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That Underwater Policy Does Not Have Any Value, Right?!

SCUBATaxpayers/insureds are often surprised when they are taxed on the value of an old policy that was underwater, when it was transferred to them, causing them to assume that the policy had no value for the government to tax. Here again, the taxpayers in Schwab v. Commissioner (9th Cir. 2013), were surprised that they had recognized taxable income on the distribution to them of life insurance policies from their non-qualified plan, which had surrender charges that exceed their cash value.

Michael and Kathryn, a married couple, were employees of Angels and Cowboys, Inc., which sponsored a non-qualified multi-employer welfare benefit plan that was administered by a third party. Each of them caused the plan to purchase, with a single premium, a variable universal life insurance policy with a three-year no lapse guarantee.

IRS Rules that Conversion to Unitrust in Accordance with State Law Will Not Trigger Loss of Grandfathered Protection

A recent Private Letter Ruling (PLR 201320009) issued by the Internal Revenue Service (IRS) blessed a conversion of a grandfathered Trust to a unitrust determination of income, as not causing any loss of the Trust’s generation-skipping transfer (GST) tax grandfathered protection, and not resulting in a gift or in the recognition of any gain. Here, the trust in question had been held for the benefit of the Settlor’s son, but the son had since died and the trust was now held for the benefit of three grandchildren. No additions had been made after September 25, 1985. However, the trust determined the income to be distributed to the grandchildren under the traditional method, with interest and dividends constituting trust income.

Long after the trust became irrevocable as a result of the death of the Settlor, the state in which the trust was being administered enacted legislation authorizing the conversion to a

Welcome Prince George of Cambridge—Is Your Parents’ Estate Planning Up to Date?

baby-cambridge-1-660On July 22, 2013, the question everyone wanted answered, boy or girl, was answered when Catherine, Duchess of Cambridge, gave birth to the royal baby, a baby boy, who is now third in line to the throne, after his grandfather, Prince Charles, and his father, Prince William.

On July 24, the next question everyone wanted answered, what’s his name, was answered with the announcement that the baby prince’s name is George Alexander Louis, and that he will be known as Prince George of Cambridge.

Now, the question that we’re sure is burning in everyone’s mind is, are Will’s and Kate’s estate planning documents up-to-date so that Prince George will be properly taken care of in the event something happens to his parents?

Trust Alternatives to Prenuptial Agreements

July 16, 2013

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Private Client Partner Renee Gabbard participated in the attached presentation on Trust Alternatives to Prenuptial Agreements.  We are pleased to provide you with the audio of this presentation through the link below.

http://trustbryancave.com/wp-content/uploads/2013/07/trust_alternatives_to_prenup.mp3

FEGLIA: Wife Can’t Enjoy Fruits of Husband’s Labor

With guest co-blogger, Washington University School of Law student and Bryan Cave summer intern, Mike Gallagher.

As is the case for everyone (and as we previously discussed in our prior post, Rock, Paper, Scissors: Life Insurance Beneficiary Designation Beats Will), based on the United States Supreme Court decision in Hillman v. Maretta, if you are a federal employee, you should carefully consider who is listed as beneficiary of your life insurance policy. In Hillman, the Court favored Warren Hillman’s ex-wife, Judy Maretta, over his widow, Jacqueline Hillman, and not because the former was more deserving or the marriage to the latter was overly capricious. $124,558 of life insurance benefits accrued to the ex-wife because the husband neglected to send the federal government’s Office of Personnel Management the necessary documentation to change his beneficiary designation before his death.

James Gandolfini’s Death Will Bring in Money to IRS and NYS

James Gandolfini’s Death Will Bring in Money to IRS and NYS

July 10, 2013

Authored by: Stacie J. Rottenstreich and Karin Barkhorn

Gandolfini

The terms of James Gandolfini’s December 2012 Last Will and Testament were made public last week when it was filed in New York County Surrogate’s Court. There are a series of specific bequests to his teenage son by his first marriage and some friends and relatives, but the bulk of his probate assets is disposed of as his “residuary estate” and is divided among his sisters, his wife and his baby daughter.

The tax clause of his Will directs that all estate taxes are to be paid from his residuary estate. What does that mean to his beneficiaries? And what does that mean to the IRS and to the NYS Department of Taxation and Finance? Only the 20% of the estate that passes to James Gandolfini’s widow will qualify for the Federal

St. Louis Compliance Workshop for Broker-Dealers and Investment Advisers – July 24, 2013

   

ACA Compliance Group St. Louis Skyline

ACA Compliance Group, Bryan Cave, ExamFX and Global Relay Present  St. Louis Compliance Workshop for Broker-Dealers and Investment Advisers – July 24, 2013

Wednesday July 24, 2013 1:00 p.m. – 4:00 p.m. Cocktail Reception Immediately Following

Location: Bryan Cave One Metropolitan Square 211 N. Broadway St. Louis, MO 63102-2750

RSVP By July 17, 2013

ACA may provide information about roundtable attendees (name, company name, provided address, phone, and email information) to our event co-sponsors. However, you may opt out of this information sharing if you prefer (see instructions following registration).

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Trustees’ Quick Guide to FATCA

The FATCA regime takes effect 1st January 2014. Click here for a copy of our bulletin on FATCA issues relevant to foreign private trusts and private investment companies together with a copy of the latest draft Form W-8BEN-E.

Play It Again Sam–Are Inherited IRAs Protected from Creditors in Bankruptcy?

When the Fifth Circuit, in a case of first impression for that circuit and all of its sister circuit, last year ruled in In re Chilton, 11-40377, 2012 WL 762924 (5th Cir. Mar. 12, 2012) that inherited IRAs constituted retirement funds within the “plain meaning” of §522 of the Bankruptcy Code and were thus exempt from the bankruptcy estate, under § 522(d)(12) (the federal exemptions), many thought the issue was settled. This was especially so because the Fifth Circuit ruling was the last (or so we all thought) in a long line of cases that ruled the same way after the enactment of the 2005 Bankruptcy Act. The Seventh Circuit in Rameker v. Clark, Nos. 12-1241 & 12-1255, United States Court of Appeals (7th Cir. 2013), on April 23, 2013, however, disagreed with the Fifth Circuit and agreed with the argument made by bankruptcy trustees in this case, and in

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