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Treasury Guidance Regarding Making a Portability Election

As discussed previously on this blog, the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 (the “2010 Act”), signed into law on December 17, 2010, authorized portability of a married decedent’s unused estate tax exclusion to the decedent’s surviving spouse. The Treasury issued proposed and temporary regulations providing guidance on the requirements for electing portability and on the applicable rules for a surviving spouse’s use of the deceased spousal unused exclusion amount (“DSUE amount”) on Friday, June 15, 2012. (This date of issuance is relevant, as June 15, 2012 marked the latest possible date on which Treasury could file these temporary regulations so that they would apply retroactively to estates of decedents who died before they were issued.) What follows is a brief summary (in question and answer format) of some of the guidance provided by these new regulations.

A Case of Buyer’s Remorse or Breach of Fiduciary Duty?

In French v. Wachovia Bank, N.A., 2011 WL 2649985 (E.D. Wis., July 6, 2011), the court issued an order granting Wachovia Bank’s (“Wachovia”) motion for summary judgment in an action by the beneficiaries of the French Trusts for breach of fiduciary duty. Wachovia was the successor trustee of the French Trusts that owned two whole life policies as well as significant other assets having a total value of about $30 million. Wachovia was appointed as such successor trustee in conjunction with its review of the policies and its recommendation to replace the whole life policies with a no-lapse John Hancock policy. The settlor (“French”) had his attorneys review the recommendation and provide him an analysis of the proposed exchange.

After an extensive year-long analysis of the advantages and disadvantages of the proposed policy exchange, including multiple detailed memoranda from his attorneys and discussions of the transaction with his attorneys and

When a Woman Loves a Woman (With Apologies to Percy Sledge…): Another Federal Judge Strikes Down DOMA

The year was 1963, the restaurant Portofino – an eclectic restaurant in Greenwich Village, a part of New York City known as one of the centers of the gay and lesbian liberal movement. It was this night that Edie Windsor met Thea Spyer. “We immediately just fit,” said Thea, in the award-winning 2009 documentary film, Edie and Thea: A Very Long Engagement by Susan Muska and Greta Olafsdotir. After sharing their lives together as a couple in New York City for 44 years, the two women wed in Canada, where same-sex marriage was legal. Two years later, Thea died of complications of multiple sclerosis. At that time the Defense of Marriage Act (“DOMA”), a 1996 federal statute, took effect, transforming Edie’s story from a personal tragedy to a public trial.

Partially Distributing An Illiquid Estate

June 19, 2012



Some personal representatives take the position that they’ll either distribute all or none of the estate. Other personal representatives are willing to make a partial distribution of estate assets only if each beneficiary gets an equal partial distribution. Both situations can be maddening to a beneficiary who just wants to receive something from an estate rather than watch it sit in probate for years until there’s some liquidity.

Often, the personal representative’s justification for not making a partial distribution is illiquidity of estate assets. Where real property is involved, the current real estate market compounds the problem of illiquid estate assets. So, what’s a personal representative to do? A recent opinion out of Missouri gives personal representatives in that state some guidance.

In Estate of Sullivan, the Missouri appellate court had a number of issues before it on appeal.

How To Create A Trust In Delaware

June 18, 2012


How To Create A Trust In Delaware

June 18, 2012

Authored by: Luke Lantta


Bill and Vieve Gore founded a manufacturing company best known for its GORE-TEX fabric. Having become considerably wealthy with more wealth anticipated, they undertook efforts to transfer that wealth without incurring significant estate taxes. Through this process, they signed two separate trust instruments during 1972 – the “May Instrument” and the “October Instrument” – both purporting to transfer the same property into the “Pokeberry Trust.”

One of their daughters claimed that the early May instrument controlled, while the other four children claimed that Bill and Vieve never intended for the May Instrument to be final and enforceable. Litigation ensued . . .

Always Read the Fine Print!

Sometimes failing to read the fine print in the IRA Account Agreement can have disastrous results, since the terms contained in the fine print of such Agreements on some pretty important points can vary greatly. In Smith v. Marez, Case No. COA11-475, NC Ct. App. , December 6, 2011, the IRA owner, Leonard Smith, opened two IRAs with Pershing LLC, signing a Traditional IRA Adoption Agreement for one and a Rollover IRA Adoption Agreement for the other, in each case adopting the terms of the applicable Account Agreement governing the terms of the IRA and designating his children as the beneficiaries. A year and a half later, after having been diagnosed with cancer, he signed a new Will designating his children in different proportions and new beneficiary forms on which he stated that the IRAs are “to be distributed pursuant to my Last Will and Testament.” Two weeks later, Leonard

New Portability Regulations to be Published on June 18

The IRS is scheduled to publish new Regulations regarding “Portability of a Deceased Spousal Unused Exclusion Amount” on June 18.   On Monday, you will be able to view the published Regulations here.  If you’re eager to read them before Monday, a pre-publication PDF version is also available.

2012 Gift Tax Opportunities: Wait to Give, but do not Wait to Plan

The 2010 Tax Relief Act has provided a great opportunity for lifetime gifts to family members with a temporary increased estate and gift tax exemption of $5.12 million making these gifts potentially free of ever incurring gift or estate tax. The exemption will return to $1 million on January 1, 2013 unless Congress acts, and although most commentators think a return to $1 million is unlikely, there is a good possibility the exemption will be reduced.

Despite this great gifting opportunity for wealthy individuals, many people are reluctant to make use of the exemption for many reasons. Some of the many reasons are:

(1) The economy. While the markets have improved since the lows of 2009, many people are worth less than before the market crash and they have less confidence in their holdings due to the volatility of the market.

Investor Had No Insurable Interest in STOLI

Nyet, we don’t mean the vodka. In the life insurance world, STOLI stands for “stranger owned life insurance.”

In Pruco Life Ins. Co. v. Brasner, Case No. 10-80804,U.S. Dist. Ct S.D. Florida, November 14, 2011, the court once again found that an investor or stranger who owned a life insurance policy lacked an insurable interest. In this case, Arlene Berger was interested in obtaining the lucrative cash payment that was the pot at the end of the rainbow of this life insurance arrangement, but with a net worth of under $1 Million, she really had no need for the life insurance. Ms. Berger learned of the life insurance arrangement from a free seminar she and her husband had attended, and she was referred to Mr. Brasner, who was a life insurance agent for Pruco.

Ms. Berger, through the help of Mr. Brasner, applied for the life insurance, but had no

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