Monthly Archive for February, 2009

Tax ID Numbers – A Primer

Published on February 28, 2009 in Uncategorized. 0 Comments Tags: , .

This is great.  Mitchell Port of the California Tax Attorney Blog has published a succinct summary of when you need a tax ID # and why.

Tax ID #s are some of the basic tools of estate planners.  But when you need one and why is not something that everyone agrees on.  Tax ID #s are also used in the entity context with LLCs, Corporations and Partnerships:

Trusts
You will be required to obtain a new EIN if any of the following statements are true.
• One person is the grantor/maker of many trusts.
• A trust changes to an estate.
• A living or intervivos trust changes to a testamentary trust.
• A living trust terminates by distributing its property to a residual trust.

You will not be required to obtain a new EIN if any of the following statements are true.
• The trustee changes.
• The grantor or beneficiary changes his/her name or address

Estates
You will be required to obtain a new EIN if any of the following statements are true.
• A trust is created with funds from the estate (not simply a continuation of the estate).
• You represent an estate that operates a business after the owner’s death.

Read the rest of Mitchell’s post for the rest of his very helpful list.  Thanks Mitchell!

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Equalizing Mom/Dad’s Estate Distributions When Assets Pass Via Joint Accounts

Published on February 28, 2009 in Estate Administration, Estate Litigation and Estate Planning. 0 Comments Tags: , , , , .

I see this all the time:

Mom/Dad passes away (no surviving spouse) and their will leaves everything to their children equally…  Except for that money which passed automatically outside of probate to the child that lived near Mom/Dad and was helping them with basics of their daily lives – paying bills, taxes, etc., because they were the joint-owner on the account in order to help mom/dad with those daily activities.

What to do?

Oftentimes its a pretty simple matter that involves the joint-title holder with mom/dad gifting an amount of money to each of the other kids necessary to offset the joint-owners extra benefit…  However, one needs to ask the question: Is this advisable from a tax perspective?  What is this annual exclusion thing I hear about?

The Annual Exclusion:
In 2009, one can give $13,000 to anyone without encountering any potential gift tax liability…  That’s $13,000 per person, not in the aggregate.  So, if this is enough to offset the extra amount received by the one child, then great, inquiry over, gift away!  If not though, if more needs to be given to the other siblings than the annual exclusion allows, then gifting is still possible but you may have some gift tax liability.  So lets talk about that, what is the gift tax and when does it matter?

The Federal Gift Tax and The Federal Estate Tax Interplay:
Its not what you think…  Usually, you think of payinga tax; actually writing a check to the government.  Not so with the gift tax (most of the time).  If you give more than the annual exclusion amount to anyone in a given year, then the amount given that exceeds the annual exclusion reduces, dollar-for-dollar, the individual exclusion for federal estate taxes – $3.5 million in 2009.  As an example:  Lets say you give someone $14,000 in 2009.  The annual exclusion has been exceeded by $1,000.  If the person who made the gift then dies in 2009, their individual exemption for the Federal Estate Tax is $3,499,000.  That $1,000 over the annual exclusion reduced their individual exemption for the Federal Estate Tax by $1,000.  Therefore, it only really matters if your estate is near the exemption amount – otherwise, I’d say go ahead and make the equalizing gift to your siblings.

What if the sibling who was the joint-owner with mom/dad doesn’t want to equalize the amount received by the other siblings?  Well then tough, that sibling is a jackass, game over.  Absent some wrongdoing on that sibling’s part, calling them an ass at every successive family event is about all you can do.  Legally its their money.  There is no legal obligation to equalize the distributions coming from the estate.  Arguably there may be a moral obligation but you can’t usually sue on those.

Of course, the better way to deal with this is to not have to deal with it at all…  Call an experienced estate planning attorney to help you or your parents.  And don’t be shy about this stuff.  If your parents (or someone else you love) is getting up there in age, tell them to call someone.  Its about planning for these little earthquakes before they happen.  You’ll pay a little bit now to get it done, but you’ll pay 3-times more (on average) after your loved-one has passed and you and the estate attorney are forced to fix things.

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Yves St Laurent Estate Sale

Published on February 28, 2009 in Estate Administration. 0 Comments Tags: , , , .

A quickie this morning with the tale of what Professor Berry is calling perhaps the greatest estate sale of all time…

Yves St Laurent died on June 1, 2008.  Last week, Christie’s conducted a three-day sale of his estate in Paris which included paintings, art objects, and furniture.

The sale brought in over $475 million which included $27.5 million for [a really ugly chair]. <– this is my commentary

Thanks Professor…  Check out his post for a picture of one of the ugliest chairs I’ve ever seen.

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President Obama’s Budget (selected portions)

Published on February 27, 2009 in Estate Planning and Links. 0 Comments Tags: , .

First, from Paul Caron of The Tax Prof Blog comes Tax Provisions in Obama’s Budget with some nice charts and a slew of links to similar reports.  This post is a great resource for some expanded reading and general knowledge about the budget.  JLM of the Trust and Wealth Management Marketing blog gives us the same link and some good commentary…  Such as:

What’s more, there are several Carter-esque tax hits proposed for the oil and gas industries. Because we all remember how great the windfall profits tax was at generating new energy sources within the U.S. Oh, wait . . .

The T&E/tax blogo-inter-web is sorely lacking in any appreciable sense of humor so I appreciate JLM’s efforts…  I wish I knew his real name though.  Anyone? JLM?  Beuhler?  Beuhler?

Next is The Tax Lady (aka Roni Deutch) via her Tax Lady Blog who discusses President Obama’s assertion that people will start to see some help by April 1.  Seriously, April 1?  Doesn’t the White House have a PR person on staff?  This is not the date to choose as a target for proposed economic relief resulting from the implementation of liberal tax policies.  Roni runs a great blog though, you should stop by and give it a read every so often…  I do.

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Ohio Adopts Revised Uniform Anatomical Gift Act

Published on February 27, 2009 in Uncategorized. 0 Comments Tags: , .

Late last year, the Revised Uniform Anatomical Gift Act (Sub. H.B. 529) was passed by the 127th General Assembly and signed by the Governor on January 6, 2009.

Special Thanks to Professor Berry for pointing this out to me…  I know, I’m in Ohio, he’s in Texas, blah blah blah.

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The Troubled Intersection of Medicaid Planning & Planning to Avoid Probate

Published on February 24, 2009 in Estate Planning. 0 Comments Tags: , .

Two of my most often-read blogs intersected today when Michael J. Keenan of the The Connecticut Elder Law Blog posted an article by David Goldman of The Florida Estate Planning Lawyer Blog.

Loosely based on the premise in Elder Law planning that “when you fix one problem you end up creating a brand-new problem”, Mr. Keenan posted David’s “Most Common Mistakes That Florida Families Can Make” as these mistakes relate to Medicaid Planning and Probate Avoidance.  It was timely posted because Ezine Articles also this morning posted their list of “10 Estate Planning Mistakes That Most Americans Make.” (No medicaid angle here though.)

These lists are among my favorite things posts because it allows me another trip to the top of my soap-box to rant about the problems I see everyday; problems that are easily avoided if only the subject family had gone to a qualified estate planning attorney…  Anways, snippets from each list are below, sprinkled with my own special color commentary of course.

1.  Transferring a portion or all of a home to a family member.  This drives me bonkers

Often, people executed deeds that include other family members in an effort to avoid probate.  The most common type of deed that people use is a life-estate deed.  Normally, A life-estate deed reserves the right for the owner to live in the home for the remainder of his or her life and then upon death the property belongs to the designated family members.  Although a life-estate deed avoids probate, it can cause many unforeseen problems.  These problems include 1) a gift for federal income tax purposes which is often unreported and can accrue interest and penalties for years; 2) loss of the stepped up basis the recipient would receive upon the death of the original owner; 3) the inability to sell or refinance the property without the consent of all owners; and 4) the creation of a disqualifying transfer for Medicaid qualification.

(A life estate deed doesn’t exist in Ohio.  Instead, we have a transfer-on-death deeds which I use frequently as they avoid all of the problems David lists above…  I include his #1 as my #1 though because, really, it drives me bonkers when I see partial interests transferred to children during mom/dad’s life solely in an attempt to avoid probate.  Bonkers)

2.  A joint account holder using funds for personal benefit.

Another common technique used by the elderly to avoid probate is to create jointly owned bank accounts with other family members.  For Medicaid planning purposes, all funds in such bank accounts are considered assets of the applicant, regardless of the source of the funds.  Often, family members do not keep sufficient records or may use the joint account to pay bills that are not the responsibility of the applicant.  Medicaid considers such transactions as “gifts” and will disqualify the recipient if they are done within 5 years of the application process.  It is possible to undo these transactions, but often the family member who received the benefit is unable or unwilling to return the money.

Purely from a planning perspective, joint accounts as probate avoidance vehicles are nightmares because, in Ohio, all the money contained in the joint account automatically passes to the surviving joint owner.  This can lead to all kinds of family strife when the remaining surviving siblings realize the joint-account-sibling just got a more from mom/dad’s estate than they did.  What makes it even worse is, those assets that went to joint-account-sibling are still included in the decedent’s gross estate for estate tax purposes but are not included in the probate assets where the family will first look to pay any estate taxes…  So not only did the other siblings not get the money, but they are (oftentimes) still expected to pay the taxes due on these monies…  Hi-jinks ensue.  And by hi-jinks, I mean lawsuits.  And if the joint-account-sibling used any of the funds for their personal benefit rather than for mom/dad…  Lookout.  This one ruins christmases everybody.

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Order Issued On Helmsley Trust

Published on February 24, 2009 in Estate Administration and Estate Litigation. 0 Comments Tags: , .

Its been a while since I posted anything on Leona Helmsley’s estate/trust troubles but this morning Professor Berry published this post about an order having issued by the court.

The trustees had filed an action asking the court to determine the scope of their discretion to apply trust funds for charitable purposes. 

The “mission statement” of the trust dated March 1, 2004 provides that the trustees may make grants for “(1) purposes related to the provision of care for dogs; and (2) such other charitable activities as the Trustees shall determine.”

The trustees asserted that this mission statement was revoked by later documents. 

The Attorney General of the State of New York, representing potential charitable beneficiaries, successfully claimed that this issue is irrelevant because the trust expressly states that the trustee’s discretion is not limited by mission statements. 

Accordingly, the court held that “the trustees may apply trust funds for such charitable purposes and in such amounts as they may, in their sole discretion, determine.”

Thanks Professor…  I had been wondering where this case went.

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Another Heath Ledger Post – Life Insurance Dispute Settled

Published on February 23, 2009 in Estate Administration and Estate Litigation. 0 Comments Tags: , .

In September of 2008 TMZ broke the story about Heath Ledger’s life insurance company draggin their feet on paying out his $10,000,000 policy to his daughter Matilda.  The reasons given were:

  1. Allegations that his death was a suicide rather than accidental
  2. He may have lied on the form where he stated he had never taken any illegal drugs.

Matilda’s attorneys filed suit alleging the insurance company (ReliaStar Life) was acting in bad faith.  According to TMZ this morning, that case has now been settled for an unknown amount.

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What Happens to Heath Ledger’s Oscar?

Published on February 23, 2009 in Estate Administration, Estate Litigation and Estate Planning. 0 Comments Tags: , , .

A good summary of the facts to date from Professor Berry:

  • Australian actor Heath Ledger died on January 22, 2008 in New York City from an accidental drug overdose. 
  • Heath was well-known for starring in the movie Brokeback Mountain and for the role of “The Joker” in the Batman movie, The Dark Knight.
  • According to Jose Martinez, Heath Ledger assets go to parents, siblings, [New York] Daily News, March 8, 2008, Heath prepared a three page will in Australia in 2003 before becoming successful.  This will leaves his entire estate to his parents and siblings.
  • After executing this will, however, Heath’s former partner gave birth to a child, Matilda Rose Ledger.
  • According to Wendy Caccetta, Heath Ledger’s Matilda to get the lot, Perth Now, Sept. 27, 2008, Heath’s family has decided to allow the entire estate estimated at $20 million to pass to Matilda despite the provisions of Heath’s will.

Professor Berry addressed the following in this post on Feburary 19:  “An interesting issue has now been raised — what would happen if Heath won the Oscar for Best Supporting Actor for his Joker performance?”  The goof professoir cites to an article by Steve Pond, And the Oscar goes to Matilda if Ledger wins, Yahoo! News, Feb. 18, 2009, which explains that Matilda would become the owner of the Oscar statuette.

It gets interesting when Professor Berry explains that:

because she is only 3, Matilda is legally unable to sign the winner’s agreement — a contract required of all nominees that says the recipient will not resell his or her Oscar without first offering it back to the academy for $1. The agreement is the academy’s way of limiting what might otherwise be a lively secondary market in Oscars.

It is true a guardian could sign such an agreement and it would be binding until Matilda reaches 18 but after that, the agreement would not be binding on her.  To solve this problem, the Academy and Ledger’s family have agreed to this solution — Matilda’s mother will hold the statuette in trust until Matilda reaches 18 at which point she must either sign the agreement or return the statuette to the Academy.

Very interesting stuff.  Thank you Professor!

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Real Estate Title Insurance Review: Living Trusts, Probate Estates

Published on February 22, 2009 in Estate Administration and Estate Planning. 0 Comments Tags: , .

Another one from Greg that got me thinking about what we do here in our office with regards to title insurance on real property in differnece circumstances…

Greg’s post is a good one in that it gets one thinking about what one should think about/do when choosing to fund their living trust with real property, namely, does the homeowners’ policy allow a trust to be the owner, should it be added as an ‘additional insured’, should you call the insurance company? etc…

It also got me thinking about a number of estates that I’m administering right now that have real property that has to be probated…  First thing to do is add the estate as an additional insured – a no-brainer there – but an even bigger concern arises if the home will be left vacant as a result of the decedent’s passing.  Most homeowners’ insurance policies require the home to be occupied and if the home is left unoccupied (usually for 90 consecutive days) then the coverage can automatically lapse.  A call into the insurance company to let them know is usually a good idea and, given the state of the market and how long a home is likely to sit there before a sale, the company will have to find out eventually…  And 90 days comes pretty quick.

An experienced probate attorney is your safest bet…  I’ve worked recently with some attorneys who are, no doubt, very skilled in their area of regular practice, but probate drives them crazy and they miss these little things.  Its just these type of “little things” that get massive quick when the house is broken into or damaged by a storm or (god forbid) burns down (<– all of which have happened to me by the way) and the insurance carrier won’t pay. 

Nightmare.  Don’t risk it.  Call someone who knows what they’re doing.

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