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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Roy R. Trudel, a Technical Director at the Center for Medicare and Medicaid Services ("CMS") recently opined that a state agency has the option of imposing a transfer penalty on an institutionalized spouse if the community spouse transfers protected resources after the institutionalized spouse's eligibility has been determined. Mr. Trudel's opinion, which is a reversal from statements made by previous CMS (HCFA) officials, came about as the result of an email exchange between elder law attorney Robert Mason of North Carolina and himself.
New Study Finds Changes Needed to U.S. Health System to Accommodate Needs of Boomers
The aging baby boom generation is likely to increase the nation's disabled population, and a study says the United States needs a better system to provide care for them. More than 40 million Americans currently have some sort of disability, the Institute of Medicine reported Tuesday.Senate Resolution Freezes Estate Tax for Two Years
Senate Resolution 21, 110th Cong. 1st Session, passed the Senate by a vote of 91 - 1.Why Can't a NY Lawyer Counsel FL Residents on NY Law?
This article from the ABA Journal summarizes the case of a NY licensed attorney wanting to give advise to FL residents about NY matters. It does a good job of summarizing FL's position on unlicensed practice of law in FL.Georgetown University Study on Medicaid Financing of Long Term Care
This article summarizes the role of Medicaid in financing long term care costs. The article also touches on how DRA will affect the ability of portions of the elderly population to get access to long term care.Estate Tax Repeal Vote Fail in Senate
Late Thursday, August 3, 2006, the Senate voted on an estate tax reform proposal that was came to close to full repeal and the republicans did not get the 60 votes they needed to pass it. The vote was 56-42!Article on Boomer Inheritances
This USA article highlights how inheritances by boomers are not meeting earlier projections. The reason behind this is the increased life expectancies of seniors and the higher then projected costs for health care.House Passes Bill to Raise Applicable Exclusion Amount to $5 Million
On Thursday, June 22, 2006, the House of Representatives passed legislation, by a vote of 269 to 156, that would raise the applicable exclusion amount to $5 million for an unmarried person and $10 million for couples. The marginal estate tax rate on estates up to $25 million would be set at the same tax rates that apply to capital gains -- now 15 percent but scheduled to rise to 20 percent in 2011. The marginal estate tax rate for estates worth more than $25 million would be twice the capital gains rate.The Section 7520 rate (used to calculate life and remainder interests) for June 2006 will be 6.0%. This is slightly higher than the May and April rates.
An Essay on Issues Involving the Older Driver
Eighty-six year-old George Weller's killing of 10 when he accelerated instead of braked at a Santa Monica, California market in July 2003 captured the public's attention dramatically. The Weller tragedy again reminded us that we face a growing problem: The aging process will in some way affect the driving habits and skills of most of our clients. Court intervention regarding older drivers is increasing in that probate judges address driving as fiduciary concerns for guardians and conservators. George Weller's court intervention came through the criminal bench as he was indicted on 10 counts of manslaughter in January 2004. Ideally, family members, health care providers, elder-law attorneys/estate planners and fiduciaries should assist aging loved ones/patients/clients in planning before driving skills decline and address what happens after the car is gone.Article of Interest on Intestacy
You may be interested in reviewing the article on the laws of intestacy in the various states.Insurance on Retirement Accounts Increased
The FDIC and Credit Union insurance coverage on retirement assets such as Individual Retirement Accounts and 401(k)s has recently been increased to $250,000 from $100,000.Equitable Estoppel Doctrine Not Available Where Medicaid Eligibility Worker Gave Wrong Advice
A State Medicaid eligibility worker advised the son of a beneficiary that her estate would not be subject to a claim after her death, and that if he wanted to preserve the family home all he needed to do was to state that his mother intended to return home. The worker was wrong.Photocopy of Will is Not "Duplicate Original"
After a decedent's death, his original 1987 will could not be located. However, a photocopy of that will was in his personal papers. There was no indication of any intent to revoke the will other than the fact that the original was missing.Personal Representative's Attorney Fees Chargeable Against Estate
The personal representative, in an estate administration contest, filed a seventh accounting and a request that the estate be closed. Family members objected, accusing the personal representative of conflicts of interest and failure to advise the beneficiaries about actions proposed to be taken by the decedent's partner (who was also a client of the personal representative). The personal representative retained counsel and the parties participated in extensive litigation resulting in the trial court removing the personal representative, denying requests for surcharge against him, and denying his request for payment of $589,441.28 in attorney's fees and costs.Constructive Trust Imposed on Proceeds of Property Sale Transferred to Joint Ownership
The agents under a durable power of attorney arranged for sale of real property (specifically devised in principal's will to her stepson) to agents' relatives for substantially less than the assessed value of the property. The proceeds were placed in bank accounts in joint names with agents. After the principal's death, the agents were appointed as personal representative of the principal's estate and stepson sued.Exception to Privileged Communications for Will Drafter Does Not Apply Where No Will Prepared
A Testator consulted his long-time law firm about drafting a new will, but no new will was ever prepared. A few days later the Testator signed a new will prepared by another, unrelated law firm.Kaiser Commission Releases Report on the Impact of the Federal Deficit Reduction Act of 2005
The Kaiser Commission on Medicaid and the Uninsured has issued a report that summarizes the Medicaid provisions of the federal Deficit Reduction Act of 2005 (DRA) signed on February 8, 2006 and discusses the implications of the proposed changes. The changes would net projected reductions in Medicaid spending of $4.8 billion over the next five years and $26.1 billion over the next ten years.Genetic Link to Parkinson's Disease Found
A recent study has identified a single genetic mutation that accounts for more than 20 percent of all cases of Parkinson's disease in Arabs, North Africans and Jews. This is a major surprise, as genetics was thought to play a relatively minor role in the cause of Parkinson’s 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 Alzheimer’s disease. The finding come from a review of 13 studies of the drugs. The review appears in The Cochrane Library, a research journal.Commission Considers Separating LTC Component of Medicaid
The Medicaid Commission, which is looking into ways to improve the government program is mulling over the possibility of separating long-term care financing from Medicaid.Social Security Death Benefit Eliminated in Bush Budget Proposal
The $255 Social Security death benefit will be eliminated under the Budget proposal submitted to Congress on February 7, 2006 by the President. White House officials defended the proposals and estimated costs would be trimmed by $3.4 billion over the next decade with the elimination of the stipend. Congressional aides said Jo Anne Barnhart, the Social Security Commissioner, had told them during a closed-door briefing that the $255 one-time death benefit has become an administrative burden, since it is not paid in all cases. Mark Lassiter, a spokesman at the Social Security Administration, said the benefit "bears no relation to what a person's funeral expenses are or to any of workers' earnings levels. We believe that eliminating it is not going to cause an appreciable financial hardship to a survivor."New Findings on Cause of Alzheimer's Disease
If confirmed, several new findings on the origins of Alzheimer's disease could overturn prevailing theories on the cause of the disease. Scientists reporting in the Journal of Neuroscience said the neurodegenerative disease may be triggered when adult nerve cells, or neurons, try to divide.IRS Increases PLR Fees, In Some Cases Dramatically
New PLR User Fees
The IRS has released the 2006 Revenue Procedures outlining fees for Private Letter Ruling Requests. Continue on to see some of the outlined changes:
DC Circuit: Lawyers Exempt from Sending Gramm-Leach-Bliley Privacy Notices
The Gramm-Leach-Bliley Act has provisions which require "financial institutions" to send annual privacy disclosure notices. This applies to banks, brokerage houses, etc. The Federal Trade Commission had taken the position that this also applied to attorneys holding financial information. The American Bar Association filed suit for a declaratory judgment. The ABA won in the District Court. Now, the U.S. Court of Appeals for the District of Columbia has affirmed the District Court's judgment.Undernourishment Screening Tool
Undernourishment is one of the major risks to the good health of elders.IRS Releases December 7520 rate
The 7520 rate for December 2005 is 5.4%, up significantly from November's 5.0%. This rate is what is used to actuarially value life estates, remainder interests, etc. A higher 7520 rate makes some transactions, such as QPRTs more attractive, while some other transactions less attractive.Important Update from Leimberg re Trust-Owned Life Insurance
Steve Leimberg was kind enough to allow us to share the following e-newsletter regarding fiduciary liability for monitoring trust owned life insurance, You can find out more about the Leimberg e-newsletters by using the link at the end of this FYI.Leavitt Endorses Many of Governors' Medicaid Proposals
On August 2, Department of Heath and Human Services Secretary Mike Leavitt discussed various health topics in an interview with Associated Press editors and reporters. On Medicaid, Leavitt said that the commission he appointed to recommend ways to cut $10 billion from Medicaid over five years would "likely look" at proposals from the National Governors Association and determine that they "are pretty well thought-out ideas."Effect of the Federal Estate Tax on Family Farms and Small Businesses
Recent discussion of the federal estate tax has focused in part, on how it affects family farms and small businesses -- particularly the possibility that having to pay the tax might jeopardize those operations.Social Security and Medicare Trustees Release Annual Reports
Annual reports released from both the Social Security Administration and the U.S. Centers for Medicare Medicaid Services.Wealthy People Less Likely to Die in Pain
A University of Michigan study finds that wealthier elders are significantly less likely than poorer ones to suffer pain at the end of their lives.IRA Gifts to Charity Temporarily Unlimited
As part of the tax relief provided by Congress, unlimited donations of IRAs or pension plans to charities will be allowed for a short period of time.Groups Campaigning Against Repeal of Estate Tax
Anti-estate tax repeal groups have begun a campaign targeting moderate Democrats and Republicans in a campaign to retain the estate tax. The campaign is helped by the efforts of many major life insurance companies as well as charitable organizations.Spendthrift Trust Not Reachable for Debts Incurred by Beneficiary Acting as Trustee
Two testamentary trusts were created in the decedent’s will, one for the benefit of each of her sons. One son became trustee of both trusts, and proceeded to empty his brother's trust by investing in his own business, and thereafter failed to account to the other brother. The court entered a surcharge against the trustee-brother and forfeited the surety bond he had posted. The court then gave a judgment in favor of the surety against the defalcating trustee-brother.Final Regulations on Ordering Rules for Charitable Remainder Trusts Issued
The Internal Revenue Services has issued final regulations on the ordering rules of section 664(b) of the Internal Revenue Code for characterizing distributions from charitable remainder trusts (CRTs).Health Affairs Journal has published three articles about the Schiavo case and the costs of end-of-life care.
Federal Housing Programs That Offer Assistance for the Elderly
A number of federal housing programs provide assistance, including rent subsidies, mortgage insurance, and loans and grants for the purchase or repair of homes, to low-income renters and homeowners.Vote for Estate Tax Repeal Delayed; Senator Kyle Prepares Amendment to H.R. 8
Aides to several key Senators have announced that there will be no vote of estate tax repeal in the Senate until after all the relief for the hurricane victims has been secured and the rebuilding in Louisiana, Mississippi and Alabama begins. Therefore, we can expect that nothing should happen for at least several weeks.Qualified Roth Contribution Programs Gain Attention
Beginning in 2006, 401-K retirement plans may be amended to permit employees to designate some or all of their contributions as Roth contributions pursuant to a "qualified Roth contribution program." Contributions to a qualified Roth contribution program are made on an after-tax basis, but distributions (including earnings) are tax-free.Greenspan Rejects Estate Tax Repeal
On June 21, 2005, Federal Reserve Chairman Alan Greenspan testified before the Senate Banking, Housing and Urban Affairs Committee, during which time he reiterated his opposition to tax-cut proposals that increase the deficit and made clear that this opposition applies to proposals that repeal or drastically reduce the estate tax without fully offsetting the costs.Illinois Governor OKs Modification of Estate Tax
On August 2, 2005, Illinois Governor Rod Blagojevich (Dem.) signed legislation (HB 1570, now PA 94-0419) that changes the credit for estate and inheritance taxes paid to other states. The new law eliminates one option of the options previously available as to how the credit is calculated for taxes paid to other states.Alzheimer's Disease Symptoms Reversed in Mice
Mice with memory loss have had their condition reversed, a discovery that should help refine the search for a cure for Alzheimer's disease and other dementias.Will Effectively Exercised Power of Appointment Even Though Not Admitted to Probate
Father (who died in 1981) established a living trust that divided into survivor's and family shares, with the former giving his surviving wife a general testamentary power of appointment and the latter giving her a power of appointment exercisable by will, deed, conveyance, bill of sale, gift or any other written instrument. If Mother did not exercise the powers of appointment, the survivor's trust would pour into the family trust, which would in turn be distributed unequally among daughter, granddaughter and grandson. Mother executed a will in 1985 purporting to appoint the entire trust corpus of both trusts; the survivor's trust was appointed outright to daughter and the family trust in equal shares among daughter, granddaughter and grandson; Mother died in 1997. Relying on advice of counsel, the trustee and family members decided not to seek probate of Mother's will.Will's Assertion of Mistreatment by Disinherited Child is Not Grounds for Invalidity
Decedent's will specifically disinherited his only child and some of his grandchildren "by reason of their ... treatment" of him. Son challenged the will, claiming that it was improperly executed, and also that the decedent had operated under "an insane delusion that four of his grandchildren did not care about him."Disclaimer Reformed to Avoid GST Tax
Daughter signed disclaimers of her interests in her mother's property in two different states. After the disclaimers were completed, she learned that her mother's GST exemption was only $650,000 and that the disclaimed property would be subject to the tax. She signed an affidavit indicating that she had disclaimed by mistake, and sought reformation of one or both disclaimers. State high court rules that reformation of the two disclaimers is permitted, and remands to the trial court for entry of an order authorizing the reformation.April 2005 section 7520 rate released
The IRS has released the Applicable Federal Rate for the month of April, 2005. Each month the Service surveys interest rates and publishes the rate that is applicable for gift calculations. The rate for April is 5.0%. The rate for March was 4.6%.An elderly woman was befriended by a law student, who helped her to transfer over $90,000 (in several transactions) to the law student, allegedly because the woman wanted to help her with tuition. The woman's nephew, who had power of attorney, discovered the transactions and moved to secure conservatorship and set aside the transactions.
Undue Influence and Constructive Fraud Claims Should Have Been Submitted to Jury
After her husband became ill, an elderly woman who had never managed finances during their married life summoned her children to meet with her and to help decide how to handle the family ranch and other properties. After the family discovered that her husband had incurred $54,000 in credit card debt the children agreed to take responsibility for that debt in return for their mother transferring shares of stock in the ranch to them; she made transfers of substantially all of the stock based on that understanding.Malpractice Claim May Be Brought By Successor Fiduciary Against Agent of Prior Fiduciary (CA)
During the pendency of a will contest, an attorney was appointed as administrator of a decedent's estate. He hired another law firm to assist with complicated tax issues. At some point, the administrator wrote to the tax lawyers confessing that he had misappropriated substantial funds from the estate; the tax lawyers initially attempted to help him borrow money to repay the estate, but ultimately wrote to him (in February) indicating that they withdrew from further representation and advising him to secure other assistance. In May the administrator died; the tax lawyers turned their file over to another attorney in July. In September the deadline ran out for filing IRS form 843, which would have extended the time for claiming a tax refund by three years. In November, after resolution of the will contest, a new executor was appointed and he brought a malpractice action against the two groups of tax attorneys. Both law firms argued that the plaintiff lacked privity with them, since they had been hired by the original administrator, and the trial court granted judgment for the defendants. The intermediate state appellate court affirmed, and the estate appealed to the state Supreme Court. That court now reverses, finding that the state probate code gives a successor fiduciary all the powers that his or her predecessor would have, impliedly including the power to bring an action such as the one here.Power of Attorney, Lacking Gift-Giving Authority, Does Not Authorize Gifts to Agent
Mother, suffering from mild dementia, executed a general power of attorney in favor of her son--the power of attorney did not include any language specifically authorizing gifts. Shortly thereafter she moved in and lived with him, and after about eight months moved to a nursing home. At the time of her move to the nursing home the son, using his power of attorney, transferred all her real property, stocks and other assets to himself. The mother died a little over a year later, leaving a will that devised all her assets equally to her son and daughter. After securing appointment as executor of the estate, daughter filed suit to recover the remaining assets, arguing that the purpose of the original conveyance was solely to protect the assets from being depleted by nursing home expenses and that with the mother's death they should be reconveyed to her estate. Trial court ordered reconveyance and on appealed. Intermediate state appellate court affirms, noting that without a specific gift-giving provision in the power of attorney, a gift to the agent "carries with it a presumption of impropriety and self-dealing." In order to overcome that presumption, the recipient of the gift must make "the clearest showing of intent" on the part of the principal; evidence that the mother in this case trusted her son more, wanted him to manage her money, and may even have been fearful of her daughter did not meet that high standard of evidence.The plaintiff, who had been seeking to provide cash for his daughter to pay anticipated estate taxes, established an irrevocable life insurance trust in 1991 and paid $300,000 in premiums for a $4.2 million second-to-die policy. The insurance agent's projections, assuming a 10% return, showed no further premium payments would be required. The ILIT Trustee, a CPA, sought independent advice which indicated that the initial premium payment would need to earn a 24% return for 28 years to cover all premiums, but the settlor instructed him to follow the insurance agent's direction.
Testamentary Effect of Trust Provision Requires Compliance With Will Formalities - Arnold v. Davis
A decedent (the widow of country music recording artist Jim Reeves) had established a trust to hold her considerable assets, though her capacity to sign or approve of a trust was later called into question. When she died while conservatorship proceedings were pending, the court granted an interpleader request and ordered that all her trust assets and all income from sale of her late husband's music and real estate holdings be paid to an administrator while the validity of the trust was resolved.A victim that was vulnerable to exploitation made a videotaped statement to police officers two days before she died and a statement to a social work supervisor shortly before her death.
As the testatrix lay dying in a hospital bed, a lawyer relative contacted a long-time associate and asked him to visit her at the hospital to help her prepare a will. The relative also provided the lawyer with details about the testatrix' estate plan, including her intention to leave him (the lawyer relative) a significant bequest. The drafting lawyer, the lawyer relative and the testatrix all met together at the hospital, and the drafting lawyer prepared a will and supervised its execution. After the testatrix' death a will contest was filed, with the result that $620,000 was made unavailable to the residual beneficiaries (the opinion does not relate the particulars of the will contest or the identity of any contestant, or indicate how much of the $620,000 was attorney's fees incurred in defense of the will and how much a payment to contestants).
Legal Malpractice in Estate Planning Case Runs From Discovery - Watkins v. Hedman, Hielman & LaCosta
An attorney prepared a complicated estate plan for a married couple. The wife advised the attorney that they wanted to make sure their trusts were and remained revocable, that they minimized estate taxes, and that they avoided probate. The attorney never consulted with the husband, but sent documents home with wife and had her staff witness and notarize them upon return, even though they had never spoken with husband."Direct Lineal Descendants" in Old Trust Does Not Include Adopted Children - McGehee v. Edwards
Several trusts were established in 1929, 1930 and 1931. Each trust limited benefits to the "direct lineal descendants" of the settlor or the settlor's parents. Although state law was amended in 1978 to presumptively include adopted children in the terms "issue" or "descendant," the new law by its terms did not extend to prior trusts. The trustees of the trusts, concerned about potential liability for their determination of the approximately 142 trust beneficiaries, filed an action to determine "who are, or may be direct lineal descendants ... and specifically whether children born out of wedlock" would be beneficiaries. Counsel for one beneficiary answered, asking the court to also determine whether adopted children would qualify, whereupon the trial court appointed guardians ad litem for "persons adopted by lineal descendants, persons born out of wedlock to lineal descendants, persons born to lineal descendants through assisted conception, and legitimate minor beneficiaries and parties unknown."The guardian of person and estate filed a petition requesting compensation for services as guardian. The ward died before hearing on the petition, and guardian filed a second petition seeking additional compensation. Almost two years after the ward's death, the trial court summarily denied the compensation requests. The Florida Court of Appeals reverses the denials, noting that no one objected to the compensation requests, the guardian was not given notice of the pending denial of compensation, and the trial court did not conduct a hearing into the reasonableness or propriety of the fees. The summary denial "violated the guardian's right to due process of law."
Before a husband began chemotherapy treatment he arranged for freezing and storage of semen in case he became sterile. The treatment was unsuccessful and husband died within two months. In-vitro fertilization, begun ten months after his death, was successful and twins were born eighteen months after his death. The wife thereupon filed for Social Security Survivor's benefits for the children, and was denied by the Social Security Administration, an Administrative Law Judge, and a Federal District Court Judge.
State Must Permit Payment of Taxes on Special Needs Trust Termination - Stell v. Boulder Co. DSS
A self-settled special needs trust was established for the benefit of an SSI recipient who also received Medicaid benefits. The SNT provided that upon termination (by death of beneficiary, for instance), funeral, burial, and administrative expenses, and taxes would be paid first, and that the state Medicaid agency would then be required to submit a claim for reimbursement before the trust would repay Medicaid expenses. The Department of Social Services disqualified the trust and the beneficiary appealed.Probate Court's Removal of Fiduciary in Six Cases Upheld - Guardianship of Monus
A professional fiduciary, who is the director of a faith-based social service agency, had served as guardian, conservator or trustee for a number of years in six separate cases. The amounts involved in the estates varied from about $13,000 to about $210,000. In each case inventories were filed late or not at all, accountings were sporadic and incomplete, and requests were made for approval of expenditures after the fact. The probate court determined that the fiduciary had violated his obligation to account fully, and removed him from all six cases.Wrongful Death Action Dismissed Against Pharmacy in Death of Nursing Home Resident - Estate of Sharp
The estate of a deceased nursing home resident sued the pharmaceutical provider which had contracted with the nursing home to provide medications. The claims alleged that the pharmacy had failed to monitor administration of controlled substances, to observe that the drugs were either being misused or stolen, or to train the facility's staff in proper drug administration procedures. Relying on cases limiting the liability of pharmacists in wrongful death actions, the trial court dismissed the complaint with prejudice.Prior to establishment of a guardianship, a ward had signed and funded a revocable living trust. Prior to her death, the guardianship court had authorized the trustee to sell her home, and directed that the proceeds be held in the trustee's attorney's trust account. After the ward's death, the trustee sought and gained court approval to pay burial expenses, but when the trustee requested authority to pay the trustee's attorney (which would have exhausted the remaining proceeds), the guardianship court refused and directed instead that the trustee pay fees to the guardian and the guardian's attorney, plus previously unpaid court fees associated with the guardianship. The trustee appealed, and the Florida Court of Appeal reversed and remanded for further proceedings.
After their father became incapacitated, his children from a prior marriage filed an action to prevent his wife from taking charge of or dissipating his assets, which were largely held in a self-settled trust naming some of the children as successor trustees. As settlement of that matter, the parties agreed that the children would take over as trustees, that the wife would continue to make care decisions for the husband, and that the husband's trust would pay $25,000 per month to the wife for his care -- and specifically directing that the wife would not be a trustee. Some time later the children became concerned that the money was not in fact being used for their father's care, and sought an accounting from his wife. She successfully objected, arguing that the settlement agreement specifically precluded a finding of a trust relationship, and that they could have (but did not) required an accounting as part of the settlement.
Ohio Bill Would Cut Interest Rate on Unpaid, Overpaid Estate Taxes
Under Ohio HB 260, which was approved on November 9, 2004 by the Ohio House with a vote of 81 to 14, the interest rate on unpaid and overpaid estate taxes is lowered to the federal short-term rate, and the penalty for late payments would be 10 percent of the unpaid tax regardless of how late the payment is.When a proposed ward objected to a pending guardianship proceeding, state law mandated appointment of both an attorney to represent him and a guardian ad litem to evaluate him. The guardian ad litem questioned the physician (whose opinion was that the proposed ward did not lack capacity) and then arranged for appointment of and evaluation by a second physician. The guardian ad litem testified as an expert witness at trial, and provided opinion testimony based in part on hearsay evidence she had accumulated. After a jury found the proposed ward to be incapacitated and the court appointed a guardian, counsel for the ward appealed, arguing that the GAL's testimony should not have been admitted as expert testimony, that she should not have been permitted to rely upon or recite hearsay evidence, and that she should not have been permitted to characterize herself as "the eyes and ears of the court."
Bequest Does Not Fail for Indefiniteness of Charitable Beneficiary - Hays v. Harmon
A decedent's will left residue of his estate to a trust "to provide for poor relief to worthy and needy individuals who reside in Crawford County, Indiana...." The decedent's only child contested the will, alleging both that his father lacked capacity and that the trust was insufficiently precise to constitute a valid charitable trust.The Section 7520 rate for December 2004 is 4.2%
IRS Statistics for 2003 Estate Tax Returns
The IRS data for the 2003 Estate Tax Returns are now available from the IRA. This data include gross estate by type of property, deductions, taxable estate, estate tax and tax credits, and by size of the gross estate.A decedent established a self-settled trust naming herself as trustee and her son as successor trustee. During the last few years of her life, the decedent was taken advantage of by her son. On her death the trust provided for specific distributions to two children and a granddaughter, with the remainder to be distributed to her son; if son failed to survive, the remainder would pass to the granddaughter. The granddaughter filed an action alleging that the son had committed elder abuse and, pursuant to the terms of a California statute, should be disinherited. The Son moved to dismiss the suit for lack of standing. The trial court found that granddaughter had standing and ultimately found that son had abused his mother and that such abuse effected his disinheritance.
Statements to Beneficiary Do Not Support Establishment of a Trust - Hubbard v. Shankle
Prior to his death, the decedent had changed the beneficiary on his life insurance policy to name his girlfriend of three months. He told her that he was making the change because he wanted her to have the proceeds and he wanted her to take care of college expenses for his two- year-old daughter. When he died the girlfriend received $110,000 from the policy, of which she immediately spent $45,000.The District Mental Retardation and Developmental Disabilities Administration (MRDDA) filed petition for appointment of guardian of the person for a 33-year-old developmentally disabled patient recently placed in a community setting as part of a court-ordered deinstitutionalization process. The trial judge found that the proposed ward qualified pursuant to the guardianship statute for appointment of a guardian, but expressed concern that there was no real emergency medical care problem and that appointment of a guardian in a case such as this one would simply encourage the MRDDA to file petitions in other cases, and that there was "no real crisis going on" to justify the guardianship.
Number of Americans With Long-Term Care Insurance Unchanged from 2002
More than 85% of American older than 45 years old do not have long-term insurance, according to a second annual survey released by the Long-Term Care Financing Strategy Group, Washington D.C., a think tank affiliated with the American Health Care Association. The study, entitled "Index of Long-Term Care Uninsured," shows the number, at 82 million, has not changed since last year¹s study. The study reveals that approximately 16% of those aged 65 and over have private long-term care insurance.Summary of American Jobs Creation Act of 2004
Congress has recently passed the American Jobs Creation Act of 2004 and the president has indicated that he will sign it.IRS Releases Inflation Adjusted Figures for LTCI; MSAs and HSAs
Inflation-adjusted figures for long-term care insurance, Archer MSAs and HSAsTreasury Eyeing Estate Tax Shelters Involving Charities
Treasury officials speaking at the American Institute of Certified Public Accountants conference on November 1-2, 2004, warned accounting and estate planning practitioners to expect a continued crackdown on many of the mechanisms being used to reduce estate tax liability, particularly those involving charities.Proposed Regs Require Registered or Certified Mail to Prove Timely Filing
Taxpayers would need registered or certified mail to prove timely filing under proposed regsPreamble to Prop Reg; Prop Reg § 301.7502-1(e)(1); Prop Reg § 301.7502-1(g)(4)
A law firm secured a $300,000 judgment against its former bookkeeper for embezzlement. The bookkeeper's mother gave the law firm a brokerage account check for $60,000 (for reasons not clear from the record). The law firm, now aware of the fact that the brokerage account was titled in joint tenancy between mother, bookkeeper and mother's other child, executed against the account. The mother intervened in the garnishment proceeding and argued that she was the sole contributor to the account, that her two children were joint tenants only as a matter of convenience, and that she had not intended to make a gift.
Post-Nuptial Agreement Does Not Violate Public Policy - Bratton v. Bratton case
A year after his marriage, a medical student hand-wrote and signed a letter indicating that he promised never to be the cause of a divorce, and if he ever did he assigned 50% of his assets and 50% of his future earnings to his wife. Two months later the couple signed a more formal post-nuptial agreement, drafted by an attorney (the parties disputed whether the attorney represented the husband or the wife), which made a similar provision if the husband "was guilty of statutory grounds for divorce."Interest Accrues on Pecuniary Devise Despite Pendency of Will Contest - Estate of Holan Case
The decedent's will left the family farm to one son, but subject to that son's payment of a percentage of the appraised value of the farm to each of the decedent's other children over a fifteen year period with interest. Other children sought introduction of a later will, but the probate court ultimately found that will to be the product of undue influence and the South Dakota Supreme Court affirmed.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.Tax Fraud Promoters Associated with "We the People" Convicted
Seven individuals associated with a tax fraud group known as "We the People" were convicted May 4, 2004 on various federal charges related to the promotion of bogus tax shelters that falsely promised to limit exposure to federal income taxes.The section 7520 rate for August 2004 is 4.8%.
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.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.IRS Releases Form 8855, Election to Treat Trust as Estate
New Form 8855, Election to Treat a Qualified Revocable Trust as Part of an Estate, has been released. Instead of having to write a statement as outlined in the IRS regulation under IRC Section 645, we should now use this form to make this election.Attorneys' Fees Award Against Losing Party in Trust Contest Upheld
Mother/son team unduly influenced a demented multimillionairess to modify three trusts of which she was settlor, naming son as successor trustee and changing the trusts' ultimate distribution to substantially benefit the mother and son. Several months later the former trustee filed a petition for appointment of a guardian ad litem for the settlor. After setting aside the changes, the trial court ordered the mother and son to repay the trusts all of their legal fees (which had been paid from trust assets) but declined to order payment of the prior trustee's or the trust beneficiary's attorneys' fees and costs.Parental Support Statute Does Not Authorize Suit Against Child of Patient With Assets
Father was admitted to the hospital for what turned out to be his final illness. Days before his death approximately $1.2 million was deposited into a trust for his benefit in settlement of a personal injury action. At the time of his death the hospital believed that Medicare would cover his care, and so submitted a bill for $42.73, which the father's estate paid and for which it secured a release of further liability from the hospital.Private Annuity Contract With Irrevocable Trust is Subject to Medicaid Transfer Penalty
Husband and wife established an irrevocable trust, and then transferred $150,000 in assets to the trust. The Trust executed a private annuity agreement with wife to pay $1,424.55/month to her. Husband then applied for Medicaid eligibility. Medicaid agency denied first application due to inadequate documentation, excess assets and a transfer penalty occasioned by the transfer to trust. After a second Medicaid denial based on excess income, husband appealed.Agent Personally Liable for Unpaid Nursing Home Bills After Medicaid
Daughter of nursing home resident held a power of attorney for her mother. Daughter/agent signed nursing home contract as "responsible party," promising to use mother's assets for her welfare (specifically including nursing home costs). Thereafter, daughter/agent made gifts to herself of just under $50,000 and paid a companion $31,760 over a period of years. Mother's husband had apparently also transferred $285,000 into a revocable trust prior to nursing home placement.Michigan Will Be Last State to Implement Medicaid Estate Recovery
Michigan health officials have begun considering regulations to comply with a federal law requiring state Medicaid programs to recoup assets from deceased beneficiaries to offset the cost of nursing home care. Michigan will be the last state to comply with the "fiscally sound, politically yucky" law, which is "so politically sensitive" that Gov. Jennifer Granholm (D) cannot find a lawmaker to sponsor legislation to address it. Earlier this year, Georgia passed legislation authorizing estate recovery.2003 A Profile of Older Americans
The 2003 edition of A Profile of Older Americans is now available on the U. S. Agency on Aging Web site. This Web-based publication includes statistics on older Americans in key subject areas such as population (including the latest population estimates and future growth projections), income and poverty, marital status, living arrangements, health, and much more. It includes both narrative and statistical charts.Does HIPAA Affect Patients' Access to Care?
An article from the March 29, 2004 Detroit News examines concerns from health care providers that the Health Insurance Portability and Accountability Act medical privacy rules have affected patients' access to care. Providers must obtain consent from patients before they can disclose medical records in "non-routine" cases. Providers who violate the rule can face fines between $100 to $250,000 and as many as 10 years in prison. Providers maintain that they are so wrapped up in complying with the privacy standards that they are distracted from doing their jobs, which can cause patients to wait longer for care.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.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.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.
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.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?Physical and Mental Decline in Elderly Not Inevitable
Years of laboratory testing indicate that the abilities to think quickly, remember accurately, and reason clearly decline beginning in young adulthood. A growing body of research is challenging the depth of this decline and its impact, suggesting that most healthy seniors can work, drive, and live independently well into their golden years.Property Owner Successfully Sues to Rescind Gift Deed for Undue Influence
The owner of 258-acre ranch signed a series of wills prepared by three different attorneys over a short period of time, culminating in a will leaving the ranch to acquaintances. Shortly after that, the acquaintances took the owner on a picnic to the property (which had been her grandfather's homestead) and described their plans to rebuild her grandfather's cabin. The property owner, overcome with emotion, announced her intention to transfer the property immediately. The acquaintances had one of the lawyers involved in estate planning prepare a warranty deed and the property owner signed it. When it was returned to her after recording, she became agitated and demanded that the property be returned to her name; the acquaintances would agree only to transfer the property into joint tenancy with the original owner.Elderly Driver's Estate Not Liable For Traffic Accident Resulting From Heart Attack
An elderly driver suffered a fatal heart attack, swerved into oncoming traffic and collided with victims' vehicle. The victims sued the driver's estate for negligence, alleging that he knew he had a family history of heart disease, he had suffered a prior heart attack and was under treatment for heart disease, and he knew or should have known that he posed a danger to the motoring public when driving.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.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.
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