Morton Legal Blog

Attorney Suspended for Assisting Direct Mail Estate Planning Marketer

The Supreme Court of Ohio suspends an attorney for two years for preparing estate planning documents for clients solicited by a company that uses direct-mailings to market estate planning services in Ohio and other states. Ohio State Bar Assn. v. Jackel (2008-Ohio-1981, May 1, 2008).

Non-Spouse Beneficiaries of Retirement Plans May Convert to Roth

A recent IRS notice seems to permit beneficiaries of inherited retirement plans and IRA's to convett those inherited accounts to a Roth IRA.  Notice 2008-30 provides guidance about the distribution provisions of the Pension Protection ACt of 2006.  Prior to this Notice, only spousal beneficiaries had this option, via the spousal IRA rollover privilege.  Non-spouses did not have this option.  "If you inherited a traditional IRA from someone other than your spouse, you cannot convert it to a Roth IRA." IRS Publication 590 (2007). 

Planning for the New "Zero Percent" Tax Bracket

This article addresses a law change that is important to all wealth planning professionals and their clients. Beginning January 1, 2008 and continuing through at least 2010, a zero tax rate may apply to long-term capital gain and dividend income that would otherwise be taxed at the regular 15% and/or 10% rates. The new zero tax rate is available to the extent that the taxpayer's other taxable income minus exemptions and deductions is less than a specified amount.

Exciting New Developments in Buy-Sell Planning

This article examines exciting new developments in business succession planning - specifically, the use of LLCs or partnerships to own life insurance for buy-sell planning purposes.  Such a structure obtains the advantages of cross-purchase and stock redemption buy-sell agreements without many of the disadvantages of either traditional structure.  This development is significant to all wealth planning professionals and their business-owner clients. 

Ethical Wills - Passing along more than your stuff.

Stephanie West Allen has an excellent post on her blog on the use of ethical wills.  Ethical wills attempt to convey ideals and values to future generations, rather than simply passing on an individual's personal belongings.  In our office, we refer to this type of planning as Legacy Planning, and attempt to incorporate this planning into all estate plans.

Buffett Urges Preservation of the Estate Tax

Billionaire Warren Buffett urged Congress to preserve the estate tax, saying that plans to repeal it would benefit a handful of the richest American families and turn the country into a "plutocracy."

How to Contest a Will

You had a loving relationship with your mother and she always said she would leave everything to you and your siblings, but after she died, you discover she had recently written a new will, leaving everything to her housekeeper. Is there anything you can do? If you believe a loved one's will is not valid, you may be able to contest it. But proving a will is invalid is difficult and this process should be undertaken only if you are sure there is something wrong.

Protect Your Children: Choose a Guardian

Many parents suddenly find themselves considering estate planning because they want to ensure the care of their children. Some new clients of mine, John and Anna, a couple from Madison, Mississippi, recently adopted a newborn baby. Even though they are in their late twenties, they're concerned about who would care for their son if something happened to them. As a result, they have begun to look into estate planning and evaluate their current financial plans. They have a retirement plan (IRAs, pensions and 401(k) benefits), life insurance and other investments, but they recognize that those plans may not meet their new needs as parents. So, what should parents know about guardianship and conservatorship or "guardian of the estate?" And, how do you go about choosing the best person to care for your children's physical, mental and financial needs?

Taxation of Trusts Simplified

 Trusts are Separate Taxpayers
All trusts are separate taxpayers. Unless disregarded under the exception for grantor trusts discussed below, each trust has its own tax year and tax accounting method. Trusts also receive income and pay expenses. Net income is taxed either to the trust or to the beneficiaries, depending upon the trust terms, local law and, in the cases of complex trusts (defined below), whether the trust distributed the income.

Non-Spouse Stretch IRA from Qualified Plans

One of the retirement account reform provisions contained in the Pension Protection Act of 2006 permitted non-spouse beneficiaries to transfer their 401k funds into an inherited IRA and take advantage of "stretch" distributions over their lifetimes instead of being subject to 5 year payout rules.  Unfortunately, the IRS issued a Notice which provided that this provision was permitted at the discretion of the plan administrators, but was not mandatory.  Congress has stated that this optional treatment was not intended, and corrective legislation has been proposed.  The IRS has now reversed its  position, and stated that, beginning  with 2008, non-spousal rollover will be required as an option. 

http://www.irs.gov/retirement/article/0,,id=173372,00.html

Dead Hand Control

Wills can be powerful instruments, as the
will of Leona Helmsley makes clear.

The hotelier and real estate mogul became a
symbol of 1980s greed and was given the
nickname ''the Queen of Mean'' after
revelations of her tyrannical treatment of
employees came to light during her 1988 trial
on tax evasion charges. A housekeeper
testified that she heard Helmsley say, ''Only
the little people pay taxes.'' Helmsley was
convicted and served 19 months in prison and
recently died at age 87 with an estimated $4
billion estate.

Child Conceived by Artificial Insemination Does Not Inherit

The Supreme Court of New Hampshire rules that a child conceived after her father’s death through artificial insemination is ineligible to inherit from him as his surviving issue. Khabbaz v. Commissioner. (N.H., No. 2006-751, Aug. 9, 2007).

Child Conceived by Artificial Insemination Does Not Inherit

The Supreme Court of New Hampshire rules that a child conceived after her father’s death through artificial insemination is ineligible to inherit from him as his surviving issue. Khabbaz v. Commissioner. (N.H., No. 2006-751, Aug. 9, 2007).

CPA Fined for Unauthorized Practice of Law

The Delaware Supreme Court fines an accountant for using two lawyers in a "contemptuous scheme" to circumvent its earlier order that the accountant cease engaging in the unauthorized practice of law by drafting wills and trusts for clients. In the Matter of Estep (Del., No. 647, 2006, Aug. 15, 2007).

Spousal Rights to Social Security Benefits

    To qualify for divorced spouse benefits, the couple must have been married at least ten (10) years. Further, the divorced spouse must not remarry and be at least sixty-two (62) years old. The divorced spouse is eligible to receive half of that worker’s primary insurance amount. The primary insurance amount is the monthly benefit amount to which a worker is entitled. Like regular social security benefits, there are penalties if the divorced spouse begins to draw on the benefits before reaching their full retirement age.

Further, the divorced spouse is eligible to receive the benefits from the worker even if that worker has deferred receipt of their benefits as long as the divorce was final for at least (2) years or the divorced spouse has reached full retirement age. Additionally, the receipt of these benefits does not affect the family maximum benefit for any other derivative benefits which the worker’s family is eligible, such as spousal or children’s benefits.

A surviving divorced spouse may also be eligible for a mother or father’s benefit if they have custody of a worker’s child that is under sixteen (16) years of age or disabled. These benefits will be approximately 75% of the worker’s primary insurance amount.

If a divorced spouse has had multiple marriages that have lasted ten (10) years or more, the divorced spouse will be able to collect whichever worker’s benefit that will be the largest income to the divorced spouse. Marriages that occur after the divorced spouse reaches the age of sixty (60) do not qualify for a divorced spousal benefit.

What are Trusts, and How are they Used?

There are many types of trusts, and many reasons that people execute them.  In its most basic form, a trust is simply an agreement between two people to hold something of value for a period of time under a specific set of instructions.  "Will you hold my wallet while I swim in the ocean so it does not get wet.  If I drown, please give it to my wife."  That was a trust, with me as the grantor, the person holding my wallet as the trustee, and me as the beneficiary.  My wife is the substitute beneficiary.   

New Estate Tax Exemption?

The House and Senate have approved a $2.9 trillion budget resolution that would keep the estate tax at where it will be in 2009 under the current law. This means that the per-person estate tax exemption would be $3.5 million ($7 million for a married couple) and the top tax rate would be 45 percent.

Policy Review of Trust Owned Life Insurance

This article explores many of the common misperceptions about trust owned life insurance - plus a process for you to add significant value for your clients by incorporating policy reviews of trust owned life insurance.

Although trust owned life insurance (TOLI) is a common planning vehicle for high net worth individuals and families, relatively few TOLI policies ever meet their initial projections. Industry studies reveal that TOLI portfolios rarely receive the required vigilant fiduciary oversight routinely associated with other assets held in trust, such as equities, real estate, etc.

Powers of Attorney, Health Care Powers, and Advance Medical hDirectives

Power of Attorney For most people, the durable power of attorney is the most important estate planning instrument available — even more useful than a will. A power of attorney allows a person you appoint — your "attorney-in-fact" — to act in your place for financial purposes when and if you ever become incapacitated.

Lessons to be Learned from Anna Nicole

Anna Nicole Smith seemed to go from one estate planning mess to another. First, she was the wife of billionaire J. Howard Marshall. For many years, she was involved in litigation over his estate because J. Howard never included her in his Will. But, even after experiencing first-hand the emotional, financial, and time costs of J. Howard’s poor estate planning, Anna Nicole left behind her own mess.