Joel A. Schoenmeyer of The Death & Taxes Blog writes here about an oft-repeated issue: How do you define fiduciary duty?
This question is obviously important when a client comes to you alleging that such a duty has been breached.
Wikipedia has 11 relationships in which a fiduciary duty is commonly found but then it follows those up with additional “possibilities”… Its not exactly a science. The duty is one that encompasses principals of equity and fairness and therefore necessarily lives in a gray area.
This case (PDF) though gives us a pretty good example of the duty and of its breach.
Mr. Schoenmeyer summarizes the facts as follows:
The case pitted a decedent’s executor (his brother and business partner) against the decedent’s widow. The case revolved largely around appraisals of the business owned by the decedent and his brother, and the court found that the executor abused his discretion in obtaining low-ball appraisals and hiding more accurate appraisals from the widow.
And it feels that the court decided correctly doesn’t it?
Judge Cardozo is famous for saying:
“A [fiduciary] is held to something stricter than the morals of the marketplace. Not honesty alone, but the punctilio of honor the most sensitive, is the standard for behavior.”
I’m not sure what that means either but like another Judge is famous of saying (about a slightly different topic), you know it when you see it.
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David M. Goldman writes here in the Florida Estate Planning Lawyer Blog:
Starting January 1, 2008 every non-spouse designated beneficiary will have the option to rollover an inherited IRA and stretch distributions. To take advantage of this opportunity your Florida estate plan must be setup correctly to qualify for this rollover opportunity. You are not entitled to a rollover, you must prove you meet the technical legal requirements.
The trust must be valid under state law;
The trust must be irrevocable or become irrevocable when the IRA owner dies;
The trust beneficiaries must be identifiable from the trust instrument;
Proper documentation must be provided to the IRA custodian.
[...]
The most common issue is the requirement that beneficiaries be identifiable from the trust document. Often trust documents do not contain adequate language to comply with the IRS rule. Make sure you have the proper language to qualify for rollover treatment.
Rollover treatment is a privilege, not a right.
Well said David. Thank you.
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Mitchell A. Port of the California Tax Attorney Blog recently posted, “No Kidding – A California Trust For Your Pet.” In it he gives one of the more complete primers on pet trusts.
Thanks Mitchell!
The Wall Street Journal is getting in on the act as well with this article on pets trust.
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In this post, Joel A. Schoenmeyer of The Death and Taxes Blog gives the following hypothetical:
Jack and Judy Smith die, leaving four children: Allen, Barbara, Charles, and David. Jack and Judy owned a house at the time of their death — the same house where they raised their children. Jack and Judy had a Will, naming Allen as executor and leaving all of their property equally to their four children. David wants to purchase the house. May he do so?
His short answer is, yes. And he’s right. The info/advice that follows is well-taken. Read Joel’s post for the rest.
I have this situation arise frequently and the first question is almost always: “Why don’t we just give the house to all the kids now, before mom and Dad die?” The simple answer is, taxes. If mom and dad give the house to their kids then the kids don’t get to enjoy the stepped-up basis in the home after mom and dad have passed away.
Probate, however, isn’t always the best way to transfer the house. After all, its probate, and aren’t we all trying to avoid that? Transfer-On-Death (TOD) deeds can accomplish getting the home to all of your beneficiaries equally without having the home pass through your local probate court. But not all states allow TOD transfers. Ohio does, but you’ll need to contact your local estate planning expert to make sure yours does.
Another way to avoid probate and still get the home where you want it to re-title the home into a trust. The trust option gets a little more complicated because you have more options – its more flexible. Again, contact your local estate planning expert to decide on the option thats best for you and your beneficiaries.
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A few days ago Michael J. Keenan of The Connecticut Elder Law Blog posted this story pointing to a list of the worst nursing homes in the US by the federal government’s Center for Medicare and Medicaid Services (CMS).
The homes in question are among more than 120 designated as a “special focus facility.†CMS began using the designation about a decade ago to identify homes that merit more oversight. For these homes, states conduct inspections at six month intervals rather than annually.
With only 120 on the list its a pretty exclusive club. And thankfully not a single facility in Ohio ‘made the cut.’
This list is available here.
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This morning the NYT is running a story by David M. Herszenhorn called “Congress Averts Higher Tax Bill for Middle Class” and it provides the final chapter to this year’s repeated attempts by congres to prevent the AMT from hitting the estimated 25 million middle-class people it was never designed to hit.
The tax reprieve postpones for one year only an expansion of the alternative minimum tax, a parallel tax system enacted in 1969 to prevent very wealthy investors from using deductions and tax shelters to avoid paying income tax altogether. The alternative tax has ensnared a growing number of middle-class Americans in recent years because the 1969 law was not indexed to inflation.
Without the fix by Congress, some 25 million filers would have had to pay the tax on their 2007 income, up from four million who paid it on 2006 income, according to the White House.
[...]
The vote on the alternative tax plan came on the final day of the first session of the 110th Congress, which ended with a burst of last-minute legislation including final adoption by the House of a $555 billion budget package.
But it was the tax plan that gave a discordant note to the last day before the holiday recess.
House Democrats angrily approved the bill after giving in to demands by Congressional Republicans and Mr. Bush that the tax cut not be offset by raising other taxes.
In other words, its not revenue neutral… Its going to leave about a $50 billion dollar hole.
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I’m not a member of ACTEC yet… I’m far too young. But my dad, who is a member is constantly throwing various ACTEC articles and publications my way – And I’ve been saying this for years:
Amidst all the recent stories of larger firms in larger cities cutting back their T&E and probate practice groups, its nice to see that I’m not completely off track…
According to the December 2007 RDA Legal Communique report by Robert Denney Associates, Inc., Estate Planning & Probate Administration are currently two of the “hot†areas of the law.
The reasons given for cutting T&E and probate practice groups have traditionally been low-margin work that is slipping closer to commodity treatment (something I’ve talked about on this blog before). But it seems a simple matter of no one getting younger that makes demand for what we do more necessary now than ever. With the now rapid passing of the greatest generation and the aging baby-boomers, there has never been a time when so many people needed assistance with passing wealth.
The report proposes that high demand is due to the fact that Baby Boomers are starting to retire.
Other “hot” areas include:
Professor Beyer and my dad are competing for attribution on this one.
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This isn’t really estate planning – its probably more pure taxation news or may be tax planning, but its a topic of some import anyways:
Jim Gust writes here about the House recently passing another fully “paid for” AMT patch.
“Paid for” in the sense that the projected 10-year increase in revenue from changes to, for example, the taxation of nonqualified deferred compensation plans paid to offshore hedge fund managers (among other similar esoterica) will be equal to the one-year “cost” of not imposing an AMT on the middle class that we never intended to impose on the middle class in the first place. Does anyone think that those deferred compensation plans won’t be revised within weeks to avoid paying any such new tax?
The White House has threatened a veto, but more importantly the bill seems unlikely to gain much traction in the Senate, given the 88-5 expression last week that a simpler plan of one-year relief is the better way to go. That bill was also nearly blocked by Senate Republicans, until Max Baucus issued a blistering press release on the consequences of their failure to take yes for an answer. The press release made crystal that Republicans would get—and deserve—all of the blame for the increased AMT if they didn’t drop their intransigence. So they did.
At least they did in the House. We’ll see…
Thanks Jim!
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David Goldman writes here about the use of Pet Trusts in Florida as a powerful way “to smooth the transition for your pet while providing the funds for its care and any special needs during its natural life.”
Picking a caretaker
Perhaps the most difficult step is finding the most suitable caretaker – someone not only able, but also willing to take on the care of your pet. Relatives and friends may enjoy visiting with your pet, but that doesn’t necessarily translate into a willingness to provide for its daily care.
Discuss what financial provisions should be made to reimburse the caretaker for actual expenses for food, toys, walking, veterinary care and any special needs.
This step can made even more difficult by the likely conflicts that are created. For instance, many older clients who want to leave something to their pets will usually name their children (or other lineal descendants) as the remainder beneficiaries who will benefit from the trust after the pet passes away. These remaindermen are also usually the same people whom the client will first look at to care for the pet-beneficiary… An obvious conflict that the planner must sensitively but deliberately talk through with the client.
Read the rest of Mr. Goldman’s post here.
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