Source: https://brian-lerner-estate-blog.com/2015/11/
Timestamp: 2017-11-21 13:43:45
Document Index: 129796790

Matched Legal Cases: ['§2056', '§2036', '§121', '§2631', '§2032', '§6200']

November | 2015 | Estate Attorney Blog
What is the Marital Subtrust?
a. The marital trust is also sometimes called the:
(1) “C trust”
(2) “QTIP trust” or
(3) “Marital deduction trust.”
b. It is generally designed to qualify for the marital deduction and is usually the receptacle for the marital share.
c. Depending on drafting, for purposes of making a “reverse QTIP election”:
(1) The marital trust may include only a portion of the marital share, e.g., the difference (if any) between:
(a) The deceased spouse’s remaining estate tax applicable exclusion amount after making lifetime taxable gifts; and
(b) The deceased spouse’s unused GST exemption; and
(2) The remaining amount of the marital share may be given directly to the survivor’s trust.
d. Alternatively, the deceased spouse may have devised the entire marital share to the survivor’s trust, in which event there will be no marital trust.
e. There are several forms of marital deduction trusts, the most common being a QTIP trust under IRC §2056(b)(7).
Understanding Terminology in a Subtrust
The terms “survivor’s trust,” “disclaimer trust,” “credit trust,” and “marital trust” refer to subtrusts. The terms “bypass share” and “credit share” are used interchangeably. The term “marital share” refers to marital deduction gifts.
Improper Subtrust Funding
What could happen if you do not properly fund the subtrust?
A great deal of postmortem planning is possible if the consequences of the actions involved in subtrust funding are understood. Improper subtrust funding may result in serious adverse tax and nontax consequences, including:
a. Loss of S corporation election by not making distributions within the prescribed time period and/or distributing to a subtrust that does not qualify for the S corporation election.
b. Loss of all or part of the marital deduction, resulting in estate tax.
c. Immediate capital gains in funding particular types of pecuniary gifts.
d. A possible immediate taxable gift by transfer into an irrevocable trust.
e. Potential taxation of part of the credit trust on the second death under IRC §2036(a).
f. Acceleration of gain on funding of income in respect to a decedent (IRD) items.
g. Potential unintended carrying out of distributable net income (DNI) on funding of pecuniary amount.
h. Loss of all or part of IRC §121 exclusion of gain from sale for later sale of the personal residence by improper placing of house in wrong trust.
i. Loss of all or part of the IRC §2631 GST exemption.
j. Failure to “pack” a credit trust by not using IRC §2032A.
k. Failure to use discounts on funding at the first death.
l. Loss of ability to take discounts on the second death.
m. Unnecessarily losing step-up in basis on second death for assets funded into the credit trust.
n. An unhappy client if opportunities were lost because of the way assets were allocated between trusts (e.g., allocating all tax-free municipal bonds to the credit trust).
o. Discovery by irrevocable trust beneficiaries that an improper allocation of assets resulted in a particular beneficiary’s not receiving the share that he or she would have received had a proper allocation been made.
Funding a Marital Trust
What is included and what must be done to fund a Marital Trust after one of the spouses dies?
The trust administration process includes the following steps:
a. Making outright distributions.
b. Identifying subtrusts.
c. Creating a spreadsheet and listing all assets.
d. Establishing targets for allocation and funding.
e. Allocating assets to the subtrusts.
f. Selecting an allocation date.
g. Preparing an asset allocation agreement and diagram.
h. Following a checklist for implementing the subtrust allocation.
i. Completing the trust administration by distributing the assets.
Posted on November 2, 2015 by Brian D. Lerner
Most of the time if there is real property involved and a married couple, they will initially make a revocable trust. However, once one of the spouses dies, it can become irrevocable so that the child will be ensured to get the property and the surviving spouse does not sell or bequeath the property to somebody other than the child.
Here are some types of irrevocable trusts:
Permanent trusts. The so-called permanent trust is a trust designed for the prolonged management of permanently and irrevocably transferred assets. The trust objectives include immediate removal of the transferred property from a settlor’s estate for estate tax purposes (accomplished at the price of making an immediate gift for gift tax purposes). The trust terms are usually designed to ensure that the income from trust corpus will no longer be includable in the settlor’s taxable income for income tax purposes.
Life insurance trusts. An irrevocable life insurance trust is typically used to remove the proceeds of life insurance from the insured’s gross estate, while making those proceeds available as a source of liquid funds for the payment of estate taxes and other obligations.
Trusts for minors. Trusts for minors are specialized forms of permanent trusts that more narrowly focus on the specialized circumstances and requirements of minors.
Grantor retained interest trusts. A grantor retained interest trust allows the settlor to retain an interest in trust assets for a limited period of time, with the remainder interest passing to another person.
Charitable remainder trusts. A charitable remainder trust is designed to provide benefits to named individuals for a specified period of time, with the remainder interest passing to charity. To obtain desired tax benefits, including an income tax deduction for the gift to charity, the drafter must ensure that these trusts meet specific requirements imposed by the Internal Revenue Code.
Charitable lead annuity trusts. A charitable lead annuity trust is designed to provide benefits to charity for a specified period of time, with the remainder interest passing to named individuals. The transfer tax benefits are similar to those of a charitable remainder trust, but there is no income tax deduction for the gift to charity.
Special needs trusts. The principal purpose of a special needs trust is to preserve government benefits for a disabled or aged beneficiary. Although the terms of the other kinds of irrevocable trusts discussed in this book are frequently influenced by the tax laws, the terms of a special needs trust are principally controlled by the public benefit laws.
Estate balancing trusts. If one member of a married couple is wealthy and the other has few assets, an inter vivos qualified terminable interest property (QTIP) trust can be used to provide the less wealthy spouse with a taxable estate, thereby making it possible to take advantage of that spouse’s unified credit upon his or her death. An outright gift would accomplish this, but the QTIP trust permits the grantor to retain control of the trust estate. I
Surviving spouse created qualified domestic trust (QDOT). Generally, no estate tax deduction is allowed for transfers to a surviving spouse who is not a citizen of the United States.
The Last Will and Testament actually can be done in different kinds of Wills. In fact, in California, explains Brian D. Lerner, there are several different types of Wills. The first type of Last Will and Testament is known as the witnessed will. Brian Lerner states that this will shall be in writing and satisfy the following requirements. The Last Will and Testament shall be signed by the testator or in the testator’s name by some other person in the testator’s presence and by the testator’s direction or by a conservator pursuant to a court order to make a will.
The Last Will and Testament needs to be witnessed by being signed, during the testator’s lifetime, by at least two persons each of whom being present at the same time, witnessed either the signing of the will or the testator’s acknowledgment of the signature or of the will and understand that the instrument they sign is the testator’s will as explained by Brian D. Lerner. Sometimes, however, explains Brian D. Lerner, the Last Will and Testament is not executed in compliance with these requirements. In these cases, the Last Will and Testament will shall be treated as if it was executed in compliance with the law if the proponent of the last will and testament establishes by clear and convincing evidence that, at the time the testator signed the last will and testament, the testator intended the will to constitute the testator’s last will and testament.
Another type of Last Will and Testament is known as the Holographic Will explains Brian D. Lerner. A holographic will is a last will and testament signed by the testator, with its material provisions appearing in the testator’s handwriting. Brian Lerner states that this type of will need not be witnessed or dated. The testator may sign the will anywhere on the document as long as the signature is made with the intent to authenticate the will. The document must be clearly intended to be a last will and testament and not mere instructions to an attorney regarding the drafting of a proposed witnessed will.
Brian Lerner states that any statement of testamentary intent contained in a holographic will may be part of a commercially printed form will. However, Brian Lerner usually advises a client to write a holographic will entirely in his or her own handwriting. This eliminates the possibility of a later dispute over what is “material” and what is not in the last will and testament.
Although a holographic will need not be dated explains Brian D. Lerner, the last will and testament should always be dated. If the holographic will is not dated and an inconsistent last will and testament exists, the courts will deem the holographic will invalid to the extent of the inconsistency unless it is shown that the holographic will was executed after the other will.Brian Lerner asks why have this problem? If you are going to have a holographic will, then simply date it so there is no issue as to when it is written. Another item to consider cautions Brian D. Lerner is that if the testator lacked testamentary capacity at any time when the holographic will might have been executed, the courts will consider the last will and testament invalid unless it is shown that the testator had capacity when the will was executed.
Brian Lerner states that normally an attorney is not concerned with holographic wills except to review one created by a client who is now interested in obtaining a witnessed will as their last Will and Testament. Nevertheless, states Brian Lerner, an attorney may be asked to draft or dictate by telephone a holographic will in certain circumstances, e.g., when a client is taking an unexpected trip or has to undergo surgery. Brian Lerner again informs that and advises that the client should copy, date, and sign the last will and testament provisions on blank paper in his or her own handwriting.
In this article I have targeted these keywords:for Estate: Will Lawyer
Title: There is the Statutory Will for people with simple Estates
Brian D. Lerner, Will Lawyer states that there are several kinds of wills. Two such wills that a will lawyer can prepare is known as an international will and a statutory will. Probate Code §§6200–6243 establish the California statutory will. Printed forms of the statutory will are available from the State Bar of California. Any person may use a statutory will. Thus, Brian Lerner states that any person “of sound mind and over the age of 18” may execute a California statutory will. However, Brian D. Lerner, will lawyer does state that the witnessed will is the most popular. Like other wills, a statutory will may be revoked by dissolution of a marriage or domestic partnership.
The requirements for executing a statutory will differ slightly from those for executing other witnessed wills states Brian D. Lerner, will lawyer. A California statutory will shall be executed only if the testator shall complete the appropriate blanks and shall sign the will and each witness shall observe the testator’s signing and each witness shall sign his or her name in the presence of the testator. Brian Lerner confirms that in the State of California, this is the requirements (at least executing requirements) for the statutory will to be valid.
One item to keep in mind cautions Brian D. Lerner, will lawyer, is that you cannot use a statutory will in conjunction with a Trust. That will simply not work and any serious estate planning will probably not use the statutory will. However, a will lawyer will certainly advise you what is best. It would seem that a statutory will are for those with smaller estates. Sometimes, states Brian Lerner, will lawyer, a person is so old and infirm that he cannot sign the will himself. If the testator is too infirm to physically sign the will or is incompetent, a statutory will cannot be used. There are other wills that can be used in this case.
On one hand, a statutory will is easy to make and it is quick explains Brian Lerner, will lawyer. However, a person dissatisfied with the limitations of the statutory will form may not change, delete, or add words to the form. Any change, deletion, or addition will “be given effect only where clear and convincing evidence shows that they would effectuate the clear intent of the testator.” However, explains Brian D. Lerner, will lawyer, a statutory will may be amended, however, by codicil in the same manner as other wills.
Brian Lerner, will lawyer explains that if the testator’s marriage or registered domestic partnership is dissolved or annulled after a California statutory will has been executed, any disposition of property made by the will to the former spouse or registered domestic partner and any nomination of the former spouse or registered domestic partner as an executor, trustee, or guardian under the will is revoked. Furthermore, states Brian D. Lerner, will lawyer, if the testator’s marriage or domestic partnership is dissolved after the testator executes a statutory will and if the testator remarries or enters into a domestic partnership with a person other than his or her former spouse or domestic partner, a new will should be executed if the new spouse or partner is the intended beneficiary of the statutory will’s spousal provisions.
This is a simple will explains Brian Lerner, will attorney. It is not designed to reduce death taxes or other taxes. Talk to a lawyer to do tax planning, or the current amount excluded from estate tax under federal law at your death, you own business-related assets, you want to create a trust fund for your children’s education or other purposes, you own assets in some other state, you want to disinherit your spouse, domestic partner, or descendants, or you have valuable interests in pension or profit-sharing plans. Clearly, if you have more than a simple will states Brian Lerner, you should talk to a will lawyer who knows about estate planning.
The Will can be set aside and revoked because of Fraud
Brian D. Lerner, California Trust Lawyer states that a Will that is obtained by fraud can be set aside and revoked. Will contestants frequently lump fraud and undue influence together as grounds for a contest because misrepresentations are often part of the pressure brought to bear on the testator states Brian D. Lerner. However, explains the California Trust Lawyer, fraud, however, is a separate and distinct ground of contest. When fraud alone is alleged, the contestant must show that the testator, even though acting of his or her own free will, was deceived into doing what he or she would not have done without fraudulent representations. It would probably be more successful to allege both fraud and undue influence in a Will Contest states Brian D. Lerner, California Trust Lawyer, as there are two different grounds of recovery.
The California Trust Lawyer asks, what exactly is fraud? The will contestant must prove that the false representations were made with the intent to deceive the testator and for the purpose of affecting his or her testamentary disposition. Brian Lerner, California Trust Lawyer, states that proving intent of a beneficiary with intent to deceive is not an easy matter and will require a significant amount of work and evidence to be shown to the Judge. The fraud need not be perpetrated at the time the will is executed, however, states Brian Lerner. Even when the false representations were made long before the will was executed, the fraud will essentially revoke the will if the testator’s belief in the representations persisted until the time of execution of the will and affected its terms states the California Trust Lawyer.
Brian Lerner asks what happens if fraud is found? If fraud is demonstrated, explains the California Trust Lawyer, only the will provision procured by the fraud is invalidated. The entire will is invalidated, however, explains Brian Lerner, California Trust Lawyer, if the fraud affects the entire testamentary disposition; the invalidated portions of the will are not severable from the rest of the will; or all the beneficiaries participated in the fraud.
Many times, states Brian D. Lerner, California Trust Lawyer, an attorney will not see the fraud right away as the client is unaware of it. Therefore, it would be incumbent on any California Trust Lawyer to be sure that he or she inquires into exactly how the Will was made, who are the beneficiaries, who spoke with the testator, where the facts are coming from and who essentially made the provisions of the Will itself.
Brian D. Lerner, California Trust Lawyer, states that you will have to go to Probate to enter into a Will Contest if there is fraud.
The Will or Trust can be set aside and revoked because of Undue Influence
A California Trust Attorney can determine the facts of your case in order to see if there is undue influence. Many times, explains Brian D. Lerner, an heir is feeling like he or she got the short end of the stick due to the fact that there appears to be undue influence.
Brian Lerner, a California Trust Attorney, states that a presumption of undue influence exists if the following conditions are met: One set of arguments which you could show undue influence, explains the California Trust Attorney would be showing the following: A confidential relationship existed between the chief beneficiary and the testator; The provisions of the will are inconsistent with the testator’s intentions expressed before and after the will’s execution explains the California Trust Attorney; Brian Lerner states the next element would be the chief beneficiary’s relationship with the testator gave the former the opportunity to control the testamentary act; The testator’s mental or physical condition permitted a subversion of his or her free will; and finally explains the California Trust Attorney would be the chief beneficiary under the will was active in procuring it.
However, Brian Lerner, a California Trust Attorney explains that there is a second set of facts sufficient to raise a presumption of undue influence (separate from the first set of facts) which includes the following: The beneficiary’s active participation in procuring the will; A confidential relationship between the testator and beneficiary; and Undue benefit to the beneficiary under the will.
Brian Lerner, California Trust Attorney states that because this second set of facts is more concise and somewhat less burdensome to the party challenging the validity of the will, it is more frequently used to raise the presumption of undue influence. Either way, the California Trust Attorney must bring this matter to Court and must present the case with sufficient detail, evidence, witnesses and declarations in order to properly make the case that undue influence exists. By the same token, explains Brian D. Lerner, some heir or beneficiary who feels that they can prove undue influence, may be wrong. The California Trust attorney can be on both sides of matter. Brian Lerner states that the California Trust Attorney can argue with supporting evidence that there was undue influence, or conversely, argue that there was not undue influence.
Brian Lerner explains that there must be active procurement of a Will and that the California Trust Attorney must prove this by a combination of factors. It often is demonstrated by circumstantial evidence. Brian Lerner, California Trust Attorney states that the beneficiary’s presence at the execution of the will is not determinative. Evidence of circumstances before and after the will execution may be considered if it tends to show undue influence at the time of will execution. Note that the California Trust Attorney explains that the beneficiary’s presence at the execution of the will is not enough to prove active procurement of the will. There must be some evidence that the beneficiary influenced the actual dispositive provisions of the will. Conversely, Brian Lerner explains that the beneficiary’s absence at the execution of the will does not necessarily mean that he or she did not actively procure the will. For example, the California Trust Attorney states in one case, the beneficiary was a psychic who convinced the testator that she was in communication with the testator’s deceased relatives. Although the psychic was not present at the will execution, the court found that she had so completely subverted the testator’s will that it was not unreasonable to conclude that she had actively procured the Will explains Brian D. Lerner. Another case explains the California Trust Attorney is in which the court found that even though the beneficiary was not present at the will execution, he had actively procured the will by refusing to help the testator escape from Nazi Germany unless she made him her sole heir.
Generally, explains Brian D. Lerner, there must be a confidential relationship and the California Trust Attorney states that a confidential relationship exists when one person places trust and confidence in the integrity and fidelity of another.
Finally, explains Brian D. Lerner, California Trust Attorney, you would need to show an undue benefit and that bequeathing property to this particular person is ‘unnatural’. Whether a Will is “unnatural” and whether a beneficiary has unduly profited from a will are questions of fact to be determined in light of the testator’s lifetime experiences and values. Thus, explains the California Trust Attorney, undue influence and proving it are highly factual and individual in each particular case.