The Wall Street Journal earlier this week published a rather interesting article that detailed an increased effort by large donors to colleges and universities to impose greater restrictions on the uses to which their gifts may be put. Not surprisingly, the article also describes the angst that this is causing college administrators and development officers.
What are the economic consequences, including the impact on government tax collections, of same-sex marriages? The tax laws in California are complex and too involved for publication in this blog. However, in an interesting article written a few years ago, several scholars at various universities collaborated in an article which begins an analysis of this topic by stating that:
It is well-known that a couple's joint income tax burden can change with marriage. Many couples, especially two-earner couples with similar incomes, pay a marriage tax because their taxes when married are more than their combined tax liabilities as single filers.This feature of the income tax suggests that legalizing same-sex marriages would increase income tax revenues, because gay and lesbian households are thought to consist primarily of two-earner couples.
In this paper we estimate the income tax effects of allowing same-sex couples to marry. We use estimates on the size of homosexual relationships, the percent who would marry if same-sex marriage becomes legal, and the average incomes of these couples, in order to generate estimates of the revenue impact.
Our calculations indicate that legalizing these marriages would lead to an annual increase in federal government income taxes of between $0.3 billion and $1.3 billion, with the likely impact toward the higher range of the estimates.
Source: California Tax Attorney Blog
Courtesy of Mitchell Port of the California Tax Attorney Blog comes a nice Q & A from the IRS that addresses many of the fundamentals of trust law and trust taxation. Like Mitchell, I believe that any good attorney practicing in this area knows the answers to these questions. Nonetheless, I think that the information is of use to most non-trusts and estates practitioners, as well as our clients, and I urge you to take a look at the IRS publication to which Mitchell links in the below post:
From the American Bar Association's RPPt Section eReport comes the news that Congress may enact legislation that would refuse patent protection to tax planning methods. I have previously posted on this issue and, as those whom read my earlier post may recall, I believe that allowing patent protection for tax planning methods is nothing short of silly, and I wholeheartedly support legislation disallowing such patents.
Leanna Hamill at the Massachusetts Estate Planning and Elder Law Blog, published the following excellent post in which she discusses the problems that "paperless records" can cause for your heirs when you die, as well as certain precautions that you can take to minimize these problems:
This article from the Wall Street Journal, Paperless World Can Leave Heirs in the Dark, outlines the dangers of keeping all your records on your computer. With online bank accounts becoming more common, there might not be paper statements of your accounts, and if you don't leave a record of them, your heirs might never know you had them. And it's not just your death that would require them to know what you have, if you become incapacitated and funds are necessary to pay for your care - you'll want your loved ones to know where to find those funds.
The article outlines the information you should have in case of an emergency. It doesn't need to be posted on your refrigerator, but it should be kept in a safe place in your house, and you should let someone you trust know where to find it. The information includes:
- details about your assets, what they are, how they are held, where to find the account information. If you have out-of-state real estate or other assets, be sure to include these.
- the names of your advisers - your financial planner, your accountant, your attorney, the guardian you've chosen for your minor children.
- information about any safe deposit boxes you might have.
- where your estate planning documents are located: your Health Care Proxy, Durable Power of Attorney, Will, Trust and deeds.
- insurance policies: long term care, life and health.
A wonderful way to keep track of these things is with the What If... Workbook
, created by Gwen Morgan. The workbook provides a place for you to document:
- financial information
- personal contacts
- location of important documents
- whether you want burial vs. cremation
- how to care for pets
- family medical history
- special gifts you'd like to leave for loved ones
- and even space for you to start documenting the type of legacy (other than financial) that you would like to leave behind for your loved ones.
To help you get started, and to provide the often necessary accountability to complete the workbook, Gwen holds small group sessions or individual meetings.
Click here to receive the Workbook at a special rate, just for readers of this website. You could get them for you and your family members for the holidays, as a good way to start the discussion about planning and your wishes for the future.
Recent news reports concerning Leona Helmsley's $12 milllion pet trust have spurred many discussions about decedents sometimes undestandable, and sometimes bizarre, efforts to influence from the grave the behavior of their heirs. In this regard, the follwoing is borrowed from Investment News:
Despite widespread incredulity from the public about the weird details of hotel empress Leona Helmsley’s will, some advisers know that bizarre bequests are not uncommon, having watched their own clients seek to rule their families from beyond the grave.Ms. Helmsley, who died Aug. 20, left her dog, Trouble, $12 million. That made the pooch seem like a higher priority than
Ms. Helmsley’s own grandchildren, two of whom received $5 million each and two who were disinherited.
To collect their fortune, the two favored grandsons, David and Walter Panzirer, must visit their father’s grave at least once each calendar year, preferably on the anniversary of his death. Should they miss a visit, they will be cut off from the money left in the trust.
The other two grandchildren, Craig and Meegan Panzirer, were disinherited for “reasons which are known to them,” according to the will.
Advisers and attorneys say they have seen families torn apart as clients disinherit children or grandchildren or require family members to change religion or sign postnuptial agreements before receiving bequests.
Although it’s difficult not to be judgmental, Jason M. Cole, the managing director of Abacus Wealth Partners LLC in Philadelphia, believes it’s his job to ensure that his clients’ wishes are met.
One of those clients directed that all assets be left to a pet shelter. Anotther forbade paper plates and plastic forks and knives at the memorial-service spread.
“We do try not to judge,” Mr. Cole said. “We need to remain as objective as possible about the estate planning process.”
Clients on ice
In the annals of posthumous micromanaging, surely few compare with a client of Rick Van Der Noord’s, a registered investment adviser and certified financial planner with Van Der Noord Financial Advisors Inc. in Greer, S.C.
He helped a divorced man draft a will in which his sons could use the inheritance only for health or medical care — and then only if the costs exceeded $12,000 a year. The sons could get 10% of the inheritance if they completed four-year college degrees, an additional 10% if they received master’s degrees and 10% more should they earn doctorates.
And there’s more. Each son gets a 20% distribution of the trust if he postpones marriage until age 27. They earn another 20% distribution if they are married to their first spouses for five years, and they earn an additional 20% for every five years of marriage until they’ve been married 15 years.
By age 45, the two sons will be paid the full remainder of the trust.
“He was trying to help parent and direct his heirs from the grave,” Mr. Van Der Noord said. “As his adviser, my job is to help him get whatever he wants, and if that’s what he wants, that’s what we’ve got for him.”
Although some clients try to exert control after death, others plan on coming back to life — hence “cryonics estate planning,” in which advisers manage money for clients who have had themselves frozen in the hopes of being revived years, or perhaps centuries, later.
“It’s an emerging field, one that I’m helping to create,” said Rudi Hoffman, a certified financial planner and chief executive of Hoffman Planning in Port Orange, Fla.
“Obviously, there’s no guarantee it will work,” he said. “It’s a best effort.”
Although Gary Altman, an estate planning attorney and owner of Altman & Associates Inc. in Rockville, Md., hasn’t had any clients make plans for their afterlife, he’s had many clients donate their bodies to science at the University of Tennessee’s Forensic Anthropology Facility in Knoxville, which has been nicknamed the “Body Farm.”
Martin M. Shenkman, an attorney in his eponymous Teaneck, N.J., law firm, draws the line when he thinks the fallout from a will could devastate a family. Recently, he refused to work with a client who wanted to give 80% of her fortune to two of her eight grandchildren while ignoring the others.
“I told her I can’t participate,” Mr. Shenkman said. “She’s going to destroy her family.”
Mr. Shenkman also had a client who wanted to leave someone $50,000 to care for an extensive tropical-fish collection. “I told him there’s a problem with that, and it’s one word,” Mr. Shenkman said. “Flush.”
Instead, Mr. Shenkman directed his client to leave the fish in a trust and to be taken care of by a trustee.
But some clients take a more expansive approach when it comes to estate planning. Several years ago, Jeff Sprowles, an adviser with Jeff Sprowles & Associates LLC in Langhorne, Pa., handled the distribution of a will for a childless husband and wife.
The couple directed that the trust be divided between a brother, three nieces and a nephew, but there was a catch: Each of them had five years from the date of the funding to spend their bequest. Anything left at the end of five years would go to charity.
Additionally, the beneficiaries were allowed to use the money only for activities that would generate immediate enjoyment.
They weren’t allowed to gamble or buy anything of permanent value, such as a vehicle or a house.
“It was pretty cool,” Mr. Sprowles said. “It had to be basically blown. They had a hell of a good time.”
However, the brother thought the idea was frivolous and refused to spend his portion of the money.
“I could almost hear him saying, ‘Bah! Humbug!’” Mr. Sprowles said.
A post by Paul Trudelle at the Toronto Estate Law Blog regarding some brewing problems with the rather generous trust that Leona Helmsley established for her dog in her will provides an opportunity to address one of the most fundamental estate planning issues, and an easily avoided problem. It seems that the primary trustee that The Queen of Mean designated for her faithful companion does not wish to serve. It is, as Paul notes in his post, unclear as to whether the substitute trustee is willing to serve. Should the substitute be likewise unwilling, the result is predictable - costly, asset consuming litigation. It is a fundamental precept that, before you designate a trustee you confirm that that person (or institution) is willing to serve. Failing to take this simple step can, as Ms. Helmsley's family may well discover, lead to needless litigation and the waste of time and assets. These problems are easily avoided by having a short conversation with your intended trustee. I would add, parenthetically, that this is especially important if you are considering what some might consider exotic or unconventional estate planning tools, such as pet trusts.
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