Tuesday, December 10, 2013
Kathleen Magowan thought her estate might be worth around $40,000, but it turns out it was really worth about $6 million.
Magowan was an unassuming first-grade teacher in Simsbury, Connecticut. After her death in 2011 at the age of 87, Magowan is now surprising many with sizeable donations through her estate, including nearly half a million donations to Simsbury public schools, the University of St. Joseph, her local parish, and the nursing home where she died.
Magowan never married but did share a home with her twin brother, Robert. It was Robert who helped her manage her money and accumulate her wealth through stocks and bonds. Says the attorney who handled her estate, “She never really looked at it because she never had a demand for that kind of money.”
See Christopher Keating, The Magowans – The Elderly Multi-Millionaire Twins Next Door, The Hartford Courant, Nov. 23, 2013.
Yun-chien Chang (Academia Sinica - Institutum Iurisprudentiae) has recently published an article entitled, The Economy of Concept and Possession, (November 8, 2013). Provided below is the abstract to the article from SSRN:
The concept of possession has been debated at least since the mid-19th century, but to date scholars still do not have a consensus on how to define it. Civil codes in the European Continent and East Asia are also divided over how possession is delineated. Some countries distinguish possession and detention, whereas others use the terms possessors and agents in possession. A few jurisdictions consider possession to be a right, while others treats it as a fact. Some civil codes simply define possession as actual control, but others also require specific intents.
Drawing on Henry Smith’s economy of concept theory, this book chapter argues that a simpler concept of possession (with actual control as the necessary and sufficient condition) economizes on information costs and makes the possession law much easier to understand. The confusion in the civil codes and the scholarly literature arises from conflation of three different concepts: possession as a fact; possession as a (subsidiary) right that is one stick in the ownership bundle; and possession as a basis for acquiring and relinquishing titles, as in adverse possession, first possession, and abandonment. Actual control is the least common denominator in all possession-related issues; thus, possession qua actual control is a fact. The subsidiary possessory right is implied in the property structure, but never spelled out. It can be transferred from owners to, e.g., holders of usufruct. Finally, intents only matter when possessors gain or lose titles, and the required intents differ across contexts; thus, a specific intent should not be embedded in the baseline definition of possession, but left to specific doctrines.
Recently, the Diet has amended a bill to remove the discriminatory provisions regarding the inheritance rights of children born out of wedlock. The amendment is removing the provision limiting an inheritance to an out of wedlock child to half of that of a marital child. The action followed the Supreme Court's Grand Bench that stated the article “runs counter to the Constitution, which guarantees equality under the law.”
See Yomiuri Shimbun Spouse's Rights Must Be Respected Despite Change on Inheritance Rights, Japan News, Dec. 9, 2013.
Texas Bar CLE and the Real Estate, Probate and Trust Law Section of the State Bar of Texas are sponsoring a CLE entitled, Building Blocks of Wills, Estates and Probate Course, for approximately 6.75 hours of MCLE credit including 3.5 ethics hours. You can watch live via webcast on January 24, 2014, or catch a video replay offered in several locations in February and March. Provided below are some of the topics featured in this course:
- Basic Estate Planning
- Elder Law Planning and Issue Spotting
- Tools for Efficiently Developing Your Estate & Trusts Practice
- Probate Procedures and Alternatives
- Administering the Estate
Donors contributing to charities work hard to maximize the benefits provided by these donations to those in need. Unfortunately, the government does not. Because the government provides tax deductions for charitable contributions, the federal government pays part of the donation. As a result, these donations are costing the federal government almost $40 billion annually.
The problem is highlighted with three examples: 1. Non-profit hospitals receive the largest amount of donations, but they are hard to distinguish from for-profit hospitals. 2. Deductions for conservation easements were created to protect the environment, however, the requirements for establishing a conservation easement are very lenient. Private golf courses are a glaring example of this problem because they are also eligible for this tax deduction. 3. Private foundation investment accounts with no definite payout time line are also eligible for tax deductions. While there are simple legislative fixes for these problems, the last time Congress looked at these issues was in 1969. Stopping the wasteful charitable deductions is a good place to start to get the federal governments finances in order.
See Ray D. Madoff How The Government Gives, New York Times, Dec. 6, 2013.
Monday, December 9, 2013
John and Rosellen Griffin built Griffin Industries, a Cold Spring-based rendering company that in 2010 sold for $840 million. Their children are now involved in a nasty and unusual legal battle over the company’s succession.
Four Griffin daughters are suing three of their brothers in federal court and invoking the RICO Act, alleging that after their parents died, the brothers conspired to position themselves to take control of the company as a part of a “racketeering enterprise.” The suit has been allowed to continue as a RICO case, which is unusual in criminal cases and almost unheard of in civil cases.
Barring a settlement, this case is expected to go to trial sometime next spring.
See James Pilcher, Inheritance Feud Claims Griffin Industry Brothers Ran Racket, Cincinnati.com, Nov. 19, 2013.
Yun-chien Chang (Academia Sinica - Institutum Iurisprudentiae (IIAS)) recently published an article entitled, Optional Law in Property: Theoretical and Empirical Critiques, Wills, Trusts, & Estates Law eJournal, Vol. 9, No. 34 (Nov. 27, 2013). Provided below is the abstract from SSRN:
Since Calabresi & Melamed’s seminal article on property rules and liability rules, numerous law and economic articles have debated the efficiency of these two rules. Many of the follow-up articles contend that Calabresi & Melamed are wrong in arguing that property rules are more efficient when transaction costs are low. Put-option liability rules and other sub-types of liability rules have been developed, and they are claimed to be superior to property rules. As several property scholars have pointed out, however, the shadow examples in this so-called optional law literature are not property laws, and they have contended that property rules should be the default in property law. Built on this line of literature, this article argues that Calabresi & Melamed are actually correct — property rules are indeed more efficient than liability rules in property law in a low transaction-cost setting, because property rules better harness private information. In addition, this article develops a theory as to when call-option liability rules might be more efficient. This article also argues that Rules 3 and 4 are either unnecessary concepts or inefficient entitlement protection rules in the area of property, and that put-option liability rules are less efficient than call-option liability rules in property, because calls utilize private information better than puts. Finally, this article contends that liability rules are intrinsically different from financial options and legal options; thus, the option analogy is better avoided.
It is important to consider state death taxes in your estate planning. A recent article posted by Kelly Humke Esq. highlights three way that people can address these type of taxes though estate planning.
- Use bypass trusts they shelter the exemptions of both spouses and defer estate taxes
- Give away gifts up to the unused federal exemption amount. Also, keep in mind that medical and tuition payments are exempt gift taxes.
- Set up a spousal lifetime access trust if you are married. Any payments and appreciation made to the trust is not counted in your estate; thus, there is a reduction for death taxes that you will have to pay for.
See Kelly Humke Esq. Consider State Death Taxes in Your Estate Planning, Wealth Strategies, Dec. 3, 2013.
Lawrence W. Waggoner (University of Michigan Law School) has recently published an article entitled, The Creeping Federalization of Wealth-Transfer Law, (November 15, 2013). Provided below is the abstract to the article from SSRN:
This paper, titled “The Creeping Federalization of Wealth-Transfer Law,” is prepared for a symposium on the role of federal law in private wealth transfer. The symposium is to be held at Vanderbilt University Law School on February 21, 2014, and is sponsored by the American College of Trust and Estate Counsel Foundation. Symposium papers will be published in volume 66 of the Vanderbilt Law Review (Nov. 2014 issue).
This paper surveys areas of federalization of wealth-transfer law. Federal authorities have little experience in making law that governs wealth transfers, because that function is traditionally within the province of state law. Although state wealth-transfer law has undergone significant modernization over the last few decades, all three branches of the federal government — legislative, judicial, and executive — have increasingly gone their own way. Lack of experience, and in many cases lack of knowledge, have not been a deterrent, and the results have been mostly disturbing.
The paper covers these topics: federal preemption of several areas of state law, the development of federal common law as a sometime substitute for state law, the federal tax exemption for perpetual trusts, and the right of posthumously conceived children of assisted reproduction to Social Security survivor benefits.
The American College of Trust and Estate Counsel (ACTEC) is presenting a CLE entitled, Estate and Gift Tax Planning Opportunities for 2014 and Beyond, on Wednesday, December 11, 2013 at 12:30 - 2:00 pm ET. Provided below is a description of the event:
Why You Should Attend
The American Taxpayer Relief Act of 2012 (ATRA) provided a “new normal” of transfer tax certainty, large indexed transfer tax exemptions, unification of estate and gift tax exclusion amounts, and portability. While fewer taxpayers will be subject to estate and gift taxes, those who do incur liability face a higher estate tax rate.
In this CLE program on estate and gift tax planning in 2014, Fellows of The American College of Trust and Estate Counsel conduct a lively and informative discussion of how ATRA has affected estate and gift tax planning for 2014 and beyond, including a focus on the useful estate and gift tax planning opportunities that have arisen post-ATRA!
What You Will Learn
- Discussion will include the following topics:
- effect of legislative proposals on planning
- addressing the huge impact of high indexed exclusions on estate planning practices
- assessing the impact of large gifts over the last several years
- planning strategies to deal with “portability” complexities
- administering trusts under pressure of high rate brackets and the new 3.8% tax on undistributed net investment income
- strategies for providing flexibility to plan for basis adjustments in light of increased (and indexed) estate exemptions
- tax planning implications of Windsor (and related IRS guidance) for same-sex couples
- growing use of decanting and status of IRS guidance
- IRS guidance and pending Tax Court case (Davidson) regarding self-canceling installment notes
- “net, net gifts” – Is a gift offset allowed for the donee’s assumption of the donor’s potential added estate tax liability under section 2035(b)?
- GRAT planning, including estate inclusion for GRAT when donor died during trust term (Trombetta)
Questions submitted during the program will be answered live by the faculty. In addition, all registrants will receive a set of downloadable course materials and free access to the archived online program.
Who Should Attend
This accredited continuing legal education program from ALI CLE is designed for attorneys who practice trust and estate law, estate planning, as well as financial planners and accountants.