Monday, March 22, 2010

Modified Accumulation Trusts For IRA or Other Qualified Plan Benefits at Death

Recent private letter rulings issued by the Internal Revenue Service have created concern among estate-planning attorneys regarding the best way to draft trusts that are intended as potential receptacles of IRA or other qualified plan beneifts upon the death of the participant. This concern stems from the fact that, unless the trust is properly drafted, it won't be possible to stretch out the payment of the retirement benefits over the trust beneficiary's lifetime.

Richest States Could Be the Best for Estate Planning

A recent study powered by TheStreet reports that the following are the states with the most and the least liquid millionaires as a percentage of the total population, listed in descending order:

Most Millionaires:
New Jersey
New Hampshire

Least Millionaires:
West Virginia
South Dakota
North Dakota

Monday, December 14, 2009

IRS Loses Billion Dollar Transfer Pricing Case

The IRS lost a billion dollar § 482 transfer pricing case yesterday. Veritas Software Corp. v. Commissioner, 133 T.C. No. 14 (Dec. 10, 2009):

P entered into a cost-sharing arrangement with S, its foreign subsidiary, to develop and manufacture storage management software products. Pursuant to the cost-sharing arrangement, P granted S the right to use certain preexisting intangibles in Europe, the Middle East, Africa, and Asia. As consideration for the transfer of preexisting intangibles, S made a $166 million buy-in payment to P. P employed the comparable uncontrolled transaction method to calculate the payment. In a notice of deficiency issued to P, R employed an income method and determined a requisite buy-in payment of $2.5 billion and made an income allocation to P of that amount. In an amendment to answer, R reduced the allocation from $2.5 to $1.675 billion. R further determined that the requisite buyin payment must take into account access to P’s research and development team; access to P’s marketing team; and P’s distribution channels, customer lists, trademarks, trade names, brand names, and sales agreements. P contends that R’s determinations are arbitrary, capricious, and unreasonable and the comparable uncontrolled transaction method is the best method to calculate the requisite buy-in payment.

Held: R’s determinations are arbitrary, capricious, and unreasonable.

5th Cir. Admits Ex-Wife's Testimony About Ex-Husband's Tax Evasion

The Fifth Circuit recently allowed an ex-wife's testimony about conversations she had with her ex-husband about his tax evasion to be admitted at the husband's trial under the joint crimes exception to the martial communications privilege even thought he ex-wife was not charged with tax evasion herself. United States v. Miller, No. 08-31168 (5th Cir. Nov. 20, 2009). The ex-husband did not help himself at trial:

Miller was the sole witness for the defense. He testified that in 1995, after being audited by the IRS, he joined Save-A-Patriot. He also studied materials provided by Save-A-Patriot. Based on his study of the materials and of the Internal Revenue Code, he believed that the income tax system was voluntary and that he was not required to pay taxes, though he had filed tax returns in the past. Because of this deeply held belief, he did not file tax returns for tax years 1995 through 2001. ...

Mrs. Miller also testified that Miller decided not to file taxes after joining Save-a-Patriot because he believed that filing taxes was not necessary and unconstitutional. This statement is not privileged because, as noted, it involves discussion of joint criminal activity. ... Further, it is not prejudicial because it is consistent with Miller’s testimony that he had a good faith belief, based on his reliance on Save-A-Patriot materials, that he did not have to pay taxes.

Revocation of a Disclaimer - Vermont

Disclaimer may be revoked if procured by undue influence. The testator’s mother and sole beneficiary under his will sought to revoke her disclaimer of all her interest in her son’s estate. The disclaimed property passed to the disclaimant’s nephew who was the contingent beneficiary of the will and the executor. The disclaimant then filed a document with the court purporting to revoke the disclaimer. The nephew objected and won summary judgment.

The Supreme Court of Vermont reversed, holding that a disclaimer cannot be revoked because it was based on a mistake of law or because the revocation is filed within the period for making a disclaimer, but that it may be revoked if it was procured through the exercise of undue influence. Carvalho v. Estate of Carvalho, 978 A.2d 455 (Vt. 2009).

Enforceability of in terrrorem clause in trust -- Virginia

The Supreme Court of Virginia held that a no-contest provision in a revocable trust “that constitutes part of a decedent’s testamentary estate plan” is subject to the same principles applied to such clauses in wills, in particular the principle that such clauses are to be strictly construed. Keener v. Keener, 682 S.E.2d 545 (Va. 2009).

Saturday, October 24, 2009

Law Changes in NY and NC

New York law now allows Domestic Partner Power to Make Anatomical Gifts:

Effective October 25, 2009, New York will allow a domestic partner the ability to make an anatomical gift of the other partner’s organs. 2009 Sess. Law News of N.Y. Ch. 348.

Changes to Wills, Trusts, & Estates Laws in North Carolina:

New legislation includes the following:

- Allowing a trustee to appoint trust property to another trust for the same beneficiary. 2009 N.C. Laws S.L. 2009-318.

- Establishing a procedure for providing notice to creditors without estate administration when a decedent dies leaving no property subject to probate. 2009 N.C. Laws S.L. 2009-444.

- Increasing the amount of funeral expenses with payment priority to $3,500 from $2,500. The first $1,500 of gravestone and burial location expenses were also given priority. 2009 N.C. Laws S.L. 2009-288.

- Revamping how a surviving spouse’s forced share is computed. 2009 N.C. Laws S.L. 2009-368.