Sioux Falls South Dakota Estate Planning, Probate and Living Trusts Attorneys Thompson Law, P.C.

Educational FYIs
These recent developments and case studies address any aspect of the law that touches on estate planning. They offer an interesting perspective and/or warning. The frequency of release varies from month to month and week to week. Our purpose for sharing these Educational FYI's to you is to further enlighten you on the many variables involved in the fine balancing act of proper estate planning.

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Article on Family Caregivers
The Sunday, September 9, 2007 issue of Parade magazine contains an article by Gail Sheehy on family caregiving. It will recount some of her own experiences as a spousal caregiver to her husband.

CMS Technical Director Opines That States May Impose Penalty on Community Spouse Post- Eligibility Transfers
Roy R. Trudel, a Technical Director at the Center for Medicare and Medicaid Services ("CMS") recently opined that a state agency has the option of imposing a transfer penalty on an institutionalized spouse if the community spouse transfers protected resources after the institutionalized spouse's eligibility has been determined. Mr. Trudel's opinion, which is a reversal from statements made by previous CMS (HCFA) officials, came about as the result of an email exchange between elder law attorney Robert Mason of North Carolina and himself.

New Study Finds Changes Needed to U.S. Health System to Accommodate Needs of Boomers
The aging baby boom generation is likely to increase the nation's disabled population, and a study says the United States needs a better system to provide care for them. More than 40 million Americans currently have some sort of disability, the Institute of Medicine reported Tuesday.

Senate Resolution Freezes Estate Tax for Two Years
Senate Resolution 21, 110th Cong. 1st Session, passed the Senate by a vote of 91 - 1.

Why Can't a NY Lawyer Counsel FL Residents on NY Law?
This article from the ABA Journal summarizes the case of a NY licensed attorney wanting to give advise to FL residents about NY matters. It does a good job of summarizing FL's position on unlicensed practice of law in FL.

Georgetown University Study on Medicaid Financing of Long Term Care
This article summarizes the role of Medicaid in financing long term care costs. The article also touches on how DRA will affect the ability of portions of the elderly population to get access to long term care.

Estate Tax Repeal Vote Fail in Senate
Late Thursday, August 3, 2006, the Senate voted on an estate tax reform proposal that was came to close to full repeal and the republicans did not get the 60 votes they needed to pass it. The vote was 56-42!

Article on Boomer Inheritances
This USA article highlights how inheritances by boomers are not meeting earlier projections. The reason behind this is the increased life expectancies of seniors and the higher then projected costs for health care.

IRS Releases December 7520 rate
The 7520 rate for December 2005 is 5.4%, up significantly from November's 5.0%. This rate is what is used to actuarially value life estates, remainder interests, etc. A higher 7520 rate makes some transactions, such as QPRTs more attractive, while some other transactions less attractive.

Will Effectively Exercised Power of Appointment Even Though Not Admitted to Probate
Father (who died in 1981) established a living trust that divided into survivor's and family shares, with the former giving his surviving wife a general testamentary power of appointment and the latter giving her a power of appointment exercisable by will, deed, conveyance, bill of sale, gift or any other written instrument. If Mother did not exercise the powers of appointment, the survivor's trust would pour into the family trust, which would in turn be distributed unequally among daughter, granddaughter and grandson. Mother executed a will in 1985 purporting to appoint the entire trust corpus of both trusts; the survivor's trust was appointed outright to daughter and the family trust in equal shares among daughter, granddaughter and grandson; Mother died in 1997. Relying on advice of counsel, the trustee and family members decided not to seek probate of Mother's will.

Will's Assertion of Mistreatment by Disinherited Child is Not Grounds for Invalidity
Decedent's will specifically disinherited his only child and some of his grandchildren "by reason of their ... treatment" of him. Son challenged the will, claiming that it was improperly executed, and also that the decedent had operated under "an insane delusion that four of his grandchildren did not care about him."

Disclaimer Reformed to Avoid GST Tax
Daughter signed disclaimers of her interests in her mother's property in two different states. After the disclaimers were completed, she learned that her mother's GST exemption was only $650,000 and that the disclaimed property would be subject to the tax. She signed an affidavit indicating that she had disclaimed by mistake, and sought reformation of one or both disclaimers. State high court rules that reformation of the two disclaimers is permitted, and remands to the trial court for entry of an order authorizing the reformation.

April 2005 section 7520 rate released
The IRS has released the Applicable Federal Rate for the month of April, 2005. Each month the Service surveys interest rates and publishes the rate that is applicable for gift calculations. The rate for April is 5.0%. The rate for March was 4.6%.

Jury's Treble-Damages Finding in Undue Influence/Theft Case Set Aside by Trial Court, Restored by Appellate Court
An elderly woman was befriended by a law student, who helped her to transfer over $90,000 (in several transactions) to the law student, allegedly because the woman wanted to help her with tuition. The woman's nephew, who had power of attorney, discovered the transactions and moved to secure conservatorship and set aside the transactions.

Undue Influence and Constructive Fraud Claims Should Have Been Submitted to Jury
After her husband became ill, an elderly woman who had never managed finances during their married life summoned her children to meet with her and to help decide how to handle the family ranch and other properties. After the family discovered that her husband had incurred $54,000 in credit card debt the children agreed to take responsibility for that debt in return for their mother transferring shares of stock in the ranch to them; she made transfers of substantially all of the stock based on that understanding.

Malpractice Claim May Be Brought By Successor Fiduciary Against Agent of Prior Fiduciary (CA)
During the pendency of a will contest, an attorney was appointed as administrator of a decedent's estate. He hired another law firm to assist with complicated tax issues. At some point, the administrator wrote to the tax lawyers confessing that he had misappropriated substantial funds from the estate; the tax lawyers initially attempted to help him borrow money to repay the estate, but ultimately wrote to him (in February) indicating that they withdrew from further representation and advising him to secure other assistance. In May the administrator died; the tax lawyers turned their file over to another attorney in July. In September the deadline ran out for filing IRS form 843, which would have extended the time for claiming a tax refund by three years. In November, after resolution of the will contest, a new executor was appointed and he brought a malpractice action against the two groups of tax attorneys. Both law firms argued that the plaintiff lacked privity with them, since they had been hired by the original administrator, and the trial court granted judgment for the defendants. The intermediate state appellate court affirmed, and the estate appealed to the state Supreme Court. That court now reverses, finding that the state probate code gives a successor fiduciary all the powers that his or her predecessor would have, impliedly including the power to bring an action such as the one here.

Negligence Action for Misleading Life Insurance Projections Fails on Multiple Counts - Dickshott v. Angelocci
The plaintiff, who had been seeking to provide cash for his daughter to pay anticipated estate taxes, established an irrevocable life insurance trust in 1991 and paid $300,000 in premiums for a $4.2 million second-to-die policy. The insurance agent's projections, assuming a 10% return, showed no further premium payments would be required. The ILIT Trustee, a CPA, sought independent advice which indicated that the initial premium payment would need to earn a 24% return for 28 years to cover all premiums, but the settlor instructed him to follow the insurance agent's direction.

Testamentary Effect of Trust Provision Requires Compliance With Will Formalities - Arnold v. Davis
A decedent (the widow of country music recording artist Jim Reeves) had established a trust to hold her considerable assets, though her capacity to sign or approve of a trust was later called into question. When she died while conservatorship proceedings were pending, the court granted an interpleader request and ordered that all her trust assets and all income from sale of her late husband's music and real estate holdings be paid to an administrator while the validity of the trust was resolved.

"Direct Lineal Descendants" in Old Trust Does Not Include Adopted Children - McGehee v. Edwards
Several trusts were established in 1929, 1930 and 1931. Each trust limited benefits to the "direct lineal descendants" of the settlor or the settlor's parents. Although state law was amended in 1978 to presumptively include adopted children in the terms "issue" or "descendant," the new law by its terms did not extend to prior trusts. The trustees of the trusts, concerned about potential liability for their determination of the approximately 142 trust beneficiaries, filed an action to determine "who are, or may be direct lineal descendants ... and specifically whether children born out of wedlock" would be beneficiaries. Counsel for one beneficiary answered, asking the court to also determine whether adopted children would qualify, whereupon the trial court appointed guardians ad litem for "persons adopted by lineal descendants, persons born out of wedlock to lineal descendants, persons born to lineal descendants through assisted conception, and legitimate minor beneficiaries and parties unknown."

Guardian Entitled to Notice and Hearing Before Denial of Request for Fees - Shappell v. Guardianship of Naybar case
The guardian of person and estate filed a petition requesting compensation for services as guardian. The ward died before hearing on the petition, and guardian filed a second petition seeking additional compensation. Almost two years after the ward's death, the trial court summarily denied the compensation requests. The Florida Court of Appeals reverses the denials, noting that no one objected to the compensation requests, the guardian was not given notice of the pending denial of compensation, and the trial court did not conduct a hearing into the reasonableness or propriety of the fees. The summary denial "violated the guardian's right to due process of law."

9th Circuit Rules Children Conceived by In-Vitro Fertilization Months After Father's Death Entitled To Soc Sec Benefits
Before a husband began chemotherapy treatment he arranged for freezing and storage of semen in case he became sterile. The treatment was unsuccessful and husband died within two months. In-vitro fertilization, begun ten months after his death, was successful and twins were born eighteen months after his death. The wife thereupon filed for Social Security Survivor's benefits for the children, and was denied by the Social Security Administration, an Administrative Law Judge, and a Federal District Court Judge.

State Must Permit Payment of Taxes on Special Needs Trust Termination - Stell v. Boulder Co. DSS
A self-settled special needs trust was established for the benefit of an SSI recipient who also received Medicaid benefits. The SNT provided that upon termination (by death of beneficiary, for instance), funeral, burial, and administrative expenses, and taxes would be paid first, and that the state Medicaid agency would then be required to submit a claim for reimbursement before the trust would repay Medicaid expenses. The Department of Social Services disqualified the trust and the beneficiary appealed.

Probate Court's Removal of Fiduciary in Six Cases Upheld - Guardianship of Monus
A professional fiduciary, who is the director of a faith-based social service agency, had served as guardian, conservator or trustee for a number of years in six separate cases. The amounts involved in the estates varied from about $13,000 to about $210,000. In each case inventories were filed late or not at all, accountings were sporadic and incomplete, and requests were made for approval of expenditures after the fact. The probate court determined that the fiduciary had violated his obligation to account fully, and removed him from all six cases.

Wrongful Death Action Dismissed Against Pharmacy in Death of Nursing Home Resident - Estate of Sharp
The estate of a deceased nursing home resident sued the pharmaceutical provider which had contracted with the nursing home to provide medications. The claims alleged that the pharmacy had failed to monitor administration of controlled substances, to observe that the drugs were either being misused or stolen, or to train the facility's staff in proper drug administration procedures. Relying on cases limiting the liability of pharmacists in wrongful death actions, the trial court dismissed the complaint with prejudice.

CBO Projects $300 Billion for Fiscal Year 2003 Deficit
In the first seven months of fiscal year 2003, the federal government ran a deficit of about $202 billion, the Congressional Budget Office estimates, $138 billion more than in the same period last year.

D.C. Budget Accepts Estate Tax Cut
The District of Columbia's fiscal 2004 budget (October 1, 2003, through September 30, 2004) has been funded without an increase in taxes, and with a reduction in the district's estate tax.

New Small Business Tax Calendar from IRS
The Small Business Tax Calendar is a 15-month tax calendar created by the IRS that is filled with useful information on general business taxes, IRS and SSA customer assistance, electronic filing and paying options, business publications and forms, common tax filing dates, and Federal legal holidays.

Congress Needs to Fix New Tax Law
One the changes brought about with EGTRRA in 2001 was the lower 18% capital gain rate for property held more than five years. Many taxpayers took advantage of the election in 2001 to treat any, or all, of their holdings as being sold on January 1, 2001 and immediately repurchased at the then fair market value so that they could take advantage of this new 18% capital gain rate when the holdings were eventually sold.

Need a Copy of Your Tax Return Info?
People may need a copy or transcript of their tax return for a variety of reasons; for example, to give to their mortgage lender or educational institution. More information on options, how to get copies, and the request form (Form 4506) is available at:

Congress Approves $350 Billion Tax Cut; Estate Tax Not Touched
On May 23, Congress approved a $350 billion tax cut that proposes to reduce but not eliminate the tax on dividends. Vice President Cheney cast the deciding vote in an evenly divided Senate hours after the House had passed the package on a 231- 200 predawn vote. The Senate vote was the final step for a bill that would represent the third-largest tax cut in U.S. history. President Bush is expected to sign the bill the week of May 26.

Patient Who Dies Without Regaining Consciousness Has No Claim for Pain and Suffering (Estate of Otani v. Broudy)
A patient, age 81, was fatally injured while under anesthesia and died without ever regaining consciousness. The estate of the patient brought suit for wrongful death (for benefit of surviving children) and also for patient's own injuries. The trial court awarded $125,000 to each child for wrongful death, over $45,000 for medical and funeral bills, and $450,000 to the estate for patient's "loss of enjoyment of life." Defendant appealed only the award for the patient's own injuries.

Medicare's Secondary Provider Statute Does Not Authorize Recovery of Product Liability Proceeds (Thompson v. Goetzmann)
A plaintiff sued hip prosthesis manufacturer for products liability and settled for $256,000 with no itemization of the basis for the settlement. Medicare, which had paid over $140,000 in medical expenses in connection with plaintiff's hip surgery, submitted a claim against the lawsuit proceeds. When settlement proceeds were distributed without satisfying Medicare's claim, Medicare filed lawsuits against the prosthesis manufacturer (from whom it sought double damages), the plaintiff and the plaintiff's counsel seeking its recovery from the settlement proceeds. Medicare cited the "Secondary Provider" statute and insisted that it creates a right in Medicare to secure reimbursement from personal injury, products liability and any other tort recovery.

Landmark Study on Elder Abuse Released
The National Research Council book on elder abuse and neglect has been released. This 552-page study, "Elder Mistreatment: Abuse, Neglect, and Exploitation in Aging America," was commissioned by the National Institute on Aging / National Institutes of Health (NIA/NIH) to establish a national research agenda in the area of elder mistreatment. It represents the latest thinking of the best scholars and practitioners in the field.

Profiles of Long-Term Care Across Various States
Comparable state-level and national data for over 70 indicators, which are otherwise difficult to obtain from a single source, may be found in this snapshot of the long-term care landscape in every state and the District of Columbia.

Pension Crisis Will Worsen in 2003
The corporate pension crisis is expected to get much worse in the next year or so as the nearly three-year bear market has forced many companies to make contributions to their defined-benefit plans to cover shortfalls and comply with federal laws that protect workers' pensions. In 2002, about 30 percent of the plans will require contributions, according to a Watson Wyatt analysis of the financial statements of some of the country's biggest companies. This figure, though, could more than double to 65 percent in 2003 if current conditions don't improve. This compares with just 15 percent of employers that made pension plan contributions in 2000 and 25 percent in 2001.

A Test for Independent Living, A Tool to Screen for LTCI Eligibility
LTC Partners has developed an informal guideline, the "Independent Living Test," for long-term care insurance agents to use. The guidelines are tools that can enable agents to be a resource to their clients or prospective clients, the company says. If a prospective client has symptoms listed in the guidelines, such individuals would not likely be eligible for LTC insurance. According to the guidelines, the questions can be used to determine whether a person is having difficulty in performing everyday activities. The results may reveal whether the family member can live independently or whether intervention is necessary.

Income Beneficiaries Not Entitled to Force Replacement of Trustee (Est. of Berthot)
A grandmother's trust provided income to child until her death, and then income to two grandchildren or the surviving grandchild until the death of both, whereupon the trust will end and distribute to great-grandchildren. On the child's death in 1994, the grandchildren began to challenge the bank trustee, alleging that bank's investment policies produced inadequate income and excessive fees. When the bank trustee filed a petition for approval of its account, the grandchildren sought the removal of the trustee and its replacement by a family friend.

Will Found Invalid After Unusual Trial (Estate of Volmer)
The son of decedent contacted the lawyer who had prepared the decedent's previous will and told him about changes she allegedly wanted made. The lawyer prepared a new will without speaking with the decedent, and delivered the original document to the son with instructions as to how to have it signed and witnessed. The mother signed the will in the hospital a month later, and died one month after that.

Estate Tax Policy and the Politics of Repeal
There was an interesting article in the Washington Post regarding estate tax policy and the politics of the repeal movement. It gives a good background on both sides of the repeal movement.

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