Nonprofit Law Blog:  “A charitable lead annuity trust (CLAT) is an irrevocable split-interest trust in which the income interest is to be paid over to one or more charitable organizations, in the form of an annuity, and the remainder interest is to be paid over to one or more noncharitable beneficiaries. Typically, CLATs are designed to provide an annual payment that is level throughout the trust term – either a stated amount or percentage of the value of the initial trust corpus. But according to attorney Jerry McCoy, an expert on charitable tax planning, unlike the case with a charitable remainder annuity trust, “a CLAT may provide for an annuity amount that is initially stated as a fixed dollar or fixed percentage amount but increases during the annuity period. The only stipulation is that the value of the annuity amount must be ascertainable at the time the trust is funded.”

Arizona Republic:  “Estate planning was tough enough even before the age of online financial accounts and social media.  Now that so many things have gone digital, there are even more issues to ponder. . . . ‘The ultimate question is what happens to these digital assets when somebody dies.'  Chances are a lot of electronically active Americans haven't pondered such questions and even fewer have done anything about them.  That's a safe bet considering that about half of Americans haven't even performed estate-planning basics such as getting a will, according to surveys.”

Fobres.com:  “The money might be drying up in Hollywood, but there's still plenty of cash being made in the graveyard.  The 13 iconic figures on Forbes' list of the Top-Earning Dead Celebrities grossed a collective $886 million in the past 12 months.”

Special Needs Answers:  “When helping older clients quickly qualify for Medicaid coverage of long-term care, elder law attorneys often ask right at the outset, ‘Do you have a relative with special needs?' The reason this question is so important is because under federal Medicaid law, someone applying for Medicaid long-term care (nursing home) benefits can transfer her assets into a special needs trust for the ‘sole benefit' of a person with disabilities, and that transfer will not disqualify the Medicaid applicant from receiving benefits. In other words, a senior who is willing to give away her assets to a person with special needs, and who meets all the other Medicaid eligibility requirements, can almost always qualify for Medicaid quickly.”

New York Times:  “To deter lawsuits, many estate plans include a no-contest clause, which provides that anyone who formally challenges the plan gets nothing. Brooke Astor, the New York philanthropist, had one in her will. Michael Jackson reportedly used one in his living trust, a private document that disposed of most of his assets. . . . These clauses are becoming more important as people live longer, said Dana G. Fitzsimons Jr., a lawyer with McGuireWoods in Richmond, Va., who handles will contests.”

Edge.com:  “Same-sex couples face many financial planning issues that married couples do not. However, like married couples, we have similar financial planning objectives, such as:

• Making certain assets reach our designated heirs in the manner we choose.
• Eliminating or reducing estate taxes.
• Protecting assets from an heir’s inabilities, disabilities, creditors and predators.
• Avoiding the cost, delays and publicity associated with probate.”

The North Carolina Estate Planning Blog has a list of twelve common estate planning mistakes.

USA Today:  “Nearly 60% of Americans don't have a basic will. There are all kinds of reasons for this oversight.  Some people just haven't gotten around to creating a will or trust.  Others think they don't need an estate plan because they don't have much.  Some people fear that as soon as they write a will, they'll die. . . . And if you die without an estate plan, you could leave a legacy of bad feelings and attorneys' fees.”

Wall St. Journal: Kelly Greene answers the following questions in an article dated October 24, 2009:

“If I leave a Roth IRA to my wife, does she have to make required withdrawals every year? And if my wife then names our two adult children as equal beneficiaries of the same Roth IRA, as long as it hasn't been depleted at the time of her death, can they split it 50-50? How should they retitle the IRAs? Assuming they have to take required distributions, how would this work? And given the fact that they would have to title these accounts as inherited IRAs, would they have full authority to manage and direct the allocations of their portfolios?”

Wealth Strategies Journal:  “We insure our life, health, our houses, our cars, teeth, eyes, our jewelry, our art, our voices, our pets ……. why not our stocks and bonds? . . . In this article the term portfolio insurance should be reckoned the very same way as we think of insurance – protection against or the mitigation of pure loss.”

Forbes.com:  “Seven steps to make sure your family doesn't end up like the Astors. The recent fraud and grand larceny conviction of socialite Brooke Astor's son, Anthony Marshall, highlights how dangerous a power of attorney can be in the hands of an abuser.  Among the 14 counts the New York jury found Marshall guilty of: misusing his power by giving himself a retroactive $1 million raise to manage his mom's finances. . . . The Astor case is a reminder to families that it's important to make sure you get this basic estate and disability planning document right.”

Wall St. Journal:  “Have you checked your will lately–or your spouse's?  If not, there may be a trap lurking in the language that could cause an unintended calamity after death.”

There was a recent taxpayer victory involving transfers of interests in a limited liability company and valuation discounts.  The United States Tax Court case of Suzanne J. Pierre v. Commissioner of Internal Revenue, 133 T.C. No. 2 (2009), found that “the transfers are to be valued as transfers of interests in  [the] LLC, and [the] LLC is not disregarded under the ‘check-the-box' regulations to treat the transfers as transfers of a proportionate share of assets owned by LLC.”   The IRS wanted the opposite result so it could disallow valuation discounts taken for lack of control and lack of marketability.

P transferred cash and publicly traded securities to LLC, a New York limited liability company, in exchange for a 100-percent interest in LLC. P subsequently made four transfers of her interest in LLC to trusts established for the benefit of her son and granddaughter: P transferred as a gift a 9.5-percent interest in LLC to each trust and then sold a 40.5-percent interest in LLC to each trust in exchange for a promissory note. In valuing the transfers for Federal gift tax purposes, P applied substantial discounts for lack of marketability and control and therefore paid no gift tax on the transfers.

R argues, inter alia, that the transfers should be treated as transfers of the underlying assets of LLC because a single-member limited liability company is a disregarded entity under the “check-the-box” regulations of secs. 301.7701-1 through 301.7701-3, Proced. & Admin. Regs.

Held: For purpose of application of the Federalgift tax, the transfers are to be valued as […]

Washington Supreme Court:  “Albert M. Luth devised all of his real property in Benton County,  Washington, to the Kennewick Public Hospital District (Hospital) in perpetuity so long as the property was not ‘transferred, incumbered [sic] or otherwise alienated from the purposes herein expressed and intended.' . . . The property was to go to Benton County (County) or the State of Washington (State) if this direction was violated.  That provision violates the rule against perpetuities and is therefore void.  The question before us is whether the interest that remains is fee simple absolute (as the Hospital maintains) or whether, instead, it is fee simple determinable (in which case the Diocese of Olympia, Inc. . . . would have an interest under the will of one of Mr. Luth's beneficiaries).  We conclude that the resulting interest is fee simple absolute in the Hospital . . . .”

The rule against perpetuities is a rule of law in most states that is derived from English law of the same name.  Washington's rule against perpetuties is typical of the rule and it is:

The rule against perpetuities requires that future estates vest or fail within “a life or lives in being at the time of the testator's death and twenty-one years thereafter.”

The purpose of the rule is to prevent the control of real property from the grave.  See the Court's opinion.

For more on the rule, watch one of my all-time favorite movies “Body Heat” with Kathleen Turner and William Hurt.  Rottentomatoes.com compiles ratings of critics […]

Wealth Strategies Journal:  “The King of Pop's mortal life has ended with debts in excess of $500 million but the value of his immortalized image could mean an immensely valuable future estate.  What can the estate-planning profession learn from the Michael Jackson estate? What kind of testamentary document was used? Was the trust well designed? How will intellectual properties be managed? What executor will preside over the Michael Jackson estate?”

Wealth Strategies Journal:  “Irrevocable life insurance trusts (‘ILITs') are commonly used to keep insurance proceeds outside the estates of the grantor-insured, the grantor's spouse, and the grantor's descendants (if a generation-skipping trust is used). As the name indicates, an ILIT is irrevocable and its terms cannot be amended after it is created. The irrevocability of an ILIT can create problems for grantors and their attorneys alike. For example, perhaps the ILIT is not a generation-skipping trust and the grantor now wishes to leverage his/her GST exemption with the policy or policies owned by the trust. Or maybe the grantor no longer wishes to provide for one or more of the beneficiaries of the ILIT, or desires to change the dispositive terms of the trust. So what can the grantor of an ILIT do if he/she is no longer happy with the terms of an ILIT?”

The Ohio Supreme Court imposed a $6,387,990 civil penalty against two companies and their owners for engaging in the unauthorized practice of law in Ohio.

[T]he Court found that American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services Inc., their co-owners, Jeffrey and Stanley Norman, and multiple employees of those firms engaged in more than 3,800 acts of unauthorized law practice by virtue of their participation in a “trust mill” operation from March 2003 through March 2005.

The Court noted that despite the fact that American Family used sales persons who had never been licensed as attorneys to “advise” customers about their estate planning needs and persuade them to purchase a trust, and that other non-attorneys in California actually prepared the trust documents, the company attempted to legitimize its unauthorized law practice by passing each transaction through a Columbus attorney, Edward P. Brueggeman. Brueggeman seldom spoke with the customers who were purported to be his “clients,” and was paid a flat fee by American Family for every trust document he approved.

In its decision, the Court wrote: “From the start of his employment until March 2005, Brueggeman had an office within American Family/Heritage offices on Citygate Drive in Columbus. Brueggeman did not pay rent and used the supplies and services provided by American Family and Heritage employees to perform his role. Brueggeman did not hire or supervise the American Family sales agents. Brueggeman, after receiving the agreement, sent a form letter to the purchasers of the plans thanking them for choosing him to prepare their living trusts and their estate-planning documents. The letter also stated that the drafting process would take four to six weeks and invited the customer to call him […]

The Trust Advisor Blog:  “Leading Trust Companies and Multi-Family Office Providers will Soon be Staffed with Advisors Trained in Family Formation Matters.  The role of a trustee is expanding. Trusts are evolving to harness medical advances. With the use of stem cells and other genetic material babies born today are expected to live over 100 years.  As part of this evolution, new state laws now make extracting live sperm from a dead body for later reproductive use legal.  Cryobanks around the country are receiving customer deposits of frozen reproductive cells which include stem cells, cord blood, sperm, eggs and embryos.  The courts have held that genetic material is property, like securities and may be bought, sold or transferred.”

Attorneys Jonathan G. Blattmachr and Alvina H. Lo wrote an article on the date on which an estate must value the assets of the estate for the purpose of determining the federal tax on the estate.

“The alternate valuation rules in Section 2032 can alleviate the hardship that a decedent's estate may experience as a result of a decrease in the value of the gross estate from the date of the decedent's death to the date on which estate tax has to be paid. These rules permit an executor to elect to value the gross estate, as a general matter, six months after the decedent's death provided that both the value of the gross estate and the federal estate tax (and certain generation-skipping transfer (GST) tax) would decline as a result of the election. Perhaps at no other time since the Great Depression, when alternate valuation was originally enacted, has the election been as useful for estates as it is in today's current economic downturn. This article discusses the impact of the Proposed Regulations under 2032 and the Kohler case, among other things. Many considerations must be kept in mind, including the income tax impact of a lower step-up in basis. Other complications that may arise involve the type of assets in the gross estate (such as retirement plan benefits that will be IRD) and the relationship between the marital deduction and a bypass trust.”