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Doctrine Of Incorporation By Reference Might Not Apply To Georgia Wills

October 31, 2012

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The case of Lee v. Swain has a long history in Georgia, first going up to the Georgia Supreme Court in 2010.  In “Swain I,” the Georgia Supreme Court reversed the trial court’s grant of judgment on the pleadings and found that it was a question of fact whether two documents taken together were Eloise Collins’ will.  These two document were (1) an unwitnessed letter written in 1999 detailing how Collins wanted her property distributed after her death, and (2) a partially filled-out commercial will form that, while properly witnessed, did not address distribution of property.

When the case was sent back down to the trial court, a jury found that the two instruments together were “the true Last Will and Testament of Eloise Harley Collins.”

The caveator appealed on a number of grounds and the Georgia Supreme Court had another chance to weigh in on

Gifting Real Estate: A Comparison of QPRTs and Intentional Grantor Residential Trusts

As discussed in our prior post, “2012 Gift Tax Opportunities: Wait to Gift, but Do Not Wait to Plan“,  we discussed how the 2010 Tax Relief Act has provided a great opportunity for lifetime gifts to family members with a temporary increased estate and gift tax exemption of $5.12 million making these gifts potentially free of ever incurring gift or estate tax. The exemption will return to $1 million on January 1, 2013 unless Congress acts, and although most commentators think a return to $1 million is unlikely, there is a good possibility the exemption will be reduced.  However, many people are reluctant to make gifts of their liquid assets, in case they might have need of them as the get older.  Many people, therefore, are looking for ways of making a gift on a non-liquid asset, such as their home or another piece of real estate, such as

Should A Testator Explain Why She Disinherited A Child?

October 29, 2012

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Hell hath no fury like a disinherited child.  Or, if not fury, then at least an appetite for litigation.

Many estate planners recommend against total disinheritance and instead couple a token distribution with an in terrorem clause.  That way the disinherited child stands to lose something if he or she pursues estate litigation.  Of course, that doesn’t always work.  Especially if the risk is greatly outweighed by the potential reward – say giving up a sure $5,000 for a possible $1 million.

So, what else can a testator do to ensure that his or her intent to disinherit is upheld if there is litigation?

In In the Matter of the Probate of the Alleged Will of Joan Pennella, a recent case out of New Jersey, we see the value placed by a court on the testator’s own explanation of why she disinherited two of her children.

Extension of Time to File Form 8939

In PLR 201231003, the taxpayer requested an extension of time to file the Form 8939 to make a timely election to apply the provisions of § 1022 of the Code to determine the basis of property acquired from a decedent who died in 2010, pursuant to § 301.9100-3.

Notice 2011-66 stated that an extension of time to file a Form 8939 could be sought and granted under four limited circumstance, one of which was that the taxpayer met the requirements for an extension under § 301.9100-3. That Regulation requires that the taxpayer acted reasonably and in good faith, defining such to include when the taxpayer “(v) Reasonably relied on a qualified tax professional, including a tax professional employed by the taxpayer, and the tax professional failed to make, or advise the taxpayer to make, the election.”

Trustees and Personal Representatives Left Holding the Liability Bag

When is a transferee of a decedent’s assets not a transferee subject to liability under §6324(a)(2) of the Code? The U.S. District Court of Utah’s answer to that question in United States v. Johnson, 109 AFTR 2d 2012-2253 (DC UT, 5/23/2012) was surprising when it held that the trust beneficiaries who had received the outright distribution of all of the assets of the decedent’s trust, subject to a Distribution Agreement that each beneficiary would be responsible for the payment of any unpaid estate tax, were not transferees subject to transferee liability for the estate tax under §6324(a)(2).

This case came before the Court in a motion to dismiss for failure to state a claim upon which relief can be granted. The defendants in this case consisted of the four residuary trust beneficiaries

Trust Reformed To Comply With Provisions Of Internal Revenue Code

October 19, 2012

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There aren’t a lot of cases out there dealing with reformation of trusts.  Many jurisdictions allow for reformation to conform with the settlor’s intent.  But settlors are usually understood to have meant what they said in the text of the trust instrument.  So what qualifies as an event worthy of trust reformation?

In Rockland Trust Company v. Attorney General, the Appeals Court of Massachusetts showed us one circumstance under Massachusetts law that would allow reformation of a trust:  avoiding adverse tax consequences, but with a caveat . . . .

Revenue Procedure 2012-41 Sets 2013 Annual Exclusion Gift Amounts

The IRS recently released Rev. Proc. 2012-41, which, in part, announces the inflation adjusted figures for annual exclusion gifts in 2013.

According to the Revenue Procedure, “For calendar year 2013, the first $14,000 of gifts to any person (other than gifts of future interests in property) are not included in the total amount of taxable gifts under § 2503 made during that year.”

In addition, for those with a non-citizen spouse, “For calendar year 2013, the first $143,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year.”

Making Sure You Get The Beneficiaries’ Names Right

October 17, 2012

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A misspelled name;  an incomplete name of a charity; an “Inc.” instead of an “LLC.”  Grantors get names wrong.  Testators make typos.  Attorneys make scriveners’ errors.

Usually it isn’t that hard to figure out that the grantor actually meant “JoAnn” instead of “JoAnne” or to figure out that the grantor meant “Habitat for Humanity” and not “Habitat for Humans.”

But then there are times when getting a beneficiary’s name wrong could mean all the difference in the world.  At a minimum, it could open the door for a court to find an ambiguity in the trust instrument, which, in turn, could open the door into a very protracted, expensive court fight over the grantor’s intent.

In Miami Children’s Hospital Foundation, Inc. v. Estate of Hillman, a recent case out of Florida, we’re reminded about the need for precision in naming beneficiaries.

New Draft Form 709 and Instructions for 2012 Gifts

In late September, the Service posted on the IRS website the new Draft Form 709 for reporting 2012 gifts and Draft Instructions for the Form 709.  This new form has also been updated to address the deceased spousal unused exclusion (“DSUE”).  A new Line 19 has been added to Part 1 – General Information, asking whether the taxpayer has applied DSUE from a deceased spouse on this or any other Form 709.  If so, the taxpayer is directed to complete a new Schedule C to determine the available DSUE, which is then included on Line 7 of Part 2 – Tax Computation as part of the maximum applicable credit amount.  The Generation-Skipping Transfer Tax computation is now on Schedule D.

It is important to note the caution at the beginning of these drafts:

“This is an early release draft of an IRS tax form, instructions, or publication, which

IRS Posts Final Form 706 and Instructions

Update: The IRS has now posted the final Instructions for the Form 706 for decedents dying in 2012, which can be found here.

The IRS has posted the final Form 706 for decedents dying in 2012, which can be found here.  However, final Instructions have not yet been posted.  Our discussion of the current Draft Instructions can be found here, but until the final Instructions have been released, they cannot be relied upon.

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