Category Archives: Fiduciary Duties

August 14, 2017

Good News for Surviving Spouses Seeking to Elect Portability

by Chelsea May

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 >>

August 2, 2017

New Uniform Directed Trust Act

by Kelly Dickson Cooper

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 >>

July 5, 2017

Electronic Wills

by Morgan Wiener

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.

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May 22, 2017

Fiduciary Duty to Elect Portability

by Matthew Skotak

The Oklahoma Supreme Court recently upheld a ruling that has required the Personal Representative of an Estate to take the necessary steps to transfer the deceased spousal unused election (DSUE) to the surviving spouse. The case stems from the rights created by the federal gift and estate tax laws regarding portability.  More specifically, beginning in 2010 one spouse was allowed to transfer, at death, his or her unused gift and estate tax exemption to the surviving spouse. Prior to 2010, each spouse had his or her own gift and estate tax exemption, but any portion of that exemption which remained unused by the spouse at death could not be transferred to the surviving spouse.

In In re Estate of Vose, 390 P.3d 238 (Okla. 2017), the Personal Representative of the Estate, one of the children of the decedent by a prior marriage, had refused to make the required election for transfer even though the surviving spouse agreed to pay the cost required to prepare the necessary Federal Estate tax return to do so. Read more >>

March 13, 2017

Now That You Have Accessed the Digital Assets, Don’t Forget to Value Them

by Jody H. Hall, Paralegal

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 >>

February 13, 2017

Trump Foundation Admits to Self-Dealing

by Kelly Dickson Cooper

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.

January 17, 2017

New Fiduciary Act Brings Both Progress and Uncertainty

by Matthew S. Skotak

You may have previously read on this blog about digital assets, the impact they have on the administration of trusts and estates, the need for fiduciaries to access digital assets, and the privacy concerns that come along with such access. In order to address these issues, Colorado recently enacted the Revised Uniform Fiduciary Access to Digital Assets Act (“RUFADAA”). This new act became effective on August 10, 2016 and can be found at C.R.S. § 15-1-1501 et seq.

RUFADAA is a significant leap by the State of Colorado to catch up to the digital age.  Prior to the passage of the law, the pervasive use of electronic banking and investing has posed a problem for many fiduciaries. Without the receipt of paper statements, personal representatives, financial agents, trustees and conservators have had a difficult time locating an individual’s assets, sometimes leading to an exhaustive search of several banking and financial institutions before asserts are uncovered. Read more >>

December 19, 2016

Claims Challenging Estate Plans

by Rebecca Klock Schroer

We are seeing an increase in the number of lawsuits in which people are challenging or trying to circumvent estate plans.  The claims traditionally include lack of testamentary capacity and those involving improper actions by family members, agents under powers of attorney or conservators.

Testamentary Capacity

A challenge to an estate plan often involves a claim that the testator was not of sound mind. Under Colorado law, a sound mind includes the presence of the Cunningham factors and absence of an insane delusion that materially affected the testamentary instrument.  The Cunningham factors are as follows: the testator must (1) understand the nature of the act, (2) know the extent of his property, (3) understand the proposed testamentary disposition, (4) know the natural objects of his bounty, and (5) that the testamentary instrument represented his wishes.  Cunningham v. Stender, 255 P.2d 977 (Colo. 1953).

In addition to these factors, the testator cannot be suffering from an insane delusion.  An insane delusion exists if a person has a persistent belief, resulting from illness or disorder, in the existence or non-existence of something contrary to all evidence, which materially affects the disposition in the testamentary instrument.  Breeden v. Stone, 992 P.2d 1167 (Colo. 2000).  For example, failure to include a child in the will because the testator believes that child has been abducted by aliens and will never return to earth. Read more >>

November 7, 2016

Nuances of Estate Tax Lien Priority

by Margot S. Edwards

In many cases, estate tax obligations have priority over the creditors of an estate, but this general rule has exceptions. It is key for a fiduciary to understand when a creditor may have priority over estate taxes, in order to ensure the fiduciary is properly carrying out its duties to the estate’s creditors.

The primary exception to the general rule is that secured creditors often have priority over an estate tax lien (I.R.C. § 6323). One common example of a secured creditor with priority over estate tax obligations is a lender who provided a purchase money mortgage, which is properly secured by real estate. A secured creditor may have priority over an estate tax obligation if the debt is secured by a security interest that was perfected under applicable state law prior to the decedent’s death.  Read more >>

June 20, 2016

Colorado Uniform Trust Decanting Act

by Rebecca Klock Schroer

The Colorado Uniform Trust Decanting Act (“Act”) was recently signed by the Governor and it will become effective August 10, 2016.   The legislation is large, complex and important for both estate planners and probate litigators.

Decanting allows a trustee to distribute the assets of one trust (“first trust”) to a second trust (“second trust”) under specific circumstances. The Act applies to an irrevocable trust, other than an irrevocable trust held solely for a charitable purpose. Colo. Rev. Stat. § 15-16-903. Decanting is used, among other things, to correct drafting errors, change the situs/governing law of a trust, alter trustee provisions (e.g. trustee succession, create a directed trustee arrangement, reallocate trustee powers), alter powers of appointment, add special needs provisions, and comply with changing tax laws.

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