Authored by: Michael C. Levy, Esq. In early June, we discussed the movement towards federal tax equality for same sex couples created by an IRS ruling on California domestic partnerships. At the time, we cautioned that while the ruling opened the door to tax equality, several obstacles still needed to be overcome for true equality to exist. Since then, two rulings by District Court judges have been handed down that may soon clear the way for same sex couples to share the same tax rights (and obligations) as other married couples. A pair of cases before the United States District… Read more
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The Abusive Use of a Power of Attorney
Authored by: Paul J. Sowell, Esq. The recent case of Smith v. Mountjoy 694 S.E.2d 598 VA, 2010 sets forth the typical fact pattern encountered when agents abuse their position as power of attorney. In 2006, Mr. Smith executed a durable power of attorney naming his wife, Mrs. Smith, as his agent. Acting as power of attorney, Mrs. Smith created two revocable trusts, one for herself and one for her husband, each with different trust terms. Under Mrs. Smith’s Trust, upon her death the trust principal was to remain in further trust for her husband’s benefit. Under Mr. Smith’s trust,… Read more
When Trustees No Longer Earn Your Trust
Authored by: Michael C. Levy, Esq. When choosing a trustee, it is difficult to assume every possible outcome of the trustee/beneficiary relationship. Despite using due care and judgment in selecting the trustee, conflicts still arise, often to the point where the relationship must be severed. But, given that most trusts do not give beneficiaries the right to remove a named trustee, terminating that relationship is not always easy. Fortunately, most states including New York provide trust beneficiaries with a mechanism to remove a trustee if these unfortunate stalemates occur. Under New York law, there are several grounds by which a… Read more
GRATS: Going, Going,…(almost) Gone?
Authored by: Laura Wartner, Esq. On June 15, 2010, the House passed a bill that would impose new and restrictive limitations on Grantor Retained Annuity Trusts (“GRATs”) a popular estate planning technique. A GRAT is an irrevocable trust in which the creator of the trust (the “Grantor”), contributes property to the trust in exchange for the right to receive an annuity payment for the term of the GRAT. GRATs can be structured so that the value of retained annuity portion is virtually equal to the value of the property contributed, meaning that no gift was made when the GRAT was… Read more
Case Law Trend Continues To Lessen The Bite of In Terrorem Clauses
Authored by: Paul J. Sowell, Esq. The Court of Appeals decision in Matter of Singer, 13 NY2d 447 (2009) supports the growing case law trend that an in terrorem clause does not necessarily foreclose a disgruntled beneficiary from conducting discovery relevant to determining the validity of a Will. The decedent, Rabbi Joseph Singer, executed a last will and testament dated April 15, 2003, which contained two in terrorem clauses. The first clause applied generally to all beneficiaries while the second applied specifically to his son, Alexander. The first in terrorem clause stated: “If any beneficiary shall, in any manner, directly… Read more
Georgia Court Denies Child Born Out of Wedlock ‘Lawfulness’ Under Her Father’s Will
Authored by: Michael C. Levy, Esq. The importance of carefully drafted language in estate planning documents increases as the types of potential takers from an estate becomes more complex and varied. This is especially true when the testator of a will or grantor of a trust has children from previous marriages or born out of wedlock. A recent Georgia ruling illustrates how conflicting and confusing language may force a court to determine the testator’s intent to the possible detriment of one or more children. In Hood v. Todd, the Supreme Court of Georgia were tasked with determining whether a child… Read more
Senator Chuck Grassley’s Speech on the Impact on Family Businesses of the Estate Tax Quandary
Posted by: Paul J. Sowell, Esq. Below is the full text of a speech delivered by Senator Chuck Grassley on the Senate Floor on June 16, 2010 which outlines the effect the estate tax limbo is having on family businesses: Today, I want to discuss the lack of action on estate tax reform. Most of you know this about me – for as many years as I have been a representative of the people of Iowa, I have never believed that death should be a taxable event. Taxing people’s assets upon their death is just plain wrong, and their heirs… Read more
A Small (but Incomplete) Step Towards Federal Tax Equality for Same Sex Couples
Authored by: Michael C. Levy, Esq. The Internal Revenue Service recently issued a private letter ruling that, for the first time, acknowledges the rights of same-sex couples to combine their income and property for tax purposes. The IRS ruling held that a same sex couple who were registered domestic partners under the California Domestic Partnership statute are required to report one-half of the couple’s combined income, both from performance of personal services and their community property, on their federal tax returns. Additionally, the IRS held that each partner was entitled to half the income tax withholding credits for himself and… Read more
Court Finds That Corporate Trustee Prudently Managed A Concentrated Stock Position
Authored by: Paul J. Sowell, Esq. The recent case of Karo v. Wachovia Bank, N.A., 2010 WL 1930118 is a prime example of how a bank acting as a co-trustee successfully defended against a claim that it breached its duty of prudence by holding a concentrated stock position. In 1966, Rosalie S. Karo established the Karo Inter Vivos Residual Trust for the benefit of her husband, Toney, and her descendants. Through a series of mergers, Wachovia ended up as a co-trustee of the trust along with Rosalie’s husband, Toney. At the time Wachovia Bank became a co-trustee, the trust owned… Read more
Constructive Fraud Claim May Prevent Children from Chopping Widow out of Benihana Fortune
Authored by: Michael C. Levy, Esq. When a fiduciary relationship exists, whether between a trustee and beneficiaries or a lawyer and their clients, it is incumbent upon the fiduciary to keep the people they represent informed and to ensure that the represented parties understand the actions being taken on their behalf. Failure to do so could have very negative consequences and, as shown in a recent decision by the New York Surrogate’s Court, may allow aggrieved parties to raise claims of constructive fraud. In 2002, Rocky Aoki, the founder of the Benihana restaurant chain, married for the third time. Prior… Read more