<img src="//bat.bing.com/action/0?ti=5189112&amp;Ver=2" height="0" width="0" style="display:none; visibility: hidden;">

TRUSTS & ESTATES, WILLS, AND TAX LAW UPDATE

Foster-Home or Difficulty-of-Care Health Services by Individuals

Posted by D. Bradley Pettit on Wed, Dec 7, 2022 @ 09:12 AM

Brad Pettit—Senior Attorney, National Legal Research Group

            In a very recent Chief Counsel Advisory, the Internal Revenue Service (“IRS”) clarified prior advisories and rulings regarding both the federal income and employment tax implications of payments made to and received by individuals for foster-home or difficulty-of-care services. In IRS Chief Counsel Advisory 202243009, 2022 WL 16551520 (Oct. 28, 2022), the IRS made it clear that although qualified payments received by individuals for providing qualified foster-home or difficulty-of-care services are not gross income to the payee, the payor is still responsible for the Federal Insurance Contributions Act (“FICA”) and the Federal Unemployment Tax Act (“FUTA”) employment taxes if there is an employer-employee relationship between the payor and payee, and no statutory exemption from employment tax obligations applies, such as the parent-child exemption. The IRS's 2022 advisory reads in pertinent part as follows:

     The 2002 Field Service Advisory (FSA) stated in-home care payments to the service providers, whether related or not, are generally remuneration for employment. As such, the payments were subject to federal income tax as well as to FICA and FUTA taxes, unless there's an exception.

 

     Notice 2014-7 reverses the conclusion for federal income tax purposes.

Read More

Topics: tax law, D. Bradley Pettit, employment tax, exclusion from gross income, income and employment taxes

Is It Legal to Inherit Objects Made from Endangered Species Parts?

Posted by Matthew T. McDavitt on Wed, Dec 7, 2022 @ 09:12 AM

Matthew McDavitt—Senior Attorney, National Legal Research Group

      It is not uncommon for the estates of individuals at death to possess one or more souvenirs, pieces of jewelry, trophies, collectibles, or artworks made from animal parts, such as carved ivory, fur rugs, tortoise-shell ornaments, crocodile skin leather, and the like. What legal issues might an estate or beneficiary face if he were bequeathed animal parts listed in Endangered Species Act?

      The U.S. Congress enacted the Endangered Species Act (“ESA” or the “Act”) (currently codified at 16 U.S.C. §§ 1531-1544) on December 28, 1973, with the aim of barring commerce in the endangered and threatened species listed in the Act, as such financial value contributes to the continuing depletion of such species and the contraction of their populations and range.

      Importantly, among the acts prohibited under the ESA, it is forbidden for an individual to “possess, sell, deliver, carry, transport, or ship, by any means whatsoever, any such species taken in violation [of the Act].” Id. § 1538(a)(1)(D) (emphasis added). However, this statutory language barring possession of an ESA-regulated species part applies solely to animals “taken in violation” of the Act, i.e., the animal was captured and/or killed and transformed into a commercial product after such species had been listed to the ESA.

Read More

Topics: Matthew T. McDavitt, estates law, Endangered Species Act regulations, bequeathed animal parts, noncommercial possession

Estate Planning—Gifts by an Attorney-in-Fact

Posted by D. Bradley Pettit on Wed, Apr 13, 2022 @ 10:04 AM

Brad Pettit—Senior Attorney, National Legal Research Group

            Although most states now have statutes that address the scope of powers of an agent under a durable or general power of attorney, it is safe to say, as a general proposition, that an agent cannot make a gift of his or her principal's property to himself or to a third party unless such a power is given to the designated attorney-in-fact in the power-of-attorney instrument. Dingle v. Prikhdina, 59 So. 3d 326 (Fla. Dist. Ct. App. 2011). Thus, in the absence of specific provision in a power-of-attorney document that authorizes the agent to make gifts of the principal's assets or property, if the attorney-in-fact makes a gift of the principal's money or property to himself, herself, or a third party, a court will presume that the gift was improper or constituted an act of prohibited self-dealing, and the agent carries the heavy burden of proving, with clear evidence, that the principal intended to allow him or her to make the gift in question. In re Estate of Curtis, 83 A.D.3d 1182, 923 N.Y.S.2d 734 (2011).

            Even if a power-of-attorney instrument authorizes gifts by the attorney-in-fact to third parties, the agent can make only those gifts of the principal's money or property that are within the scope of the gift-giving powers conferred upon the agent by the governing document and that are in the best interests of the principal.

Read More

Topics: estate planning, D. Bradley Pettit, gifting authority, attorney-in-fact, power-of-attorney document

WILLS: Virginia Construction Survival Clause—Beneficiaries Who Predecease Distribution

Posted by Matthew T. McDavitt on Thu, Nov 18, 2021 @ 10:11 AM

Matthew McDavitt—Senior Attorney, National Legal Research Group

     In some wills, testators expressly condition the beneficiaries’ receipt of legacies upon their survival to the date of actual distribution of the gift during the estate administration. In such circumstances, the question occasionally arises regarding the propriety of such survival mandate where (1) the administration is delayed beyond the average length due to dilatory conduct by the executor or due to litigation, and (2) one or more legatees survived the testator’s death but died prior to the distribution of the legacy. A handful of courts nationally have addressed this fact pattern, arriving at a logical rule applicable when unusual delay in distribution results in the one or more legatees predeceasing distribution.

     It is well-settled that the “personal representative is under a duty to settle and distribute the estate of the decedent . . . as expeditiously and efficiently as is consistent with the best interests of the estate.” 31 Am. Jur. 2d Executors and Administrators § 686 (2021). As such, a handful of American courts examining the issue have concluded that the equitable rule in this circumstance is that legacies conditioned upon beneficiary survival to the date of distribution vest at the time such legacies could first have been distributed (often a year from when the estate was opened), to protect such gifts when the administration is unduly delayed.

Read More

Topics: wills, Matthew T. McDavitt, unreasonable delay in distribution, interests vest on undelayed distribution date

TAX: Sales Tax Pandemic—Facemasks

Posted by James P. Witt on Thu, Sep 23, 2021 @ 12:09 PM

Jim Witt—Senior Attorney, National Legal Research Group

            In addition to the direct health issues caused by the COVID-19 pandemic, given the economic disruption the pandemic has caused, it is obvious that the pandemic will indirectly be giving rise to countless legal issues (for instance, in the construction/real estate field alone, with government mandates halting some projects and granting waivers as to others, and with issues related to supply chain, employee safety, construction disputes, defaults, loans, and leases, there will be important questions up for decision for a long time to come). As exemplified by the case of McLean v. Big Lots Inc., No. 2:20-CV-02000-MJH, 2021 WL 2317417 (W.D. Pa. June 7, 2021), however, there will also be COVID-19-related cases concerning far less momentous topics.

            In McLean, the plaintiffs in a putative class action asserted claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. §§ 201-1 et seq., against defendants Big Lots, Inc., Dollar General Corp., Jo-Ann Stores, LLC, Home Depot, Inc., and Wal-Mart, Inc., alleging that the defendants charged sales tax on otherwise exempt protective face masks. The plaintiffs alleged that the defendant retailers knowingly, negligently, or deceptively falsely advertised the price of protective face masks, representing that protective face masks were subject to Pennsylvania sales tax and collecting the tax from the plaintiffs. In fact, under sales tax exemptions for medical supplies and clothing, 72 P.S. §§ 7202, 7204, the masks were not subject to sales tax.

Read More

Topics: James P. Witt, sales tax, pandemic, face masks

ESTATE PLANNING: Pet Trusts

Posted by D. Bradley Pettit on Fri, Aug 20, 2021 @ 11:08 AM

D. Bradley Pettit, Senior Attorney, National Legal Research Group

           According to a treatise on revocable trusts,

[t]he number of individuals who own animals is staggering. As many as 56.7 million households in the United States own dogs and 45.3 million own cats.

2 George M. Turner et al., Revocable Trusts, 5th § 78:1 (Westlaw current through November 2020 update).

            As to pet trusts, the Uniform Probate Code provides as follows:

Subject to this subsection and subsection (c), a trust for the care of a designated domestic or pet animal is valid. The trust terminates when no living animal is covered by the trust. A governing instrument must be liberally construed to bring the transfer within this subsection, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor’s intent.

Unif. Prob. Code § 2-907(b) (Westlaw current through 2019 Annual Meeting of the National Conference of Commissioners on Uniform State Laws).

Read More

Topics: trusts, estate planning, D. Bradley Pettit, pets

GIFTS: Beneficiaries/Disqualification to Take/Ingratitude

Posted by Matthew T. McDavitt on Thu, May 6, 2021 @ 12:05 PM

Matt McDavitt—Senior Attorney, National Legal Research Group

            It is well-settled that in most states, completed inter vivos gifts are deemed irrevocable, even in circumstances where the donor’s relationship with the donee later deteriorates or the purpose of the gift dissipates. “Many gifts are made for reasons that sour with the passage of time. Unfortunately, gift law does not allow a donor to recover/revoke an inter vivos gift simply because his or her reasons for giving it have soured.” Dayal v. Lakshmipathy, 2020-Ohio-5441, ¶ 37, 163 N.E.3d 683 (quotation formatting and citations omitted). However, Louisiana has a unique statute that allows completed lifetime gifts to be revoked upon proper facts showing “ingratitude” to the donor, either through attempted murder or through cruel treatment, where an action is brought within a year of the injurious act or imputed knowledge of such.

Revocation on account of ingratitude may take place only in the following cases:

  • If the donee has attempted to take the life of the donor; or
  • If he has been guilty towards him of cruel treatment, crimes, or grievous injuries.
Read More

Topics: Matthew T. McDavitt, inter vivos gifts, ingratitude, Louisiana revocation

Taxation of Early Withdrawal from Retirement Account; COVID Exception

Posted by D. Bradley Pettit on Tue, Mar 16, 2021 @ 10:03 AM

Brad Pettit, Senior Attorney, National Legal Research Group

            A recent decision by the U.S. Tax Court serves as a reminder that if an individual elects to take funds from his or her tax-favored retirement account before he or she attains the age of 59½, the distribution from the account to him or her is not only subject to federal income tax, as are all distributions from retirement accounts, but is also subject to the 10% additional tax that is imposed upon early withdrawals from retirement accounts, such as individual retirement accounts ("IRAs"). In Lashua v. Commissioner, T.C. Memo. 2020-151, 2020 WL 6559172 (Nov. 9, 2020), the Tax Court reminded us that if we decide to withdraw funds from an otherwise tax-deferred retirement account before we reach the age of 59½, we should be prepared, under 26 U.S.C. § 61(a), to report the distribution as "gross income" on our individual or joint federal income tax return and, pursuant to 26 U.S.C. § 72(t)(1), to pay an "additional tax" equal to 10% of the funds that were withdrawn.

Read More

Topics: D. Bradley Pettit, early distribution of retirement funds, exceptions to additional 10% tax, COVID exception, qualified retirement account

ESTATES: Multiple Wills—Reconciliation—Choice of Personal Representative

Posted by James P. Witt on Wed, Feb 17, 2021 @ 11:02 AM

Jim Witt—Senior Attorney, National Legal Research Group

            Once in a while, the estate planning steps taken by a decedent make you wonder if he or she was intentionally leaving a mess. When Aretha Franklin, the Queen of Soul, died as a result of pancreatic cancer at age 76 on August 16, 2018, no will was filed. Her family believed that she died intestate. If that had been the case, her net estate would have simply been divided under Michigan law into four equal shares, one for each of her sons, Clarence, Edward, Ted, and Kecalf. In May 2019, however, the family discovered three wills written by Franklin, two from 2010 were found in a locked cabinet, and one from 2014 was found in a spiral notebook left under a couch cushion. The wills seemed fairly evenhanded as among the four sons, but there were questions raised as to the documents' validity by a number of contradictory provisions and the problem with deciphering some of the writing, not to mention numerous underlinings, strikeouts, and marginal notes; much of the writing seemed to be in a stream of consciousness mode.

Read More

Topics: James P. Witt, estate planning, multiple wills, reconciliation, personal representative

ESTATES: Can Legitimacy of a Putative Heir Be Challenged in an Intestacy Administration?

Posted by Matthew T. McDavitt on Thu, Oct 8, 2020 @ 11:10 AM

Matt McDavitt—Senior Attorney, National Legal Research Group

            When a person dies without a will, the decedent’s estate is passed via the statutory regime of intestate succession, representing the presumed intention of most people to gift their estate at death to their close heirs.

            A decedent’s intestate heirs encompass one’s closest blood relatives (plus more remote relatives via representation through deceased family members who have died leaving surviving issue), plus any children that were legally adopted by the decedent, or their issue. However, while it is common nowadays for out-of-wedlock children to petition estate administrations in order to prove their relation to a claimed deceased father, the related circumstance also arises where the paternity of a presumptive child of marriage is challenged.In such a situation, may the parties interested in the estate contest the legitimacy of presumptively marital children where there is evidence that such a child was not, in fact, a blood relative of the decedent, as in the case of marital infidelity?

Read More

Topics: Matthew T. McDavitt, intestacy, estates, putative heir, presumption of legitimacy, clear and convincing evidence

New Call-to-action
Free Hour of Legal Research  for New Clients
Seven ways outsourcing your legal research can empower your practice