another's property was an effective waiver, and the wife appealed.Letter May Be Effective to Amend Trust (Goodnow v. Sullivan Case)
The facts of Goodnow v. Sullivan, a Utah Supreme Court case filed February 26, 2002, are as followsEquitable Adoption (Estate of Ford Case)
The decedent and his wife raised a foster son from the age of one and always treated him as a member of the family. While he was still a minor the foster parents indicated that they would have adopted him but for unspecified difficulties in connection with his mother, but no adoption was ever undertaken. The foster mother died, followed by the death of the only child of the foster parents, followed by the death of the foster father, who left no Will. A nephew and niece of the foster father filed a petition to determine heirship, and the foster child filed a claim of interest asserting that he was equitably adopted under state law.Successor Executor Cannot Maintain Malpractice Claim (Borissoff v. Faust Case)
The California Court of Appeals ruled, in Borissoff v. Faust, that the requirement of privity is not met by the appointment of a successor fiduciary -- the attorneys in each instance represented the individual special administrator and not the estate itself. The Court held that "The estate itself is not a legal entity capable of being a client."Medicaid Lien reduced by P.I. Attorney's Fee
The attorney for the plaintiff filed suit and negotiated a settlement of $33,000. The State Medicaid agency asserted that its $12,687 lien should be satisfied before payment of attorney's contingency fee. The Medicaid agency had written to the plaintiff asserting its subrogation rights 22 months after the injury, had corresponded again several months later, and had taken no further action when the plaintiff did not respond to its inquiries.Social Security; Medicare Insolvency Dates Extended
The Social Security trustees, in their annual report to Congress on march 26, 2002, said Social Security is expected to be insolvent by 2041, three years later than had been estimated previously.Creditor Has Burden of Proving Improper Expenditures (WW Extended Care case)
In the Indiana Court of Appeals case, WW Extended Care, Inc., v. Swinkunas (March 19, 2002) a skilled nursing home secured a judgment against a resident in one state, then domesticated that judgment in the state where resident's agents under a power of attorney were located. The nursing home then brought supplemental proceedings against the agents under the power of attorney, alleging that they had a fiduciary duty to account to the principal and that the creditor could assert that right to accounting on behalf of the principal (step into the shoes doctrine). When the nursing home deemed the accounting inadequate it sought to collect on its judgment personally from the agents, arguing that the agents had the burden of proving the accuracy of their accounting and the validity of expenditures. The trial court denied the request and the nursing home appealed.AARP Report on Health Security - Part 2
Beyond 50: "A Report to the Nation on Trends in Health Security" is the second annual report in AARP's Beyond 50 series. The report sheds a strong light on the health and health care of America's midlife and older populations. It is a comprehensive depiction of the state of health security of Americans age 50 and older, and a portrait of health and well-being, health coverage, access to care, affordability of care, quality of care, and informed decision-making.Agency under POA Does Not Raise Presumption of Undue Influence (Childress v. Currie Case)
In the Tennessee Supreme Court case, Childress v. Currie (May 3, 2002), the decedent had signed a new Will benefiting one relative and contemporaneously named the same relative as the agent in her new powers of attorney. The disinherited relative contested probate of the new Will, arguing that the agent-beneficiary was thereby placed in a confidential relationship, creating, in turn, a presumption of undue influence.Contestants Entitled to Review Ward's Report (Conservatorship of Schaeffer Case)
In the California Court of Appeals case, Conservatorship of the Person and Estate of Schaeffer (May 6, 2002), the wife of a conservatee filed a petition for removal of an independent conservator and for the appointment of herself as his successor. The court-appointed counsel objected, and filed confidential report with court detailing the conservatee's position and supporting information (including, apparently, hearsay reports of evaluators and others). The wife-contestant requested an opportunity to review the report, but the trial court refused. After hearing the court declined to remove the independent conservator, and the wife appealed.No Living Will Does Not Prevent Withdrawal of Feeding Tube (Juan-Torregoas v. Garcia Case)
The Tennessee Court of Appeals decided Juan-Torregoas v. Garcia on May 7, 2002, The case involved a patient in chronic vegetative state who was on life support and being fed via a percutaneous endoscopic gastrostomy ("PEG") tube. When the patient was moved to a hospice unit and the PEG tube was disconnected, the mother and siblings of the patient filed an action to compel continuation of artificial feedings.Spouse's Fees for Enforcement Action Payable From Estate (Hoyt v. Hoyt)
In the Florida Courts of Appeals case, Hoyt v. Hoyt (May 3, 2002) the surviving spouse requested payment of lump-sum family allowance as provided for in state law. The personal representative (surviving spouse's step-son) refused the request, and the surviving spouse filed a court action to secure payment. The court ordered "immediate" payment.Updates on HHS Nursing Home Initiative
The Administration on Aging and the Centers for Medicare & Medicaid Services ("CMS") will work with state long-term care ombudsmen to help consumers take advantage of new quality measures for nursing homes developed under HHS' Nursing Home Quality Initiative. "This new partnership will help families take advantage of our new quality information about nursing homes as they make critical decisions about choosing a nursing home," Secretary Tommy Thompson said in an HHS press release.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 2002-48 indicates the charitable mid-term federal rate under Code Section 7520 for August 2002 is 5.2%.
Outline for Proposed Split-Dollar Regulations
Here is an outline regarding the recently released Proposed Split-Dollar Regulations that you may find of interest. It was prepared by Robert S. Keebler, CPA, MST, who can be reached at the contact information below. I hope the information proves useful to you.Senate majority leader Daschle wants the Senate to consider a charitable tax bill before Congress recesses on August 2.
Two NY Times Financial Articles of Interest
The following two articles from the New York Times may be of interest to members.Prospects of a permanent repeal of the estate tax depend on the outcome of the November election. If the Democrats control one or both houses of Congress, permanent repeal is unlikely at best.
2002 VA Benefit Guide Now Available
The 2002 edition of "Federal Benefits for Veterans and Dependents" is now available.Nursing Home Litigation Costs Rise Ten-Fold Since 1990
The average per-bed cost of long-term care litigation rose to $2,360 in 2001 from $240 in 1990--a 24% annual rate of increase, according to a new study by AON Risk Consultants.Information of Use to ElderLaw Attorneys
The National Center on Elder Abuse has issued several new publications in the past few months that may be of interest to members involved in ElderLaw.Ambitious Federal Elder Justice Proposal Developed by Senator Breaux
In a landmark development, in late May Senate Special Committee on Aging Chairman John Breaux (D-LA) announced "the first-ever comprehensive federal effort to address elder abuse, crimes against seniors and to guarantee protections for every older American."Planning Opportunities in Light of State Estate Tax Decoupling From Federal Tax
Many of you have heard me ranting and raving about how state's decoupling from the federal state death tax credit system will cause a need for more and more special planning and language in the documents in the future. Steve and I just recently added some additional provisions to Article Seven of DAP 4.1 to create additional flexibility and planning opportunities.Many of you are aware that Standard and Poors began enforcing its copyright on CUSIP information about two years ago and it has become increasingly difficult to obtain information on CUSIP from free information sites.
Former A+ Insurance Company Likely Heading for Bankruptcy
If you have sold any Conseco insurance products or you have any clients who own Conseco insurance policies, you may want to advise them to review their options in the near future.The incidence of Alzheimer's Disease is expected to increase as the population of elderly grows. Early diagnosis and treatment will be the key to lessening the disease's worst effects, but, how to spot the disease before its symptoms become serious (and harm is already done) is a challenge for health professionals. A new study has determined that the best predictor of future Alzheimer's type dementia is a verbal memory test. Researchers' findings support the use of the California Verbal Learning Test (long delay recall and percent recall) as the best predictor of Alzheimer's type dementia, with executive function type measures also being predictive but less so than both the long and short delay memory tests.
Control is the Issue With Those Desiring Assisted-Suicide
Although 78 percent of the 91 Oregonians who have died by assisted suicide were enrolled in hospice programs, there is little information about the experiences of hospice practitioners with these patients. Researchers found that a very important reason for the request was to control the circumstances of death. The least important reasons included depression, lack of social support, and fear of being a financial drain on family members. Although the patients were concerned about burdening others, only 11 percent of hospice nurses rated their family caregivers as more burdened than family caregivers for other hospice patients.Taxpayers Affected by 9/11Attacks Get Extention of Home Sale Exclusion
Taxpayers affected by the September 11, 2001, terrorist attacks who sold a home before meeting the usual two-year requirements for the exclusion of gain may now qualify for the reduced maximum exclusion of gain on the sale or exchange of a principal residence.CBO Predicts Four Years of Budget Deficits
In its Sequestration Update Report for Fiscal Year 2003, the Congressional Budget Office on August 27 sharply increased its deficit forecast, projecting $157 billion in red ink this year and an additional $145 billion in fiscal 2003. Medicaid spending will rise 14 percent in fiscal year 2002 due to increased prescription drug costs and greater enrollment, while Medicare spending will increase 6.3 percent over the previous year. The agency now expects deficits every year until fiscal 2006, when the government could post a $15 billion surplus. In January, CBO projected deficits of $21 billion in fiscal 2002 and $14 billion in fiscal 2003.Today's older workers will live longer and spend more time in retirement than workers in any previous generation. This trend presents a challenge to workers and to public policy that has to date been met with analyses that, by looking primarily at household wealth and savings, address the issue only around the edges. The key question, however, tends to be ignored: will households have enough income to afford a decent standard of living in retirement? Between 1989 and 1998, a period of strong economic growth and a 248 percent rise in stock prices, the annual income that a household headed by a person approaching retirement (i.e., age 47-64) could expect in retirement rose at the average by 7 percent, to $50,000 a year. But gains for the average have not meant gains for all households. Over this same period, the share of these near-retirement households unable to expect adequate income in retirement increased.
Academic Papers on the Social and Economic Impact of Gifts and Bequests
The Center for Retirement Research at Boston College is making available the papers presented at its conference, "The Role and Impact of Gifts and Estates," held October 21-23, 2001. The conference addressed how individuals dispose of their assets in retirement and the social and economic impact of their choices.Free Publication Available on Americans With Disabilities Act
The Equal Employment Opportunity Commission has issued what it calls a "practical, reader-friendly handbook" outlining the employment provisions of the Americans with Disabilities Act. "The Americans with Disabilities Act: A Primer for Small Business" contains examples, tips, and "do's and don'ts." Resource lists are included in the handbook to help small employers recruit individuals with disabilities and obtain assistance in making reasonable accommodations.Indiana Looking to Kill Some Types of Medicaid Planning
Indiana officials are working to close loopholes in Medicaid law to stop the practice of Medicaid estate planning.IRS Wins Another FLP Victory Under IRC 2036
The IRS has scored another victory in pulling undiscounted partnership assets back into a taxpayers estate using IRC 2036 in Estate of Thompson v. Comm'r, T.C. Memo 2002-246 (September 26, 2002).State Nursing Home Care Act Claim Survives Death (Myers v. Heritage Enterprises)
A nursing home resident's legs were broken as a result of allegedly negligent transfer from wheelchair to bed. The resident's estate brought suit, including one count alleging a statutory violation of the state Nursing Home Care Act.Internet Sites for Valuation of Stock Options
Need to value your stock options for a 706?Valuable Pension Tools on the Internet
Check out these pension related tools available on the internet:Senators Say CARE Bill is Near
Sens. Rick Santorum, R-Pa., and Joseph I. Lieberman, D-Conn., said they may have developed the right formula for debate on a charitable giving tax bill, H.R. 7, that has long been stalled in the Senate. They said they are asking Democrats to support a unanimous consent agreement that would allow four Democratic amendments and one Republican amendment.
4th Circuit Holds Prenuptial Not a Waiver to Pension Benefits (Hagwood v. Newton)
In Hagwood v. Newton (4th Cir. 2002), the 4th Circuit held that a prenuptial agreement could not serve as a waiver to a surviving spouse's interest in the deceased spouse's pension benefits. A valid spousal waiver under ERISA can only be made by a SPOUSE. As the parties were not married at the time they signed the prenuptial, it was not effective to waive the surviving spouse's ERISA rights under the deceased spouse's pension plan.Estate Given Extension to Elect QFOBI Deduction
The IRS has granted an extension of time under Treas. Regs. 301.9100-1 and 301-9100-3 to make an election under IRC 2057(b)(1)(B) to deduct the adjusted value of the decedent's qualified family owned business interest.House Again Votes to Make Estate Tax Repeal Permanent
The House of Representatives again voted to make the provisions of EGTRRA permanent. The vote, which occurred on September 19, 2002, was 242 to 158, including 42 Democrats. It would eliminate the revival of the repealed taxes (sunset clause) in 2011. The bill, HR 524, has no binding effect on the Senate.Starting with 2002 tax returns, a Sch. B will no longer need to be filed detailed individuals interest and dividend earnings from various accounts and investments, unless the total interest and dividend income exceeds $1,500. This increase in the threshold for filing means that 15 million taxpayers will have one less piece of paper to file at tax time.
Starting on January 1, 2003, the standard mileage rate for purposes of computing deductions for tax purposes is 36 cents per mile. This is down from 36 1/2 cents per mile in 2002. The standard mileage rate for medical and moving purposes is 12 cents per mile, down from 13 cents -- and the charitable rate remains at 14 cents per mile.
Will Contest Tolls Statute of Limitations (Estate of Roberson case)
A California Decedent had allegedly agreed to provide home and lifetime support for his domestic partner, and had executed a Will that was purported to accomplish this result. After his death, the Decedent's mother contested the Will and ultimately prevailed in court. The domestic partner then filed a complaint seeking a constructive trust over the assets of the estate.UTMA Beneficiaries Barred by Statute of Limitations (Levine v. Levine)
In the California Appellate Court case, Levine v. Levine (October 17, 2002) a grandfather opened UTMA accounts for each of his two grandchildren over which he was custodian. Eight years after opening the UTMA accounts, the grandfather closed the accounts and then deposited the proceeds, totaling approximately $120,000, in accounts in his own name.Eleventh Circuit Finds CRT Defective (Estate of Atkinson)
In this Eleventh Circuit case, the Decedent had established a Charitable Remainder Annuity Trust ("CRAT") with annuity payments to herself for life and then too individual annuity beneficiaries, with the remainder to charities. The CRAT also provided that the individual annuity beneficiaries would take no share if they did not agree to pay the estate tax imposed by virtue of their surviving beneficial interests.Grandparent Visitation Statute Unconstitutionally Applied (Zasueta v. Zasueta)
The paternal grandfather and step-grandmother sought court-ordered visitation with their granddaughter after their son committed suicide and the son's wife (child's mother) refused them visitation. The trial court, in applying the California grandparent visitation statute, found the mother's refusal of visitation made her "unfit."Good Summary of ERISA Fiduciary Duties in DOL Brief
The U.S. Department of Labor ("DOL") has filed an amicus brief opposing the dismissal of the lawsuit brought by former participants in the Enron Corporation's Savings Plan, the Enron Employee Stock Ownership Plan and the Enron Cash Balance Plan against Enron Corporation and other defendants. The internet site "401khelpcenter.com" states that this brief can be viewed as a primer of the fiduciary duties under ERISA, as the alleged acts and omissions of Enron and the other defendants appear to implicate nearly every ERISA fiduciary duty.Two Recent SNT Cases of Interest
Here are two recent Special Needs Trust cases of interest:Revocation of Will Does Not Effect Validity of Trust (Estate of Furst v. Sunderland)
The Decedent, with the assistance of an attorney, executed an estate plan which included a revocable living trust and pour-over Will. Subsequent to the creation of the estate plan, the Decedent transferred substantially all his assets into his trust's name.Right of First Refusal Not Triggered by Intrafamilial "Sale"
In the Connecticut Supreme Court case, Webster Trust v. Roly (Conn. August 6, 2002), property owners sold a portion of their property to another party, and later gave the buyer a right of first refusal as to any bona fide offer received on the remaining property.Bank Liable for Executor's Actions (Cochran Investment Co., Inc., v. Bank of America)
In this California case, the executor of an estate pledged his share of the estate to a personal creditor. Sometime later, the executor sold the estate's real property and received proceeds by check made payable to him as executor. The executor deposited the check in the executor's personal bank account.HHS LAUNCHES NATIONAL NURSING HOME QUALITY INITIATIVE Broad Effort to Improve Quality in Nursing Homes Across the Country HHS Secretary Tommy G. Thompson today launched the national Nursing Home Quality Initiative to further improve the quality of care given to the millions of Americans who live in nursing homes. The initiative combines new information for consumers about the quality of care provided in individual nursing homes with important resources available to nursing homes to improve the quality of care in their facilities.
Charitable Donation of Automobile
The Service has issued a Revenue Ruling indicating that individuals can claim a charitable deduction when automobiles are donated to a charity's agent. Further, it gives updated guidance regarding substantiation and valuation of such a gift. The text of the Revenue Ruling follows:Salvation Navy Not A Qualified Charity
David Valfer incorporated the Salvation Navy, Inc. as a non-profit corporation under Pennsylvania law in 1976. He was its sole founder, director and officer. In 1999, the Salvation Navy filed a Form 1023, seeking recognition as a tax-exempt organization. In its Articles of Incorporation, the Salvation Navy stated one of its purposes was to "find out where one goes when he or she leaves". It also recited that its activities include the charitable work performed on a volunteer basis by David Valfer. Mr. Valfer attached several documents to the Form 1023, including citations and statements of recognition for 20 years of community service in the City of Hartford, CT. Mr. Valfer also indicated that the Salvation Navy's sole source of financial support was Mr. Valfer's SSI, Aid to the Disabled Income, Medicaid payments and food stamps.Treasury 2003 Inflation Adjustments. In Rev. Proc. 2002-70 (30 Oct 2002), Treasury has released the inflation adjustments for next year. Under existing law, the estate exemption will remain at $1 million for 2003. In addition, the gift exclusion will also remain at the existing $11,000 per donor-per donee. However, the generation skipping tax exemption will increase to $1,120,000.
Homeland Security Charitable Trust
The Homeland Security Bill includes a new type of charitable trust. The Johnny Michael Spann Patriot Trust will qualify as a new charitable entity. The trust is named after Mike Spann, who died defending freedom in the war in Afghanistan.CMS Proposes Appeals Process for Medicare Coverage Decisions
Apparently as a result of a lawsuit brought in August of this year, the Centers for Medicare & Medicaid Services ("CMS") has now proposed a rule that would establish a process for beneficiaries to appeal local or national Medicare coverage determinations. Under the proposal, an administrative law judge would initially review appeals of local coverage determinations. The HHS Departmental Appeals Board would review appeals from national coverage determinations and from ALJ decisions on local coverage determinations. The board's decisions could then be appealed to federal court.State Not Allowed to Collect Medicaid Claim From Relatives (Missouri DSS v. Brundage)
A decedent left a small estate of approximately $40,000. A relative filed an affidavit indicating the estate was small, and that he would distribute the assets to the heirs. The Missouri Department of Social Services (MDSS)then filed a claim with the probate court seeking payment of approximately $40,000 for health care services provided to the decedent. Negotiations ensued, but no resolution was reached. The relative distributed the assets to the heirs without making payment to MDSS.The Service has released a Notice (2002-124) providing relief to taxpayers in areas affected by the November 10th tornadoes. Taxpayers with filing deadlines between November 10 and January 10 are extended until January 10, 2003.
Social Mobility and the Estate Tax
There is an interesting editorial in the NY Times concerning social mobility and the estate tax. The article follows:Attorney Disciplined For Failure to Include Special Needs Provisions in Will
An attorney in Maine prepared a Will for an elderly client naming the client's sister as the primary beneficiary. At time of execution the sister was in a nursing home, with care being provided by Medicaid. The will drafted by the attorney failed to include any supplemental needs trust provisions, and the attorney did not advise his client of the effect of a bequest to her sister while she was receiving Medicaid benefits.IRC 7520 Rate Falls to Lowest Level Ever
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 2002-74 indicates the charitable mid-term federal rate under Code Section 7520 for November 2002 is 3.6%. This is the lowest level ever - a 0.6% drop from the October 2002 rate of 4.2% and full 1.0% decrease from the September 2002 rate of 4.6%.More States Decoupling from Federal Estate Tax System
Thanks to member Coury Macdonald for letting me know of the recent emergency legislation passed to decouple the District of Columbia from the federal estate tax system starting in 2002. This continues the steady stream of estate tax "decoupling" laws to emanate from many state legislatures. Here is an update on the current status of the trend. In it some planning approaches that are designed to preserve flexibility in the face of uncertainty are discussed.Conseco Files for Bankruptcy Protection
As predicted in an FYI earlier this year, Conseco, the parent company of several insurance companies that were large issuers of annuities and long term care insurance, filed for bankruptcy this past week. An article from the New York Times on this bankruptcy filing follows:Claim of Breach of Fiduciary Duty Does Not Violate No Contest Clause (Est. of Hoffman)
California decedent's will provided that anyone contesting the will would receive $1 and no more -- the residual beneficiary of the will was a living trust benefiting five children. Three years after her death, two of the beneficiaries of the decedent's estate sought court authorization to pursue removal of three co-executors and trustees for alleged breaches of fiduciary duty. The trustees were alleged to have paid themselves virtually all the income of a wholly-owned family business as wages, and the executors were accused of failure to seek removal of the trustees (who were the same three children of decedent). The Probate Court refused authorization to pursue the action against the fiduciaries, finding the proposed action was frivolous and would violate the trust's no contest clause.Schizophrenic PLRs on Allocating GST Exemption: PLRs 200213013 and 200218001
H creates an ILIT and contributes $49,000 per year to the trust. W, his wife, has a $5,000 Crummey withdrawal power. H's children, C1 and C2, each have a $22,000 Crummey withdrawal power. H and H elect gift-splitting.Fifth Circuit Slaps IRS (Estate of Dunn v. Comm'r)
At her death Beatrice Dunn owned 62.96% of Dunn Equipment Inc., a 42 year old closely held corporation that owned and leased heavy equipment used in the petroleum refinery and petrochemical industries. The estate reported the value of the partial interest in the corporation at $1.6 million. The IRS asserted that the proper valuation was $2.2 million.H.R. 5008, introduced by House Ways and Means Committee member Earl Pomeroy (D - N.D.), would raise the estate tax exemption amount to $3 million after 2002 and $3.5 million after 2008. EGTRRA would be repealed and they were be no plan to implement carryover basis for inherited assets. There would however, by new valuation rules regarding the transfers of non-business assets.
Senate Votes for Permanent Exemption for Payments to Victims of Nazis
The Senate, by unanimous consent, approves two bills (S. 2577 and H.R. 4823) that would make permanent an exclusion from federal income tax for restitution received by victims of the Nazi regime. The virtually identical measures would repeal the sunset of the Economic Growth and Tax Relief Reconciliation Act of 2001 with respect to the exclusion for such payments. The House approved H.R. 4823 by voice vote in June, so that measure can now move to the president's desk for his expected signature.Transfer from Entireties Tenancy to Sole Name Does Not Defeat Tax Lien
In U.S. v. Patej, the US Dist. Ct. for the Eastern Dist. of Michigan ruled that property purchased by a physician and placed in his and his wife's names as tenants by the entireties remained subject to a federal tax lien for the physician's unpaid taxes. This was the case even after the wife transferred the property to her sole name pursuant to a divorce judgment following the physician's flight from the country.Facility Liable for Patient's Fall (Georgian Court Nursing Center v. CMS)
In Georgian Court Nursing Center v. CMS, 2002 WL 1804679, 2002 HHSDAB LEXIS 83, CCH Medicare and Medicaid Guide par. 120, 401 (HHS Dept. Appeals Board 2002), a nursing facility was found out of compliance during a survey and three revisits over a six month period for failure to abide by a physician's order to use a two-person lift in transferring a patient. A facility employee tried to life a woman without help and the woman fell, breaking her arm.Effective January 1, 2003, the minimum and maximum Community Spouse Resource Allocation (CSRA) for spouses of institutionalized individuals will increase as follows:
Medicare Proposes Major Change to Appeals Process
Section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 amends section 1869 of the Social Security Act to substantially revise the Medicare claim appeals process. The statute mandates a series of structural and procedural changes to the existing appeals process, including:Medicare Proposes Major Change to Appeals Process
Section 521 of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 amends section 1869 of the Social Security Act to substantially revise the Medicare claim appeals process. The statute mandates a series of structural and procedural changes to the existing appeals process, including:Two Views on the Benefits of Long-Term Care Insurance
The benefits of long-term care insurance are many and varied, and reach beyond policyholders themselves to include family caregivers. Public programs benefit as well, enjoying reduced expenditures on long-term care. The Health Insurance Association of America has released a white paper, which summarizes the major advantages of long-term care insurance for policyholders, caregivers, and public programs. These findings are based on analyses of empirical data collected over the last five years.Will Successfully Challenged (Estate of Evans)
In the Mississippi Court of Appeals Case, Estate of Evans (November 12, 2002), a long time companion of the testator located and consulted with an attorney about preparing a will for testator, who was then in the hospital. The attorney indicated that he could not go to the hospital and suggested that the companion have the testator write out his wishes and bring them to attorney. Several days later the companion returned to the attorney's office with the handwritten instructions, which she indicated had been prepared by testator.Bush's Budget Adviser Says Deficit Is Worsening
According to a New York Times article, the President's budget chief is now forecasting budget deficits considerably larger than previously anticipated. This may short circuit attempts for large tax cuts or making permanent the cuts made as part of the 2001 Act.PI Claimant Can Amend Complaint to Name Estate as Defendant (Pierce v. Johnson)
In the North Carolina Court of Appeals case, Pierce v. Johnson (November 19, 2002) the Decedent had been involved in an automobile accident eighteen months before his death (the death was from causes unrelated to the accident). The Decedent's son was appointed as the executor of his estate and he published notice to creditors. Six months after the creditor's claims period expired, the other driver filed a personal injury action naming the Decedent individually and served his son at the address of the father. Apparently because the father and son shared a middle name, and because the son's attorney never indicated that the defendant had died, the plaintiff did not seek to amend her complaint to name the estate of the Decedent.Beneficiary of Unexecuted Will Has No Cause of Action Against Attorney (Sisson v. Jankowski)
The Federal District Court certified a question of law as to whether an attorney might be liable for his negligent failure to arrange for timely execution of a will. A client had given the attorney instructions to prepare a will leaving his entire estate to one brother and disinheriting his other brother.Discovery Orders Denied to Guardianship Petition (In Re Hyman)
A son filed guardianship against his mother, alleging his sister's influence as a cause of their mother's alleged paranoia and delusions. The son sought an order compelling depositions of his mother and sister so that he could determine her medical condition, the names of treating physicians and nature and extent of any asset transfers made by the mother. The mother objected and the court conducted an evidentiary hearing, during which the mother testified that her son's motivations were based on her having testified against him in a landlord / tenant dispute (the son, an attorney, rented space in a building owned by his mother). The son, in turn, testified that mother was delusional, believing him to be involved in organized crime and wanting to kill her.Separate Maintenance Order Does Not Terminate Wife's Rights (Estate of Carlisle)
The decedent and his wife had secured a decree of legal separation and an order compelling spousal maintenance payments to the wife. All the spouses' assets were divided as part of the decree. The decedent then changed his will to disinherit the wife, and he died a little more than a year later.Estate Tax Calculation for victims of terrorist attacks or combat-zone deaths
The Service just released Rev. Rul. 2002-86 which provides sample estate tax calculations under I.R.C. Section 2201, amended by Victims of Terrorism Tax Relief Act. This ruling is helpful if you have an estate tax return to do for someone that was either 1) a victim of a terrorist attack or 2) was a member of the U.S. military who died in a combat-zone related death.IRS Rejects Valuation Discounts for IRAs
In TAM 200247001, the Service rejected estate tax valuation discounts for income taxes payable on IRAs and for the lack of marketability inherent in the asset.Long-Term Care Insurance Premiums Likely to Increase
The following information is from J.J. MacNab, owner and insurance analyst at Insurance Barometer, LLC, of Bethesda, MD:More on Revenue Ruling 2002-62
It seems that Revenue Ruling 2002-62 raises as many questions as it answers with regard to substantially equal periodic payments from a retirement plan or IRA in order to avoid the IRC 72(t) penalties. Below is an article from Robert S. Keebler, CPA, MST of Virchow, Krause & Company, LLP, which might clear up some questions your clients' might raise under certain circumstances.Life tenant can be S Corp shareholder
In Private Letter Ruling 200247030 the Service has ruled that a life tenant holding stock under a life estate qualifies as an eligible shareholder for S corporation purposes.Hospice Care is Growing Industry
Since the first U.S. hospice opened in the 1970's, hospice care has grown into a multibillion dollar industry. In 2000, more than 3,100 programs served roughly 700,000 patients, and the Medicare benefit, which pays for the majority of hospice services, is expected to reach an estimated $3.8 billion in 2002.In his speech on November 22, 2002, Dan Crippen, the Director of the Congressional Budget Office, said, "the Congressional budget process is dead." Noting that the modern budget process began after Congress enacted the budget law in response to the Nixon administration's impoundments, Crippen said that the pendulum has swung back to where the President now controls the budget again. How the federal budget is enacted is an important determinant of what legislation gets enacted.
Survey Says One Fourth of Americans Say Its OK to Defraud Insurance Companies
Nearly one in four U.S. adults say that overstating the value of claims to insurance companies is acceptable, and more than one in 10 say they approve of submitting insurance claims for items that were not lost or damaged or for treatments that were not provided, according to a survey released today by Accenture.Attorney Testifies Regarding Will Ambiguity (Est. of Lord)
The residuary provision of decedent's will created a trust for testator's husband, if he survived her. In event husband predeceased her, an alternate residuary clause directed distribution of the remainder to a "trust," even though no trust was created if husband predeceased. When the testator died a few months after her husband, her intestate heirs argued that there was a partial intestacy because there was no provision for distribution of the estate itself. The Probate Court accepted the testimony of the drafting attorney and his secretary to the effect that they had introduced the mistake by use of the "cut and paste" utility of the law office's word processing program and the Probate Court ordered that the will be read as if the provision was for distribution of the "estate" rather than "trust."Senator Hutchinson Reintroduces Charitable IRA Rollover Bill
U.S. Senator Kay Bailey Hutchison (R-TX) has re-introduced bipartisan legislation to allow donors to roll over assets from an Individual Retirement Account, or IRA, to a charity without incurring a tax liability. Senator Hutchinson said, "Charitable giving shouldn't be taxable event. Unfortunately, that's exactly what happens under current law if a donation comes from an IRA. This bill will encourage a valuable new source of American philanthropy." Senator Hutchinson went on to say, "one of my priorities has been to promote charitable giving and expand the role charities and faith-based institutions play in addressing social problems in the United States. This bill will make it easier for Americans to help those in need."Undue Influence Invalidates Will (Estate of Masterhan)
A decedent died at age ninety-two, leaving a will directing the distribution of his entire estate to his caretaker. The decedent's sister objected to the will on grounds of lack of testamentary capacity and undue influence. The District Court found that the will was the product of undue influence and sustained the sister's objection.Elective Share Is Part of Spouse's Estate (Gallagher v. Evert)
In the South Carolina Court of Appeals case, Gallagher v. Evert, a husband died testate in January 1998. His Will left his entire estate to his son from a prior marriage. His widow elected against her husband estate for her statutory share in May 1998.Life Insurance Rider Payable to Owner Despite Settlement Agreement
A decree in a dissolution proceeding awarded each spouse his or her own life insurance policies. One policy on the ex-husband's life (and therefore awarded to him) included a rider on his ex-wife's life. After the marital dissolution was final, the husband continued to pay all the premiums on the policy and its rider on his ex-wife. On the ex-wife's later death, the ex-wife's estate made a claim for the insurance proceeds, citing both the decree language and the state law which invalidated beneficiary designations on a spouse's property upon dissolution.Constructive Trust Imposed (McCord v. Spradling)
In the Mississippi Supreme Court case, McCord v. Spradling, a prospective husband and wife executed a pre-nuptial agreement providing that each party retained the power to dispose of all of his or her property and that neither would make any claim against the other's estate (this was to be the second marriage for both parties). Husband's first wife had died prior to this marriage, but his benefits under the Federal Employees Group Life Insurance Act (FEGLIA) still named his first wife as beneficiary. Upon his later death, FEGLIA policy rules dictated that in the absence of a valid beneficiary designation the entire policy would be payable to his surviving spouse (the second wife). The husband's executrix sought imposition of a constructive trust on the FEGLIA policy proceeds, which relief was denied. The Mississippi Court of Appeals affirmed the denial for relief.Governors Claim "Worst Budget Crisis Since World War II"
A report from the National Governors Association concludes that states are "facing their worst budget crisis since World War II." Taken together, states have a cumulative budget shortfall this year of nearly $50 billion. Toping the concern is Medicaid funding. The state lawmakers will press for federal bailouts, but they will find a difficult climate in deficit-ridden Washington. Every state but Vermont has laws requiring it to keep a balanced budget. The report warns that major budget cuts will be made in 2003.Tax Court Penalizes Attorney for Frivolous Position
In Takaba v. Commissioner, 119 T.C. 18 (December 16, 2002), the Tax Court, in an opinion written by Judge Halpern, held an attorney liable for penalties and fees. The client had brought a case with frivolous arguments which the attorney continued to pursue when he began his representation. The taxpayer claimed that he had no income that was taxable because of a section 3401(a) loophole. He further claimed that he was not required to file Form 1040 for 1996 because it lacked the proper OMB number.Victims of Nazis Restitution Not Taxed
President Bush signed H.R. 4823 that makes permanent an exclusion from federal income tax for restitution received by victims of the Nazi regime. The new law repeals the sunset of the Economic Growth and Tax Relief Reconciliation Act of 2001 with respect to the exclusion for such payments.The Service just released Revenue Ruling 2003-5 providing the applicable federal rates for January 2003. The section 7520 rate to be used to value remainder and life estates will be 4.2%. This is up slightly from December's 4.0% and November's low of 3.6%.
Unsigned Mediation Agreement Not Enforceable (Laska v. Laska)
In this Wisconsin case, grandchildren brought suit against their grandfather's widow, alleging intentional interference with anticipated inheritance. In mediation proceeding the parties agreed that the widow would pay $135,000 to the grandchildren and would relinquish any interest in other assets.An elderly woman signed a codicil to her will leaving a specific annuity to her housekeeper, and also signed a change of beneficiary form for the annuity. The attorney gave the original beneficiary change form to the elderly woman, who did not send it to insurance company.
Paying Reasonable Compensation to S Corp Shareholder-Employee
From the IRS Service Centers:An S Corporation must pay reasonable compensation (subject to employment taxes) to shareholder-employee(s) in return for the services that the employee provides to the corporation, before a non-wage distributions may be made to that shareholder-employee. THIS ISSUE HAS BEEN IDENTIFIED AS AN AREA OF NON-COMPLIANCE AND WILL RECEIVE GREATER SCRUTINY IN THE FORESEEABLE FUTURE.
IRS Indicts Offshore Guru Jerome Schneider
The U.S. Attorney Kevin V. Ryan and IRS Criminal Investigation Director of Field Operations Richard Speier, jointly announced the indictment yesterday of Jerome Schneider, age 51, and Eric J. Witmeyer, age 48, on one count each of conspiracy to defraud the Internal Revenue Service, fourteen counts each of wire fraud and eight counts each of mail fraud. The two were indicted by a federal grand jury in San Francisco in connection with their alleged marketing and sales to U.S. taxpayer investors of offshore international banks or corporations and causing those entities to be "decontrolled" which is a process used by the defendants to attempt to conceal the U.S. taxpayer investor's ownership in the offshore bank or corporation.IRS Underpayment Rates Lowest Ever
The interest rates the Internal Revenue Service uses for underpayments and overpayments over taxes for the calendar quarter beginning January 1, 2003 will drop by one percentage point in each category to:IRS Offers New Toll-Free Numbers to Assist Taxpayers
The Internal Revenue Service has announced two new toll-free telephone numbers to provide individual and small businesses with better service. These numbers became operational on December 2, 2002.Taxpayer Advocate's Report Proposes Regulation of Preparers
In his report, National Taxpayer Advocate Olson has asked Congress to authorize the IRS to regulate federal tax return preparers. Under the proposal, any paid return preparer who is not an attorney, certified public accountant, or enrolled agent and who prepares more than five returns would have to register with IRS and pass one or more tests of their tax knowledge developed by the service. The proposal is contained in the national taxpayer advocate's fiscal year 2002 annual report to Congress. The report details numerous legislative recommendations to improve taxpayer rights.Estate May Not Pursue Malpractice Action Against Attorney (Rutter v. Jones, et al)
A testator intended to leave "about $5,000" each to two housekeepers, with ten percent of the residue of her estate to be left to various charities. As drafted, the testator's will and trust left the determination of the amount to be left to the housekeepers to the discretion of her trustee. The decedent's charitable gifts did not qualify for the charitable deduction on the estate tax return (since the amount of the charitable bequest could not be determined at the time of her death), and, as a result, her estate paid an additional $663,996 in estate taxes.Nursing Home Arbitration Clause Not Enforceable Under Federal Arbitration Act
When a nursing home resident sued the home for negligent care, the nursing home attempted to invoke the mandatory arbitration clause included in the admission contract signed by the resident's son. The trial court struck the nursing home administrator's affidavit describing interstate nature of the nursing home business, finding that the resident did not have personal knowledge of the arbitration clause in the contract.Failure to Order SNT Not Error (Matter of Mental Hygiene Legal Services fbo Thomas C.)
The long-time guardian of the property of a developmentally disabled adult secured the court's approval to pay $30,000 (of a total estate of $228,000) for day care services. The guardian subsequently resigned.A growing body of case law deals with the vagaries of drafting Special Needs Trusts. An estate planning / elder law practice that includes the drafting of SNTs cuts across a number of areas of law, including personal injury, tax, public benefits, Medicare, Medicaid, trust law, and even estates and liens. A knowledge of public benefits laws, especially Medicaid and SSI, is critical in order for an attorney to handle SNT cases.
Medicaid Recovery Claim Against Surviving Spouse's Estate (Estate of Gullberg)
A husband deeded his joint tenancy interest in family home to wife. He then became Medicaid eligible. Husband died in 1994, leaving his surviving wife. Six years later the wife died still owning the house and having never received Medicaid benefits). The Minnesota Medicaid agency sought to collect recovery of husband's Medicaid costs.Trust and Estates Magazine Articles of Interest
The following articles from the March 2003 and April 2003 issues of Trusts and Estates magazine may be of interest.Undisclosed Conditions Invalidate Life Ins Application (Est. of Bennett v. Crownlife Ins)
The applicant for a life insurance policy had seen the doctor twice, complaining of slurred speech, "fullness" in his ear and other symptoms. The doctor determined that patient was probably suffering from multiple sclerosis or amyotrophic lateral sclerosis and referred him to a neurologist, but did not tell him about the possible diagnosis (because of the seriousness of the diseases).Medi-Cal Not Entitled to Payment of Lien Against P.I. Award (Garcia v. County of Sacramento)
The plaintiff, with blood alcohol level of .23, fell from a bridge and was catastrophically injured. He sued Sacramento County, which owned and managed the bridge, and secured a $7.5 million judgment [ANOTHER UNBELIEVABLE JURY AWARD], reduced for his own 80% responsibility for the injuries to $1.5 million [AT LEAST THEY GOT THAT PART RIGHT].Bene May Not Sue Attorney for Personal Rep for Negligence (Allen v. Stoker)
The court had two competing wills offered for probate, and it found one to be the decedent's last will and appointed the personal representative nominated in that will. However, the court also ordered that the administration of the estate should be supervised, and ordered the attorney for the personal representative to jointly sign all estate checks.No Summary Judgment on Heirs' Claim to Adverse Possession (Ponder v. Ponder)
A decedent left a surviving spouse and several children by that spouse, plus one child from a prior marriage. The surviving spouse filed for summary estate administration proceedings, alleging that she was sole heir. Under Georgia law, the child from a former marriage was entitled to a share of the estate. The surviving spouse deeded the property to her children.A hospital filed a claim against Medigap insurer, arguing that the policy and the promotional literature distributed with it obligated the insurer to pay prevailing rates for covered services, not the rates that Medicare would have paid for the same services.
The Service has announced that it will renew a program that matches information from Schedules K-1 filed by pass-through entities (partnerships, S corporations, and trusts) to what the partners, shareholders, and beneficiaries report on their own returns.
AFR and 7520 rate for May 2003
The Service has released interest rates for May. The new rate under Section 7520, used to value life estates, remainder interests, etc., is 3.8%. The revenue ruling which gives all the new applicable federal rates follows:Nursing Home Required to Disclose Info on Employees (Alterra Healthcare v. Estate of Shelley)
A nursing home resident's leg was trapped in the footboard of her bed, resulting in her being suspended upside down for six to eight hours before discovery. After her later death her executor brought suit and, in the course of discovery, requested release of employee records. The executor acknowledged that information such as addresses, telephone numbers and social security numbers could be redacted, but insisted that it was entitled to other information about non-party employees to permit it to determine whether adequate training, supervision and hiring practices had been employed.President Can't Count on Democrat Support for Economic Stimulus Package
The following is from the January 9, 2003 TaxWatch Bulletin by RIA:The following is a list of phone numbers and websites that the IRS Ogden Utah Service Center has published for assistance to attorneys and other tax professionals.
Frivolous Tax Appeals Can Bring Stiff Penalties
The Tax Court states that frivolous cases waste its limited resources and delay the resolution of other taxpayers genuine controversies. Taxpayers who would abuse those rights to stall tax collections could get stiff penalties, up to $25,000.New Form to Report Suspicious Activity
Businesses that issue or redeem money orders or travelers checks must use a new form to report suspicious activities to the IRS.Undue Influence Not Shown in Establishment of Joint Tenancy Bank Account (Dickinson v. Dickinson)
The decedent had executed a will in 1977 devising her estate equally among her niece and four nephews. In 1991 one nephew became concerned about her condition and asked another nephew to act -- the result of the second nephew's actions was a new durable power of attorney and a change of six certificates of deposit into joint tenancy with the second nephew.Devise of Land Includes Claim for Environmental Damages (Estate of Wright)
The decedent's will left an identified parcel of real property to her nephew, and the residue of her estate to two other persons. At the time of making the will (and at the time of her execution of an unrelated codicil), the decedent had been one claimant in an action against an oil company for damages resulting from a brine spill on the property. The residual devisee(s) filed a petition for declaratory judgment, seeking a declaration that the cause of action against the oil company was personal property and passed according to the residuary clause of decedent's will. The specific devisee objected, and the trial court ruled that the environmental damage claim was part of the real estate.Long-Time Companion Claims Against Decedent's Estate Based on Palimony (Matter of Roccamonte)
The decedent, married with children, had lived with a woman other than his wife for 25 years at the time of his death. The couple had begun an affair a decade before that, and the companion had moved across the country to get away from her lover. The decedent had promised her that he would divorce his wife and marry her, and that he would provide for her financially for the rest of her life. Based on that promise she returned to him, divorced her husband and moved into an apartment with him.A complaint was filed by elderly woman in 1997 (with five amendments naming additional defendants and causes of action) alleging violations of fiduciary duty, theft, conversion and unjust enrichment dating from transactions as early as 1992. The complaint alleged that the plaintiff was unaware of the misappropriations until 1995, within the four-year statute of limitations applicable to most of the counts of the complaint.
Estate Tax Policy and the Politics of Repeal
There was an interesting article in the Washington Post regarding estate tax policy and the politics of the repeal movement. It gives a good background on both sides of the repeal movement.Kansas Senate Approves Repeal of State Inheritance Tax
The Kansas State Senate voted on measure SB 94.Arkansas Adopts Federal Phase-out of Estate Tax
Arkansas Senate Bill 60, signed into law by Governor Mike Huckabee (R) as Act 645, adopts the federal phaseout of the estate tax for states, which is based on the state death tax credit allowable against the federal tax.Will Found Invalid After Unusual Trial (Estate of Volmer)
The son of decedent contacted the lawyer who had prepared the decedent's previous will and told him about changes she allegedly wanted made. The lawyer prepared a new will without speaking with the decedent, and delivered the original document to the son with instructions as to how to have it signed and witnessed. The mother signed the will in the hospital a month later, and died one month after that.The deceased husband's estate was left in trust for his second wife, with the trustee given the discretion to invade the trust principal for her "health, support in reasonable comfort, education, best interests and welfare." The second wife had suffered a debilitating stroke and was moved to another state and then on to a nursing home. The trustee, who was also a child of decedent's from his first marriage and one of the two remainder beneficiaries to the trust, refused to make any discretionary payments without a detailed accounting of the widow's financial circumstances. The widow sued to compel distributions from the trust and the nursing home where she resided was allowed to intervene.
Income Beneficiaries Not Entitled to Force Replacement of Trustee (Est. of Berthot)
A grandmother's trust provided income to child until her death, and then income to two grandchildren or the surviving grandchild until the death of both, whereupon the trust will end and distribute to great-grandchildren. On the child's death in 1994, the grandchildren began to challenge the bank trustee, alleging that bank's investment policies produced inadequate income and excessive fees. When the bank trustee filed a petition for approval of its account, the grandchildren sought the removal of the trustee and its replacement by a family friend.Prenup Agreement Interpreted After H's Death (Est. of Blumenthal)
The decedent and his surviving spouse had executed a prenuptial agreement with two provisions which became problematic. One required the decedent to maintain a certain life insurance policy with a face value of $200,000 naming his wife as beneficiary, or she would be entitled to that amount from his residuary estate. The second provision prohibited husband from making lifetime gifts to his own children or grandchildren without making similar gifts to his new wife's sons. After his retirement husband stopped making payments on the life insurance policy, with the result that the benefit had dropped to $38,700, although other policies naming wife as beneficiary totaled $114,000. Each year until three years before his death husband had made substantial gifts to his children and grandchildren, but no gifts to his stepsons.Lawyer's Liability for Fiduciary Breach Discharged (In re Baylis)
A client named her lawyer and her daughter as successor co-trustees of her living trust. The trust held several apartment buildings, which the daughter managed for a fee. The daughter also lived in one apartment rent-free, and the trust paid most of her living expenses. The daughter refused to cooperate in the sale of any of the apartments, and the lawyer failed to secure her cooperation or seek her removal. Ultimately, other income beneficiaries sought the removal of the daughter and the lawyer as co-trustees, and secured a probate court judgment against each for breach of fiduciary duty in the administration of the trust.Articles of Interest in March/April 2003 Probate and Property Magazine
The March / April 2003 issue of Probate and Property magazine has the following articles that may be of interest:Appointment of Guardian Ad Litem Requires Notice and Hearing (In re Joann E.)
A grandmother, although mentally ill, HIV positive and a hepatitis patient, had been caring for her granddaughter for several years and had been appointed as the granddaughter's guardian ad litem (apparently in pending juvenile proceedings). After the grandmother's brief hospitalization, new dependency proceedings were initiated against granddaughter, and the court on its own motion appointed both an attorney and a guardian ad litem for the grandmother, without either giving her notice or conducting a hearing on the need for a guardian ad litem -- in fact, the record contained no indication of the actual appointment of a guardian ad litem, but merely the appearance at the next hearing of a guardian ad litem on her behalf.Probate Court Lacked Jurisdiction to Order Lot Line Adjustment (Dabney v. Dabney)
A mother and her daughter lived next door to one another and were both beneficiaries of two separate trusts created by their respective husband and father at his death. The trusts owned fractional shares of the two beneficiary's homes, and the daughter owned another fraction of her home outright. The daughter argued that mother, as trustee, had failed to act appropriately in the division of the deceased husband / father's estate partly because one of the residences encroached on the lot containing the other residence. The daughter filed a petition for removal of the mother as trustee and to compel an accounting. The mother responded that prior to appointment of a new trustee daughter should be compelled to sign a lot line adjustment to remove the encroachment. The probate court found that the mother had not misbehaved, but that she should be removed because of the friction between the beneficiaries, and ordered the daughter to sign the lot line adjustment documents.Husband, facing significant drug charges, disappeared in 1989 leaving notes describing how he would become a fugitive. Shortly afterward wife divorced husband, in the course of which she signed an affidavit that he was a fugitive.
Decedent's Siblings Permitted to Seek DNA Testing of Putative Child (Matter of Tytanic)
The decedent's common-law wife had delivered a child during their relationship in 1974. The decedent was listed as father on the child's birth certificate. Two years after the couple divorced, the decedent instituted a proceeding challenging the paternity, resulting in an order that no further notice would be required if and when the child's mother sought adoption of the child by her new husband, and acknowledging that paternity was in question.Revisiting America's "Aging Crisis"
In 2001, American Association of Retired Persons (AARP) released a report entitled "Global Aging: Achieving Its Potential." It argued that the increase in life expectancy over the past century represents a remarkable success story. Although an aging world poses real challenges to income security, health, and long-term care programs, the report argued that the challenges are manageable if institutions and individuals act in a timely fashion to deal with them. The report suggested a number of strategies to help governments, employers, and individuals adjust to an aging world.During his lifetime, decedent, a lifelong smoker, had received $169,765 in care from the New Hampshire Medicaid agency. Decedent died in December 1997. Her only remaining asset was her home, which was subject to probate proceedings. The New Hampshire Medicaid agency filed a claim against her estate. Meanwhile, New Hampshire (along with a number of other states bringing similar actions) had recovered billions in payments from several tobacco companies by alleging, among other things, that the state's Medicaid costs were impacted by the illnesses caused by smoking. While numerous courts have relied on federal statutes to prevent Medicaid patients from claiming any portion of the settlement proceeds, the tactic in this case was to argue that New Hampshire's claim was based on a statutorily-inferred assignment of the decedent's right of action, and the claim against her estate should be reduced accordingly. The Probate Court dismissed the estate's petition.
Nursing Home Quality: Better Care Through Better Staffing
This Alliance for Health Reform and Commonwealth Fund briefing examines nursing home quality from the perspective of better care through better staffing. Discussion focuses on how important to quality are staff numbers, skill levels, morale and turnover, what can be done to staffing levels and training to improve overall quality, who can best drive positive change in the long-term care workforce, how new programs influence nursing home quality, and what role will government play in maintaining quality standards and improving staffing ratios.A Test for Independent Living, A Tool to Screen for LTCI Eligibility
LTC Partners has developed an informal guideline, the "Independent Living Test," for long-term care insurance agents to use. The guidelines are tools that can enable agents to be a resource to their clients or prospective clients, the company says. If a prospective client has symptoms listed in the guidelines, such individuals would not likely be eligible for LTC insurance. According to the guidelines, the questions can be used to determine whether a person is having difficulty in performing everyday activities. The results may reveal whether the family member can live independently or whether intervention is necessary.Pension Crisis Will Worsen in 2003
The corporate pension crisis is expected to get much worse in the next year or so as the nearly three-year bear market has forced many companies to make contributions to their defined-benefit plans to cover shortfalls and comply with federal laws that protect workers' pensions. In 2002, about 30 percent of the plans will require contributions, according to a Watson Wyatt analysis of the financial statements of some of the country's biggest companies. This figure, though, could more than double to 65 percent in 2003 if current conditions don't improve. This compares with just 15 percent of employers that made pension plan contributions in 2000 and 25 percent in 2001.Profiles of Long-Term Care Across Various States
Comparable state-level and national data for over 70 indicators, which are otherwise difficult to obtain from a single source, may be found in this snapshot of the long-term care landscape in every state and the District of Columbia.Landmark Study on Elder Abuse Released
The National Research Council book on elder abuse and neglect has been released. This 552-page study, "Elder Mistreatment: Abuse, Neglect, and Exploitation in Aging America," was commissioned by the National Institute on Aging / National Institutes of Health (NIA/NIH) to establish a national research agenda in the area of elder mistreatment. It represents the latest thinking of the best scholars and practitioners in the field.A plaintiff sued hip prosthesis manufacturer for products liability and settled for $256,000 with no itemization of the basis for the settlement. Medicare, which had paid over $140,000 in medical expenses in connection with plaintiff's hip surgery, submitted a claim against the lawsuit proceeds. When settlement proceeds were distributed without satisfying Medicare's claim, Medicare filed lawsuits against the prosthesis manufacturer (from whom it sought double damages), the plaintiff and the plaintiff's counsel seeking its recovery from the settlement proceeds. Medicare cited the "Secondary Provider" statute and insisted that it creates a right in Medicare to secure reimbursement from personal injury, products liability and any other tort recovery.
The Service has released the June 7520 rate of 3.6%. The Applicable Federal Rates for other purposes also are listed below.
A patient, age 81, was fatally injured while under anesthesia and died without ever regaining consciousness. The estate of the patient brought suit for wrongful death (for benefit of surviving children) and also for patient's own injuries. The trial court awarded $125,000 to each child for wrongful death, over $45,000 for medical and funeral bills, and $450,000 to the estate for patient's "loss of enjoyment of life." Defendant appealed only the award for the patient's own injuries.
IRS Small Business Resource Guide CD
The IRS is proud to announce the availability of its new Small Business Resource Guide CD-ROM for 2003. It has a new look and enhanced navigation features, and is now available for order from the IRS website.Bill Introduced for Above-the-Line Deduction of LTC Premiums
Insurance trade groups, health care trade groups and groups representing older Americans are supporting a bill that would create an "above-the-line" income tax deduction for individual long-term care insurance premiums. The bill, introduced by Nancy Johnson, (R-Conn.) and Earl Pomeroy, (D-N.D.) would start by offering a 25% LTC insurance premium deduction. If enacted as written, the bill would phase in a 100% deduction by 2008, according to a summary released by Johnson and Pomeroy.Kentucky Changes Medicaid Rules Effective June 1, 2003
The Kentucky Community Spouse Resource Allowance, or CSRA, currently $90,660, will become one-half of the couple's combined countable resources up to the maximum allowance of $90,660. The minimum CSRA will be $20,000.Congress Approves $350 Billion Tax Cut; Estate Tax Not Touched
On May 23, Congress approved a $350 billion tax cut that proposes to reduce but not eliminate the tax on dividends. Vice President Cheney cast the deciding vote in an evenly divided Senate hours after the House had passed the package on a 231- 200 predawn vote. The Senate vote was the final step for a bill that would represent the third-largest tax cut in U.S. history. President Bush is expected to sign the bill the week of May 26.Split Dollar: Private Boon or Bust
The following article deals with Split Dollar after the proposed regulations from a salesman's perspective.Oklahoma Bid for 'Pickup' Estate Tax Status Dies in House
On April 21, Oklahoma state Rep. Don Armes (R) withdrew from the floor of the State House an amendment that constituted the latest attempt to make Oklahoma a "pickup" state for estate tax purposes.Need a Copy of Your Tax Return Info?
People may need a copy or transcript of their tax return for a variety of reasons; for example, to give to their mortgage lender or educational institution. More information on options, how to get copies, and the request form (Form 4506) is available at:IRS Releases Guidance on Terminating IRC 645 Election
Notice 2003-33 provides guidance regarding the determination of the applicable date that terminates the election period under IRC 645 for trusts and estates of decedents dying before December 24, 2002.Illinois to Decouple from Federal Estate Tax System
The bill to decouple from the Federal "Pick-Up" Estate Tax system has passed the Illinois House and Senate and is awaiting the governor's signature.IRS Announces That New Tax Scams Have Surfaced
Tax season may be over, but tax scams continue. IRS imposters target families of those serving in the Armed Forces and e-mail users.IRS Releases Info on IRC 1031 Safe Harbors
Revenue Procedure 2003-39 provides safe harbors under section 1031 with respect to certain Like Kind Exchange (LKE) Programs.Debate Heats Up Over Estate Tax Repeal
The following was recently received from the Planned Giving Design Center website. While not much of it is new, I thought members and their clients may find it of interest.IRS Practitioner's Guide to the Filing Season
The IRS just released its Practitioner's Guide to the 2003 Filing Season. This publication gives a nice review of income tax changes.Important California Medi-Cal case (CANHR v. Diana Bonta, et al.)
The California Court of Appeals has reversed a lower court holding for summary judgment in favor of the Department of Health Services. The Appellate Court held that the California Department of Health Service's informal internal guidelines, such as those regarding annuities, life estates, exemptions from estate recovery, use of voluntary liens, and recovery of in-home health services payments, were Regulations within the meaning of the Administrative Procedure Act, and as such, the Department should be required to abide by the notice and hearing provisions of the Administrative Procedure Act.Could Education Trust be Terminated (James Hurley v. Moody Nat'l Bank of Galveston)
Mother created an education trust for grandson; the terms of the trust were that it be maintained until the grandson completed college or age 35. At age 20, the grandson, as well as his father and another heir, request that the trust be terminated as son had no further plans to attend school. The grandson later returns to school. The trustee seeks declaratory judgment -- whether the grandson's desire to terminate trust and his sporadic attendance at school supported his contention that he had "completed his education".Statute of Limitations in Probate Case (DeVere Carney v. Kardinal Land)
The Rhode Island Supreme Court, in DeVere Carney, et al. v. Kardinal Land, Inc. et al (Jan. 7, 2003), held that the statute of limitations had been tolled on a fraud counterclaim before the Probate Court.Potentially Important IRC 2036 FLP Case (Kimbell v. U.S.)
The U.S. District Court for the Northern District of Texas has just decided what may be a very important FLP case, Kimbell v. U.S., Civil Action 7:01-CV-0218-R (January 15, 2003). In simplest terms, the court held that because the decedent held a 0.5% GP interest and a 99% LP interest in her family limited partnership at death, and as a GP and LP she could have removed the GP and directed distributions to herself, the partnership should be disregarded under IRC 2036 and the full value of the partnership assets brought back into her estate. Following is a copy of the case for you to review. It is likely that Steve and I will have additional comments on this case over the next week or so.Children Not Liable for Property Tax, etc... on Wife's Life Estate (Matter of William Bland)
In a codicil to his will, the decedent gave a life estate in his residence to his wife, with condition that remaindermen, decedent's sons, were to pay all the real estate taxes, insurance, and maintenance on the real estate. The sons failed to make payments and the wife sued. The wife appeals a judgment for sons. The issue on appeal is whether the court erred in finding that codicil direction did not, as a matter of law, require that sons pay all of the real estate taxes, insurance and maintenance on the subject real property. The Ohio Court of Appeals affirms.Articles of Interest from Bloomberg Wealth Manager magazine
Following are some articles from the February Bloomberg Wealthmanager magazine that members may find of interest.Petition for Admission of Lost Will Not Entitled to Jury Trial
The decedent left a will signed three years before his death. His brother alleged that the decedent had first shown him, then given him, a later will leaving his whole estate to the brother, but that he (the decedent's brother) had misplaced the instrument.Failure to Sign Will Prevents Admission to Probate Despite Mistake (Allen v. Dalk)
An Attorney prepared a will, a financial power of attorney, and a health care directive for client's signature. In the attorney's office, the client signed three duplicate originals of the power of attorney and four duplicate originals of the health care directive. The will itself, however, was not signed, apparently as a result of a simple mistake.Constructive Trust Not Imposed Where There is Remedy (Wilkison v. Wiederkehr)
Parents and their two children signed an agreement by which son would pay $10,000 to daughter and daughter would forego any interest in the family home. The parents agreed to make a will leaving the residence to the son. Shortly thereafter the father died.No Standing to Probate Later Will (Estate of Briskman)
The decedent had transferred substantially all of her assets to the manager of her bank in the months before her death, and had left a will naming him as executor and beneficiary.Failure to Elect Against Will is Medicaid Transfer (Perna v. Dept. of Public Welfare)
A Medicaid recipient's husband died (in a state other than the one where recipient lived) in April 1997. In December, the Medicaid agency issued notice that it intended to terminate benefits because of recipient's failure to claim her elective share (1/3 of the augmented estate) from husband's estate.Tax Tips Under the New Law Part I
The new tax law causes the dividends on stocks to be taxed at capital gains rates -- either 5% or 15% depending on the level of income of the client. This will make many high yielding stocks, such as utilities, many real estate investment trusts and many well established old-line companies more attractive.Tax Tips Under The New Law Part II
The new tax law taxes capital gains at a 5% rate (0% in 2008) for those individuals in the 10% to 15% tax bracket. This creates a planning opportunity for those taxpayers who still have highly appreciated securities to pay for college education in a cost effective manner. Taxpayers can make a gift of these securities to their college age children, who will presumably be in these lower tax brackets. The children can then sell the securities, pay the 5% tax (0% in 2008), and use the proceeds to pay for their college education.Tax Tips Under the New Tax Law Part III
In the summer of 2002 the Education Department released two FaxAlerts, one explaining Net Unrealized Appreciation, or NUA and the other explaining Charitable NUA, or the combination of an NUA strategy with the use of a charitable remainder trust. For those taxpayers with large holding of company stock in their retirement plans, the NUA strategy just got even better.Tax Tips Under the New Tax Law Part IV
For any payments received on installments sales after May 5, 2003, the portion of the payment representing gain will be taxed at the new lower capital gain rates (5% or 15%).Tax Tips Under the New Tax Law Part V
Certain taxpayers may see a drop in state income taxes due to new federal tax law.Tax Tips Under the New Tax Law Part VI
Where it proves beneficial, consideration should be given to deferring large itemized deductions into 2004 or 2005.Congress Needs to Fix New Tax Law
One the changes brought about with EGTRRA in 2001 was the lower 18% capital gain rate for property held more than five years. Many taxpayers took advantage of the election in 2001 to treat any, or all, of their holdings as being sold on January 1, 2001 and immediately repurchased at the then fair market value so that they could take advantage of this new 18% capital gain rate when the holdings were eventually sold.Texas Bill Authorizes Medicaid Recovery Against Homes
Thanks to Member Brent Caldwell for forwarding the Education Department the following article from the Dallas News.Law Lets State Take Homes of Patients
Illinois Lawmakers Vote to Decouple From Federal Estate Tax
Illinois would decouple from federal estate tax law under S.B. 1725.New Oklahoma Law Clarifies Estate Tax Exclusion
After rejecting the usual annual efforts to change Oklahoma's estate tax into a pick-up tax, S.B. 430, which amends 68 O.S. section 807 to provide that the value of the gross estate would not include certain portions treated as gifts, was signed into law on June 5.New Small Business Tax Calendar from IRS
The Small Business Tax Calendar is a 15-month tax calendar created by the IRS that is filled with useful information on general business taxes, IRS and SSA customer assistance, electronic filing and paying options, business publications and forms, common tax filing dates, and Federal legal holidays.Alaska Rewrites Trust Act and Approves Uniform Principal and Income Act
The Alaska Legislature has adopted a number of provisions (in HB 212) that would clarify and improve Alaska Trust Act, including its Self Settled Spendthrift Trust provisions.The Service has released the Applicable Federal Rates for July 2003. The new Section 7520 rate (used to value life estates, remainders, etc.) is 3.0%. Note: This is the lowest rate since they began in 1952 and a significant decrease from June's 3.6%.
D.C. Budget Accepts Estate Tax Cut
The District of Columbia's fiscal 2004 budget (October 1, 2003, through September 30, 2004) has been funded without an increase in taxes, and with a reduction in the district's estate tax.CBO Projects $300 Billion for Fiscal Year 2003 Deficit
In the first seven months of fiscal year 2003, the federal government ran a deficit of about $202 billion, the Congressional Budget Office estimates, $138 billion more than in the same period last year.House Passes Pension Security Act
On May 14 the House of Representatives approved H. R. 1000, the Pension Security Act, by a 271-157 vote.U. S. Pension Plans in Deep Financial Trouble
Large U.S. corporations face severe shortfalls in their pension plans that may be even worse than expected, a new study from HSBC Bank says.An "Important Message from Medicare"
This transmittal by the Centers for Medicare Medicaid Services to Medicare-certified hospitals explains that hospitals are required to issue the "Important Message From Medicare" to all Medicare beneficiaries that are admitted as inpatients to the hospital at or about the time of their admission or at some point during the course of the hospital. The message details the patient's rights.Early Experience with the Texas Advance Directives Act
Every U.S. state has developed legal rules to address end-of-life decision-making. No law to date has effectively dealt with medical futility. By enacting a law regulating end-of-life decisions, Texas became the first state to provide a mechanism for resolving medical futility disputes and other end-of-life ethical disagreements. Data collected at a large tertiary care teaching hospital strongly suggest that this law represents a first step toward practical resolution of this controversial area of modern health care.Study on Dying Suggests Hospice Cannot Be "One Size Fits All"
New scientific evidence shows consistent patterns of decline of functioning for four different types of dying. These findings suggest that different pathways to death require more flexibility of healthcare and hospice services to meet the needs of critically ill patients whose time until death is unpredictable.The Department of Labor has expanded GovBenefits.gov, a Web site that allows members of the public to check online -- and for free -- federal benefits programs for which they might qualify.
The National "Save For Your Future" Campaign Begins
The national "Save for Your Future" education campaign is a partnership between the Social Security Administration and the American Savings Education Council committed to informing Americans about the need to save and plan for retirement and other life stages.State Medicaid Waiver Program Runs Afoul of ADA (Townsend v. Quasim)
In the Ninth Circuit case, Townsend v. Quasim, the plaintiff received Medicaid services in an adult care home because he qualified as "categorically needy" (his income was less than 300% of the maximum federal benefit rate) under the state Medicaid waiver program. After an increase in his income the plaintiff moved to "medically needy" status and Medicaid informed him that he would have to move to a nursing home to continue to receive benefits.House Speaker Announces Outline of Medicare Reform
On May 1, House Speaker Dennis Hastert, R-Ill., announced principles for legislation to reform Medicare and add a prescription drug benefit to the program.
Medicare+Choice a Tough Sell in Rural States
President Bush's Medicare reform proposal, which in part would rely on the private sector to provide a prescription drug benefit to beneficiaries, may face challenges from legislators from rural areas because of private health plans' record of shunning less profitable rural areas, the Wall Street Journal reports.Pending Litigation Concerning the Gramm-Leach-Bliley Act
The President of the ABA issued a message today regarding the pending litigation concerning the Gramm-Leach-Bliley Act as applied to lawyers.Elderly Will Be Better Able to Afford Health Care in 2030
This paper in May/June issue of Health Affairs estimates the ability of the elderly to pay for necessary health care services and emerging technologies. Projections from the Long Term Care Financing Model paint a promising picture of the income and assets that elders in the future will have available to support discretionary, uncovered health care and service costs.CMS Kicks Off Home Health Agency Quality Initiative
The U. S. Centers for Medicare Medicaid Services ("CMS") launched the Home Health Quality Initiative on May 1, in eight states: Florida, Massachusetts, Missouri, New Mexico, Oregon, South Carolina, West Virginia, and Wisconsin.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.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?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.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.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.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.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."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.Article on Recent KY Medicaid Changes
An article on important changes to Kentucky Medicaid.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.
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.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.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.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.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.
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.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 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.)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.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.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.
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.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.
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).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.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.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".Statement by ABA President Alfred P. Carlton, Jr. regarding ABA v. FTC
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.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.Alzheimer's Cases Could Triple by 2050
Doctors warn of a coming epidemic in Alzheimer's Disease cases in the WebMD article.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.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.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.Ward's Preference for Conservator May Be Bypassed by Court (Matter of Iwen)
In a proceeding to appoint conservator of the person and estate, the ward expressed preference for one child's appointment. In addition, the ward had previously executed a power of attorney naming same son, and nominating him to serve if conservatorship was ever required. Another son initiated the conservatorship proceeding, alleging that her care was inadequate and that she was unsafe in her home. Court appointed neutral conservator, who arranged for move to adult care home.Prior to his death the decedent had given his fiance the name of his attorney, his safe deposit box key, and instructions that everything she would need to take care of herself in the event of his death could be found in the box. When he died a search of the box turned up a typewritten page with the decedent's and his attorney's names plus, in the decedent's handwriting, the words "In case of death - goes to [decedent's fiance]." The fiance retained counsel (first one attorney and, later, a replacement) to represent her interests, and when her claim was dismissed she filed suit against her own attorneys claiming that they negligently failed to protect her interests.
Attorney for Conservator-Thief Not Liable to Surety Company (Capitol Ind Corp v. Fleming, et al)
An attorney represented a conservator in two successive annual accountings, which reflected unauthorized gifts and "loans" to the conservator's family members. The conservator was later removed and indicted. The conservator's surety was unable to recover full amount of losses from ex-conservator and sued attorney for failing to disclose evidence of conservator's criminal misconduct.Federal Court Says Feds and States Have Failed to Implement Olmstead
On August 19, 2003 the National Council on Disability released an online version of its comprehensive analysis of federal and state implementation of the Supreme Court's Olmstead decision. The federal government and the states have largely failed to adhere to a Supreme Court decision requiring them to move people with disabilities out of institutions and into communities, says the report. The National Council on Disability blames the problem on a shortage of housing subsidies, Medicaid requirements that states must pay for care in nursing homes but not in community settings, and a lack of public awareness.An elderly unmarried couple lived together in a woman's home for several years before they entered into a written agreement not to change their existing wills favoring one another without consent of the other party. Several years later the man left the home, announced that he had no intention of returning and that he wanted no further contact with the woman. Thereafter he signed a new will revoking the will which had been the subject of the agreement. The woman brought suit against him for anticipatory breach of the contract not to make a will. The man died during the pendency of the action and his estate was substituted as a party. The estate sought dismissal for various reasons (including alleged lack of venue, since none of the executors of the decedent's estate lived in the county where the litigation was pending) and the woman sought summary judgment. The trial court determined that there was sufficient evidence of an immoral relationship to allow the enforceability of the agreement to be decided by the jury and refused to grant the woman summary judgment.
Governors Back House Medicare Plan Covering Dual Eligibles
Calling it their "top legislative priority," the governors of all 50 states gathered in Indianapolis on August 17 for their annual summer meeting reiterated a plea to Congress, as it deliberates on a Medicare prescription drug benefit, for the federal government to pick up the costly prescription drug tab for more than six million poor, elderly Americans under the Medicare-Medicaid dual eligible program. States spend approximately $40 billion per year on "dual-eligibles;" of that $7 billion is on prescription drugs. The governors endorsed the House Medicare measure as they did August 1, in a letter to Congress, which was signed by governors from every state. The House measure would slowly phase out the states' financial responsibility over a 15-year period. The governors are highlighting this unanimous agreement over "dual eligibles" after failing to agree on comprehensive Medicaid reforms debated by a bipartisan task force of 10 governors earlier this year.Bad News May Be Ahead for Retired Public Employees
In order to prop up public pension plans hit hard by stock market losses, states will contribute $9.6 billion to the nation's 12 biggest state pension plans this year, a USA TODAY survey found. That is a 35% increase in the past two years, but it is still billions of dollars less than what is needed to fund retirement benefits guaranteed to public employees. The 123 public pension funds that operate statewide, covering both state and local workers, have $180 billion less in assets than they need to cover their long-term benefit obligations, reports Wilshire Associates, an investment adviser in Santa Monica, Calif. That amount is almost twice the size of California's annual state budget.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.
Interesting Reading in Probate and Property
The July / August 2003 issue of Probate and Property has several articles of interest.The defendant, a resident of one state, traveled to another to assist his elderly cousin with financial matters. While there, the defendant secured a power of attorney and arranged to be named as joint tenant on some of the elderly cousin's accounts. Thereafter, the defendant arranged to move his cousin to the state where he lived. After a short stay there, the cousin decided to move to a third state.
New Services at IRS Replace Distinct EIN Hotline Number
The IRS has announced two new services for business taxpayers that have allowed the IRS to close its distinct telephone number for obtaining an employer identification number. Taxpayers needing an EIN now should use either the new business and specialty tax line, (800) 829-4933, or the new Online EIN Internet application at http://www.irs.gov.Treasury Releases Final Regs on Split Dollar Life Insurance
The Treasury Department and IRS have issued final regulations for split dollar life insurance. The final regulations provide that the tax treatment of split-dollar life insurance arrangements will be determined under one of two sets of rules, depending on who owns the policy. If the executive owns the policy, the employer's premium payments are treated as loans to the executive. Consequently, unless the executive is required to pay the employer market-rate interest on the loan, the executive will be taxed on the difference between market-rate interest and the actual interest.This electronic version of a popular brochure issued by the Administration on Aging contains 2002 statistics on older Americans in 13 key subject areas, including population data, health status, income, and poverty. It includes both narrative and statistical charts.
Increasing Fear of Downside to Medicare Drug Benefit
There is increasing concern that an introduction of a prescription drug benefit to Medicare could deprive many recipients of more extensive coverage. Many employers provide prescription drug coverage to retired employees. These retired employees fear that the employers will end that benefit upon the introduction of a Medicare prescription drug benefit. Because it is likely that the Medicare benefit will not be as generous as the employer plan, these retired employees would be worse off upon the passage of a Medicare prescription plan. The New York Times has a good article on this.New Split Dollar Regs Apply to Arrangements Entered Into After Today
The new Split Dollar Regs apply to any split-dollar life insurance arrangements entered into AFTER today, September 17, 2003.A long-term care insurance policy was purchased in 1989, which included a provision requiring a three-day hospitalization before nursing home placement. There was no change in the policy terms before the insured was admitted to a nursing home in 1998, but Pennsylvania law adopted in 1992 prohibited the "prior institutionalization exclusion." The insurance company denied coverage and the insured sought declaratory judgment and claimed bad faith and unfair trade practices.
A vulnerable mother lived with her adult daughter. According to the state protective services agency, the mother had complained of pain and suffered injuries, but daughter did not seek medical attention. After several administrative proceedings, the state protective services agency entered a finding that daughter neglected mother under state law prohibiting abuse or neglect of vulnerable adults. The daughter appealed to state trial court, which upheld the finding.
A mother who was the income beneficiary under three trusts filed litigation against her children as the trustees of the trusts. A son responded (in part) by filing a guardianship proceeding alleging the mother's inability to make responsible decisions regarding her property or person. The court appointed an attorney "to serve as counsel ... to appear and answer the [guardianship] petition ... and to act as [the mother's] temporary guardian of her property. The attorney also appeared in the trust litigation, participated in negotiations leading to resolution and secured the court's approval of the settlement, then brought action to compel the trustee/son to sign settlement agreement -- which provided for payment of attorney's fees from trust principal.
Attorney Suspended for Forging Clients' Signatures on Pleadings (In re Uchendu)
In at least sixteen instances over a two-year period, an attorney signed his client's names to probate court pleadings (including inventories, notices and certificates required to be signed by fiduciaries rather than counsel). In most but not all cases, he included his initials next to the signature. In four cases, he notarized his own signature, indicating that the client had signed in his presence.October Applicable Federal Rates
The Service has released the applicable federal rates for October 2003. They are up slightly from September. The new rate under Section 7520, used to value life estates and remainder interests, is 4.4%.Interesting Article on Changes to Medicaid Benefits
States are making cutbacks in Medicaid services to reduce budget deficits.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.Ttee's Atty Not Entitled to Fees from Trust for Unsuccessful Defense of Amendment (Est. of MacAdams)
The trustor, shortly before his death, changed both the trustee and the principal beneficiary of his living trust. After his death, the trustee named in the original instrument sought to declare the amendment invalid, and the California Court of Appeals ultimately ruled that he did not have standing. A beneficiary named in the original document then brought action to challenge amendment and was ultimately successful.Selling Annuities to Seniors: Keep It Simple Seminars Work, Says Marketing Group
The president of the Millennium Marketing Group explains how to sell fixed annuities to seniors: "The 'Keep It Simple' philosophy appeals to the widest range of potential clients. Generally speaking, those who attend senior seminars are not there to receive an MBA in Finance over a 2 - 3 hour period of time. Instead, they are looking for simple solutions to simple problems. The majority of attendees are seniors (60+) who are looking to put their safe (retirement) money -- or what's left of it -- in a safe place. Many have stayed too long in the stock market and lost money, renewed their CD's at abysmally low rates or are stuck in an older annuity with a shaky company and/or poor renewal rates. The purpose of the 'KISS' concept is to help these clients identify their problems and show them how fixed annuities can provide a solution -- on a simple basis."Toll Free Number Reserved for Practitioner Community
The IRS encourages practitioners to use the toll free Practitioner Priority Services (PPS) number at 866-860-4259.Distinct EIN Hotline Number to be Disconnected
Two new services for business taxpayers have allowed the IRS to close its distinct telephone number for obtaining an employer identification number.District Court Rules Irrevocable Trust is Revocable (Thompson v. Barnhart)
John Thompson was seriously injured in a boating accident in West Virginia and began receiving SSI. He later was awarded a settlement relating to the injury, which was placed in a (d)(4)(A) Trust. Mr. Thompson was both the trust's grantor and its sole beneficiary. The trust states that Mr. Thompson "shall have no interest in either principal or interest of this trust." Upon Mr. Thompson's death, Medicaid is to be reimbursed and any residue paid in accordance with Mr. Thompson's will or to his "heirs-at-law."Assignment of Tort Recovery to State Bars Claim for Future Medical Expenses (Guzman v. U.S. West)
Anissa Guzman, age seven, was struck and injured by a motor vehicle while trying to cross the street from behind an illegally parked truck owned by telecommunication provider U.S. West. Anissa suffered permanent injuries, including brain damage. She and her mother sued U.S. West and the driver of the truck. As a condition for Anissa's receipt of Medicaid benefits, her mother assigned all of her "rights to medical support and third party payments" to the state. The state filed a medical-assistance lien and later settled all its claims against U.S. West. Anissa and her mother then settled their remaining claims against U.S. West, except their claim for future medical expenses, estimated to exceed $5 million.IRS Continues to Reject Formula Gifts
In TAM 200337012 (September 12, 2003), the IRS has specifically rejected the effectiveness for gift tax purposes of a clause attempting to make a gift of whatever percentage of interest in a family limited partnership equal to a stated dollar amount.Trust Distributions Characterized as Advancements of Future Trust Income (Frazier v. Brechler)
A trust provided for mandatory distribution of income and discretionary distribution of principal to husband after death of the Trustor. When the Trustor died there was insufficient trust income to make distributions over the next few months, and so trustees distributed "advances" against future income in each of the three months after the Trustor's death. Later in the same year the trustees reduced the total income distributions to the husband. The husband brought an action to compel the trustees to distribute the full amount of the income and the trial court determined that the "advances" were really discretionary distributions of principal and ordered distribution of an additional $113,397.07 to the husband (the full amount of the trust's annual income, none of which had been distributed under the trial court's calculations).Will Beneficiary Has No Claim Against Lawyer for Failure to Deliver or File Will (Munnich v. Yost)
Several months after death of his wife, husband consults an attorney about estate planning. The husband delivered the wife's original will to attorney. The attorney neither advised the husband to act to probate his wife's estate or to notify devisees -- and the attorney took no action himself. Several months later, the couple's son filed a petition for determination of intestacy, and the husband notified attorney. The attorney thereupon filed original will with the court.Two relatives filed competing conservatorship proceedings with regard to elderly woman. Testimony at trial (including from subject of the proceedings) indicated that she had let one of the relatives handle most of her finances, that she regretted having done so and did not know what had become of her assets, and that she believed she could handle her property once again.
A testamentary trust directed that a ranch be used as a stock ranch and, if funds were available, as a boarding ranch to teach young children about farm life. Any excess funds (and the residue of the trust 20 years after the death of income beneficiaries) was to pay higher education costs for children from two counties.
A $7.5 million marital trust included a provision providing for accountings to be delivered only to the surviving spouse and giving her, as income beneficiary, the sole and absolute authority to settle the accountings. The mother of residual beneficiaries demanded more information and accountings, and trustees refused. The trustees then petitioned the court for a finding that the trust provision giving sole accounting approval to the surviving spouse was valid, and that they had discharged their duties.
Will Does Not Compel Satisfaction of Mortgage with Non-Probate Property (Est. of Vincent)
A decedent's will provided that the Executor was to pay "all my just debts," and specifically authorized the Executor to continue to pay mortgage payments on real property that had been transferred to a nephew during the decedent's life. No payments were made and the note went into default; the holder of the note filed a claim against the estate for the note balance of $128,341.62. The nephew sought exoneration of the note by the estate, citing the will language permitting payments and the direction to pay "just debts. The trial court found that the property was not part of the probate estate and that the nephew was not entitled to an exoneration of the debt.The September 2003 Trusts Estates magazine has several articles of potential interest.
Heir / Devisee Has Standing to Contest Will Despite Receiving More Under Challenged Instrument
Aunt's will left all her personal and household effects to her nephew, who was also one of her heirs at law. Nephew sought to challenge the validity of the will, but the Personal Representative argued that he lacked standing because he would receive more under the challenged instrument than he would receive under prior wills. Trial court agreed and dismissed the nephew's will contest.After his wife's death a widower befriended a neighbor woman and began taking most of his meals at her home. Eventually the widower moved in with the neighbor and she provided personal care services for him for four years. After the widower's death the neighbor filed a claim against his estate for housing, cooking, laundry, transportation, and other care-giving services. The neighbor claimed an oral agreement that the decedent would pay for the care she provided.
Unmentioned Grandchild is Covered by Pretermitted Child Statute (Alexander v. Est. of Alexander)
When a decedent executed his will, one child had died leaving a surviving son. No mention of deceased child or living grandchild was included in the decedent's will, which instead left the decedent's entire estate to one of two surviving children of the decedent. The son of the deceased child, by his mother, brought an action to be identified as pretermitted child under the Arkansas statute, which creates a forced heirship for unmentioned issue. The trial court found that the will's language on Rule Against Perpetuities (which mentions "issue" generically) evidenced decedent's intent to disinherit unmentioned issue.Creditor Entitled to Notice of Final Account in Probate Estate (Estate of Spencer)
An informal probate (in a UPC state) was filed without prior notice to the heirs / devisees / creditors. Notice was timely given to a possible creditor, which did not file claim until after expiration of claims period. The personal representative nonetheless partially allowed the claim and gave notice. The creditor took no action until one day after time for filing a complaint of petition. Thereafter, the personal representative filed a formal petition to close the estate, listing the creditor's claim as disallowed because not timely filed. Relying on the notice standards for informal probate proceedings, the personal representative did not give notice of the final account / closing petition to the creditor and the Probate Court approved the account and discharged the personal representative. The creditor filed a notice of appeal more than six months after expiration of the appeal time.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.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.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.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.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%.
IRS Announces Decrease in Interest Rates
The Internal Revenue Service announced a decrease in the interest rates for the calendar quarter beginning October 1, 2003.750,000 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.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.
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%.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.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.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.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 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 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.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, 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.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.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.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.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)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.
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.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.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.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.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 Planning Numbers for 2004
The Center for Medicare and Medicaid Services (CMS) has released the following figures for 2004 Medicaid planning purposes.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.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.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.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.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.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.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.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."The November 2003 issue of Trusts & Estates magazine has a few articles which may be of interest to you.
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.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.
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.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.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.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.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.The IRS has just announced the IRC 7520 Rate is 4.2% for December 2003.
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.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.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.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.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.There are a few articles of interest which appear in the November / December 2003 issue of the Tax Management Estates, Gifts and Trust Journal.
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.
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.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.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.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.
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.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.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 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.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.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.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.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.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.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.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.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.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.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.
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).
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.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.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.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.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.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.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.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.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.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.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.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.
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