The following notable updates were posted on Leimberg for the weeks of April 12-April 25, 2015:

  • Chuck Rubin on IRS Program Technical Advice 2014-018: Can a Form 1040 Income Tax Return Omission Lead to an Extended Statute of Limitations for an Estate Tax Return Form (706) or Estate Income Tax Return (Form 1041)? (Estate Planning Newsletter). The IRS finds an interesting way to hold open the statute of limitations for an estate tax assessment and estate income tax assessment via an omitted foreign financial asset disclosure on a Form 1040.
  • Lee Slavutin & Practical Guidance for ILIT Trustees and Their Advisors (Estate Planning Newsletter).  Summarizes four cases where ILIT beneficiaries sued trustees for alleged violations of fiduciary responsibility. The cases are analyzed within the context of the Uniform Prudent Investors Act (UPIA). In two cases, Cochran v. KeyBank and French v. Wachovia, the trustee was vindicated and, interestingly, in both cases the trustee relied on an independent third party to evaluate the insurance proposal. In the other two cases, Paradee v. Paradee and Rafert v. Meyer, the trustee behaved recklessly and taught us what not to do.  This newsletter aims to provide trustees and their advisors with practical tips to ensure that they fulfill their responsibilities when dealing with life insurance trusts.
  • Jonathan E. Gopman, Jeffrey M. Gad, Ryan J. Beadle, Michael A. Sneeringer, Joseph M. Landolfi, Jr., Evan R. Kaufman and Cynthia Carlson on Mikel v. Commissioner: Another Crummey Result for the IRS (Estate Planning Newsletter).  Despite conceding that: (1) the trust in question afforded each beneficiary an unconditional withdrawal right; (2) there was no basis on which the trustee of the irrevocable trust could properly refuse to honor a timely withdrawal demand; and (3) the beneficiaries had an enforcement remedy in state court, the IRS argued that beneficiaries did not receive a “present interest in property” because their rights of withdrawal were not “legally enforceable” in practical terms. Like Crummeyand Cristofani, the IRS suffered yet another defeat.  The line of reasoning is unique, melding the religious components of Orthodox Jewish law with the legal nuances of in terrorem provisions.
  • Richard Fox: Recent Cases Denying Charitable Income Tax Deduction Provide Reminder of Need to Strictly Adhere to Statutory Requirements for Deductibility of Façade Easements (Charitable Planning Newsletter).  In two recent cases involving the contribution of façade easements to the National Architectural Trust or NAT (now known as the Trust for Architectural Easements), the taxpayers’ claimed charitable income tax deduction was denied because of the failure to satisfy the statutory requirements for the deductibility of the contributed façade easement. Although valuation issues have been the major source of controversy in cases involving the donation of façade easements, the value of the easements is irrelevant unless the requirements for deductibility are met in the first place. These cases reinforce the importance of ensuring the adherence to the requirements for deductibility of a façade easement and the consequences of failing to meet such requirements.
  • Fred Franke and David Sessions: Self-Settled Asset Protection Trusts for Married Couples in Maryland (Asset Protection Newsletter).  Even though Maryland does not have a general domestic asset protection trust statute, it allows married couples to engage in asset protection through a tenants by the entirety immunity trust and/or an irrevocable inter vivos QTIP trust. The creditor protection afforded to these two trusts is provided by statute. This commentary explains the statutory requirements that must be satisfied in order to claim the safe harbor and the creditors who may defeat that protection.

See full Leimberg Reports at Leimberg Information Services.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.