Discounted Assets and Funding Challenges in Estate Administration

/in , , , , ,

by Kami Pomerantz

Estate of Miriam M. Warne, T.C. Memo 2021-17 (February 18, 2021)  (“Warne”), a recent Tax Court case, illustrates a potential mismatch between the value of an asset for estate tax purposes and the value of the asset for purposes of the marital or charitable deduction from estate tax.  This mismatch can lead to a phantom loss of estate value for purposes of such deductions and cause an inadvertent estate tax surprise.  Although this mismatch can be avoided, it requires those drafting specific gifts and administering an estate to choose assets carefully when making bequests and funding decisions.

Read more

Options for Transferring Vehicle Titles – Before or After the Owner’s Death

/in , , , ,

by Jody H. Hall

Navigating the DMV can make anyone skittish, but in the specialized area of trusts and estates, it makes people downright nervous.  In addition, the Colorado DMV generally requires their own forms for transfers before or after death.  As with all other assets, the name or names on the actual vehicle title is going to control how we need to dispose of or transfer that vehicle when needed.  Below are a few forms specific to the unique needs of trust and estate practitioners and their clients and links for your convenience. Read more

Trustees Beware: Provide Timely Information to Beneficiaries

/in , , , , , , ,

by Carol Warnick

Individual trustees often fail to fulfill the duties imposed on trustees, not only by the trust instrument, by also by the trust statutes applicable in the jurisdiction.  It is often the case that the individual trustee is a member of the family and seems to believe that the rest of the family won’t care if he or she doesn’t follow the applicable statutory and trust requirements.

A recent Nebraska case, In Re Estate of Forgey, 906 N.W. 2d 618, (Neb. 2018), featured a decedent who died in 1993.  By 2013, when one of the family members initiated litigation, the trustee, a son of the decedent, had neither distributed out the property of the trust into the separate shares called for by the trust document, nor had provided annual accountings to the beneficiaries as required by both the Nebraska statutes and the trust document itself.  In addition, he failed to sign and file the timely prepared federal estate tax return, resulting in an IRS assessment of penalties and interest of over $2 million. 

Read more

Inheriting Vehicles – Sample Checklist Before You Go to the DMV

/in , , ,

by Jody H. Hall, Paralegal

As a probate paralegal, I spend a decent amount of time helping families transfer assets and completing forms.  One of the more common questions that I get is “What does one need to do and take to the DMV to transfer a vehicle title to the beneficiary?”  I typically go through the steps and let the client know all of the information they should have handy; however recently I discovered an awesome checklist from the Denver DMV.  While they state that this is specific to Denver County and you should check with the specific county, this is a really good starting point for all Colorado titles. Read more

Your Secret’s Safe with Your Estate Planning Attorney, Or Is It?

/in , , , , , , ,

by Lauren A. Morris

A mother visits her attorney to discuss her estate plan. She expects that the conversations she has with her attorney will be forever confidential and privileged, particularly when she wishes to guard uncomfortable realities from her family members, such as her desire to disinherit her son. Upon the mother’s death, her disinherited son figures out that he is in fact removed from her estate plan. Here we have the classic scenario in which a snubbed child wants to challenge the provisions in the estate plan to prove that the decedent did not intentionally fail to provide for him. But with the mother now deceased, how do we determine her actual intent?

The mother’s estate planning attorney is in the next best position to ascertain her intent, but doesn’t the attorney’s duty of confidentiality to the mother prevent him from disclosing any information he may have regarding her intent, specifically when the mother thought she was speaking in confidence? Read more

Avoiding Fiduciary Conflicts of Interest

/in , , , , , ,

by Carol Warnick

It is very difficult for a trustee to have conflicts of interest without breaching the duty of loyalty.  We typically think of trustee conflicts as they relate to self-dealing by the trustee, which is almost always a problem and for which the beneficiaries can obtain redress.  But I have seen more conflicts lately in my practice where a trustee is trustee of different trusts that have conflicting interests, or the trustee is serving as trustee of a trust and also as personal representative of an estate whose interests are in direct conflict with each other.

When faced with a conflict situation, a trustee needs to take action before he or she breaches the duty of loyalty, which is a bedrock duty owed by all fiduciaries.  Restatement of Trusts § 78 (1) states that a “trustee has a duty to administer the trust solely in the interest of the beneficiaries . . . .”  That is not possible when the two trusts (or the trust and the estate) have conflicting interests and what the fiduciary does as trustee of one trust would be detrimental to the other.  One example would be engaging in a specific transaction that is beneficial to the beneficiaries of one trust but harmful to the beneficiaries of the other trust or of the estate.  Read more

No Contest Clauses – Not Just for Wills

/in , , , , , , , ,

by Matthew Skotak

Fiduciary litigation continues to grow and often times outpaces the development of case law regarding the myriad of issues that arise in estate and trust disputes.  Historically fiduciary litigation involved disputing family members or changes in family circumstances.  However, another frequent source of litigation is the estate planning documents themselves.  For this reason, estate planners often include a no contest clause, or in terrorem clause, in a will or trust as a means of deterring feuding beneficiaries from challenging the validity of the instrument; yet, enforcement of these no contest clauses carries its own burden.

A no contest clause is more frequently contained in a will, although it can also be prudent to include these provisions in trusts – especially when the underlying concern is to discourage litigation over the decedent’s estate plan by disinheriting a person who unsuccessfully contests the will and/or trust.  The enforceability of these provisions varies from state to state; however, Colorado has determined that a no contest clause is valid when the contesting party lacks probable cause to bring their challenge.  See Colo. Rev. Stat. §§ 15-11-517, 15-12-905.  Read more

Fifty Ways to Leave Your Lover (or Fifty Ways to Plan, Administer and Litigate Estates)

/in , , , , , , , , , , , , , , , , , , , ,

by Carol Warnick

As the old song by Paul Simon contemplates, there are fifty ways to leave your lover, and there are also fifty ways to plan, administer and litigate estates and trusts.  I have recently become aware of various situations in which attorneys assume that because things are done a certain way in the state in which they practice, they are done the same way in other states.

I am licensed in three states, Colorado, Utah and Wyoming, and deal regularly with the significant differences between them.  For example, Colorado tends to use “by representation” in dealing with passing assets down the generations, but Utah and Wyoming both use “per stirpes.”  Read more

Good News for Surviving Spouses Seeking to Elect Portability

/in , , , ,

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

Fiduciary Duty to Elect Portability

/in , , , , ,

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