IRS Revenue Procedure 2017-34, effective as of June 9, 2017, increases the amount of time that a surviving spouse has to file an estate tax return (Form 706) for the purpose of electing portability of the Deceased Spousal Unused Exclusion amount (otherwise known as “DSUE”). The portability election, which was first introduced in 2010 and made permanent under the American Taxpayer Relief Act of 2012, offers a great way for a surviving spouse to preserve the unused estate tax exemption of their deceased spouse. The DSUE amount can then be added to the surviving spouse’s own exemption amount and be used to shelter the surviving spouse’s lifetime gifts and transfers at death from estate taxes.
Prior to June 9, 2017, a portability election was required to be made on a timely filed estate tax return, due to the IRS nine months from the decedent’s date of death, with the availability of an automatic six month extension. The IRS has once before provided some relief from this deadline in Revenue Procedure 2014-18, but that ruling was temporary and provided no relief for the estates of decedents dying after January 1, 2014. The IRS claims to have been flooded with numerous requests for an extension of time to file for the portability election and has issued this new Revenue Procedure to provide a simplified method to obtain the extension to elect portability for a decedent’s estate who has no estate tax filing requirement to the later of (i) January 2, 2018 or (ii) the second anniversary of the decedent’s date of death. Note that the regulation provides that this longer deadline is not available to the estate of a decedent if an estate tax return was timely filed. In such case, the executor either will have elected portability by timely filing the return or will have affirmatively opted out of portability by not making the election. Read more >>
More and more, I review trust agreements that appoint a trustee, but then appoint other individuals or institutions to perform certain tasks that are normally in the domain of the trustee. They are sometimes referred to as trust protectors, trust advisors, trust directors, special powerholders, investment trustees, or distribution trustees. I most often see these appointments in the areas of investments or distributions.
The trust language that attempts to divide the responsibilities of a trustee among a group is often unclear and give rise to difficult questions as to the scope of each individuals’ responsibilities. There is also the question of whether the trustee is responsible for the actions of the other appointees and if the appointees are fiduciaries. These problems with interpretation are often exacerbated because the laws are not clear about the division of these responsibilities and the liability of each actor. Read more >>
As long as I have been a probate paralegal, and even prior when I worked in financial services, I have spoken about assets with beneficiary designations, including life insurance, retirement accounts and annuities passing outside of probate as if they were a foregone conclusion. Period. End of Story. However, some recent situations have reminded me that the plot of the story may indeed have a surprise ending.
First of all, it bears reminding to our clients, that documents with beneficiary designations do not pass in accordance with the general instructions in the Decedent’s Will. I recently worked with a client that became concerned when we learned that an estranged family member received a portion of an IRA account due to the beneficiary designation. It was very confusing and upsetting to her that this family member received assets in addition to those provided for in the Will.
Secondly, there are situations where the beneficiary designation needs to be reviewed and confirmed, both at the time the designation is made and at the time of the claim. Read more >>
I recently joined forces with family law attorney Ian Shea to co-author an article for The Colorado Lawyer. The article highlights a few of the intersections between probate law and family law, including spouse’s property interests in trusts, the automatic temporary injunction, the revocation of spouse’s interests under the Colorado Probate Code, and representation of fiduciaries in divorce proceedings.
As regular readers of this blog know, one of our favorite topics is digital assets, including estate planning for digital assets. Today, we’re taking a slightly different focus and discussing developments in digital estate planning, more commonly known as electronic wills.
One of the more recent developments in estate planning is the concept of electronic wills. In general, an electronic will is one that is signed and stored electronically. Instead of signing a hard copy document in ink, the testator electronically signs the will, and it is also signed by witnesses and notarized electronically. Not surprisingly, companies like LegalZoom are very interested in this topic.
In my practice, I regularly answer questions regarding the permissibility and advisability of modifying irrevocable trusts. With the enactment of a decanting statute in Colorado in 2016, these types of requests will only increase. One of the major hurdles in modifying irrevocable trusts (and a trap for the unwary) is the potential tax consequences of a modification. We often have to consider estate tax inclusion issues, the possibility of the imposition of gift taxes due to the modification, and the potential loss of generation-skipping transfer tax exemption for a trust. Read more >>
Does the fact that a husband and wife create “mirror-image” wills or trusts mean that they have entered into a contract with their spouse to maintain the dispositive provisions in the document? The law in Colorado is very clear that no contract exists merely because the documents are “mirror-image” or reciprocal.
Pursuant to Colo. Rev. Stat. § 15-11-514, a contract to make a devise may be established only by:
(i) provisions of a will stating material provisions of the contract, (ii) an express reference in a will to a contract and extrinsic evidence proving the terms of the contract, or (iii) a writing signed by the decedent evidencing the contract. The execution of a joint will or mutual wills does not create a presumption of a contract not to revoke the will or wills. (emphasis added).
It is well documented that all of our lives have become more data-driven and we are practically tethered to our electronic devices. Therefore, it should not be surprising to realize that more and more of our assets, and those of our clients, have a digital component. What may be surprising, however, is just how much value we place on our digital assets. Surveys report that the average value of personal digital assets owned by individuals globally ranges from $35,000 – $55,000.
A few key words typed into any search engine, including a review of articles written on this blog, will provide a wealth of information on accessing digital assets, including digital assets in your clients’ estate planning documents, and safeguarding your digital assets inventory. However, after the client’s death, once we have a list of their digital assets, and have gained access those assets, it is prudent for the probate and trust practitioner to remember to value those assets. Read more >>
The rules and regulations surrounding the operation of family foundations contain traps for the unwary and prohibit self-dealing transactions. We regularly help families navigate the complex rules regarding self-dealing transactions for private foundations.
These self-dealing rules tripped up the Donald J. Trump Foundation, which has admitted that it has engaged in self-dealing. How do we know? A private foundation is required to file a Form 990-PF each year and that return requires a foundation to answer questions regarding its activities and transactions. The following question caused issues for the Trump Foundation: “During the year did the foundation (either directly or indirectly): Transfer any income or assets to a disqualified person (or make any of either available for the benefit or use of a disqualified person)? By answering “Yes,” the Trump Foundation has admitted that a self-dealing transaction occurred. The Trump Foundation’s Form 990-PF (and many other foundations’ returns) are available through www.guidestar.com.
Charitable trusts are both valuable estate planning tools and excellent philanthropic devices. For instance, certain charitable trusts provide appealing tax benefits for donors creating charitable inter vivos trusts. While in most respects, charitable trusts are governed by the same state law concepts often discussed here on this blog (like fiduciary duty obligations for trustees), there are a few notable exceptions worth highlighting for anyone looking to take advantage of charitable trusts for estate or tax planning purposes.*
In general terms, a charitable trust is simply a trust that has a charitable purpose. See, e.g., Denver Found. v. Wells Fargo Bank, 163 P.3d 1116, 1125 (Colo. 2007) (“Instead of identifying a person or corporation as beneficiary, the settlor of a charitable trust must describe a purpose which is of substantial public benefit.”). Under Uniform Trust Code § 405, charitable purposes include “the relief of poverty, the advancement of education or religion, the promotion of heath, governmental or municipal purposes, or other purposes the achievement of which is beneficial to the community.” The Restatement (Third) of Trusts § 28 largely matches the UTC, although it is a tad more expansive. For instance, the Restatement includes the advancement of knowledge, rather than just education, in its definition of charitable purpose. The differences between the UTC and the Restatement, though, are slight. Read more >>