Thursday, April 25, 2013

Part 3 of a 3 part series.

In a trilogy of new cases decided in the last couple of months, the courts in three states have addressed the issue of whether the trustee of a revocable trust has a duty to account to, and can be held liable to, the remainder beneficiaries of the trust, for a period during which the trust was revocable, after the death of the settlor. In reviewing the discussion of the courts in these three decisions, it is clear that, while a trust is revocable, the trustee has a duty only to the settlor, and that even after the death of the settlor when the interests of the remainder beneficiaries has vested, the trustee continues to have no duty to the remainder beneficiaries for any actions taken while the trust was revocable. In Part 1 of this series, we reviewed the case of Pennell v. Alverson and in Part 2 of this series, we reviewed the case of In re Estate of Giraldin; now, we turn to In the Matter of Trust # T-1 of Mary Faye Trimble.

In the latest case in this trilogy, the Iowa Supreme Court, in In the Matter of Trust # T-1 of Mary Faye Trimble, 2013 WL 275637 (Iowa, January 25, 2013), reviewed all the cases on this point, including the Giraldin case previously discussed, to conclude that the trustee had no duty to account to the remainder beneficiaries for the period during which the trust was revocable. (more…)

Tuesday, April 23, 2013

Part 2 of a 3 part series.

In a trilogy of new cases decided in the last couple of months, the courts in three states have addressed the issue of whether the trustee of a revocable trust has a duty to account to, and can be held liable to, the remainder beneficiaries of the trust after the death of the settlor, for a period during which the trust was revocable. In reviewing the discussion of the courts in these three decisions, it is clear that, while a trust is revocable, the trustee has a duty only to the settlor, and that even after the death of the settlor when the interests of the remainder beneficiaries has vested, the trustee continues to have no duty to the remainder beneficiaries for any actions taken while the trust was revocable. In this series of blogs, we review these cases.  In Part 1 of this series, we reviewed the case of Pennell v. Alverson; now, we turn to In re Estate of Giraldin.

The Court in the Pennell case agreed that, to the extent that the remainder beneficiaries were raising issues concerning breaches of fiduciary duty to Cleo during her lifetime, the remainder beneficiaries have standing to pursue those claims.

This distinction was picked up and further refined in December of 2012 by the California Supreme Court in In re Estate of Giraldin, 150 Cal. Rptr. 3d, 290 P.3d 199 (Cal.2012), reversing the result in the decision of the Court of Appeals (199 Cal.App.4th 577 (2011). In that case, Bill Giraldin created a revocable trust in early 2002 and designated his son, Tim, to serve as the trustee. The trust provided that Bill was the only beneficiary during his lifetime, and in the event of Bill’s incapacity, the trustee was to make liberal distributions for Bill’s needs, and that “the rights of remainder beneficiaries shall be of no importance.” The trust also contained a provision that during Bill’s lifetime, “the trustee shall have no duty to provide any information regarding the trust to anyone other than [Bill].” (more…)

Friday, April 19, 2013

Part 1 of a 3 part series.

In a trilogy of new cases decided in the last couple of months, the courts in three states have addressed the issue of whether the trustee of a revocable trust has a duty to account to, and can be held liable to, the remainder beneficiaries of the trust after the death of the settlor, for a period during which the trust was revocable. In reviewing the discussion of the courts in these three decisions, it is clear that, while a trust is revocable, the trustee has a duty only to the settlor, and that even after the death of the settlor when the interests of the remainder beneficiaries has vested, the trustee continues to have no duty to the remainder beneficiaries for any actions taken while the trust was revocable. In this series of blogs, we will review these cases.

In the first of these three cases to be decided, in September of 2012, the Arizona Court, in Pennell v. Alverson, 2012 WL 4088679 (Ariz.App. Div 1, September 18, 2012) interpreted the revocable trust created by Cleo Hubbard (the “Cleo Trust”) during her lifetime under Michigan law, and held that Angella Alverson, one of Cleo’s daughters, as a co-Trustee and ultimately a sole Trustee, did not owe any fiduciary duty during Cleo’s lifetime to the remainder beneficiaries. In this family dispute brought by Angella’s sister and her children and one of Angella’s grandsons, the Court first found that under Michigan law, the duties of the trustee and the rights of the beneficiaries are governed solely by the terms of the trust. (more…)

Thursday, April 18, 2013

 

The 7520 rate for May 2013 has dropped back to 1.20%.

The Federal Interest Rates for April can be found here.

Friday, April 12, 2013

On Wednesday, President Obama released his FY 2014 budget which calls for $3.8 trillion in spending over the next fiscal year and $1 trillion in tax increases over the next 10 years.

Among the proposals in the budget plan, President Obama proposes a return of the estate tax to the law in effect in 2009, which changes would go into effect beginning in 2018.  If this proposal is adopted, it would be a quick end to the “permanency” of the transfer tax law that was enacted at the end of last year.

 

Wednesday, April 3, 2013

Right now we are all in the peak of tax return filing season. As part of the tax return process, many tax practitioners file information returns for the entities they represent. Any person, including a corporation, partnership, individual, estate, and trust, who makes a payment (such for as rent, wages, salaries, and annuities) must file an information return with the IRS to report the payment. But what happens if a false information return is filed with the IRS?

In 1996, Congress enacted 26 U.S.C. § 7434(a), which gives victims of fraudulent filing activities a damage remedy against the perpetrators. The provision applies whenever “any person willfully files a fraudulent information return with respect to payments purported to be made to any other person.” It allows the subject of the false information return to recover from the person filing the return the greater of $5,000 or actual damages flowing “as a proximate result” of the fraudulent return including costs incurred in dealing with deficiencies resulting from the return, court costs and, in the court’s discretion, “reasonable attorneys fees.” (more…)