The following is a summary of popular topics discussed in estate planning blogs and articles last month.
Federal Estate and Gift Tax Updates
The IRS announced that for 2012, the federal estate tax exclusion will increase to $5,120,000 (it was $5 million in 2011). As Julie Garber of about.com notes, this means that the lifetime gift tax exemption and generation-skipping tax exemption will also increase to the same amount in 2012.
However, these amounts are currently under review. The Joint Committee on Deficit Reduction (aka the “Super Committee”) must release its plans to reduce the federal deficit by $1.2 trillion by a due date later this month. One plan the Committee is considering includes reducing the estate and generation-skipping tax exemptions to $3.5 million and the gift tax exemption to $1 million for 2012.
Not everyone supports the Committee’s proposal. As cited by Professor Gerry Beyer, Stephen J. Entin and Dick Patten of forbes.com argued that repealing the estate tax would raise enough revenues over the next 10 years to cover almost one-third of the federal deficit.
The IRS also announced that the $13,000 annual gift tax exclusion will remain the same in 2012.
Perhaps the most discussed topic in estate planning last month was the death of Steve Jobs. Most estate planning lawyers praised the fact that Jobs appeared to have most of his assets in trust, so little to none of his estate will have to go through the very public probate process.
In fact, it is unlikely that Jobs’ estate plan will ever be made public because he used living trusts, but this did not stop the speculation about his affairs.
For instance, some predicted that Jobs’ $6-7 billion estate could very well pass to his heirs tax-free. On the other hand, others posited that this conclusion is either myth or if true, is not so uncommon in situations where the deceased has a surviving spouse.
Al Davis, longtime owner of the Oakland Raiders, also passed away in October. Because Davis left the team to his wife, Mike Ozanian at forbes.com predicts that the family will eventually owe hundreds of millions in estate taxes. As a result, the Davis family may sell the team to cover this eventual expense.
Julie Garber posted this summary of the effect estate taxes have had on other MLB, NBA, and other NFL teams as well.
This led to a post by Len Berman of forbes.com, hoping that his beloved Baltimore Orioles will be sold for similar reasons.
Arbitration Clauses in Trusts
Many trusts end up with disputes between beneficiaries and trustees. To save the parties the cost of expensive lawsuits, many estate planning lawyers are now including clauses in trusts that instead require the parties to arbitrate their differences.
Recently, the Texas Court of Appeals in Rachal v. Reitz ruled that one trust’s arbitration clause was unenforceable because it did not meet basic contractual requirements. According to Samantha Weissbluth and Simon Johnson at trustsandestates.com, Texas is now one of only four states to consider this question and use this rationale. As of this date, Florida and Arizona are the only states whose legislatures passed laws that protect arbitration clauses.
Joel Schoenmeyer of the Death and Taxes Blog discusses the prevailing view amongst estate lawyers that trusts cannot be viewed as contracts, and also includes a sample arbitration clause he is currently using in his trusts.
The Federal Arbitration Act as a potential source of law for these clauses was considered in a rough draft of a forthcoming law review article by David Horton, Associate Professor at Loyola Law School in Los Angeles. His full article can be downloaded from the Social Science Research Network.
Estate Planning and Technology
Digital Assets – Saman M. Jaffery of the Toronto Estate Law Blog discussed a recent survey of 2,000 U.K. adults conducted by Goldsmiths at the University of London, which indicated that 11% of users include internet passwords in their wills. Later, I was greatly honored to have my post on this topic, comparing U.K. and U.S. digital asset policies, referenced in Professor Gerry Beyer’s award-winning Wills, Trusts & Estates Prof Blog.
Virtual Law Practice – Rania Combs, Esq. is one of the first and most successful estate planning lawyers maintaining a “virtual practice”, a law firm model where all services are provided to clients online. Recently, she briefly discussed this practice model while also linking to an article on the topic by the American Bar Association.