The Ohio Trust & Estate Blog

Estate Planning Malpractice – NY Court Has A Warning For Ohio Planners

Published on August 14, 2010 in Estate Litigation, Estate Planning and Recent Cases worth noting. 0 Comments

I’ve written on the issue of estate planners committing malpractice against their clients here and here on this blog before. Its an issue of interest for Ohio attorneys because Ohio still clings to the antiquated rule of privity to decide who has standing to sue the attorney who allegedly gave the bad advice. Basically, requiring privity means you must have been the one in a contractual relationship with the attorney – the client. In the estate planning context, however, this is a little complicated because if the bad advice was given during the client’s lifetime its more than probable than not that damages for the bad advice won’t accrue until the client dies. Therefore, you’ve got no one left to sue the attorney for malpractice because the client is dead! Kinda dumb, I know, I complain about it all the time.

However, tn The Estate of Saul Schneider v. Victor M. Finmann, N.Y.3d 2010 N.Y, Slip Op 05281 (pdf of opinion) decided this past June 17th, the New York court held:

the legal representative of a decedent stands in that person’s shoes for the purpose of being able to maintain a malpractice action against the decedent’s estate planner where improper advice or negligent estate planning has resulted in a loss.

Imputing this legal fiction on the fiduciary means a malpractice action can now be maintained. So there you go Ohio courts! Lets get this done. If you don’t want to update the law (to the much preferable California rule that follows the harm and allows the party that suffered as a result of the bad advice to bring a malpractice case) then lets give this a try… Its a little awkward but its about time in Ohio stepped up and allowed aggrieved clients to sue the attorney who rendered the poor advice.

Thanks to Philip Bernstein of the New York Probate Litigation Blog for pointing this out to me.

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You Must Check This Out

Published on July 29, 2010 in Uncategorized. 0 Comments

Frequent readers will notice the new badge in my right sidebar… Its for the film, Leading Ladies.

I’ve written here before about this film.

Friending them on Facebook, via that little badge down there on the right, will help get the word out so more of you can see this fantastic and important movie. Let Love Lead!

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New Estate Tax Fix Introduced

Published on July 14, 2010 in Estate Planning. 0 Comments

Last night, as part of the jobs bill, Senators Blanche Lincoln (D-Ark.) and Jon Kyl (R-Ariz.) introduced legislation creating a permanent fix for the estate tax.

According to this story at TheHill.com:

Their proposal would require Democratic leaders to amend the small-business jobs bill with a provision that sets the estate tax at 35 percent with a $5 million exemption. These amounts will be phased in over a 10-year period and also be indexed for inflation. In addition, inherited assets would be taxed at their worth upon transfer, not when the deceased purchased them.

Fantastic! I’ve said before that I like $5 million as the exemption and bringing the stepped up basis back is just a no-brainer.

Quoting Senator Kyl:

“If the Small Business Lending bill is intended to help small business create jobs, wouldn’t it make sense to provide small-business owners with the certainty that their tax rates aren’t going to skyrocket at the beginning of next year?”

I’m not often in agreement with Republican sound-bytes, but I am wholeheartedly behind this one.

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So You Say You Want To See A Trust That You’re A Beneficiary Of And An Accounting Of The Trust?

Published on July 8, 2010 in Trust Administration and Trust Litigation. 0 Comments

Well ok then! If its an Ohio trust, all you have to do is ask.

Under Ohio law, the Trustee of a Trust is obligated to give a copy of the trust to the beneficiaries that ask for it. The same goes for an accounting of the trust as well. Ohio Revised Code Section 5808.13 reads as follows:

A) A trustee shall keep the current beneficiaries of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests. Unless unreasonable under the circumstances, a trustee shall promptly respond to a beneficiary’s request for information related to the administration of the trust.

(B) A trustee shall do all of the following:

(1) Upon the request of a beneficiary, promptly furnish to the beneficiary a copy of the trust instrument. Unless the beneficiary expressly requests a copy of the entire trust instrument, the trustee may furnish to the beneficiary a copy of a redacted trust instrument that includes only those provisions of the trust instrument that the trustee determines are relevant to the beneficiary’s interest in the trust. If the beneficiary requests a copy of the entire trust instrument after receiving a copy of a redacted trust instrument, the trustee shall furnish a copy of the entire trust instrument to the beneficiary.

So, if you’re the beneficiary of a trust or you even think you may be the beneficiary of a trust, all you’ve got to do is ask!

If your the Trustee of a trust and you receive one of these requests, you likely have to comply. And typically – at least in my experience – all the requesting beneficiary wants is a little information. In these situations sunlight really is the best disinfectant so unless you’ve got something to hide then responding timely is almost always advisable.

What is an accounting? Well its not simply a listing of the assets owned by the trust – though that’s a nice start. NO, an accounting should show all cash and property transactions during the accounting period, including compensation paid to the trustee and the trustee’s agents, gains and losses realized during the accounting period and all receipts and disbursements should be evident as well. Finally, the account should identify and value the trust assets on hand at the close of the accounting period and for each asset or class of assets that are reasonably capable of being valued the accounting should contain two values, the asset acquisition value and the estimated current value. This is the only way for beneficiaries to be kept reasonable informed about what’s going on with the trust.

I’ve had this issue come up a lot in the last two months and I am actually litigating 3 different matters right now all because a Trustee didn’t want to make the required disclosures. So, beneficiaries, if you’re having a problem getting information from your Trustee just tell them they have to respond to your request. If you’re a Trustee, either respond or risk getting removed as Trustee. (If the latter happens, keep in mind, that usually all of my attorney’s fees incurred in removing you will come out of the trust thus reducing its value for all beneficiaries. I’ll also usually take a long hard look at any compensation you’ve taken before your removal… So think about that when contemplating not responding to a beneficiary’s request.)

If your the beneficiary of a trust or the Trustee, give me a call and we’ll talk about the best next step to protecting your interest and the trust.

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The Responsible Estate Tax Act (RETA)

Published on June 25, 2010 in Estate Planning. 0 Comments

The Responsible Estate Tax Act is the irksome name of the act introduced this morning by Senators Sanders (I-VT), Harking (D-IA) and Whitehouse (D-RI) to remedy the impending doom of 2001 when the estate tax is (re-)released like the Cracken upon an ill-prepared populace… However, its at least something, hence my first post in some time.

The prolific Paul Caron of the TaxProf Blog has already posted the details and linked to a number of worthy reads on this new act which I have re-posted at the bottom here. Thanks Paul!

In short, the act brings the estate tax back with a $3.5 million exemption with the highest rates (for most of us) at 45%. There is a progressive rate structure that increases the highest rate for the wealthiest among us – 55% for estates over $50 million – and a billionaires surcharge.

The Senators summarize their bill as follows:

Exempts the first $3.5 million of an estate from federal taxation ($7 million for couples), the same exemption that existed in 2009. Doing this would mean that 99.75% of all estates would be exempted from the federal estate tax in 2011 alone.

Includes a progressive rate structure so that the super wealthy pay more. Under our bill, the rate for the value of the estate above $3.5 million and below $10 million would be 45%, the same as the 2009 level. The rate on the value of estates above $10 million and below $50 million would be 50%, and the rate on the value of estates above $50 million would be 55%.

Includes a billionaire’s surtax of 10%. Our bill also imposes a 10% surtax on the value of an estate above $500 million ($1 billion for couples). According to Forbes Magazine, there are only 403 billionaires in the United States with a collective net worth of $1.3 trillion. Clearly, the heirs to these multi-billion fortunes should be paying a higher estate tax rate than others.

Closes all of the Estate and Gift Tax Loopholes requested in President Obama’s Fiscal Year 2011 budget. These loophole closers include requiring consistent valuation for transfer and income tax purposes; a modification of rules on valuation discounts; and a required 10-year minimum term for Grantor Retained Annuity Trusts (GRATS). OMB has estimated that closing these loopholes that benefit the super-wealthy, would raise at least $23.7 billion in revenue over 10 years.

Protects family farmers by allowing them to lower the value of their farmland by up to $3 million for estate tax purposes. Under current law, the value of farmland can be reduced up to $1 million for estate tax purposes under § 2032(a) (Special Use Valuation). Our bill increases this level to $3 million and indexes it to inflation.

Benefits farmers and other landowners by providing estate tax relief for conservation easements. Our bill provides tax relief to farmers and other landowners by amending estate tax rules for conservation easements through an increase in the maximum exclusion amount to $2 million and increasing the base percentage to 60%.

I’m happy to see any movement on this issue because of the extreme hardship that the $1 million exemption will cause my clients. I’m not holding my breath but I will risk cautious optimism.

Professor Caron posted the below sources in his original post and almost all are worth a read. Warning: I would avoid Chris Dubay’s piece at the Heritage Foundation’s website. Putting aside that its terribly written, its more assertion than fact and does little to increase the reader’s knowledge, either of the estate tax itself – something Mr. Dubay clearly has no understanding of based on his other published pieces on the same subject - or the proposed legislation… Its just really sophomoric work and more of the ilk of a Glenn Beck-style opinion piece than a scholarly examination of proposed legislation.

Forbes, Three Senators Call For Billionaire Estate Surtax, by Janet Novack

Going Concern, A Few Senators Would Like Billionaires to Pitch in with the Deficit Problem, by Caleb Newquist

Heritage Foundation, Dangerous Death Tax Plan Offered in the Senate, by Chris Dubay

The Hill, Sanders Forwards Estate Tax Fix That Inflicts Pain on the Wealthy, by Jay Heflin

New York Post, Death Tax Compromise Favors New Yorkers, by Josh Kosman

Wall Street Journal, Sanders Estate-Tax Proposal Would Hit Wealthy Harder, by Laura Saunders

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Interview With Professor Daniel Pinello

Published on June 2, 2010 in Uncategorized. 0 Comments

I am excited to be interviewing soon with Professor Daniel Pinello for his new book on the effects of state constitutional amendments that ban marriage, civil unions, domestic partnerships, etc. (called Super-DOMAs) for lesbian and gay pairs.

Dan contacted me a couple weeks ago and in addition to being a very nice man, he appears to be the real deal. His credentials and list of publications (available above) are impressive and worth checking out. I’m flattered to be considered a potential resource for his next work of scholarship on this very important subject.

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Estate Tax Deal? – Support Growing For a Choice

Published on April 16, 2010 in Estate Planning. 0 Comments

This is kind of novel so I thought I’d mention it:

From this post at The Hill.com:

Senate Republican Whip Jon Kyl (R-Ariz.) wants taxpayers to have options on how to pay for an estate tax.

Under the senator’s plan, beneficiaries could choose to either abide by current law or agree to whatever Congress passes. The deal would likely be for estates created before the year end.

Democratic staffers with the House Ways and Means Committee have indicated support for this initiative.

It also sounds like Senator Kyl wants a $5 million dollar exemption with rates at 35%. A lowering of the rates and a raising of the exemption means a lot less money for the federal government but these are reasonable numbers. Something though needs done… If we see a $1 million dollar exemption come 1/1/11 we’re going to have some very unhappy clients.

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Probate Creditor Deadlines Are Important

Published on April 11, 2010 in Estate Litigation and Recent Cases worth noting. 0 Comments Tags: claims against estates, collecting from probate.

The above is actually important to point out. Should be self-evident right? Nope.

Too many talented and experienced attorneys blow their cases for failing to adhere to probate creditor claim rules and time lines. This post by Juan Antunez of The Florida Probate & Trust Litigation Blog is a perfect example of how wrong things can go if you’re not paying attention to probate court rules. The below summary of 2010 WL 479862 (Fla. 1st DCA Feb 12, 2010) is from Mr. Antunez:

Wald was involved in an automobile/motorcycle accident with the decedent and brought a personal injury lawsuit to recover damages. Wald eventually prevailed in his lawsuit, but the judgment was not rendered until after the decedent’s death. Some time after obtaining the judgment, Wald filed a claim against the probate estate.

The personal representative argued she had served notice on Wald’s attorney as required by Florida Probate Rule 5.041(b) (2009) on May 23, 2007, thus triggering the time constraints of section 733.702(1). Therefore, under the statute, Wald had until June 22, 2007, to file any claim he might have. Since Wald’s claim was not filed until July 2, 2007, the personal representative argued it was untimely and forever barred.

Scary stuff right? Well, it happens all too often. Juan wisely points out:

Plaintiffs suing estates often fail to realize that they’re really litigating their claims in two separate courts in front of two separate judges:

The trial court adjudicating their lawsuit (this is where the decedent’s liability is established); and

The probate court administering the decedent’s probate estate (this is where you go to collect on your judgment)

Ohio’s rules for presenting claims against an estate are found in R.C. 2117. 2117.06 gives a creditor 6 months after a decedent dies to present a claim or, as in Florida, the claim is forever barred. A distinction is necessary here though. If the above case had happened in Ohio, the Plaintiff still likely could have won something from decedent defendant’s non-probate property. I’m thinking here of decedent defendant’s auto insurance coverage. Assets from insurance that are recoverable as damages in a tort action are non-probate property (typically). Thus these assets aren’t governed by 2117.06. You have the regular time allowed under Ohio law to bring a claim of this type – 2 years I think in Ohio for personal injury claims. However, if the defendant dies during the case, or perhaps died as a result of the accident before the case was filed, you still have to pay attention to the probate court deadlines if you want to retain the ability to recover from defendant’s estate. Hypothetical: Plaintiff wins their case against defendant for liability stemming from a car accident. Defendant died as a result of the accident. Plaintiff gets a $1 million dollar judgment against Plaintiff. (I know that’s high but its my hypothetical.) Defendant had insurance which will pay Plaintiff, however, Plaintiff’s insurance company will not pay any more than policy limits. SO, the insurance isn’t sufficient to pay the full claim and now Plaintiff wants to/has to recover the deficiency against decedent’s estate but we’re now more than six months from the date of defendant’s death. Plaintiff is out of luck. Nothing they can do about it. Even if defendant dies with a multi-million dollar estate, Plaintiff gets nothing from that estate if their claim wasn’t timely filed. This situation, similar to the one linked to above = a malpractice lawsuit against the attorney who failed to adhere to the probate code’s deadline.

In the opinion of the linked-to case (available here as a PDF), the court was none-too-pleased with plaintiff’s attorney for blowing this deadline:

Filing a probate claim is a relatively simple act and requires nothing more than submitting a written statement of the case. If for some reason Wald’s attorney was unable to file the claim, he certainly could have referred Wald to another attorney or advised Wald about the need to timely file a claim. Wald’s attorney failed to accomplish this simple task.

Ouch. Probate deadlines are important people! If you’re litigating a personal injury case or any other claim that even may have to be collected from a probate estate, find yourself a good probate attorney to advise on the collection procedures in your local probate court. Otherwise you may need a good malpractice attorney.

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Ohio Supreme Court Chief Justice Moyer dies at 70

Published on April 3, 2010 in Uncategorized. 1 Comment

From the AP:

COLUMBUS, Ohio — Ohio Supreme Court Chief Justice Thomas Moyer, who was the longest-serving sitting state Supreme Court chief justice in the United States, died Friday at age 70.

…

Pfeifer said Moyer’s health had deteriorated over the past weeks but he was in court on Tuesday, despite looking “very ill,” and returned Wednesday looking much better. He said he was disappointed Moyer didn’t get a “very grand party” to end his more than two decades as chief justice but Moyer would’ve been proud he presided to the end of his life.

He was a terrific Justice who will be missed.

State law says “the judge having the period of longest total service upon the court shall be the acting chief justice” if the chief justice is absent or disabled. Pfeifer, considered the all-Republican court’s most liberal voice, now is the longest-serving justice on the court; he was first elected in 1993.

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Presenting: Leading Ladies (now with ebedded player!)

Published on March 16, 2010 in Uncategorized. 0 Comments

We don’t always get the most entertaining clients… Sometimes we don’t even get clients that we like. However, recently I had an opportunity to offer a small amount of counsel to a little movie that became very big, and is about to get even bigger.