Mediation Update

Last month, the Supreme Court of New Hampshire issued a decision titled “Lillie-Putz Trust v. Downeast Energy” in which the Court affirmed two superior court orders, dismissing the Trust’s writ with prejudice and denying a motion for reconsideration, based on the Trust’s refusal to appear for a scheduled mediation. The case provides a good reminder that Courts take the mediation process seriously, and participants should as well. That approach not only complies with Superior Court Rule 170 – it vastly increases the chances for resolution, and probably saves all participants from higher litigation costs and business disruption.

-Submitted By Christopher Pyles, Esq.
603-629-4725
cpyles@wiggin-nourie.com

Tax-Free Death of a Billionaire?

George Steinbrenner's death in July of 2010 is likely to result in a federal estate tax savings of an estimated $500 million dollars for his heirs. The federal estate tax has lapsed this year and, if no further Congressional action is taken, it will resurface in 2011 with a mere $1 million per-person exemption. Had Steinbrenner died in 2009, when the federal estate tax was 45 percent, with a $3.5 million per-person exemption, his estimated $1.1 billion estate could have paid federal estate taxes of almost $500 million, depending on how the estate was structured.

Steinbrenner's estate will still be liable for any applicable state level estate taxes, but New York's State's estate tax is 16%. Neither will his heirs completely escape taxes as they will still have to ultimately pay a capital gains tax if and when assets are sold. And due to a change in tax law this year, the tax would be applied to the amount by which the assets have appreciated since Steinbrenner acquired them. There also continues to be the lingering threat made by some members of Congress that they will seek to impose the 2009 federal estate tax retroactive to the beginning of 2010. As the year progresses, it appears increasingly unlikely that the estate tax will be retroactively imposed. Nevertheless, and in spite of the fact that the constitutionality of such a decision would be litigated for years to come, and that the retroactive imposition of the tax would be fraught with practical complications, Steinbrenner's estate has not alluded the estate tax entirely quite yet.

- Jaime Gillis, Estate Planning Attorney

Is LegalZoom Legal?

Irrespective of whether the courts ultimately rule that LegalZoom is engaging in the unauthorized practice of law or not, there is an inherent problem with using LegalZoom or any other do-it-yourself approach to estate planning. As estate planners, we may begin the drafting of a plan with templates, it would be inefficient not to do so. However, at Wiggin & Nourie, the templates we use are the product of decades of varied legal experience and opinion. The templates are constantly updated to ensure that they remain technically correct. Further, there are dozens of templates and a great deal of care is taken in selecting which template to use to lay the groundwork for any client's plan. Once selected, the template is carefully tailored to a client's specifications and the content of the document is explained in detail to the client. Moreover, our client conferences provide us with the ability to develop a relationship with clients and an opportunity to extract information surrounding client finances, goals and family dynamics that are relevant to the drafting process. Finally, once a plan is executed, we ensure that it is safely stored and we continue to follow-up with the client for years to come to ensure that trust funding issues are attended to and that technical modifications and updates continue to be made as necessary. In short, there is a human and professional component to estate planning that should not be discounted.

I think that people generally have a tendency to underestimate the work that goes into the preparation of an estate plan, it requires a great deal more than simply printing off forms. LegalZoom and other such services reinforce the opinion that estate planning may easily be accomplished by generating simple forms, but if you are considering the use of such services, you should look closely at the service provider's disclaimer. You will likely see, as in the case of LegalZoom, that the service provider is not serving as your attorney, does not review the documents you prepare for legal sufficiency and does not guarantee that the documents are correct. Preparing estate planning documents without the benefit of a legal opinion may result in unintended consequences that may be costly to correct in the future. In my experience, the vast majority of clients engage in estate planning to gain a sense of reassurance that their family will be cared for after their death in the manner that the client thinks is most appropriate, to pay for documents to be prepared without receiving the benefit of legal advice may undermine the entire purpose of the planning in the first place.

http://www.abajournal.com/news/article/suit_claims_legalzooms_document_prep_is_unauthorized_practice

New FDIC Rules Regarding Accounts Held in Trusts

In response to the tumult in the financial sector, the FDIC announced Tuesday interim rules effective on September 26, 2008, regarding the extent of FDIC insurance coverage for bank accounts titled in living trusts.

Many people are unaware that the standard $100,000* coverage limit is generally increased for accounts titled in living trusts. Prior to the issuance of the interim rules announced yesterday, that increased coverage was determined by examining the identity of the trust beneficiaries, and the extent of their interest in the trust. Generally, the $100,000 coverage limit was leveraged so that $100,000 of coverage was extended to each "qualifying beneficiary." This meant that a trust for the benefit of parent during life, and payable to children A, B, C, D and E on parent's death, would receive a total of $500,000 in coverage if each of the children met the definition of "qualifying beneficiary" and if each of them had an equal stake in the trust (assuming the accounts titled in the trust at a particular FDIC-insured institution had an aggregate balance of at least $500,000). Because it was necessary to evaluate whether the beneficiaries were "qualified" (the definition of which is beyond the scope of this blog entry), customers were often unsure how much coverage they had, and processing of claims when institutions failed was often delayed. The new interim rules announced yesterday eliminate the need to evaluate the identity of the beneficiaries, and eliminate the need to confirm the extent of the beneficiaries' stakes in the trust. Therefore, the trust above would still receive $500,000 of coverage because there are five beneficiaries, even if A, B, and C were children receiving 90% of the trust (30% each), and if D and E were non-relatives receiving only 10% each.

Although the rules are still somewhat complex with respect to the evaluation of the amount of coverage when a depositor has multiple accounts at one institution, the interim rules greatly clarify the utility of living trusts in leveraging the depositor's FDIC insurance coverage. The full text of the FDIC announcement can be found at http://www.fdic.gov/regulations/laws/federal/2008/08sep26rule.html.

*Effective October 3, 2008, this figure has been temporarily increased to $250,000 and all figures discussed herein should be adjusted accordingly. The increase in coverage is currently set to expire December 31, 2009.

New Hampshire Civil Union

Attorney Polly Hall, a domestic attorney with our firm and I have been presenting talks around the State on the new Civil Union statute. Recently we did a presentation at a local university to discuss the statute that will go into effect January 1, 2008. It was well attended, and I think the people of New Hampshire are starting to really think about the new law and its impact on our state.

While the new law will give rights to civil union partners, it also comes with its drawbacks. Of note is the university's benefit program. I have been told that the university is thinking of treating same sex partners as they treat heterosexual partners. This means if a same sex couple is in a "domestic partnership," meaning they have not entered into a civil union, they will not be afforded the benefits of a couple joined in a legal union. Only same sex couples who enter into a civil union will be afforded benefits available to heterosexual married couples. As Attorney Hall and I discussed the new law, the audience began to understand the broad impact of the statute and I get the sense in the community that a lot of people will be watching to see how the new law impacts our State.

Conservation Easement Tax Incentives Expire Soon

The Pension Protection Act of 2006 added temporary tax incentives for the donation of conservation easements. Ordinarily, the income tax charitable deduction allowable for the donation of a conservation easement is limited to 30% of the donor's contribution base (a modified adjusted gross income figure), and the excess value of the donation may be carried forward for only five years. The Pension Protection Act increased the percentage limitation for most taxpayers to 50%, and the carry forward limit to 15 years. However, these new incentives for conservation easement donations apply only to donations of conservation easements made between January 1, 2006 and December 31, 2007.

Because the donation of a conservation easement requires a survey, a specialized appraisal, and negotiation with the donee conservation organization, all of which can take several months, donors need to act now if they hope to take advantage of the tax incentives offered by the Pension Protection Act. Proposed legislation has been introduced to extend the incentives, but that legislation is likely to languish because tax incentives for conservation easements are somewhat controversial. Past abuses in the valuation of conservation easements have caught the attention of the IRS and Congress, which has lead to wrangling over the content of further legislation.