Utilizing a Power of Appointment Committee in WINGS

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by Carol Warnick

As previewed in my blog post of January 25, 2021, Wyoming laws provide an opportunity to utilize a Wyoming Incomplete Gift, Non-Grantor Trust (“WING”) to potentially avoid state income tax on the sale of assets.  My previous post outlined the basic rules that must be followed for the WING to work properly, and in this blog post I want to focus on the distributions by committee in a WING.

The Distribution Committee must have at least two members other than the grantor and his or her spouse who are “adverse.”  An “adverse” party is defined in the Internal Revenue Code[1] and Treasury Regulations as someone who has a substantial beneficial interest in the trust which would be adversely affected by the exercise or non-exercise of the power possessed.  The other beneficiaries of the trust fit the description of adverse parties and are typically the other members. Read more

Tax and Estate Planning Perspectives

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by Kami A. Pomerantz

From a tax and estate planning perspective, we would like to make you aware of the following:

Tax Filing Extensions:

The IRS has extended the filing and payment deadline for all 2019 income tax returns to July 15, 2020. This means that no penalty or interest will be assessed for an individual’s failure to file or pay income taxes, regardless of amount, until after July 15, 2020.

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Possible Legislative Change for Retirement Planning

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by Kami Pomerantz

On May 23, 2019, the U.S. House of Representatives passed the Setting Every Community Up for Retirement Enhancement Act of 2019 (H.R. 1994) referred to as the SECURE Act.  The SECURE Act passed with broad support in the House with a vote of 417-3.  The SECURE Act incorporates many provisions in Retirement Enhancement Savings Act of 2019 (S. 972), also known as RESA, which has extensive bipartisan support in the Senate.  Recently a small group of Senators blocked passage of RESA in an attempt to allow 529 Plan funds (educational savings account funds) to be used to support home-schooling.  However, due to generally strong bipartisan support in the Senate and House as well as retirement plan industry support, it is expected that some form of RESA will ultimately pass, the two bills will be reconciled, and that the reconciled bill will become law. 

The SECURE Act makes it easier for many Americans to save for retirement.  Most of the provisions provide more flexibility to employers and reduce administrative costs regarding creation and implementation of employer related retirement plans.  It is hoped that these reforms will allow employers to create more robust retirement plans and to encourage their employees to participate in such plans. 

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Wyoming Creates a New Chancery Court Which Will Hear Trust Cases

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by Carol Warnick

Wyoming has created a chancery court which will be authorized to hear cases in fifteen (15) specific areas, including cases alleging breach of fiduciary duty and transactions governed by the Wyoming Uniform Trust Code, in addition to hearing business disputes.  This represents a significant change in the way many trust disputes, as well as business disputes, will be handled in Wyoming. 

Effective March 15, 2019, the special court of limited jurisdiction, called the Chancery Court of the State of Wyoming, was authorized to assist in the expeditious resolution of disputes involving commercial, business, trust and similar matters.  It is directed “to employ nonjury trials, alternative dispute resolution methods and limited motions practice and shall have broad authority to shape and expedite discovery as provided in the rules adopted by the supreme court to govern chancery courts.”  WYO. STAT § 5-13-115 (a). 

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Planning Opportunities Under the New Tax Cuts and Jobs Act

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By Chelsea May

In December, President Trump signed into law what is commonly referred to as the Tax Cuts and Jobs Act.  This legislation, which is mostly effective as of January 1, 2018, is the first major reform to the federal tax code since 1986 and affects almost every individual and business taxpayers in some way or another. For individuals, the top tax rate has temporarily dropped from 39.6% to 37% and the standard deduction has nearly doubled.  Personal exemptions are repealed and the mortgage interest deduction is limited to interest on a mortgage of $750,000 or less per married couple. The AGI limitation for deductions of cash donations to public charities increased from 50% to 60% and the deduction for alimony payments was repealed (for divorces or separations executed after December 31, 2018).  Corporate tax rates have dropped from a 35% top rate to a permanent 21% flat rate, a 20% deduction is now available for certain pass through entity income and the corporate AMT has been repealed.

The new tax act also increased the federal estate and gift tax exemption amount. Specifically, for lifetime gifts and the estates of any decedents passing between January 1, 2018 and December 31, 2025, the estate tax and GST tax exemption amounts were increased to $10 million per person, adjusted for inflation occurring after 2011 (expected to be about $11.2 million for 2018). The marginal transfer tax rate remains at 40%. Read more

New Uniform Directed Trust Act

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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

Beneficiary Designations: They Aren’t Always What They Seem

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by Jody H. Hall, Paralegal

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

Trump Foundation Admits to Self-Dealing

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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.

Will the Estate Tax Really Go Away?

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by Carol Warnick

Will the estate tax be eliminated as part of the tax reform promised by the incoming administration?  Unfortunately, my crystal ball is not working well and I don’t have an answer for that question.  I would, however, like to share a bit of the tortured history of the estate and gift tax since the Civil War in the hope that it might give us some perspective when wondering what the future will bring.

A series of Acts between 1862-64 created an inheritance tax which helped finance the war effort.  Rates were between .75% and 5% and there was an exemption of $1,000.  In 1870 the inheritance tax was repealed.  An estate tax was again instituted to fund a war effort in 1916, in response to World War I.  The rates were between 1% and 10% and there was an exemption of $50,000.

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Personal and Family Lending: New Federal and Colorado Regulations

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by Desta K. Asfaw

There have been a number of recent changes to the mortgage lending laws.   Under current law in Colorado, certain private loans secured by residential real estate may be subject to compliance with strict licensing and other requirements.   Failure to comply could potentially result in misdemeanor charges and/or fines.

These new obstacles stem from provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (“SAFE Act”), the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), and the Colorado Mortgage Loan Originator Licensing and Mortgage Company Registration Act (“CMLO Act”).

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