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What’s Yours is Ours?

What’s Yours is Ours?

November 5, 2012

Authored by: Kathy Sherby and Stephanie Moll

Estate of Alfred J. Richard v. Commissioner, T.C. Memo 2012-173 (6/20/2012), is an unusual case in which the government sought to include 140 shares of preferred stock in A.J. Richard & Sons, Inc. (the “Company”) in the gross estate of the decedent, Alfred Richard (“Alfred”).  The shares were initially reported on the estate tax return, but it was later determined that Alfred did not own the shares that passed through his predeceased wife’s will.  The government’s arguments in opposition to the estate’s amended Tax Court petition reducing the number of shares of preferred stock from the 740 shares reported on the estate tax return by the 140 shares in Mrs. Richard’s name at the time of Alfred’s death, were each resoundingly overruled by Judge Goeke.

Mrs. Richard had died in 1997 at a time when she owned 140 shares of preferred stock in the Company and Alfred owned 600 shares

Should A Testator Explain Why She Disinherited A Child?

November 1, 2012

Authored by:



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

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.”

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.

Summary of New Provisions in IRS Draft Instructions for Form 706 for Decedents Dying in 2012

As we told you last week, the IRS recently released Draft Instructions for Form 706 for decedents dying in 2012, which can be found here. If you don’t feel like reading all 52 pages yourself, here are some of the highlights:

• The new Form 706 includes a new Part 6—Portability of Deceased Spousal Unused Exclusion (DSUE). This new Part 6 allows the taxpayer to (1) opt out of electing to transfer the decedent’s DSUE to his or her surviving spouse, (2) calculate the amount of DSUE that can be transferred to the surviving spouse if so elected, and/or (3) account for any DSUE amount received by the decedent from his or her predeceased spouse.

Searching for Guidance Regarding Making a Portability Election?

In Notice 2011-82, 2011-42 IRB 516, 09/26/2011 the Service reiterated much of the instructions on portability addressed informally in the Instructions for Form 706 for 2011 decedents. The Form 706 Instructions contain detailed instructions for dealing with making the election to allow the surviving spouse to use the predeceased spouse’s unused exclusion amount and for computing the maximum unified credit amount on the death of the surviving spouse.

The instructions for Form 706 state that the executor will be considered to have made the predeceased spouse’s unused exclusion election by filing a “timely and complete Form 706.” There will be no need to check a box on the return. This has again been reaffirmed in Notice 2011-82. The use of the word “complete” in the instructions lead most practitioners to conclude that the Service is looking for a 706 with all the information that would be

Diversification And The Prudent Investor Rule

March 21, 2012

Authored by:



We get asked a lot about two categories of cases: (1) cases about discretionary distributions; and (2) cases about concentrations and diversification. And, it’s easy to understand why – fiduciaries are often given a great amount of discretion in exercising their duties, but then may get sued over it. While there seems to be a growing number of decisions dealing with matters like undue influence and lack of capacity, the numbers of authorities regarding the exercise of discretionary powers and diversification/concentrations are still limited.

That’s why when an opinion like that of the Illinois Court of Appeals in Carter v. Carter comes along, we have to take notice. In this case, the court considered a breach of fiduciary duty claim arising from the trustee’s alleged strategy of investing only in tax-free municipal bonds. The appellate court determined that this strategy did not violate the prudent

Administering an Estate for the First Spouse of a Married Couple to Pass Away in 2011 or 2012

If you are administering an estate for the first spouse of a married couple to pass away in 2011 or 2012, you should consider whether or not to make a “portability election” under Section 2010(c)(5)(A) of the Internal Revenue Code.

Section 2010(c), as recently amended, generally allows a surviving spouse of a U.S. citizen decedent who passes away in 2011 or 2012 to use the decedent’s unused Federal estate tax exclusion amount in addition to the surviving spouse’s own basic Federal estate tax exclusion amount. This eliminates the need for spouses to re-title property and/or create trusts solely to take advantage of each spouse’s full basic Federal estate tax exclusion amount.

Under the current tax law, a person’s applicable Federal estate tax exclusion amount is the sum of (1) the basic Federal estate tax exclusion amount (currently, $5,000,000 minus any taxable lifetime gifts) and (2) in the case of a

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