Grantor vs Non-Grantor Trusts

I received a call a couple of days ago from previous clients who asked whether or not they needed to get a tax number for their trust.  They did not understand that as their trust was a revocable trust (also known as a grantor trust) meaning they had full control of trust assets, their social security numbers were automatically the tax identification numbers for the trust and any trust income should be filed on the grantors' 1040. Only when a trust is or becomes irrevocable (or is known as a non-grantor trust) do the trustees acquire a separate tax identification number and file a 1041 as long as the irrevocable trust is in existence.

Choosing The Right Fiduciary--Trustee, Agent, Personal Representative

In an article written September 10, 2012, by Jeanne Skowronski of the Wall Street Journal, Ms. Skowronski writes about the importance of choosing the right trustee to serve as the fiduciary of your estate.  Ms. Skowronski talks about four questions which she feels should be asked in deciding who should serve as fiduciary.  She asks:




- How large and complex are the assets in the trust?
- Can anyone in your family do the job?
- How are the relationships between your beneficiaries?
- Have you explored other options?




Here at Hughes Estate Group, we emphasize the great importance of choosing the right individual or entity to serve as the fiduciary of a person's estate.  We ask a series of questions in order to help you determine the best fiduciaries for your estate plan. 




We feel there should be much more deliberation in determining who should serve than simply naming your first born child for example or even the child most able to handle finances.  The relationships between siblings and many other issues also hold great bearing on who should be named as the individual or individuals to take care of your affairs at your incapacity or death. It is important to ask the right questions in deciding who should serve as trustee of your trust, or agent of your power of attorney, or personal representative of your will or estate. 

Power of Appointment Types

There are two types of powers of appointment:  a general power of appointment and a limited (special) power of appointment.  Each of these types of powers carries different and significant tax implications.

General Power of Appointment:
In a general power of appointment the donor gives the donee authority to appoint (transfer) the donor's rights, assets, or items to anyone the donee wishes, including the donee himself.  Potential adverse tax consequences accrue to a donee who possesses a general power of appointment: the rights, assets, or items which the donee has power to appoint are considered the donee's property for gift and estate tax purposes.

Limited (Special) Power of Appointment:
In a limited (special) power of appointment the donor limits the donee's authority to appoint (transfer) the donor's rights, assets, or items.  The authority may be limited in various ways.  For example, the donee may be limited in regard the the persons to whom he or she can appoint assets; or the donee may be limited in regard to the times at which he or she can appoint assets; or the donee may be limited in regard to the purposes for which he or she can appoint assets (for instance, the health, education, maintenance, or support of the appointee).  In certain circumstances the donee possessing a limited power of appointment and the appointee may be the same person.  With a limited (special) power of appointment, the Internal Revenue Service usually does not consider the rights, assets, or items subject to appointment to be owned by the donee in determining the donee's own gift and estate taxes.  In estate planning, generally a limited (special) power of appointment is preferred over a general power of appointment.

Power of Appointment

Parties involved with a power of appointment are:
"Donor" is the person who creates a power of appointment.  The donor is usually the owner of rights, assets, or items being ultimately appointed by the donee.
"Donee" or "holder" refers to the person who possesses a power of appointment--who has been named to appoint or transfer all or a portion of an owner's rights, assets, or items.
"Appointee" is the person who receives the rights, assets, or items as a result of the power of appointment being exercised.
"Taker in Default" is the person who receives the rights, assets, or items if the power of appointment is not exercised.

General Definition:
A "power of appointment" is a unique power given to a donee (holder) by a donor to distribute the donor's rights, assets, or items usually at the donor's death to appointees.  A donee of a power of appointment is different than a personal representative or trustee.  A donee of a power of appointment does not have the responsibility of managing a person's estate or trust assets.  Rather, the donee has the authority to appoint the donor's rights, assets, or items to appointees.  There are two types of powers of appointment: a general power of appointment and a limited (special) power of appointment.  Each of these types of powers carries different and significant tax implications.

Who Gets Dad's Old Anvil

Once both parents have died, the children have a big job ahead of them. It litterly can take years to wade through all the accumulated stuff. And the stuff might really be valuable (not just monetarily). The sentimental value of a certain item can help ease the lose of the loved one as family reminisces, or it can cause the dreaded family fight that keeps family members from talking to each other for years. An article written by Kelly Greene of the Wall Street Journal entitled, "The Pearls Are Mine!" gives some good suggestions for working through the mountain of stuff in an timely and friendly way.

The Basic Stages of Life

There are three basic stages of life when contemplating estate planning.

1. Individual is alive and mentally competent



2. Individual is alive and mentally incapacitated



3. Individual has died

Each of these stages is handled differently.

Individual is alive and mentally competent
When an individual is alive and mentally competent, estate planning documents can be in place, but most likely the documents are sleeping (or not being used) during this stage of life.

Individual is alive and mentally incapacitated
When an individual is alive but mentally incapacitated, there are certain estate documents that if prepared ahead of time allow family members to step in and begin acting on behalf of the incapacitated individual. The kind of documents that might be prepared for this stage of life are:

• health care power of attorney



• medical directive (pull-the-plug)



• health care directive



• financial power of attorney



• do not resuscitate (In Utah, an individual can only obtain a DNR by contacting a physician and filling out the DNR with the physician.)

If these documents are not in place before an individual becomes incapacitated, family members will go to court to obtain conservatorship or guardianship appointment in order to act for an incapacitated person.

Individual has died
When an individual has died, any powers of attorney used during incapacity becomes void and family members must turn to any will or trust that has been established to deal with this stage. If an individual has prepared a trust and/or will, family members can begin the process of accessing assets, paying bills, and distributing assets to the beneficiaries of the deceased person. If the person dies without estate documents in place, most likely the family members will need to go through probate to obtain authority to access and distribute any property of the deceased person.

In contemplating estate planning, it is important to be aware of the three stages of life and prepare for each stage.

Joke of the Week

Friend: "Was your grandmother's mind vigorous and sane up to the very last?"
Heir: "I don't know--the will won't be read until tomorrow."

Check out our website here for additional information regarding estate planning.

The dead just keep on getting richer

Speaking of Michael's estate, it's growing. Billboard is reporting that the 2008 "King of Pop" is still No.1 in Germany, Austria, Switzerland, Italy and Holland. It's the set's Fourth week on top of the European top 100 albums chart. He still has three titles on the pan-European list - "The Collection" and the"the Essential" are at #s 2 and 3. "The Essential" is a favorite in the UK and Ireland with sales for a fourth week on top.

Hobbit Heirs Getting Short End of the Stick?

Hobbit Heirs are asking for $220 Million in "Rings" earnings. The heirs say New Line used classic "Hollywood Accounting," which inflated expenses and excluded revenue from its accountings denying the family of any payments at all. Hollywood accounting has long been seen as attempt by movie studios to cheat authors out of royalty payments. The allegation is that the accounting formulas they use have been designed to ensure that it is mathematically impossible for any film to show a net profit.

“Usually it’s not outright thievery by the studios, but death by contract,” Bloomberg quotes Pierce O'Donnel, the Los Angeles-based lawyer who represented the late columnist Art Buchwald in a successful case against Viacom Inc,s Paramount Pictures in 1988.

J.R.R. Tolkien sold movie rights to his “Lord of the Rings” novels 40 years ago for 7.5 percent of future receipts. Three films and $6 billion later, his heirs haven’t seen a dime from Time Warner Inc.

A jury will look at the accounting methods used by New Line Cinema, the Time Warner unit that made the movies, in October, where the lawsuit is set for trial in Los Angeles.

Studios' financial shenanigans were exposed in a lawsuit filed by writer Art Buchwald alleging that Paramount Pictures stole his script idea and turned it into the 1988 movie Coming to America starring Eddie Murphy. Buchwald won the lawsuit and was awarded damages, and then accepted a settlement from Paramount before any appeal took place.

The decision was important mainly for the court's determination in the penalty phase of the trial that Paramount used "unconscionable" means of determining how much to pay authors. Paramount claimed, and provided accounting evidence to support the claim, that despite the movie's US$350 million in revenues, it had earned no net profit, according to the definition of "net profit" in Buchwald's contract, and hence Buchwald was owed nothing.

Wikipedia states that "The court agreed with Buchwald's argument that this was "unconscionable", and therefore invalid. Fearing a loss if it appealed, and the subsequent implications of the unconscionability decision across all its other contracts, Paramount settled for undisclosed terms. The case was the subject of a 1992 book, Fatal Subtraction: The Inside Story of Buchwald v. Paramount by Pierce O'Donnell, the lawyer who represented Buchwald, and Los Angeles Times reporter Dennis McDougal"

Michael Jackson Blogging

Though Michael Jackson's personal life and finances were definitely different, his business acumen was legendary, and according to Kiplinger.com, he left an estate plan that we can all learn from.

Here's what he did.

He made a will, which unfortunately most people don't do. Most people's estates will be distributed according to state law. Jackson, on the other hand, spelled out what he wanted to happen. He cited each of his children by name and specifically excluded those that he did not want to share in his estate. This makes it clear that these were considered choices, not oversights.

Along with his will, he created a revocable trust. This trust is actually a legal entity. The pour-over will dumped all of the assets into the trust, which now owns all of Michael Jackson's assets. With this move he avoided probate, which is public record, assuring some privacy for his affairs.

While he was alive, he administered the trust. He designated who he wanted to take over (act as trustees), when he was gone. He set up two independent co-trustees with specific relevant experience, a lawyer and a business manager, both of whom had long histories of working with him. Both have excellent reputations in their perspective fields. By relying on experience and expertise Jackson improved his odds that his wishes would be followed.

So far the estate plan has already survived the challenge from his mother who wanted to administer the business affairs and distribution of the estate. But the big fight is going to be custody of the children.

Jackson made it that he wanted his mother to care for the children, but it looks like the biological mother, Debbie Rowe is going to challenge that. Usually the court will give preference to a biological parent over everyone else unless they are unfit or have given up parental rights. The mother, Debbie Rowe relinquished her rights, but later petitioned to reinstate them. Who knows what's behind that story. Another issue is Michael's mother's age, which is 79. And it could get wild because there's a third surrogate mother out there who could show up for the party.

So it looks like in death Michael's personal life is mess as it was when he was alive, but his business affairs will be fine because he took the effort to get good legal advice and did some sound estate planning.

Off the Wall Off the Charts

Mr. Jackson is digging out of debt from beyond the grave. Based on preliminary sales numbers, the entire top nine positions on Billboard's top pop catalog albums chart will be Jackson-related titlees. Jackson himself has a record eight of the top ten, while a Jacson 5 compilation is also up there.

No. 1 Number Ones
No. 2 Essential Michael Jackson
No. 3 Thriller
No. 4 Off the Wall
No. 5 Jackson 5's Ultimate Collection
No. 6 Bad
No. 7 Dangerous
No. 8 Greatest Hits:HIStory
No. 9 The Ultimate Collection

Top Digital Albums

No. 1 The Essential Michael Jackson
No. 2 Thriller

Doris Duke Charitable Foundation Sale

Lawn Ornaments of the Late Doris Duke's Estate

From Antiques and the Arts Online
The Doris Duke Charitable Foundation decided to sell off some of its holdings in an Action May 2nd and 3rd at Millea Bros Auctions and Appraisals. The sale attracted huge interest and brought in over $2,000,000.


You can view the catalog here

Controversy over the Bergman Estate in Faro

The secluded island home where Swedish filmmaker Ingmar Bergman spent his final years is up for sale.

The property brochures states that Bergman first visited Fårö in 1960, in search of a location to shoot “Through a Glass Darkly.” In his memoir he wrote, “If one wished to be solemn, it could be said that I had found my real home; if one wished to be light hearted, it could be said that it was love at first sight."

Here's a travel story from the NY Times "The Enchanted Island That Bergman Called Home"

The estate has four dwellings and a private movie theater.

The Bergman Center Foundation is appealing for funds to buy the late Ingmar Bergman's estate on the Baltic Sea island of Faro and for the use of filmmakers and other artists. Originally this is what Bergman wanted, but later changed his mind and dictated in his will that the property be sold.

The sale, which is being handled by Christies and began on May 18, is facing serious opposition in Bergman’s native Sweden. There have been accusations that the Swedish government is not doing enough to preserve his legacy.

Dogs Get the Short Stick in Helmsley Charitable Trust Distributions

The trustees for Leona Helmsley's estate said Tuesday they have started spreading her estimated $5 billion fortune by awarding $136 million in grants to charitable causes; a mere $1million is going to the dogs.

Helmsley, who died in 2007 at age 87, had ordered in a 2004 revision to the mission statement for the Leona M. and Harry B. Helmsley Charitable Trust that its money go to "purposes related to the provision of care for dogs," along with other charities.

A Manhattan judge ruled in February that the money was not limited to man's best friend, allowing it to be spread among dozens of charities for sex abuse victims, Jewish day school students, the homeless and medical research.

$40 Million for the Center for Digestive Diseases at NY Presbyterian Hospital

Other Winners

Center for the bowel disease program at Mount Sinai Medical Center.
A charity that provides food in Souther Africa
Cornell's School of Hotel Administration

Canine causes will split $1 million 10 ways among charities that provide, among other things, training for seeing-eye dogs, dogs for the deaf, and bomb sniffers.

Executors become the one to blame in economic hard times

From the Ottawa Business Journal
Estate Executors: The New Sacrificial Lamb
Mon, Apr 13, 2009 12:00 AM EST

A foreseeable consequence of the market's fall is that individuals are paying closer attention to all sources of income these days. Investments and job security are obvious places to focus one's attention, but I've noticed another trend recently: greater scrutiny of estate executors, and their decisions, during the administration of an estate. . . . Executors would be wise to protect themselves during these hard times lest they become the sacrificial lamb, otherwise known as "The One to Blame".

The article goes on to detail the what executors must do to stay out of trouble.

Literary life after death

By Rachel Keeler

Published: March 26 2009 12:59 Last updated: March 26 2009 12:59

For lovers and scholars of the 20th-century novel, Stephen Joyce has become something of a literary villain. The grandson and sole living heir of James Joyce, the Irish author and poet, has spent the past 17 years fiercely guarding his family’s estate through a series of court battles with those brave enough to try to use copyrighted Joyce documents.

In 1988, he took offense at the epilogue to Brenda Maddox’s “Nora,” a biography of Joyce’s wife, which described the decades that Joyce’s schizophrenic daughter, Lucia, spent in a mental asylum. Although the book had already been printed in galleys, Maddox, fearing a legal battle, offered to delete the section; the agreement she signed with Stephen also enjoined her descendants from publishing the material. Shortly afterward, at a Bloomsday symposium in Venice, Stephen announced that he had destroyed all the letters that his aunt Lucia had written to him and his wife. He added that he had done the same with postcards and a telegram sent to Lucia by Samuel Beckett, with whom she had pursued a relationship in the late nineteen-twenties.

“I have not destroyed any papers or letters in my grandfather’s hand, yet,” Stephen wrote at the time. But in the early nineties he persuaded the National Library of Ireland to give him some Joyce family correspondence that was scheduled to be unsealed. Scholars worry that these documents, too, have been destroyed. He has blocked or discouraged countless public readings of “Ulysses,” and once tried unsuccessfully to halt a Web audiocast of the book. In 1997, he sued the Irish scholar Danis Rose, who was trying to publish a newly edited version of “Ulysses,” calling it “one of the literary hoaxes of the century.” (Around the same time, Stephen expressed his intention to obstruct a proposed new edition by the American scholar John Kidd; he told the chairman of Kidd’s publisher, W. W. Norton, that he was “implacably opposed” to the project, which was never completed.) According to Hans E. Jahnke, Stephen’s stepbrother, who once had a stake in the Joyce estate, the suit against Rose, which lasted five years, cost the estate roughly a hundred thousand dollars. The estate won the case. In 2004, the centenary of Bloomsday, Stephen threatened the Irish government with a lawsuit if it staged any Bloomsday readings; the readings were cancelled. He warned the National Library of Ireland that a planned display of his grandfather’s manuscripts violated his copyright. (The Irish Senate passed an emergency amendment to thwart him.) His antagonism led the Abbey Theatre to cancel a production of Joyce’s play “Exiles,” and he told Adam Harvey, a performance artist who had simply memorized a portion of “Finnegans Wake” in expectation of reciting it onstage, that he had likely “already infringed” on the estate’s copyright. Harvey later discovered that, under British law, Joyce did not have the right to stop his performance. Stephen has also attempted to impede the publication of dozens of scholarly works on James Joyce. He rejects nearly every request to quote from unpublished letters. Last year, he told a prominent Joyce scholar that he was no longer granting permissions to quote from any of Joyce’s writings. (The scholar, fearing retribution, declined to be named in this article.) Stephen’s primary motive has been to put a halt to work that, in his view, either violates his family’s privacy or exceeds the bounds of reputable scholarship. The two-decade-long effort has also been an exercise in power—an attempt to establish his own centrality in regard to anything involving his grandfather. If you want to write about James Joyce and plan to quote more than a few short passages, you need Stephen’s consent. He has said, “We have proven that we are willing to take any necessary action to back and enforce what we legitimately believe in.” Or, as he put it to me during two phone calls that he recently made to me from La Flotte, “What other literary estate stands up the way I do? It’s a whole way of looking at things and looking at life.”

Stephen’s notoriously acerbic dealings are held up by many who question the role of intellectual property law in literary estate management.

For many it's not about money, but about legacy.

Felicity Dahl look after the estate of her late husband, author Roald Dahl.
has established a children’s museum and charitable foundation, presided over several fantastical movie adaptations, set up an award-winning website and is now promoting the new Roald Dahl Funny Prize, awarded in November in London to authors Ursula Jones and Andy Stanton.

While the extended Dahl family shares ownership of the estate and its copyright royalties – 10 per cent of which helps fund the museum and foundation – Dahl explicitly left control of his legacy to Felicity. She now oversees an ebullient team of literary agents, trustees and executors who direct exactly how Dahl’s copyrighted stories, archives and trademarked brand name may be used.

There are big variations in how way estates are handled by heirs. JRR Tolkien sold the film rights to his books in 1969. His family is now embroiled in a lawsuit against New Line Cinema over royalties from the recent Lord of the Rings films. Some authors donate full rights to charities while others leave few instructions to heirs who let the writing slip into obscurity.

But for people such as Felicity Dahl, who see decades of potential wrapped up in art left behind, the proper care and development of a loved one’s intellectual property is everything.

Maintaining artistic integrity in posthumous projects takes a tremendous amount of acumen and finesse on the part of an heir. Getting it right also requires the ability to exploit disjointed levels of international copyright and trademark laws.

Roald Dahl’s archives are open to the public at the Roald Dahl Museum in Buckinghamshire, just outside London.

Estate goes after the URL

Domain Name Wire reports that the estate of the late Jim Morrison wans the domain name JimMorrison.com and they are willing to fight. The fight goes the World Intellectual Property Organization (WITPO), which administates various IP treaties, in this case the Rules for Uniform Domain Name Disputes. The name is currently owned by a Rick Sentierei. It is a mash up of Jim Morrison stuff, with side bars on Health Shopping, Family Fun, and Places to go.

Jim Morrison, who died in 1971 of a likely overdose, willed his estate to Pamela Courson, his long-time companion. After her death in 1974 of an overdose, her parents battled Morrison's parents for control of the estate, which was eventally decided in favor of the Coursons.

RIP Annenberg

The historic Sunnylands estate of Walter and Leonore Annenberg, which required such privacy for visiting world leaders that it earned restricted air space status, soon will open to the public.


Leonore Annenberg, who died Thursday morning, is expected to be interred in a mausoleum in a private portion of the estate next to her late husband, Walter.

But the estate at Frank Sinatra and Bob Hope drives in Rancho Mirage, home to a prestigious art collection and nine-hole golf course behind pink brick walls, eventually will open for tours three days a week. In the early 1950s, the Annenbergs began building a renowned collection of Impressionist and Post-Impressionist masterpieces that was worth an estimated $1 billion when they pledged it to the Metropolitan Museum of Art in 1991. The collection of about 50 works -- including paintings by Cezanne, Renoir, Monet and Van Gogh -- usually hung in their 32,000-square-foot mansion in Rancho Mirage.

Family spokeswoman Kathleen Hall Jamieson (I never got the connection) said the 240-acre estate passes into a family trust with Annenberg's death, but an administrative staff headed by Gaddi Vasquez and former Palm Springs Art Museum executive director Janice Lyle will oversee a staff to run the facility to be called the Annenberg Center.

Mrs. Annenberg is survived by her sister, Mrs. Frank Wolf; two daughters, Diane Deshong of Beverly Hills, Calif., and Elizabeth Kabler of New York; a stepdaughter, Wallis Annenberg of Los Angeles; seven grandchildren and eight great-grandchildren.

There will be a private family service. The family asks that individuals make a donation to their favorite charity in lieu of sending flowers.

A Gift from Grandma

Filter Pure Inc., a nonprofit company started by Tracy Hawkins started last year with a partner in the Dominican Republic, combines old know-how and modern technology. Unglazed clay pots fired with the right ingredients can trap parasites, E. coli and other bacteria while the clean water drips through pores in the clay.

At a cost of about $30, a ceramic pot nestled in a 5-gallon plastic bucket can turn contaminated river water into clean drinking water for a family for five years.

After earning an industrial engineering degree from Georgia Tech in 1985, Hawkins worked nearly 15 years in corporate America. She left corporate life in 1999, thanks to an inheritance from her grandmother. She spent her time learning pottery and volunteering at the school her children attended in Atlanta.

Hawkins said she strongly believes she’s found her life’s mission, thanks in large part to the money left by her grandmother.

“When she’s looking down on me from afar, I hope she’s saying: ‘That’s why I wanted you to have this. I knew you would do good works.’ “

From ATJ.com

_______________

Another good reminder! Do your estate planning. Keep your plans up to date.

Distrustee

Ayer Mill, Lawrence Massachusetts



An indictment accuses John F. Doorly, 60, of misappropriating the money and using it for buying real estate, cars, airplanes and golf club memberships. The alleged crimes happened while Doorly was chief operating officer of Tenens Corp., where he worked for more than 30 years. The alleged the embezzlement probably began at least a decade ago without detection.

He was charged in a Wednesday in a federal indictment of assessing millions in phony fees, transferring company funds to himself and hiding the theft with various schemes, including false financial statements.

Tenens Corp. was set up to manage money for the family of Lowell industrialist Ayer, the first president of American Woolen.

The American Woolen Company was established in 1899 under the leadership of William M. Wood and his father-in-law Frederick Ayer through the consolidation of eight financially troubled New England woolen mills. It was purchased by Textron in 1955.