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Distributable Net Income Is Not Synonymous With Net Income Owed To Income Beneficiaries

Originally posted on bryancavefiduciarylitigation.com

It is uncommon to see modern trusts that require distribution of all income but preclude distribution of any principal to a beneficiary. Since the characterization of income and principal can be subject to multiple interpretations, precluding any distribution of principal often can lead to legal disputes. In Favour v. Favour (not for publication), the Arizona Court of Appeals disagreed with an Arizona superior court’s ruling that “the income beneficiary of [a] Martial Trust is entitled only to the annual ‘distributable net income (“DNI”)… reported on the federal income tax return, and no more than that.” The Will also specified that it was intended to qualify as “qualified terminable interest property” (“QTIP”) for which an election could be made under Section 2056(b)(7).

Renee Gabbard Honored for Excellence in Public Service

March 24, 2014

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KKFIrvine Partner, Renee Gabbard, is being honored on March 27, 2014 with an Award for Excellence in Public Service at the Chapman University Fowler School of Law’s Public Interest Law Foundation (PILF) 2014 Silent Auction and Gala.  The Silent Auction and Gala honors the dedicated work of its students and community leaders in public interest law.  Proceeds from the dinner and auction will support PILF’s public interest summer jobs grant program.

Update: Rev. Proc 2014-18s Effect on Same-Sex Married Couples and Portability Elections

Under the portability rules a surviving spouse can elect to have the deceased spouse’s unused estate tax exemption (currently $5.34 Million) added to the surviving spouse’s estate tax exemption amount. But to do this, a federal estate tax return has to be filed within 9 months of the death of the first spouse, even if there is no taxable estate for estate tax purposes. The federal estate tax return is the only way to take advantage of the portability election.  The nine month time limit has proved to be an issue in regards to same-sex spouses, whose marriages were not recognized by the IRS until the Windsor decision on June 26, 2013.  Click here, here, and here to read about the Windsor decision. We believed the Windsor decision may have opened the door to the otherwise “late” portability elections for same-sex spouses, but were not sure how

No Liability for Trust Protector in McLean v. Ponder

The Missouri Court of Appeals recently issued an opinion in Robert T. McLean Irrevocable Trust v. Ponder,[1] a case involving the question of whether a Trust Protector could be held liable in not exercising the right to remove and replace the Trustees of a special needs Trust.

The Robert T. McLean Irrevocable Trust (the “Trust”) was created with settlement proceeds from Robert McLean’s (“Robert”) personal injury case.  Ponder was appointed “Trust Protector” of the Trust with the right to remove the Trustee and appoint a successor Trustee.  The Trust Protector was also given the right to appoint a successor Trust Protector and to resign as Trust Protector.  The Trust also provided that the “Trust Protector’s authority was conferred in a fiduciary capacity” and that the Trust Protector was not liable for any actions taken “in good faith.”  The Trust did not provide Ponder with any

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